Nordic Tankers A/S Annual Report 2008

Transcription

1 Annual Report 2008

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3 Nordic Tankers A/S Annual Report 2008 Management s CVR no review

4 Company data Company Nordic Tankers A/S Sønderlandsgade 44 DK-7500 Holstebro CVR no.: Registered office: Holstebro Website: Subsidiaries Nordic Copenhagen Shipping Co. Pte. Ltd., Singapore, wholly owned Nordic Oslo Shipping Co. Pte. Ltd., Singapore, wholly owned Jointly controlled entities Nordic Seaarland Tankers B.V., the Netherlands, % holding, joint venture Supervisory Board Klaus Kjærulff, Chairman Attorney-at-Law Sven Rosenmeyer Paulsen, Deputy Chairman Jens Fehrn-Christensen CEO, LLM Mogens Buschard CEO Jesper Tullin CEO Flemming Krusell Sørensen Executive Board CEO Flemming Krusell Sørensen COO Claus Breitenbauch Audit Deloitte Statsautoriseret Revisionsaktieselskab 2

5 Contents Company data Management s review Consolidated financial highligths Results for 2008 and outlook Steen Bryde and Nordic Tankers Product tankers Operations and markets Chemical tankers Operations and markets Financial review Fleet description and pools Risk management Corporate Governance Shareholder information Group chart Nordic Tankers A/S 31 December Supervisory and Executive Boards Management statement The independent auditors report Financial statements Consolidated and parent company income statement Consolidated and parent company balance sheet Statement of changes in equity Cash flow statement Notes Fleet list

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7 Management s review To the investors of Nordic Tankers A/S 2008 was in many ways a dramatic year for Nordic Tankers. After a successful listing on the Stock Exchange in 2007, the year was plagued by the international financial crisis and the sharp slowdown of the world economy. At the same time, the company became the battleground for a power struggle, which attracted more attention than the shipping operations. The outcome of the power struggle was that, at the annual general meeting in April 2008, the financier Steen Bryde was elected new Chairman of the company and had his own nominees elected to the Supervisory Board. This manoeuvre subsequently led to a turbulent time for Nordic Tankers in the media. Unfortunately, making the acquaintance of Steen Bryde and his supporters has had negative financial consequences for the company. The events surrounding Steen Bryde s rise to a position of power within Nordic Tankers and the consequences hereof are described in detail below. At an extraordinary general meeting on 2 February 2009, Steen Bryde and his Supervisory Board were removed with the support of a large group of shareholders. Instead, a new, professional Supervisory Board was elected with strong competencies in shipping and finance. The new Supervisory and Executive Boards make a targeted effort to rebuild Nordic Tanker s reputation as a serious and dedicated shipping company and to restore shareholder and stakeholder confidence in the company. At the general meeting on 23 April 2009, the Supervisory Board is going to present a new strategy with the objective of creating maximum value for the company s 6,000 shareholders. All alternatives are being considered including the company s organisational structure and geographic location. However, the overall goal is still to ensure Nordic Tankers a significant position within the Danish shipping industry. Moreover, the Supervisory Board will seek to build a shareholder structure that will ensure a stable and productive future development and prevent new, destructive attacks on the company. Profit after tax for 2008 amounted to USD 4.6 million. The financial results were negatively affected by a number of factors. First, an extraordinary write-down of the company s chemical tankers of USD 8.5 million because of the deteriorating market conditions resulting from the global financial crisis. Moreover, a loss of USD 2.9 million on a holding in the listed property company Tower Group, which the Supervisory Board chaired by Steen Bryde acquired in July, was charged to the income statement. Also, it has been necessary to make provisions of USD 2.0 million for any claims relating to other transactions made by the Supervisory Board chaired by Steen Bryde. Finally, the annual results are negatively affected by a significant tax payment and weaker-than-expected operating results for the fourth quarter. The sale of the company s LR1 tanker NORDIC LISBETH had a positive effect on the financial statements, reflected in a gain of USD 15.1 million after tax. The Supervisory Board considers the annual results to be unsatisfactory, but acceptable in the light of past events. In the first half of 2009, Nordic Tankers will receive three newbuildings; an LR1 product tanker, which is whollyowned by Nordic Tankers, and two handy-size tankers, which are co-owned with Zacchello Group, Italy. The fleet will then comprise a total of 10 vessels. Following the delivery of the newbuildings, the average age of the company s fleet will be 2.6 years, which is a very young age compared with other shipping lines. The young fleet is a significant asset for Nordic Tankers as customers and partners make ever higher demands on a modern, secure and environmentally sound fleet. In other words, Nordic Tankers, in cooperation with our pool partners, is well prepared to navigate through 2009, which will be characterised by great uncertainty and global recession. We would like to thank the many loyal shareholders who patiently supported the company through difficult times. We would especially like to thank the investor-elected Supervisory Board members from Difko 47, who got a team together that fought against the Supervisory Board chaired by Steen Bryde and their intentions with the company and in the end got a new Supervisory Board elected. We look forward to continuing the work that began when the company was floated on the Stock Exchange. Klaus Kjærulff Chairman of the Supervisory Board Flemming K. Sørensen CEO Management s review 5

8 Consolidated financial highligths 1/10-31/12 1/10-30/ * 2003/04* Key figures USD 1000 USD 1000 USD 1000 USD 1000 USD 1000 USD 1000 Revenue 45,303 37,084 28,105 27,318 6,521 19,705 Gross profit 26,635 24,287 17,755 18,773 4,856 14,094 EBITDA 39,208 34,220 17,093 26,479 5,744 17,943 Operating profit (EBIT) 20,227 26,079 11,440 22,807 4,782 13,770 Earnings from continuing operations 4,607 16,347 7,751 22,807 4,782 13,770 Earnings from discontinued operations 0 5, Net financials -12,017-7,355-4,093-1,759-1,226-1,028 Profit for the year 4,607 21,622 8,694 18,648 2,178 7,024 Parent company s share of earnings 4,607 20,501 8,505 18,296 2,149 6,872 Invested capital 223, , ,324 47,659 27,231 28,010 Net working capital (NWC) -2,588 1,702 2,825 1,141-1,083-1,406 Equity 115, ,538 55,322 46,854 28,074 23,553 Balance sheet total 245, , ,820 82,176 92,594 55,555 Investments in property, plant and equipment 51,991 63, ,628 16, Net interest-bearing debt 105, , ,065-4,195-3, Cash earnings 14,290 24,007 11,382 20,731 3,111 11,045 Average number of full-time employees Number of shares, current 7,180,000 7,180,000 1,300 1,300 1,300 1,300 Ratios Gross margin (%)** 58.8% 65.5% 63.2% 68.7% 74.5% 71.5% Operating margin (%)** 44.6% 70.3% 40.7% 68.3% 33.4% 35.6% Equity ratio (%) 46.9% 43.3% 30.3% 57.0% 30.3% 42.4% Return on invested capital (%)** 8.6% 12.5% 10.4% 60.9% 17.3% 44.1% Return on equity (%) 4.0% 25.8% 17.0% 49.8% 8.4% 32.6% Assets/equity Financial gearing Operating asset gearing Revenue/invested capital** Net working capital/revenue** -1.0% 6.1% 10.1% 4.2% 13.2% 10.4% Key figures - shares Earnings per share, USD Net asset value per share, USD Market price per share, DKK The consolidated financial highlights for have been prepared in accordance with IFRS, cf. description in note 1. Comparative figures for 2004 and 2003/04 have not been restated to reflect the changed accounting policies on transition to IFRS, but have been stated in accordance with the previous accounting policies based on the provisions of the Danish Financial Statements Act and Danish accounting standards. * The comparative figures for 2004 and 2003/04 for the balance sheet items have been translated from DKK to USD at the USD/DKK rate of exchange ruling at the end of the relevant year, while the average USD/DKK rate of exchange has been used to translate the income statement items and cash flows. The key figures and ratios have been calculated in accordance with the standards laid down by the Danish Society of Financial Analysts in Recommendations & Financial Ratios See definitions on page 70. ** The ratios have been calculated exclusively for the continuing operations. 6 Management s review

9 Results for 2008 and outlook Financial results In addition to the parent company, the consolidated financial statements of Nordic Tankers include the subsidiaries Nordic Copenhagen Shipping Co. Pte. Ltd. and Nordic Oslo Shipping Co. Pte. Ltd. and the jointly controlled entity Nordic Seaarland Tankers B.V. The group reported a profit after tax of USD 4.6 million, down from a profit after tax of USD 21.6 million for The profit meets the latest expectations for a profit after tax of USD 4-5 million as announced on 11 March Revenue amounted to USD 45.3 million as against an expected USD 46 million. In the annual report for 2007, the company expected a profit after tax, excluding sale of vessels, of USD 6 million for 2008 and a total revenue of USD million. At 31 December 2008, the company s equity amounted to USD million, up from USD million at the end of The company earned USD 3.1 million before tax on operating its vessels compared with an expected USD 4.7 million. The LR1 product tanker NORDIC LISBETH was sold in July for about USD 70 million, which is significantly above today s market value. The sale generated a gain before tax of USD 18.5 million. The annual results were negatively affected by writedowns of USD 8.5 million on the company s chemical tankers. Moreover, the company recorded a loss of USD 2.9 million on a holding in the property company Tower Group. Those shares were acquired at a price of 115 during the period when Steen Bryde chaired the Supervisory Board. At the end of the year, the price had fallen to 9. Moreover, the new Supervisory Board, which was elected at an extraordinary general meeting on 2 February 2009, has deemed it necessary to make provisions of USD 2 million for any claims relating to contracts and agreements entered into during Steen Bryde s tenure as chairman. In 2008, costs increased significantly. Staff costs and external costs grew from USD 3.5 million in 2007 to USD 6.0 million. This was, among other things, due to higher remuneration for the members of the Supervisory Board and an increase in external consultancy fees. A large portion of the provisions for unsettled cases relating to the period when Bryde was in power is also booked under this item. For further information on earnings and costs relating to the company s vessels, please see the section on operations and markets. Outlook for 2009 Because of the financial crisis and the negative development of the global economy it is very difficult to predict the market situation in Against this background, we expect 2009 to be a difficult year and we expect a profit after tax of between USD 0 and 3 million, excluding any write-downs on vessels. The earnings expectations reflect the great uncertainty that characterises the shipping markets as a result of the global financial crisis. Nordic Tankers has three newbuildings scheduled for delivery during the period from April to July One wholly-owned LR1 tanker and two handy-size product tankers, in each of which Nordic Tankers A/S has a 50% holding. The handy-size vessels are co-owned with our partner in Nordic Seaarland Tankers Zacchello Group. Strategy In shipping terminology, Nordic Tankers is a so-called tonnage provider. This means that the company owns vessels, but that their commercial operation has been outsourced. The company has also chosen to outsource the technical operation of the vessels as well as the greater part of the administrative functions. This strategy means that the company has a very small organisation. The concept is well-known, especially in the USA, but with this structure Nordic Tankers differs markedly from other listed shipping lines in Denmark. Thus, we have created an alternative option for investing in shipping operations via the Stock Exchange. Today, Nordic Tankers owns four rather new chemical tankers and has holdings in three handy-size product tankers. Including the three vessels due for delivery in 2009, the company s fleet has a very young average age of about 2.6 years. Outsourcing of the company s operations provides the greatest possible flexibility to increase or reduce the company s tonnage when and if deemed financially appropriate. All the company s vessels are in market leading pools administered by recognised shipping lines. Management s view is that this gives the company access to a great knowledge base and helps achieve the best possible results from operating the vessels. A strategic process was launched with the election of the new Supervisory Board of Nordic Tankers. At the general meeting on 23 April 2009, the Supervisory Board will present its plan. All aspects will be considered during the process, including segments, organisation and geographical location of the company s offices. Company history Nordic Tankers is a shipping company emerging from the general partnership K/S Difko XLVII (47). This company was founded in 1984 as part of an order for three product tankers at the now closed B&W Shipyard in Copenhagen. The vessels were delivered in 1986 and 1987 and were chartered on 15-year bareboat contracts with purchase options for the Management s review 7

10 Steen Bryde and Nordic Tankers charterers. In 1991, the charterers exercised their options on one of the vessels. In February 2000, the charterers of the two remaining tankers could no longer meet their contractual obligations because of poor market conditions. Consequently, K/S Difko XLVII (47) took over their company, Nordic Shipping I/S (now Nordic Tankers A/S). In this connection, a contract was made with A/S Dampskibsselskabet TORM for commercial operation of the vessels which were then operated in TORM s LR1 pool. From 2000 and onwards, freight rates generally developed positively and Nordic Tankers built up its financial resources, which made it possible to invest in further tonnage. Among other things, this resulted in the acquisition of chemical tankers that are operated in cooperation with Eitzen Chemicals A/S. Tonnage tax was introduced in Denmark in 2001, and K/S Difko XLVII (47) decided to enter Nordic Tankers for the scheme from and including the financial year 2001/02. In April 2006, Nordic Tankers set up a joint company Nordic Seaarland Tankers B.V. with Netherlands-based Seaarland Shipping Management B.V., which is owned by the Italian shipping group Zacchello Group. The company joined the tonnage tax scheme in the Netherlands. Nordic Seaarland Tankers B.V. invests in handy-size product tankers. These vessels are operated by Maersk Tankers in a pool. In preparation for the company s admission to OMX Copenhagen Stock Exchange, K/S Difko XLVII (47) on 23 May 2007 allotted shares in Nordic Tankers to its approximately 5,700 investors. At the beginning of 2008, K/S Difko XLVII (47) was wound up was particularly characterised by the turbulence surrounding the management of the company in connection with the temporary takeover of power by Steen Bryde. Below is a list of events: January 2008 Steen Bryde is not elected to the Supervisory Board Steen Bryde was first associated with Nordic Tankers when he, in October 2007, announced that he held 5.09% of the company s shares. Steen Bryde and persons close to him subsequently acquired further shares, which empowered him to requisition for an extraordinary general meeting to be held on 21 January Initially, the purpose was to secure Steen Bryde a seat on the Supervisory Board, but later he called for the replacement of the entire Supervisory Board. With the support of many small shareholders, the existing Supervisory Board was re-elected. April 2008 takeover of power by Steen Bryde As we were heading towards the annual general meeting on 23 April 2008, it became clear that Steen Bryde had increased his shareholding and voting share in Nordic Tankers considerably. This was done through option agreements with shareholders who were offered to sell their shares later at an agreed premium if they conferred their voting rights to Steen Bryde. The existing Supervisory Board wondered how Steen Bryde had come in contact with those shareholders and subsequently reported a former cooperative partner of Nordic Tankers to the police for having leaked parts of or the entire register of shareholders. At the general meeting, which was held at the Bella Centre due to the large attendance, Steen Bryde gained a majority, which meant that the existing Supervisory Board that had arranged for the listing of Nordic Tankers on the Stock Exchange was replaced by a new Supervisory Board chaired by Steen Bryde. Shortly after the general meeting, Flemming Krusell Sørensen resigned as CEO and COO Claus Breitenbauch was temporarily appointed CEO. August 2008 New strategy, including disposal of the LR1 segment In connection with the presentation of the company s interim report for 2008 on 27 August, Steen Bryde and the new Supervisory Board announced that they were going to focus on two shipping segments, which meant that the LR1 segment would be disposed of. Shortly before this announcement, the LR1 product tanker NORDIC LISBETH had been sold. As an element of the new strategy, the Supervisory Board would explore the possibilities of investing in new shipping segments and turn Nordic Tankers into an asset management company. 8 Management s review

11 October 2008 New CEO and extraordinary general meeting On 13 October, the Deputy Chairman since the general meeting in April, Geir Jansen, was appointed new CEO, while Claus Breitenbauch continued to serve as COO. A few days later, the Supervisory Board convened an extraordinary general meeting to be held on 31 October The purpose of the extraordinary general meeting primarily was to implement a number of amendments to the articles of association, which would allow Nordic Tankers to invest in properties, alternative energy and listed/unlisted securities, and to relocate the company s registered office from Holstebro to Copenhagen. Prior to the extraordinary general meeting, the former investor-elected Supervisory Board from Difko 47 formed a ginger group with the objective of stopping the proposal to amend the articles of association and forcing Steen Bryde and his Supervisory Board to resign. Through advertisements in daily papers, a website and proxies, the group mobilised support from a large group of shareholders and stopped the proposal to amend the articles of association at the extraordinary general meeting. December 2008 requisition for extraordinary general meeting and proposal for a new Supervisory Board With the support of investors holding more than 10% of the share capital, the ginger group, on 16 December, requisitioned a new extraordinary general meeting to elect a new Supervisory Board chaired by Klaus Kjærulff, former CEO of the shipping line TORM. When the existing Supervisory Board failed to call an extraordinary general meeting within the time-limits prescribed by the company s articles of association, the Danish Commerce and Companies Agency stepped in and, on behalf of the company, convened an extraordinary general meeting to be held on 2 February At the same time, the agency appointed the Legal Adviser to the Danish Government to preside over the general meeting. January 2009 Steen Bryde takes over the position of CEO On 11 January 2009, the company announced that Steen Bryde stepped down as chairman and was replaced by Jesper Bo Nielsen. Steen Bryde continued to serve on the Supervisory Board. At the same time, the third member of the Supervisory Board, Brian Søholt Petersen, was appointed CFO. Moreover, a brokerage agreement was entered into with two companies owned by Jesper Bo Nielsen. February 2009 Steen Bryde and others leave Nordic Tankers, new Supervisory Board is elected On 2 February 2009, the day of the holding of the extraordinary general meeting, the Supervisory Board resigned with immediate effect. At the same time, Steen Bryde and Brian Søholt Petersen resigned as CEO and CFO, respectively. Earlier, Bristen Gruppen, the joint company of Steen Bryde and Brian Søholt Petersen, had gone into insolvent liquidation and both parties had gone personally bankrupt. At the extraordinary general meeting, the proposed, and present, Supervisory Board was elected and Klaus Kjærullf became Chairman. Subsequently, Flemming Krussel Sørensen was appointed temporarily as CEO and Claus Breitenbauch was reinstated as COO. The new Supervisory Board has undertaken an extensive review of the transactions conducted by the former Supervisory Board. On 11 February 2009, the Supervisory Board decided to ask the Public Prosecutor for Serious Economic Crime to investigate Steen Bryde, Brian Søholt Petersen and Jesper Bo Nielsen, who were reported for fraudulent abuse of their position, or, alternatively, attempted fraudulent abuse of their position. The financial consequences of the Steen Bryde case are described elsewhere in the annual report. December 2008 the Executive Board and members of the Supervisory Board resign On 22 December, CEO Geir Jansen and COO Claus Breitenbauch were dismissed with immediate effect because of disagreement between the Executive and Supervisory Boards about the future operation and strategy of the company. Moreover, it was announced that the Supervisory Board members Geir Jansen, Mads Roikjer and Mogens Worre Sørensen resigned from the Supervisory Board, which subsequently consisted of Steen Bryde, Brian Søholt Petersen and Jesper Bo Nielsen. Management s review 9

12 Product tankers Operations and markets 2008 Chemical tankers Operations and markets 2008 The product tankers experienced a relatively weak market in the first half of This was due to a warm winter in both Europe and the USA, very high bunker oil prices (used by vessels as fuel) and huge petrol stocks in the USA. However, at the end of the second quarter, the market improved significantly. This was, among other things, due to an increase in transport of petrol over the Atlantic Ocean to the USA, more diesel to Europe and an increase in import of refined products to West Africa. Moreover, reduced speed resulting from the very high bunker oil prices took capacity out of the market. In the third quarter, the strong freight market continued now also driven by arbitrage traffic between east and west. A fall in bunker oil prices from USD 700 to USD 550 per ton improved daily earnings for a LR1 tanker by USD 6,000. A continuously heavy demand for diesel in Europe resulted in further, long shipments from the Far East. Also the import of refined products to West Africa gave a boost to long voyages. The lurking financial crisis did not yet have a negative impact on freight rates for the large product tankers. In the fourth quarter, however, freight rates fell steadily but from a very high level. The financial crisis began to unfold with fewer arbitrage cargoes and growing stocks and thus falling shipment demand. Market outlook 2009 It is difficult to predict the development of the market in The financial crisis is affecting the markets across all segments, however, we expect the development of the tanker market to be less volatile and dramatic than what we have seen with the container carriers and the dry cargo market. Surplus tonnage in 2009 and, in the short term, weaker demand for shipment of both chemicals and refined oil products is expected to have a negative impact on freight rates in The world fleet of product tankers is assumed to peak in 2009, and since only a few newbuildings are due for delivery in 2010 and later, we expect a better balance between supply and demand in 2010, which will strengthen freight rates. Moreover, the single hull tankers will be phased out throughout most of the world. New refineries built far from their final markets, several refineries built primarily for export and surplus refinery capacity will all increase demand for shipping due to longer routes (ton/mile) and increased arbitrage. In 2011, we estimate that there will be a shortage in shipping capacity, which should result in significantly improved freight rates. In the first nine months of 2008, freight rates on the chemical tanker market were generally acceptable though rates varied somewhat. As expected, vegetable oil, ethanol and bio fuel cargoes employed a great number of the many new chemical tankers. However, the vessels of the City class reported different results. As a great portion of the employment was generated from shipment of refined oil cargoes, the market was quite similar to the handy-size tanker market. I. e. a relatively weak first quarter, a somewhat better second quarter, a relatively strong third quarter and a declining fourth quarter. In other words, the market was increasingly affected by the financial crisis with decreasing arbitrage, growing stocks and lower consumption in general. Lower consumption was a fact, irrespective of whether the cargo was chemicals or refined oil products. The year was characterised by very high bunker oil prices and sharply increasing operating costs especially pay to vessel crew. As a result of falling market prices and the squeezed market situation, it was necessary to make a write-down of the value of the group s four chemical tankers of USD 8.5 million. Market outlook 2009 It is also difficult to predict the development of this market in In 2009, surplus tonnage, both in respect of chemicals and refined oil products, is expected to have a negative impact on freight rates. Moreover, in the short term, a decline in shipping demand will also have a negative effect. By the end of February 2009, the world fleet consisted of ,000 dwt chemical tankers with an average age of just 3.6 years. Another 97 vessels are on order. Because of the weak demand, we do not expect to see a balance between supply and demand until sometime in 2010 and freight rates will then increase in The negative trend, specifically for the company s 13,000 dwt chemical tankers, manifested itself already in the second half of 2008 and is reflected in the budget for 2009, where we expect lower earnings compared with the previous years. In the long term, the 13,000 dwt tankers are expected to benefit from the expected phasing out of many single hull 5-10,000 dwt tankers in To this should be added expected new cargoes as a result of the reclassification of IMO cargoes. 10 Management s review

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15 Financial review Profit for the year and equity figures in ( ) = 2007 Profit for the year after tax amounted to USD 4.6 million (USD 21.6 million) including profit on sale of vessels. Profit before tax amounted to USD 8.2 million (USD 24.3 million). The profit meets the latest expectations for a profit after tax of USD 4-5 million as announced on 11 March Revenue amounted to USD 45.3 million as against an expected USD 46 million. In the annual report for 2007, the company expected a profit after tax of USD 6 million for 2008 and revenue of USD million. Profit on sale of vessels (NORDIC LISBETH) totalled USD 18.5 million before tax. In 2007, profit on sale of vessels (including discontinued operations) totalled USD 18.3 million before tax. The financial results were negatively affected by a number of factors. First, a write-down of the value of the company s chemical tankers of USD 8.5 million because of the deteriorating market conditions resulting from the global financial crisis. Furthermore, a loss of USD 2.9 million on a holding in the listed property company Tower Group, which the former Supervisory Board chaired by Steen Bryde acquired in July, was charged to the income statement. Moreover, provisions of USD 2.0 million have been made to cover any claims relating to other transactions made by the former Supervisory Board. Equity amounted to USD million (USD million), corresponding to a rise of 2.5%. Key elements of the increase in equity are as follows: Equity development in million USD. Equity at 1 January Profit for the year 4.6 Fair value adjustment of derivative financial instruments used to hedge future cash flows -2.5 Transferred to the income statement for a cash flow hedge 0.6 Equity at 31 December The group s vessels are recognised in the balance sheet at cost less accumulated depreciation and impairment losses. The carrying amount of the vessels is currently compared with their earnings potential and value indicators. If there are indications of impairment exceeding the annual depreciation, a write-down to the lower recoverable amount will be made. In the last quarter of 2008 and the first months of 2009, there have been strong indications of impairment. Against this background, the company s chemical tankers have been written down by USD 8.5 million. There is no indication of impairment in the group s other vessels. The assumptions applied in the calculation of the recoverable amount are set out in note 13. Other valuations for accounting purposes and estimates are described in note 1 Accounting policies. Revenue Revenue, in the form of freight receipts, increased by USD 6.2 million to USD 45.3 million. (continuing and discontinued opera tions), a rise of 16%, which is primarily due to larger tonnage. Freight rates increased in the LR1 product tanker segment and decreased in the handy-size and chemical tanker segments. The increase offsets the decrease in terms of revenue. Continuing operations LR1 product tankers LR1 product tanker operations in 2008 in the form of ship-days were down 41% on Freight receipts fell by USD 4.5 million, which is primarily due to the sale of NORDIC HANNE. Operating profit (EBIT) of the LR1 product tanker segment amounted to USD 24.1 million (USD 16.3 million), including profit from the sale of vessels of USD 18.5 million (USD 10.2 million). At end-2008, all LR1 product tankers had been sold, but the new management has decided to continue these opera tions with the LR1 product tanker NORDIC HANNE, which is due for delivery in April Handy-size tankers Handy-size tanker operations in the form of ship-days increased by 60% in 2008 compared with Freight receipts amounted to USD 18.2 million (USD 11.8 million), corresponding to a rise of 54%. Operating profit (EBIT) of the handy-size tanker segment amounted to USD 5.9 million (USD 4.5 million). Chemical tankers Chemical tanker operations in the form of ship-days were up 69% on last year following the acquisition of NORDIC STOCK- HOLM and NORDIC HELSINKI as well as the 100% holdings in NORDIC OSLO and NORDIC COPENHAGEN, which were acquired in mid-2007 and have been active throughout Freight receipts amounted to USD 17.0 million (USD 10.6 million), corresponding to a rise of 60%. The chemical tanker segment reported an operating loss of USD 6.9 million, including write-downs of USD 8.5 million. Operating profit (EBIT) for 2007 amounted to USD 6.1 million, including profit from the sale of vessels of USD 3.2 million. For further information, please see the segment data in note 3. Discontinued operations There were no discontinued segments in In 2007, operations in the multi-purpose segment were divested on 31 May. For further information, please see note 4. Financial income and expenses, net Net financial expenses amounted to USD 12.0 million (USD 7.4 Management s review 13

16 million). The increase was attributable to increased interest expenses relating in part to borrowings for extra tonnage, loss on investments in Tower Group shares and costs relating to early repayment of loans. Tax The company s tax payment is calculated according to the rules and regulations of the Danish Tonnage Tax Act, including a USD 3.5 million tax in 2008 on profit from the sale of vessels. For further information, please see note 11. Assets At 31 December 2008, the company s balance sheet amounted to USD million, a fall of USD 14.3 million, or 5.5%. Non-current assets fell by USD 16.3 million to USD million, primarily as a result of the sale of NORDIC LISBETH and the writing down of the chemical tankers. The acquisition of the handy-size tanker NORDIC HANNE pulls in the opposite direction. Current assets increased by USD 2.3 million to USD 19.0 million, primarily as a result of improved liquidity. Equity and liabilities Group equity increased by USD 2.8 million to USD million, corresponding to 2.5%. No dividend was declared in Group liabilities fell by USD 17.0 million to USD million. Non-current liabilities fell by USD 17.6 million in 2008 to USD million as a result of repayment of loans. Cash flows Operations contributed USD 23.1 million (USD 22.8 million). Financial income and expenses and taxes negatively affected cash flows from operating activities by USD 12.9 million in 2008 (USD -7.4 million). Total cash flows from operating activities amounted to USD 10.2 million in 2008 (USD 15.4 million). In 2008, a total of USD 52.0 million (USD 63.6 million) was invested in vessels and newbuildings. The sale of vessels affected the cash flows from investing activities by USD 68.1 million in 2008 (USD 20.2 million). Total cash flows from investing activities amounted to USD 13.0 million (USD million). Cash outflows from financing activities amounted to USD 21.3 million in 2008 (USD 37.1 million). In 2008, loans raised to provide funding amounted to USD 61.5 million and repayment of debt finance amounted to USD million. In 2007, loans raised to provide funding amounted to USD 24.9 million. Moreover, in 2007, proceeds from the rights issue amounted to USD 29.7 million, repayments of borrowings to USD million and purchase of treasury shares to USD -4.0 million. In 2008, the group s cash and cash equivalents grew by USD 1.8 million to USD 12.1 million. Cash and cash equivalents at year-end consisted exclusively of bank deposits in USD and DKK. 14 Management s review

17 Management s review 15

18 Fleet description and pools Product tankers LR1 product tankers LR1 product tankers are 69-79,000 dwt vessels (Panamax size) with ,000 cubic meter epoxy-painted cargo space. These vessels primarily sail with large quantities of refined oil products from the place of production to other parts of the world. Examples include naphtha from the Middle East to the Far East, diesel from the Far East to Europe, jet fuel from the Middle East to Europe or petrol from the Baltic countries to North America. Even products such as crude oil, which could previously only be shipped in vessels designed for this purpose, may now be shipped in LR1 tankers because today the hold of this vessel type can be cleaned so thoroughly that it can carry a great number of different products. Since 2007, LR1 vessels that have the right approvals (IMO 3 classification) have even carried vegetable oils. The IMO classifications specify what kind of cargo a vessel is allowed to carry. The higher the IMO classification, the higher the requirements of the design and construction of the cargo space. Together with the major Aframax/LR2 product tankers, the LR1 tankers are often the first vessels to be directly affected by seasonal fluctuations derived from the demand for heating oil during winter in the northern hemisphere, increased activity (petrol and jet fuel) during the main holiday periods, maintenance of major industrial plants, refineries, etc. Following the sale of NORDIC LISBETH, Nordic Tankers did not operate any LR tankers at the end of 2008, however, a newbuilding, which was ordered in 2006, is on order. The newbuilding NORDIC ANNE is scheduled for delivery from New Time Shipbuilding in China on 20 April *Nordic Lisbeth Nordic Anne Holding 100% 100% Year of construction Shipyard Samsung, New Times, South Korea China Deadweight 72,718 ~73,500 Number of cargo spaces/cubic 12 / 83,344 m 3 12 / ~83,000 m 3 Length m m Main engine MAN B&W MAN B&W Horsepower 15,010 ~14,000 Speed, loaded 15,7 knots ~15,0 knots * NORDIC LISBETH was sold in July and delivered to the buyer in December Handy-size product tankers The handy-size product tankers include 29-40,000 dwt vessels. Their main practice field is shipment of refined oil products and IMO2 and IMO 3 classified chemical cargoes, including vegetable oils. The areas served include the Mediterranean, the Black Sea, North-West Europe, South East Asia and the Carribean. Vegetable oils are typically carried from South East Asia to Europe. Nordic Tankers partner in the handy-size segment is Italybased Zacchello Group. In 2006, a jointly controlled shipping company was established in the Netherlands, Nordic Seaarland Tankers B.V., which has signed a commercial management agreement with Seaarland Shipping Management and a technical management agreement with Motia for all the vessels in the joint shipping company. Both of these companies are part of the Zacchello group. At 31 December 2008, the company operated three handysize tankers and two newbuildings were on order - ordered in 2006 from Hyundai-Mipo, South Korea. The newbuilding NORDIC AGNETHA is due for delivery on 9 May 2009, and the newbuilding AMY is due for delivery on 9 July Chemical tankers The 13,000 dwt chemical tankers of this segment meet the IMO 2 requirements for tankers carrying lighter chemicals. The difference between chemical and product tankers is being erased as almost all new tankers up to 50,000 dwt are highly flexible with respect to the cargoes they can carry. Therefore, the cargoes carried in the company s chemical tankers are often identical with the cargoes carried by the company s handy-size tankers. Nordic Tankers partner in the chemical tanker segment is Norway-based Eitzen Chemical A/S. At 31 December 2008, the company operated a total of four chemical tankers. Pools The establishment of pools is a cooperation between several shipping companies on employment of their vessels in a specific segment. The vessels employed in a pool are often of comparable size, capacity and quality. Pools are widespread in the international shipping industry and improve service for customers and exploit the benefits of scale. The pool managers of the individual pools market all the vessels employed in their pool as a single coherent fleet. By employing a large number of almost identical vessels in one pool, customers are offered the right vessel at the right place just when they need it. All Nordic Tankers vessels are employed in pools that are all characterised as being leading within their segments. 16 Management s review

19 Handy-size product tankers Nordic Ruth Nordic Pia Nordic Hanne Nordic Agnetha Amy Holding 75% 75% 100% 50% 50% Year of construction Shipyard Daedong, GSI, China GSI, China Hyundai-Mipo, Hyundai-Mipo, South Korea South Korea South Korea Deadweight 35,820 38,471 38,396 Approx. 37,400 Approx. 37,400 Number of cargo spaces/cubic 12 / m 3 12 / m 3 12 / m 3 12 / ~ m 3 12 / ~ m 3 Length m m m m m Main engine Sulzer MAN B&W MAN B&W MAN B&W MAN B&W Horsepower 11,100 10,710 10,710 ~9,600 ~9,600 Speed, loaded 14,4 knots 15,2 knots 15,2 knots ~15 knots ~15 knots Chemical tankers Nordic Copenhagen Nordic Oslo Nordic Stockholm Nordic Helsinki Holding 100% 100% 100% 100% Year of construction Shipyard Hyundai-Samho, Hyundai-Sam-ho, Hyundai-Samho, INP Sekwang, South Korea South Korea South Korea South Korea Deadweight Number of cargo spaces/cubic 12 / m 3 12 / m 3 12 / m 3 12 / m 3 Length 127,2 m 127,2 m 127,2 m 128,6 m Main engine MAN B&W MAN B&W MAN B&W MAN B&W Horsepower Speed, loaded 13,4 knob 13,4 knob 13,4 knob 13, 5 knob LR1 At end-2008, Nordic Tankers did not operate any vessels in this segment. Up to now, Nordic Tankers has been a member of TORM s LR1 pool. TORM introduced the pool concept for LR1 tankers in Today, this pool includes five shipping companies with 38 tankers, and six newbuildings are scheduled for delivery in The members of the pool are TORM, Reederei Nord Klaus E. Oldendorff Ltd., Gotland Shipping (Bahamas) Ltd., Difko A/S and Skagerack Invest Limited. Handytankers Nordic Tankers vessels are, via its cooperation with Seaarland Shipping Management, employed in Maersk Tankers Handytankers pool, which includes four shipping companies with 117 tankers in the 27-51,000 dwt segment, and nine newbuildings are scheduled for delivery in The members of the pool are Maersk Tankers, Seaarland Shipping Management, Motia and d Amico Tankers. The pool was established in 2001 by the present four members. City Class Nordic Tankers is also a member of Eitzen Chemical s City Class Pool. It was established in 2005 by Eitzen, Nordic Tankers and Brøvig. Today, the pool includes four shipping companies with 26 vessels in the 10-15,000 dwt segment, and ten vessels are scheduled for delivery in The members of the City Class Pool are Eitzen Chemical, Nordic Tankers, Lloyds Fond and Rigel Schiffahrs GMBH. Management s review 17

20 Risk management The Executive Board currently identifies risks considered to have the most significant effect on the group s financial position and business performance and plans any measures deemed relevant to limit the group s sensitivity to such risks. Risks and measures are reviewed annually with the Supervisory Board. Funding for company operations At 31 December 2008, Nordic Tankers finance loans totalled USD million. As part of placing contracts for new vessels, the group put in place new credit facilities and drawing rights totalling USD 78 million, and Nordic Tankers commitments with its bankers, Nordea, will, thus, total USD 188 million at end The company s funding is subject to a series of covenants, all of which have been satisfied. The company will in future constantly work to meet those covenants. HR and outsourcing The company has two employees who make up the Executive Board. The day-to-day management of the company has been outsourced to business partners who undertake commercial management, technical management and administrative tasks. The Executive Board lays down directions for the company s short-term and long-term operations and development, and the Supervisory Board will constantly supervise and support the Executive Board. If required, the Supervisory Board will, for a short period of time, be prepared to play an active role in the management of the company. Since a significant part of the company operations and administration has been outsourced, the company depends on the performance of service partners. The management constantly focuses on whether service partners fully comply with the requirements set by Nordic Tankers as well as external partners. Fluctuations in bunker oil prices Oil prices, and hence the price of the bunker oil used by vessels as fuel, fluctuate widely. Total variable expenses for operating the company s vessels depend very much on the price of bunker oil. If oil prices were to rise, it is uncertain whether such an increase could be wholly or partially set off against increased freight rates. The manager of the individual pools, in which the company s vessels are included, decides, in cooperation with the individual companies, whether to hedge bunker requirements. Commercial management and pool contracts The company has contracted with third parties for the commercial management of the company s vessels and pool arrangements. Nordic Tankers endeavours to make contracts with leading pool managers. Shared ownership of vessels The company owns vessels jointly with one other shipping company, Zacchello Group. With respect to these vessels, the company is highly dependent on agreement with the co-owner when it comes to important decisions on the vessels, including their sale and changes in employment and management. Foreign exchange risks On transition to IFRS with effect from the financial year 2006, Nordic Tankers changed its accounting policies and now the company presents its financial statements in USD. The company s foreign exchange exposure is quite low as the majority of the company s income and expenses are in the same currency (USD); however, it will be financially hedged if and when deemed necessary by the management. The company s financial reporting and earnings are in USD, whereas the share price on NASDAQ OMX Copenhagen is in DKK; consequently, an investment in the company s shares will mean significant exposure to changes in the USD/ DKK exchange rate. Interest rate risk At 31 December 2008, Nordic Tankers net interest-bearing debt amounted to USD 105 million. The company has hedged about 55% of the interest rate risk associated with this debt for a period of between one and two years. Consequently, the company continues to be sensitive to fluctuations, especially in interest on USD. Based on the net interest-bearing debt at 31 December 2008, an interest rate increase of one percentage point would result in an increase in the company s annual interest expenses of about USD 1.1 million before tax. The management continually monitors the interest market and assesses the need for hedging. 18 Management s review

21 Corporate Governance Nordic Tankers is committed to maintaining a high standard of corporate governance, and the Supervisory Board currently reviews the framework and principles for the overall management of the company. The aim is to achieve longterm growth in shareholder value. The company is in compliance with the majority of the recommendations given in Recommendations for corporate governance made public by NASDAQ OMX Copenhagen. The main deviations are in the following areas: Composition of the Supervisory Board The company has not at the present time found it necessary to fix a retirement age for members of the Supervisory Board as the company emphasises the importance of a Supervisory Board composed of members with considerable relevant professional experience. The company has not yet prepared independent descriptions of the tasks, duties and responsibilities of the Chairman and Deputy Chairman of the Supervisory Board. The tasks and duties are partially described in the procedures of the Supervisory Board. Moreover, the Supervisory Board has decided that separate procedures relating to the Chairman and Deputy Chairman will be drawn up when the company has been listed on the stock exchange for a period of time. Because of the company s relatively simple structure and modest staff, the Supervisory Board has not found it necessary to set up a supervisory board committee. However, as a result of the new requirement, the Supervisory Board is going to establish an audit committee before the annual general meeting in Because of the limited number of employees in the company, the management sees no reason for having employee representatives on the Board. Remuneration for the Supervisory and Executive Boards The Supervisory Board has not formulated an actual remuneration policy, but it currently reviews remuneration for the Supervisory and Executive Boards to make sure that it reflects their duties and responsibilities. The Supervisory Board has decided not to disclose the remuneration or retirement benefit plan applicable to individual members of the management. No incentive schemes have been offered to the Supervisory and Executive Boards; consequently, no overall guidelines have been drawn up for such schemes. Management s review 19

22 Shareholder information Share data Listed on: NASDAQ OMX Copenhagen Share capital: DKK 71,800,000 Nominal value: DKK 10 Shares issued: 7,180,000 Share classes: One Votes per share: One Bearer share: Yes Restriction on voting rights: No Restricted negotiability: No Security ID code: DK Movements in the company s share price The closing price at year-end was DKK 40. A fall of 61% compared with end The fall and movements in the company s share price are on a par with blue chip shipping shares see the below graphs. Investor relations The aim of Nordic Tankers investor relations policy is to ensure a high level of information to the company s shareholders through: Transparency Reliability Accessibility The tools for ensuring that the company lives up to this objective are: The website contains news in brief and background information about company operations and management. Nordic Nyt a newsletter for shareholders featuring indepth articles. Shareholder structure At 17 March 2009, Nordic Tankers had 5,744 shareholders, of which 97.16% were registered shareholders. Relative price Index value of 100 as at 1 January Nordic Tankers Torm Eitchen Chemical D/S Norden Mærsk B Date The company s shares are covered by the following analyst: Anders R. Karlsen, Equity Research shipping, Nordea Bank, tel Management s review

23 At 26 March 2009, the following shareholders held more than 5% of the share capital and voting rights: Glumsø Invest ApS: 449,492 shares (6.26%) reported on 15 December 2008 Danstig ApS: 380,000 shares (5.29%) reported on 20 June 2007 Treasury shares The Supervisory Board of Nordic Tankers has been authorised by the general meeting to acquire a maximum of nom. DKK 718,000 treasury shares, corresponding to 10% of the share capital. At year-end 2008, Nordic Tankers held nom. DKK 240,000 treasury shares. The acquisition was part of the preparations for the IPO, and the company has not acquired treasury shares since its listing in Dividend policy The prospectus for the IPO stated that Nordic Tankers did not expect to distribute dividend for the first 2-3 years. The company would instead pursue an active investment policy. This strategy has been retained. Material agreements The group has arranged a credit line of up to USD 168 million, of which USD 118 million had been drawn down at 31 December The agreement includes a Change of Control clause relating to situations in which control of the company changes. The effect of the clause is that the loans must be repaid not later than 60 days after a Change of Control situation has occurred, unless approved by the lending bank. Change of control of the company has no impact on other material agreements. Procedures for election of members to the Supervisory Board The members of the Supervisory Board are elected at the general meeting, except for those elected pursuant to the provisions of the Danish Companies Act on employee representation. The number of Supervisory Board members elected by the general meeting shall be 5-8. The members of the Supervisory Board are elected for one year at a time. Retired Board members can be re-elected. Procedures for making amendments to the articles of association Resolutions to amend the company s articles of association are passed at the general meeting pursuant to sections 65a(2), 65b(1) or (5) or section 79(1) or (2) of the Danish Companies Act. Any proposal for amending the articles of association that a shareholder wishes to present at the annual general meeting must be submitted in writing to the Supervisory Board not later than 15 February in the year in which the annual general meeting is held. Financial calendar March 2009 Annual report 23 April 2009 Annual general meeting 28 May 2009 Interim report for Q August 2009 Interim report for H November 2009 Interim report for Q Releases made public via NASDAQ OMX Copenhagen in Nordic Tankers to change Executive and Supervisory Boards Requisition for extraordinary general meeting Major shareholder announcement from Glumsø Invest Aps Closing of the sale of NORDIC LISBETH has occurred The Danish Securities Council and the Danish FSA clear Steen Bryde Financial calendar Nordic Tankers A/S, Financial calendar Quarterly report Nordic Tankers A/S, Q Minutes of extraordinary general meeting Nordic Tankers A/S Minutes of extraordinary general meeting Supervisory Board withdraws proposal to change objects clause Proxy form Information to shareholders FSA finds no reason to require that a mandatory bid be made Notice convening extraordinary general meeting Nordic Tankers to have new CEO Interim report for H Nordic Tankers A/S to sell LR1 tanker Major shareholder announcements Nordic Tankers A/S Major shareholder announcements Nordic Tankers A/S Nordic Tankers A/S to launch new strategy on 27 August Financial calendar Interim report for Q Preliminary announcement of interim report for Q Management s review 21

24 Major shareholder announcement from Brian Petersen Appendix to minutes of general meeting held on 23 April 2008 CVs of Board members Change to financial calendar Minutes of annual general meeting held on 23 April New Supervisory Board of Nordic Tankers A/S Letter to OMX about mandatory bid Change of venue for general meeting Notice convening general meeting on 23 April Preliminary announcement of annual report Major shareholder announcement from Bryde Gruppen A/S Major shareholder announcement from Hasse Larsen, who has sold his shares Financial calendar Minutes of extraordinary general meeting Support to the existing Supervisory Board, which was reelected Nordic Tankers acquires product tanker Nordic Hanne Major shareholder announcement from Steen Bryde Notice convening extraordinary general meeting to be held on 21 January 2008 Group chart Nordic Tankers A/S 31 December 2008 Nordic Tankers A/S Nordic Stockholm, Nordic Helsinki, TBN 001 All wholly owned Subsidiaries Jointly controlled entities Nordic Copenhagen Shipping Co. Pte. Ltd. Wholly owned Nordic Seaarland Tankers B.V. Netherlands Nordic Copenhagen. Wholly owned Nordic Hanne, wholly owned Nordic Ruth and Pia, 75% holding TBN 004 and 005, 50% holding Nordic Oslo Shipping Co. Pte. Ltd. Wholly owned Nordic Oslo. Wholly owned 22 Management s review

25 Supervisory and Executive Boards Supervisory Board Klaus Kjærulff Born Chairman of the Supervisory Board. Elected to the Supervisory Board on 2 February Educated in the shipping business and subsequent training at Insead in France. Since 1976 in a number of senior positions in Torm - from the company s CEO. Member of numerous boards including Danmarks Rederiforening (Deputy Chairman), Det Norske Veritas Council, Danish Export Council, Assuranceforeningen SKULD (Deputy Chairman) and the International Chamber of Commerce in Denmark. Consul of Malaysia in Denmark. Sven Rosenmeyer Paulsen Born Deputy Chairman of the Supervisory Board. Elected to the Supervisory Board on 2 February Attorney with additional maritime law education abroad. Entitled to appear before the Supreme Court and specialises in maritime law, ship financing, shipbuilding contracts, purchase and sale of ships, and insurance and contracts of the shipping industry. Partner in law firm Kromann Reumert Member of the Board of Sydbank A/S. Flemming Krusell Sørensen Born Elected to the Supervisory Board on 2 February Educated in banking. Has worked at Kjoebenhavns Handelsbank as Arbitrage Manager in Luxembourg and in Varde Bank as Liquidity and International Director. From 1995 in Difko Administration, responsible for shipping companies. Member of the Executive Board from Managing Director of Nordic Tankers from Mogens Buschard Born Elected to the Supervisory Board the first time in LLM. Has been employed in government services for a number of years. Subsequently, self-employment in investment. Director of Danstig ApS and other investments firms. Member of the boards of several foundations and corporations. Among the initiators of the formation of Nordic Tankers A/S and its first Chairman of the Supervisory Board. Bukdahl A/S and member of the boards of Sun-Air of Scandinavia A/S, Maritime Museum Fund and Hansi & Janus Larsens Familielegat. Jesper Tullin Born Elected to the Supervisory Board on 2 February Mercantile education, Copenhagen Business School. Founder of Finansgruppen A/S - majority shareholder and CEO of the company. Chairman of the boards of the following companies: Pilbæk Administration A/S, Finansgruppen Erhverv A/S, Ejendomsselskabet af 25. marts 2003 A/S and Scorpion Investment A/S. Member of the boards and CEO of the following companies: Bækgården Invest A/S, Finansgruppen A/S, Finansgruppen Projekt A/S, Finansgruppen International A/S, and Finansgruppen Administration A/S. Member of the Board of Finansgruppen Nordic A/S. Executive Board Flemming Krusell Sørensen Born CEO as of 2 February Educated in banking. Has worked at Kjoebenhavns Handelsbank as Arbitrage Manager in Luxembourg and in Varde Bank as Liquidity and International Director. From 1995 in Difko Administration, responsible for shipping companies. Member of the Executive Board from Managing Director of Nordic Tankers from Claus Breitenbauch Born COO as of 2 February Shipping education from A.P. Møller Mærsk and more than 30 years of managerial experience in international shipping and shipping operations. Member of the boards of Nordic Seaarland Tankers B.V., Nordic Copenhagen Shipping Co. Pte. Ltd. and Nordic Oslo Shipping Co. Pte. Ltd. COO of Nordic Tankers from Jens Fehrn-Christensen Born Elected to the Supervisory Board on 2 February MSc (Economics and Business Administration). Has more than 25 years of experience as a manager in the shipping industry. From 1992 Economic and Finance Director in Dampskibsselskabet Norden A/ S CFO and member of the management of Dampskibsselskabet Norden A/S. Chairman of the Board of NCS Holding A/S, Meyer & Management s review 23

26 Management statement We have today considered and approved the Annual Report of Nordic Tankers A/S for the financial year ended 31 December The Annual Report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies. We consider the accounting policies applied to be appropriate for the Annual Report to give a true and fair view of the Group s and the Parent s financial position at 31 December 2008 and of their financial performance and their cash flows for the financial year then ended. Further, in our opinion the management s review gives a true and fair view of the development in the Group s and the Parent s operations and financial matters, the results of the Group and the Parent for the year and the financial position as a whole, and describes the significant risks and uncertainties pertaining to the Group and the Parent. We recommend that the Annual Report be adopted at the Annual General Meeting. Copenhagen, 26 March 2009 Executive Flemming K. Sørensen, Claus Breitenbauch, Board CEO COO Supervisory Klaus Kjærulff, Sven Rosenmeyer Paulsen, Jens Fehrn-Christensen Board Chairman Deputy Chairman Mogens Stig Buschard Jesper Tullin Flemming K. Sørensen The Supervisory Board of Nordic Tankers A/S from left to right: Jens Fehrn-Christensen, Sven Rosenmeyer Paulsen (Deputy Chairman), Klaus Kjærulff (Chairman), Flemming Krusell Sørensen, Mogens Buschard and Jesper Tullin. 24 Management s review

27 The independent auditors report To the shareholders of Nordic Tankers A/S We have audited the annual report of Nordic Tankers A/S for the financial year ended 31 December The annual report comprises the statement by Management on the annual report, the Management s review, the income statement, the balance sheet, the statement of changes in equity, the cash flow statement and the notes to the financial statements, including the accounting policies. The annual report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies. Management s responsibility for the annual report Management is responsible for the preparation and fair presentation of an annual report in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an annual report that is free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility and basis of opinion Our responsibility is to express an opinion on this annual report based on our audit. We conducted our audit in accordance with Danish and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the annual report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual report. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the annual report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of an annual report 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the annual report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the annual report gives a true and fair view of the Group s and the Parent s financial position at 31 December 2008 and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure requirements for listed companies. Århus, 26 March 2009 Deloitte Statsautoriseret Revisionsaktieselskab Per Buhl Nielsen State authorised public accountant Erling Brødbæk State authorised public accountant Management s review 25

28 Financial statements Consolidated and parent company income statement Consolidated and parent company balance sheet Statement of changes in equity Cash flow statement Notes 1 Accounting policies Significant accounting estimates, assumptions and uncertainties Consolidated segment information Discontinued operations Staff costs Profit on sale of vessels Depreciation and impairment losses Income from equity investments Financial income Financial expenses Tax on profit for the year Earnings per share Property, plant and equipment Investments in subsidiaries Investments in jointly controlled entities Receivables Available-for-sale financial assets Cash Share capital Treasury shares Finance loans Deferred tax Trade payables Other payables Remuneration for the auditors elected by the annual general meeting Changes in working capital Acquisition of enterprises in Divestment of enterprises in Operating lease commitments Contingent liabilities, collateral and contractual obligations Foreign exchange, interest rate and credit risks and application of financial instruments Related parties Shareholder relations Events occurring after the balance sheet date Financial statements

29 Consolidated and parent company income statement Parent company Group USD 1000 USD 1000 Note USD 1000 USD ,002 18,653 Revenue 45,303 37,084-6,075-7,751 Operating expenses -18,668-12,797 10,927 10,902 Gross profit 26,635 24, ,511 Staff costs 5-2, ,443-3,213 Other external costs -3,446-2,622 10,202 18,545 Profit from sale of vessels 6 18,545 13,388-3,506-9,683 Depreciation and impairment losses 7-18,981-8,141 14,347 14,040 Operating profit (EBIT) 20,227 26,079 6,516 0 Income from investments in subsidiaries Income from investments in 4,375 0 jointly controlled entities ,072 Financial income ,554-8,112 Financial expenses 10-12,808-7,811 22,495 7,000 Profit before tax from continuing operations 8,210 18,724-2,665-3,561 Tax on profit from continuing operations 11-3,603-2,377 19,830 3,439 Profit from continuing operations 4,607 16, Profit from discontinued operations 4 0 5,275 19,830 3,439 Profit for the year 4,607 21,622 Distribution of profit for the year 19,830 3,439 Parent company s shareholders 4,607 20, Minority interests 0 1,121 19,830 3,439 4,607 21,622 Earnings per share excl. minority interests (EPS) 12 Continuing and discontinued operations (USD) Continuing operations (USD) Financial statements 27

30 Consolidated and parent company balance sheet Assets Parent company Group USD 1000 USD 1000 Note USD 1000 USD ,214 49,968 Vessels 207, ,171 10,380 10,380 Prepayments on vessels 19,147 18, ,594 60,348 Property, plant and equipment , ,123 12,082 12,082 Investments in subsidiaries ,705 40,055 Investments in jointly controlled entities ,787 52,137 Financial assets , ,485 Total non-current assets 226, , Lubricant stocks 890 1, Receivables 16 3,386 3,224 11,373 6,747 Loans to subsidiaries 0 0 1,787 2,314 Other receivables 2,320 1,988 14,155 9,703 Receivables 5,706 5, Available-for-sale financial assets ,675 7,472 Cash 18 12,118 10,275 16,482 17,666 Current assets 18,956 16, , ,151 Assets 245, , Financial statements

31 Liabilities and equity Parent company Group USD 1000 USD 1000 Note USD 1000 USD ,826 12,826 Share capital 19 12,826 12,826 25,959 25,959 Share premium 25,959 25,959 60,129 63,568 Retained earnings 69,691 65, ,445 Reserve for hedging transactions -2, Reserve for foreign currency translation adjustments Reserve for fair value adjustments 9,632 9,632 97,566 99,381 Equity, parent company s shareholders 115, , Equity, minority interests ,566 99,381 Total equity 115, ,538 62,810 20,147 Finance loans , , Deferred tax ,810 20,147 Non-current liabilities 109, ,294 6,975 0 Finance loans 21 7,926 11,872 1,097 1,769 Trade payables 23 3,083 3,574 3,393 3,509 Corporation tax 3,509 3,396 1,022 5,345 Other payables 24 6,101 1,119 12,487 10,623 Current liabilities 20,619 19,961 75,297 30,770 Total liabilities 130, , , ,151 Liabilities and equity 245, ,793 Financial statements 29

32 Statement of changes in equity, 2007 group Reserves Reserves for fair value for foreign adjustments Reserves currency in connection Equity, Share- Share for hedging translation with step Retained minority Total capital premium transactions adjustments acquisitions earnings interests equity USD1000 USD1000 USD1000 USD1000 USD1000 USD1000 USD1000 USD1000 Equity at 1 January , ,322 Capital increase, bonus shares 8,905-8,905 0 Capital increase, issue 3,715 25,959 29,674 Fair value adjustment of property, plant and equipment 9,632 9,632 Foreign currency translation adjustments relating to enterprises in other currencies Fair value adjustment of derivative financial instruments used to hedge future cash flows -1,119-1,119 Recognised directly in equity 12,620 25,959-1, ,632-8, ,013 Transferred to the income statement - hedging of cash flows Profit for the year 20,501 1,121 21,622 Total recognised income and expenses 12,620 25,959-1, ,632 11,596 1,121 59,528 Acquisition of treasury shares Elimination of minority interests -1,864-1,864 Other transactions ,864-2,312 Equity at 31 December ,826 25, ,632 65, , Financial statements

33 Statement of changes in equity, 2008 group Reserves Reserves for fair value for foreign adjustments Reserves currency in connection Equity, Share- Share for hedging translation with step Retained minority Total capital premium transactions adjustments acquisitions earnings interests equity USD1000 USD1000 USD1000 USD1000 USD1000 USD1000 USD1000 USD1000 Equity at 1 January ,826 25, ,632 65, ,538 Fair value adjustment of derivative financial instruments used to hedge future cash flows -2,458-2,458 Recognised directly in equity 0 0-2, ,458 Transferred to the income statement - hedging of cash flows Profit for the year 4, ,607 Total recognised income and expenses 0 0-1, , ,714 Acquisition of treasury shares 0 Minority interests 2 2 Other transactions Equity at 31 December ,826 25,959-2, ,632 69, ,254 Financial statements 31

34 Statement of changes in equity, 2007 parent company Reserves for foreign Reserves currency Share Share for hedging translation Retained Total capital premium transactions adjustments earnings equity USD1000 USD1000 USD1000 USD1000 USD1000 USD1000 Equity at 1 January ,652 49,447 Capital increase, bonus shares 8,905-8,905 0 Capital increase, issue 3,715 25,959 29,674 Foreign currency translation adjustments relating to investments Fair value adjustment of derivative financial instruments used to hedge future cash flows Recognised directly in equity 12,620 25, ,905 28,844 Transferred to the income statement - hedging of cash flows Profit for the year 19,830 19,830 Total recognised income and expenses 12,620 25, ,925 48,567 Acquisition of treasury shares Other transactions Equity at 31 December ,826 25, ,129 97, Financial statements

35 Statement of changes in equity, 2008 parent company Reserves for foreign Reserves currency Share Share for hedging translation Retained Total capital premium transactions adjustments earnings equity USD1000 USD1000 USD1000 USD1000 USD1000 USD1000 Equity at 1 January ,826 25, ,129 97,566 Fair value adjustment of derivative financial instruments used to hedge future cash flows -2,179-2,179 Recognised directly in equity 0 0-2, ,179 Transferred to the income statement - hedging of cash flows Profit for the year 3,439 3,439 Total recognised income and expenses 0 0-1, ,439 1,815 Acquisition of treasury shares 0 Other transactions Equity at 31 December ,826 25,959-2, ,568 99,381 Definitions of reserves, etc. Share premium account comprises the premium on issued shares in 2007 less related issue costs. Hedging reserves represent the cumulative net change in the fair value of hedging transactions qualifying for hedging of future cash flows and where the hedged transaction has yet to be realised. Reserves for foreign currency translation adjustments include the cumulative foreign currency translation adjustments relating to the change in 2006 in presentation currency from DKK to USD and subsequent foreign currency translation adjustments resulting from translation of net items relating to enterprises and investments in currencies other than USD. Fair value adjustment reserves record cumulative fair value adjustments in connection with step acquisition of enterprises. Financial statements 33

36 Cash flow statement Parent company Group USD1000 USD1000 Note USD1000 USD1000 Operating profit (EBIT) from 14,347 14,040 continuing operations 20,227 26,079 Operating profit (EBIT) from 0 0 discontinued operations 0 5,623 3,506 9,683 Depreciation and impairment losses 18,981 8,298-10,202-18,545 Profit/loss from sale of vessels -18,545-18, ,712 Changes in working capital 26 2,448 1,106 7,132 8,890 Cash flows from primary operations 23,111 22, Financial income received ,554-5,201 Financial expenses paid -9,897-7, ,019 Corporation tax paid -3, ,331 1,205 Cash flows from operating activities 10,157 15,396-4,000-15,350 Acquisition, etc. of financial assets ,223 0 Acquisition, etc of property, plant and equipment -51,991-63,598-12,136 0 Acquisition of enterprises ,398 20,225 68,108 Sale of property, plant and equipment 68,108 20,225 11,502 0 Divestment of enterprises , ,154 Acquisition of available-for-sale financial assets -3,154 0 Repayment of receivables from 2,176 4,626 jointly controlled entities 0 1,947-11,373 0 Acquisition of loans for subsidiaries 0-5,568 4,995 0 Distributions received from investments ,834 54,230 Cash flows from investing activities 12,963-48,722 24,902 26,835 Financing raised 61,485 24,902 29,674 0 Flotation proceeds 0 29,674-11,550-76,473 Repayments on loan facilities -82,762-17, Acquisition of treasury shares Didivends distributed ,578-49,638 Cash flows from financing activities -21,277 37, ,797 Cash flows for the year 1,843 4,644 2,600 1,675 Cash and cash equivalents at 1 January 10,275 5,631 1,675 7,472 Cash and cash equivalents at 31 December 12,118 10, Financial statements

37 Financial statements 35

38 Notes 1 Accounting policies The annual report of Nordic Tankers A/S, which includes the consolidated financial statements and the financial statements of the parent company, has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for annual reports of listed companies (reporting class D); cf. IFRS order issued pursuant to the Danish Financial Statements Act. In addition, the annual report complies with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The financial statements have been prepared in accordance with the historical cost convention except where fair value accounting is specifically required by IFRS. The functional currency of the parent company and all significant subsidiaries and jointly controlled entities is USD, and the presentation currency of the group is USD. The accounting policies have been consistently applied and are described below. Implementation of new and revised standards and interpretations The annual report for 2008 has been prepared in accordance with the new and revised standards (IFRS/IAS) and new interpretations (IFRIC), which apply to financial years starting on or after 1 January The standards and interpretations are: IAS 39, Financial instruments: Recognition and measurement (revised 2008) IFRIC 11, IFRS 2 Group and treasury share transactions IFRIC 12, Service concession arrangements IFRIC 14, The limit on a defined benefit asset, minimum funding requirements and their interaction Implementation of the new and revised standards and interpretations has not led to any changes in the accounting policies. Standards and interpretations not yet effective At the time of publication of this annual report, a series of new and revised standards and interpretations have not yet taken effect or been adopted by the EU and have, consequently, not been incorporated into the annual report: Implementation of the revised IAS 1, Presentation of financial statements, will result in another presentation of the income statement and equity. Implementation of the revised IFRS 3, Business Combinations, will mean that as of the financial year 2010, the group must recognise costs of purchase and changes in conditional purchase considerations for acquisitions directly in profit or loss. Beyond this, the management believes that the implementation of the new and revised standards and interpretations will not materially affect the financial statements for the coming financial years, except for the further disclosure requirements for operating segments, which follow from the implementation of IFRS 8, Operating segments. Consolidated financial statements The consolidated financial statements include Nordic Tankers A/S (parent company) and the enterprises (subsidiaries) which are controlled by the parent company. Control is presumed to exist when the parent company, directly or indirectly, owns more than 50% of the voting rights or in any other way can or does exercise a controlling influence. Entities which are by agreement managed jointly with one or more other enterprises are considered to be jointly controlled entities which are accounted for by proportionate consolidation. Basis of consolidation The consolidated financial statements have been prepared on the basis of the accounts of Nordic Tankers A/S and its subsidiaries and jointly controlled entities. The consolidated financial statements have been prepared by adding together items of a uniform nature. The accounts used for consolidation purposes have been prepared in accordance with the group s accounting policies. Intercompany income and expenses, intercompany balances and dividends as well as profit and loss from intercompany transactions have been eliminated on consolidation. Subsidiaries items are recognised in full in the consolidated financial statements. Minority interests proportionate share of results is included as part of consolidated results for the year and as a separate part of group equity. Investments in jointly controlled entities are recognised and measured in the consolidated financial statements pro rata with the group s ownership interest and presented on a line-by-line basis in the consolidated financial statements. 36 Financial statements

39 The proportionate share of the results of the entities after tax and elimination of unrealised proportionate intercompany profits and losses and less impairment loss relating to goodwill is recognised in the income statement. The proportionate share of all transactions and events recognised directly in the equity of the jointly controlled entity is recognised in group equity. Participation in pools Nordic Tankers A/S generates practically all its revenue through pool arrangements. Total pool revenue is generated from each vessel participating in the pool. The pool measures revenue based on the contractual rates and the duration of each voyage, and revenue is recognised in the i ncome statement upon delivery of service in accordance with the terms and conditions of the charter parties. The pools are regarded as jointly controlled operations, and the group s share of items in the income statement and balance sheet in the respective pools is accounted for by recognising a proportional share, based on participation in the pool, combining items of a uniform nature. The group s share of pool revenue is primarily dependent on the number of days the group s vessels have been available for the pools in relation to the total available pool earning days during the period. Business combinations Newly acquired or newly established enterprises are recognised in the consolidated financial statements as of the date of acquisition or establishment. The date of acquisition is the date on which control of the enterprise is effectively transferred. Enterprises that have been sold or wound up are recognised in the consolidated financial statements until the date of the sale or the winding-up. The date of sale is the date on which control of the enterprise is effectively transferred to a third party. On the acquisition of new enterprises, the purchase method is applied according to which the identifiable assets, liabilities and contingent liabilities of the newly acquired enterprises are measured at their fair values at the date of acquisition. However, non-current assets acquired as part of a business combination that meet the criteria to be classified as held for sale are measured at fair value less estimated costs to sell. When a business combination is achieved in stages, the enterprise is recognised for the period until control is acquired separately for each transaction, including as an associate or jointly controlled entity. Upon acquisition of control of the enterprise, the identifiable assets, liabilities and contingent liabilities of the enterprise are measured at their fair values at the date of acquisition for both new acquisitions and any existing interests in the enterprise. On initial recognition, fair value adjustments relating to the group s existing interests are treated as a revaluation, and increases in carrying amounts are recognised directly in equity under revaluation reserves, while reductions are recognised in the income statement. The acquired assets, liabilities and contingent liabilities are not revalued after initial recognition. Newly acquired jointly controlled entities are recognised in the consolidated financial statements from the date the joint control commences. Entities that have been sold or wound up are recognised in the consolidated income statement until the date of the sale or the winding-up. The date of sale is the date on which joint control of the entity ceases. Restructuring costs are only recognised in the pre-acquisition balance sheet to the extent that they constitute a liability for the acquired entity. Account is taken of the tax effect of the revaluations made. The cost of an enterprise consists of the fair value of the consideration paid plus costs directly attributable to the acquisition of the enterprise. If the final determination of the consideration is conditional on one or more future events, adjustments are recognised in cost to the extent that the events are probable and the consideration can be measured reliably. The excess (goodwill) of the cost of the business combination over the fair value of the acquired assets, liabilities and contingent liabilities is recognised as an asset under intangibles and is tested for impairment at least once every year. If the carrying amount of the asset exceeds its recoverable amount, it is written down to the lower recoverable amount. If negative goodwill arises, the calculated fair values and the calculated cost of the enterprise are reassessed. If, after reassessment, the fair value of the acquired assets, liabilities and contingent liabilities continues to exceed the cost, the balance is credited to the income statement. Profit or loss from the sale or winding up of subsidiaries Profits or losses from the sale or winding up of subsidiaries are stated as the difference between the sum received from the sale or winding up and the carrying amount of the net assets at the time of selling or winding up, including goodwill, accumulated foreign currency translation adjustments recognised directly in equity and expected costs of sale or winding up. The selling price is measured at fair value of the consideration received. Foreign currency translation On initial recognition, transactions in currencies other than the functional currency of each enterprise are translated using the exchange rate ruling at the date of the transaction. Receivables, payables and other monetary items in Financial statements 37

40 foreign currencies, which have not been settled at the balance sheet date, are translated using the rate of exchange ruling at the balance sheet date. Any exchange differences arising between the rate of exchange ruling at the date of the transaction and the rate of exchange ruling at the date of payment and the balance sheet date, respectively, are recognised in the income statement as financial income and expenses, net. Property, plant and equipment, intangibles, inventories and other non-monetary assets purchased in foreign currencies and measured using historical costs are translated using the rate of exchange ruling at the date of the transaction. Non-monetary items that are revalued at fair value are translated using the rate of exchange ruling at the date of the revaluation. Upon recognition in the consolidated financial statements of enterprises with functional currencies other than USD, the income statements are translated at the average exchange rates for the respective months, unless these deviate materially from the actual exchange rates ruling at the dates of the transactions. If so, the actual exchange rates are used. Balance sheet items are translated using the exchange rates ruling at the balance sheet date. Exchange differences arising from translation of balance sheet items at the beginning of the year at the rates of exchange ruling at the balance sheet date and from translation of income statements from average rates of exchange to the rates of exchange ruling at the balance sheet date for enterprises presenting financial statements in another currency than USD are recognised directly in equity. Correspondingly, exchange differences arising from changes made directly in the equity of these enterprises are also recognised directly in equity. Translation adjustments of receivables from or payables to subsidiaries which are considered to be part of the parent company s total investment in the said subsidiary are also recognised directly in equity in the consolidated financial statements if the receivables or payables are denominated in another currency than USD. Exchange differences arising from translation of the group s share of equity at the beginning of the year at the rate of exchange ruling at the balance sheet date and from translation of the share of the results for the year from average rate of exchange to the rate of exchange ruling at the balance sheet date are recognised directly in equity. Derivative financial instruments Derivative financial instruments, primarily interest rate swaps, are used for hedging purposes. Derivative financial instruments are initially measured at fair value on the contract date. Directly attributable costs associated with the purchase or issue of the financial instrument are added to derivative financial instruments where subsequent fair value adjustments are recognised in equity. Derivative financial instruments are subsequently measured at fair value at the balance sheet date. Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as effective hedges of future transactions are recognised directly in equity. When the hedged transactions are realised, accumulated changes are recognised as part of the cost of the transactions. Changes in the fair value of derivative financial instruments used to hedge net investments in foreign enterprises are recognised directly in equity to the extent that the hedge is effective. On disposal of the foreign enterprise in question, the accumulated value changes are transferred to the income statement. Derivative financial instruments that do not qualify for hedge accounting are classified as held for trading and measured at fair value, and changes in fair value are recognised in the income statement as financial income or expenses as they occur. Segment information Nordic Tankers A/S operates three segments: product tankers, chemical tankers and handy-size tankers. There used to be four segments, but the multipurpose segment was discontinued during the 2007 financial year. This segmentation is based on Nordic Tanker A/S internal management and reporting structure. The segment information follows the group s risks, accounting policies and management control. The group only has one geographical segment as the group regards the global market as a single market, and individual fleet units are not restricted to specific regions or parts of the world. Segment income and expenses and segment assets and liabilities include items directly attributable to each segment and those items which can be reliably allocated to individual segments. Non-allocated items primarily relate to assets and liabilities as well as income and expenses associated with the group s administrative functions, investing activities, income taxes etc. Non-current assets in the segments include the assets used directly in the operation of the segment, including intangibles and property, plant and equipment. Current assets in the segments include the assets directly associated with the operation of the segment, including inventories, trade receivables, other receivables, prepayments and cash. Segment liabilities include all operating liabilities, including trade payables, provisions and other payables. 38 Financial statements

41 Tax Corporate income tax has been provided for at a rate of 25% of taxable income calculated pursuant to the Danish Tonnage Tax Act. The company has opted for the tonnage tax scheme for a binding period of 10 years, which expires at the end of Under the tonnage tax scheme, the calculation of taxable income is not based on income and expenses as for normal corporation tax. Taxable income is instead calculated on the basis of the tonnage used with the addition of net interest income and gains on disposal of vessels acquired pre On disposal of vessels acquired pre-2007, deferred tax is provided for at a rate of 25% of the taxable gains realisable on their carrying amount. Taxable gains are calculated as the difference between the carrying amount of vessels and their taxable acquisition price. Adjustments of deferred tax as a result of a change in the carrying amount of vessels when applying depreciation are recognised in the income statement. Discontinued operations and non-current assets held for sale Discontinued operations are significant business areas that have been sold or are classified as held for sale pursuant to a plan. Subsidiaries held exclusively for resale are considered to be discontinued operations. The results of discontinued operations are presented in the income statement as a separate item consisting of the operating profit or loss after tax from the operation and any profits or losses resulting from fair value adjustments or the sale of the operations and associated liabilities. Non-current assets and groups of assets held for sale are presented separately in the balance sheet as current assets. Liabilities directly associated with such assets are presented as current liabilities in the balance sheet. Non-current assets held for sale are not depreciated but are written down to the lower of carrying amount and fair value less estimated costs of sale. Income statement Revenue Income, including revenue, is recognised in the income statement when: the income creating activities have been carried out on the basis of a binding agreement the income can be measured reliably it is probable that the economic benefits associated with the transaction will flow to the group costs relating to the transaction can be measured reliably Revenue comprises freight and demurrage receipts from the vessels and gains and losses from forward freight agreements designated as hedges. Revenue is recognised when it meets the general criteria mentioned above and the stage of completion can be measured reliably. Accordingly, freight and demurrage receipts are recognised at selling price upon delivery of service in accordance with the charter parties concluded. Operating expenses Operating expenses include costs relating to the operation and maintenance of vessels, including costs relating to crew not employed by consolidated enterprises. Operating expenses are recognised as incurred. Staff costs Staff costs comprise wages and salaries, social security and pension costs, etc. and are recognised as incurred. Other external costs Other external costs comprise administrative expenses, which include the cost of offices, administrative service partners, etc. Financial income and expenses, net Financial income and expenses include interest income and interest expenses, realised and unrealised exchange gains and losses on payables and transactions in foreign currencies, mortgage amortisation premium/allowance as well as additions and allowances under the on-account tax scheme. Interest income and expenses are accrued on the basis of the principal and the effective interest rate. The effective interest rate is the discount rate that is used to discount expected future payments related to the financial asset or the financial liability in order for the present value of such asset or liability to match its carrying amount. Dividends from investments are recognised when the right to receive payment has been established, which is typically when the dividend has been approved by the general meeting. Balance sheet Property, plant and equipment Vessels Vessels are measured at cost less accumulated depreciation and impairment losses. The cost comprises the cost of acquisition and any expenses directly related to the acquisition until the time when the asset is ready for use, including interest expenses incurred during the period of construction. Financial statements 39

42 All major components of vessels except for dry-docking assets are depreciated on a straight-line basis to the estimated residual value over their estimated useful lives, which Nordic Tankers A/S estimates to be 25 years. The management considers that a 25-year depreciable life is consistent with that used by other shipping companies with comparable tonnage. Depreciation is based on cost less the estimated residual value. Residual value is estimated as the lightweight tonnage of each vessel multiplied by scrap value per ton. The useful life and residual value of the vessels are reviewed at least at each financial year-end based on market conditions, regulatory requirements and the group s business plans. Moreover, the group evaluates the carrying amount of the vessels to determine whether events have occurred that indicate impairment and would require an adjustment of the carrying amounts. Prepayments on vessels under construction are recognised as instalments paid and prepayments. Docking The fleet of own vessels is required to undergo planned dry-dockings for major repairs and maintenance, which cannot be carried out while the vessels are operating. Drydockings are generally required every months depending on the nature of the work. Costs relating to dry-dockings are capitalised and depreciated on a straightline basis over the estimated period until the next docking. The residual value is estimated at nil. A portion of the cost of acquiring a new vessel is allocated to the components expected to be replaced or refurbished at the next dry-docking. For newbuildings, the initial drydocking asset is estimated on the basis of the expected costs related to the first-coming docking, which is based on experience with similar vessels. For second-hand vessels, a dry-docking asset is also segregated and capitalised separately, however, taking into account the normal docking intervals of the vessel. At subsequent dry-dockings, the asset comprises the actual docking costs incurred. Impairment of property, plant and equipment The carrying amounts of property, plant and equipment with finite useful lives are evaluated at the balance sheet date to determine whether there are indications of impairment. If an indication of impairment is identified, the recoverable amount of the asset is estimated in order to determine the need for recognising an impairment loss and the extent hereof. If an asset does not generate cash flows that are independent from other assets, the recoverable amount is determined for the smallest cash-generating unit to which the asset belongs. The recoverable amount is defined as the higher of the fair value of the asset or the cash-generating unit less costs to sell and the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money, the risks specific to the asset or the cash-generating unit for which the estimates of future cash flows have not been adjusted. If the recoverable amount of the asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount is reduced to the recoverable amount. An impairment loss for cash-generating units is allocated to the assets of the unit, but no asset will be reduced to a lower value than its fair value less expected costs to sell. Impairment losses are recognised in the income statement. Where an impairment loss subsequently reverses as a result of changes in assumptions used to determine the recoverable amount, the carrying amount of the asset or cash-generating unit is increased to the revised recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cashgenerating unit. Impairment of goodwill is not reversed. Inventories Inventories consist of oils and lubricants, etc. and are measured at cost using the FIFO method or the net realisable value, whichever is lower. Receivables Receivables comprise trade receivables, loans and other receivables. Receivables are classified as loans and receivables that are financial assets, with fixed or determinable payments, that are not quoted in an active market and which are not derivative financial instruments. Receivables are initially measured at fair value and subsequently at amortised cost, which usually equals the nominal value less provisions for bad debts. Write down is done individually using a provisions account. Prepayments Prepayments recognised under assets comprise paid-up expenses relating to the subsequent financial year. Prepayments are measured at cost. Other securities and equity investments Other securities and investments recognised under current assets comprise listed bonds and equity investments in enterprises that are not subsidiaries, jointly controlled entities or associates. Other securities and investments are classified as available-for-sale financial assets. Available-for-sale financial assets are financial assets that are not derivative finan- 40 Financial statements

43 cial instruments and which are either classified as available for sale or which cannot be classified as loans or receivables, financial assets measured at fair value through the income statement or held-to-maturity financial assets. On initial recognition, other securities and investments are measured at fair value on the trade date plus costs directly attributable to the acquisition. The securities are subsequently measured at fair value at the balance sheet date, and changes in fair value are recognised directly in equity. On the sale or disposal of the securities, accumulated fair value adjustments are recognised in the income statement. If there are clear indications of impairment and when there is objective evidence of impairment of a permanent nature, a write-down to fair value will be made through the income statement. Significant or prolonged impairment of the fair value is deemed to constitute objective evidence. Fair value is determined as the market price for listed securities and estimated fair value determined on the basis of market information and generally accepted valuation methods for other securities. Own investments that are not traded in an active market and whose fair value cannot be reliably measured, are measured at cost. Dividend Dividend is recognised as a liability at the time of approval by the general meeting. Treasury shares Acquisition costs and consideration for treasury shares and dividend on treasury shares are recognised directly as retained earnings in equity. Provisions Provisions are recognised when the group has a legal or constructive obligation as a result of past events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Provisions are measured as the best estimate of the expenditure required to settle the obligation at the balance sheet date. Provisions with an expected maturity of more than one year from the balance sheet date are measured at present value. Non-current financial liabilities (finance loans) Finance loans are initially measured at fair value less any transaction costs. Finance loans are subsequently measured at amortised cost. This means that the difference between the amount on initial recognition and the redemption value is recognised in the income statement as a financial expense over the term of the loan using the effective interest method. Lease commitments Lease payments relating to operating leases are recognised using the straight-line method in the income statement over the term of the leases. Other financial liabilities Other financial liabilities comprise bank loans, trade payables and other payables to public authorities, etc. Other financial liabilities are initially measured at fair value less any transaction costs. Liabilities are subsequently measured at amortised cost using the effective interest method. Accordingly, the difference between the proceeds and the nominal value is recognised in the income statement as a financial expense over the term of the loan. Deferred income Deferred income recognised under liabilities comprises received income for recognition in subsequent financial years. Deferred income is measured at cost. Cash flow statement The consolidated and parent company cash flow statements are presented using the indirect method and show cash flows from operating, investing and financing activities as well as cash and cash equivalents at the beginning and end of the year. Cash flows from acquisition and divestment of enterprises are shown separately under cash flows from investing activities. Cash flows from acquired enterprises are recognised in the cash flow statement from the time of their acquisition, and cash flows from divested enterprises are recognised up to the time of sale. Cash flows from operating activities are stated as the operating profit or loss, adjusted for non-cash operating items and changes in working capital, less corporation tax paid attributable to operating activities. Cash flows from investing activities include payments in connection with the acquisition and divestment of enterprises and financial assets and the acquisition, development, improvement and sale, etc. of intangibles and property, plant and equipment. Cash flows from financing activities comprise changes in the parent company s share capital and related costs as well as raising and repayment of loans, instalments on interestbearing debt, acquisition of treasury shares and payment of dividend. Cash flows in other currencies than the functional currency are recognised in the cash flow statement using average exchange rates for the respective months, unless these deviate materially from the actual exchange rates ruling at the dates of the transactions. If so, the actual exchange rates are used. Financial statements 41

44 Cash and cash equivalents comprise cash less any bank overdrafts which form an integral part of the group s cash management. Supplementary accounting policies for the parent company Investments in subsidiaries and jointly controlled entities in the financial statements of the parent company Investments in subsidiaries and jointly controlled entities are measured at cost. If the cost price exceeds the recoverable amount of the investment, it is written down to this lower amount. Moreover, cost is written down to the extent that dividend distributed exceeds total earnings from the enterprise since its acquisition. The recoverable amount is defined as the higher of the fair value of the subsidiary or jointly controlled entity less costs of sale and the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money, the risks specific to the enterprise in question for which the estimates of future cash flows have not been adjusted. 42 Financial statements

45 2 Significant accounting estimates, assumptions and uncertainties Many items cannot be measured reliably, but must be estimated. Such estimates consist of assessments based on the most recent information available at the time of preparing the financial statements. It may be necessary to change previous estimates as a result of changes in the assumptions on which the estimates were based or due to new information, further experience or subsequent events. Significant accounting estimates In connection with the practical application of the accounting policies described, the management has made the following significant accounting estimates that have had a significant impact on the financial statements: Carrying amount of vessels The group evaluates the carrying amount of the vessels to determine whether events have occurred that would require an adjustment of the amounts. The valuation of vessels is reviewed based on events and changes in circumstances indicating that the carrying amount of the assets might not be recovered. In assessing the recoverable amount, the group reviews significant indicators of potential impairment such as purchase and selling prices and general market conditions. Moreover, market valuations from leading and independent international ship brokers are obtained on an annual basis to support the valuation of vessels. When an indication of impairment is identified, the discounted future cash flows are compared to the carrying amount of the vessels. If they are lower than the carrying amount, an impairment loss is recognised as the difference between the fair value and the carrying amount. If an indication of impairment is identified, the need for recognising an impairment loss according to IFRS is assessed by comparing the carrying amount of the vessels to the higher of the net realisable value of the vessels and the discounted future cash flows. The review of impairment indicators and projection of future discounted cash flows is complex and requires the group to make various estimates, including of future freight rates, earnings from vessels and discount rates. All of these factors have been historically volatile. The carrying amount of the group s vessels may not necessarily represent their actual market value at any point in time as market prices of second-hand vessels to a certain degree fluctuate with changes in charter rates and the cost of newbuildings. If the estimated future cash flows or related assumptions change permanently, it may be necessary to reduce the carrying amount of the vessels. There were no impairments of vessels recorded in 2007, but impairments of vessels of USD 8.5 million were recorded in 2008, cf. further information in note 13. Special liabilities In 2008, contracts and agreements were entered into which the company considers to be unlawful and non-binding on the company and, therefore, contests. Thus, there is uncertainty about the degree to which the company must meet the obligations under these contracts and agreements. The management has made a careful assessment of the risks and scope and has made provisions for liabilities in the order of USD 2 million, including estimated costs relating to investigation and clarification of the extent of the liabilities. About USD 1.2 million for staff costs and about USD 0.8 million for other external costs. Total estimated liabilities are provided for under current liabilities. Financial statements 43

46 3 Consolidated segment information Income statement LR1 Product Handy-size Chemical Not Continuing tankers tankers tankers allocated operations USD 1000 USD 1000 USD 1000 USD 1000 USD 1000 Revenue 10,099 18,192 17, ,303 Operating expenses -2,911-6,353-9, ,668 Gross profit/loss 7,188 11,839 7, ,635 Staff costs ,544-2,526 Other external costs ,376-3,446 Depreciation and impairment losses -1,129-4,701-13, ,981 Profit from sale of vessels 18, ,545 Operating profit/loss 24,108 5,927-6,852-2,956 20,227 Financial income Financial expenses -1,735-4,201-3,652-3,220-12,808 Profit/loss before tax 22,385 1,805-10,385-5,595 8,210 Tax on profit/loss for the year -3, ,603 Profit/loss for the year 18,885 1,785-10,416-5,647 4,607 Segment assets 12, ,209 97,387 14, ,526 Capital expenditure 51, ,991 Segment liabilities 4,334 74,944 25,568 25, ,272 Ship-days (number) ,435 Gross profit per ship-day (USD 1000) For further information, please see note 13 on write-down of vessels. 44 Financial statements

47 Consolidated segment information Income statement LR1 Product Handy-size Chemical Not Continuing tankers tankers tankers allocated operations USD 1000 USD 1000 USD 1000 USD 1000 USD 1000 Revenue 14,635 11,821 10, ,084 Operating expenses -4,763-3,593-4, ,797 Gross profit/loss 9,872 8,228 6, ,287 Staff costs Other external costs ,622 Depreciation and impairment losses -2,826-2,947-2,368-8,141 Profit from sale of vessels 10, ,185 13,387 Operating profit/loss 16,270 4,530 6, ,079 Financial income ,070 Financial expenses -1,824-2,777-3,825-8,426 Profit/loss before tax 15,270 1,795 2, ,724 Tax on profit/loss for the year -2, ,377 Profit/loss for the year 12,938 1,756 2, ,347 Segment assets 97,181 72,785 89, ,793 Capital expenditure 20 4,375 86,257 90,652 Segment liabilities 48,188 45,340 53, ,255 Ship-days (number) Gross profit per ship-day (USD 1000) For further information on the multi-purpose segment, which was discontinued in 2007, please see note 4. Financial statements 45

48 4 Discontinued operations On 31 May 2007, the vessels CEC Delta and CEC Daisy, which constituted the multi-purpose segment, were sold. The sale was part of the continuous replacement of the fleet but primarily to refocus the company on tankers. Nordic Tankers had an 80% holding in the companies operating Delta and Daisy. 80% of the selling price, USD 7,406 thousand, was received in cash. Parent company Discontinued operations Group USD 1000 USD 1000 USD 1000 USD 1000 The discontinued operations had the following effect on the income statement: 0 0 Operating profit for the period until transfer of control ,516 0 Gain from sale 0 4, Tax on gain realised from the sale ,189 0 Effect on net profit for the year 0 5,275 Operating profit for the period until transfer of control may be specified as follows: Dis- Discontinued continued operations operations USD 1000 USD 1000 Revenue 0 2,038 Operating expenses 0-1,165 Gross profit Other external costs 0-18 Depreciation and impairment losses Operating profit Financial income 0 18 Financial expenses 0-39 Profit before tax Tax on profit for the period 0 0 Profit for the period The discontinued operations had the following effect on the cash flow statement: Cash flows from operating activities 0-4,436 Cash flows from investing activities 0 7,387 Cash flows from financing activities 0-1, ,266 The sale of the discontinued operations may be specified as follows: Carrying amount of net assets 0 3,443 6,516 0 Gain from sale 0 3,940 7,383 0 Selling price 0 7,383 Segment assets 0 5,677 Capital expenditure 0 0 Segment liabilities 0 1, Financial statements

49 5 Staff costs Parent company Group USD 1000 USD 1000 USD 1000 USD Remuneration for the Supervisory Board ,117 Wages and salaries -2, Defined contribution plans Other social security costs ,511-2, Average number of employees 2 2 Crew aboard vessels is not included in the average number of employees as they are not employeed by the company. Wages and salaries are included under operating expenses. The Executive Board has company cars. The related costs incurred are included under other external costs. Remuneration for senior executives Members of the Supervisory and Executive Boards of the parent company and other senior executives receive the following remuneration: Supervisory Board Group Executive Board USD 1000 USD 1000 USD 1000 USD 1000 Remuneration for the Supervisory Board Wages and salaries 0 0-2, Defined contribution plans , Parent company Supervisory Board Executive Board USD 1000 USD 1000 USD 1000 USD 1000 Remuneration for the Supervisory Board Wages and salaries 0 0-2, Defined contribution plans , In 2008, wages and salaries for the Executive Board included termination benefits of USD 810 thousand. Financial statements 47

50 6 Profit on sale of vessels Parent company Group USD 1000 USD 1000 USD 1000 USD ,900 70,160 Selling price 70,160 28, ,052 Cost of sale -2, ,023-49,563 Carrying amount -49,563-14,810 10,202 18,545 18,545 13,388 In 2008, parent company and group earnings were affected by the sale of the LR1 tanker NORDIC LISBETH. In 2007, parent company earnings were affected by the sale of the LR1 tanker NORDIC HANNE. In 2007, group earnings were affected by the sale of NORDIC HANNE and the 50% holding in the Chemical tanker SICHEM PEARL. 7 Depreciation and impairment losses Parent company Group USD 1000 USD 1000 USD 1000 USD ,506-3,483 Depreciation, vessels -10,481-8, ,200 Impairment losses, vessels -8, ,506-9,683-18,981-8,141 8 Income from equity investments Parent company Group USD 1000 USD 1000 USD 1000 USD ,516 Profit from sale of investments in subsidiaries Distribution from jointly controlled entities 0 0 Profit from sale of investments in 3,971 0 jointly controlled entities , Financial statements

51 9 Financial income Parent company Group USD 1000 USD 1000 USD 1000 USD Interest on bank deposits, etc Interest on receivables 8 70 Interest income from financial assets not measured at fair value Foreign exchange gains ,072 Financial income from continuing operations Interest on bank deposits Interest income from discontinued operations ,072 Total financial income Financial expenses Parent company Group USD 1000 USD 1000 USD 1000 USD ,539-4,036 Interest on mortgage debt -8,643-7, Interest on bank loans Interest on current liabilities ,598-4,297 Interest expenses on continuing operations -8,937-7, Bank fees Borrowing costs Garantee commission Foreign exchange loss ,911 Impairment of available-for-sale financial assets -2,911 0 Fair value adjustments transferred from equity relating to hedging of future cash flows ,554-8,112 Financial expenses on continuing operations -12,808-7, Interest on mortgage debt Interest on bank loans Interest expenses on discontinued operations ,554-8,112 Total financial expenses -12,808-7,850-2,743-7,040 Net financials -12,017-7,376 Financial statements 49

52 11 Tax on profit for the year Parent company Group USD 1000 USD 1000 USD 1000 USD ,490-3,509 Tax for the year -3,533-3, Changes in deferred tax ,584-3,509 Tax on profit for the year -3,533-2, Other taxes ,665-3,561-3,603-2, Of which relating to discontinued operations ,665-3,561 Tax on continuing operations -3,603-2,377 Tax on profit for the year may be specified as follows: 22,495 7,000 Profit before tax 8,210 24,327-22,495-7,000 Of which under the tonnage tax or other schemes -8,210-24, Calculated tax, 25% 0 0 3,401 3,485 Tax on profit from sale of vessels 3,485 3,401 Of which recognised as provision for deferred tax at the beginning of the year Tonnage tax Adjustment of tax for previous years Tax on interests ,584 3,561 3,603 2,623 The company opted for the tonnage tax scheme with effect from the 2002 accounting period for a binding period of 10 years. The company did not own any vessels on entry into the tonnage tax scheme; consequently, the company has no deferred taxes from the transitional period. 50 Financial statements

53 12 Earnings per share Group USD 1000 USD 1000 Profit for the year, continuing operations excluding minority interests 4,607 16,347 Profit for the year, discontinued operations excluding minority interests 0 4,155 Profit for the year 4,607 20,502 Number of shares used in calculation of earnings per share Average number of outstanding shares 7,180,000 6,251,123 Average number of treasury shares -24,000-18,279 Number of shares used in calculation 7,156,000 6,232,844 USD USD Earnings per share, continuing operations Earnings per share, discontinued operations Earnings per share, continuing and discontinued operations Calculation of diluted earnings per share is not relevant. Financial statements 51

54 13 Property, plant and equipment - group Property, plant and equipment Prepayment on Prepayment on Vessels and vessels under Vessels and vessels under docking construction docking construction USD 1000 USD 1000 USD 1000 USD 1000 Cost at 1 January 225,226 18, ,203 14,577 Additions relating to business combinations ,054 0 Other additions 51, ,223 4,375 Disposals -54, ,254 0 Cost at 31 December 222,973 19, ,226 18,952 Revaluations at 1 January 9, Additions 0 0 9,632 0 Cost at 31 December 9, ,632 0 Depreciation and impairment losses at 1 January -10, ,486 0 Depreciation for the year -10, ,297 0 Impairment losses for the year -8, Reversal on disposal 4, ,096 0 Depreciation and impairment losses at 31 December -25, ,687 0 Carrying amount at 31 December 207,423 19, ,171 18, Financial statements

55 Property, plant and equipment - parent company Property, plant and equipment Prepayment on Prepayment on Vessels and vessels under Vessels and vessels under docking construction docking construction USD 1000 USD 1000 USD 1000 USD 1000 Cost at 1 January 113,252 10,380 96,494 10,380 Additions ,223 0 Disposals -54, ,465 0 Cost at 31 December 59,203 10, ,252 10,380 Depreciation and impairment losses at 1 January -4, ,974 0 Depreciation for the year -3, ,506 0 Impairment losses for the year -6, Reversal on disposal 4, ,442 0 Depreciation and impairment losses at 31 December -9, ,038 0 Carrying amount at 31 December 49,968 10, ,214 10,380 Impairment tests of vessels As a result of a fall in the fair value of the company s vessels, cf. ship brokers assessments and the general uncertainty about market developments, the company has identified indicators of impairment of the company s vessels. Therefore, the company assessed the recoverable amounts of its vessels as at 31 December The recoverable amount was calculated for each of the company s vessels, which is defined as the smallest cashgenerating unit, for which it is possible to calculate the value in use. The recoverable amounts of the vessels were determined on the basis of value in use calculations as the value in use was higher than the fair value in every case. The value in use calculations were carried out using cash flow projections over the vessels expected useful lives, based on approved budgets and estimates for the first three years, the estimated subsequent development and a weighted discount rate of 8% p.a. after tax. Based on the value in use calculations, the company assessed that the company s four vessels in the chemical tanker segment have suffered impairment; consequently, those vessels were written down by a total of USD 8,500 thousand, of which USD 6,200 thousand related to the parent company s two vessels in the segment. Moreover, the company assessed that no other vessels or newbuildings on order had suffered impairment. The key assumptions used in the value in use calculations are the following: Financial statements 53

56 Cash flows are based on normal earnings over the remaining useful lives of the vessels, based on the vessels expected useful lives of 25 years, cf. the accounting policies. Freight rates for the first three years have been estimated based on experience, knowledge of the market and input from the company s business partners. As from 2012, freight rates in the segments concerned are estimated to see an annual increase of 3% based on estimates for Operating and administrative expenses for the first three years are estimated based on experience with the vessels concerned, good knowledge of the market and expected cost development. As from 2012, costs are estimated to see an annual increase of 3% based on estimates for Docking costs are estimated based on experience and future docking plans. Docking costs are estimated to see an annual increase of 3%. The recoverable amount of the vessels is highly dependent on the development of the freight market, which in today s market is characterised by great uncertainty. If fluctuations in the freight rates differ from the management s estimate, this may have a positive or negative impact on the recoverable amounts. The management has made its best estimate of the development of the freight market, both in the next 1-2 years and in the longer term, and considers those assumptions to be fairly probable. 14 Investments in subsidiaries Parent company USD 1000 USD ,082 Cost at 1 January 12,082 0 Additions relating to acquisitions Disposals relating to the divestment of enterprises 12,082 12,082 Cost at 31 December 12,082 12,082 Carrying amount at 31 December The parent company s subsidiaries are: Nordic Copenhagen Shipping Co. Pte. Ltd. Singapore. Wholly-owned. Nordic Oslo Shipping Co. Pte. Ltd. Singapore. Wholly-owned. 54 Financial statements

57 15 Investments in jointly controlled entities Parent company Group USD 1000 USD 1000 USD 1000 USD ,444 24,705 Cost at 1 January 0 0 4,000 15,350 Additions relating to acquisition of equity investments 0 0-4,739 0 Disposals relating to disposal of equity investments ,705 40,055 Cost at 31 December 0 0 The jointly controlled entities are: Nordic Seaarland Tankers B.V., the Netherlands, joint venture, operation of a wholly-owned handy-size tanker and two 75.01% holdings in handy-size tankers. The table below shows the jointly controlled entities share of profit included in the consolidated income statement and principal items included in the consolidated balance sheet at 31 December 2007 and 2008 in compliance with IFRS: Group USD 1000 USD 1000 Revenue 18,192 11,821 Operating expenses -6,353-3,593 Other expenses -5,912-3,698 Net financials -4,122-2,735 1,805 1,795 Non-current assets 116,997 70,665 Current assets 4,212 2,120 Non-current liabilities 68,241 41,666 Current liabilities 46,563 28,378 Financial statements 55

58 16 Receivables Parent company Group USD 1000 USD 1000 USD 1000 USD Receivables from pool arrangements 3,386 3, ,386 3,224 Group revenue derives from pool arrangements. Receivables from pool arrangements reflect the difference between recognised revenue and freight settlements received. The receivables are not past due, and following an individual assessment, no write-downs were made. 17 Available-for-sale financial assets Available-for-sale financial assets comprise listed Danish shares acquired for USD 3,153 thousand in The shares were measured at a fair value of USD 242 thousand calculated at the market price at 31 December 2008, which resulted in a write-down in 2008 of USD 2,911 thousand. The holding s significant and prolonged impairment is deemed by the company to constitute objective evidence of impairment of a permanent nature; consequently, the writedown was recognised in the income statement. 18 Cash Parent company Group USD 1000 USD 1000 USD 1000 USD ,675 7,472 Cash and bank deposits 12,118 10,275 1,675 7,472 12,118 10,275 Cash consists primarily of deposits in reputable banks, and no special credit risk is deemed to be associated with the cash. The group s and parent company s cash has been pledged as security for finance loans. Bank deposits carry floating interest rates. The group has undrawn borrowing facilities of USD 7.4 million. 56 Financial statements

59 19 Share capital Parent company Group USD 1000 USD 1000 USD 1000 USD ,826 Share capital at 1 January 12, ,620 0 Capital increase 0 12,620 12,826 12,826 Share capital at 31 December 12,826 12,826 The share capital consists of 7,180,000 shares of DKK 10. The shares have not been divided into classes, and there are no special rights attached to the shares shares shares 130,000 7,180,000 Number of shares at 1 January 4,970,000 0 Capital increase through bonus shares 2,080,000 0 Capital increase through IPO 7,180,000 7,180,000 Number of shares at 31 December 20 Treasury shares Parent company and group Nominal value % of share capital shares shares DKK DKK % % Treasury shares at 1 January 0 24, , % Acquisition 24, , % 0% Disposal % Treasury shares at 31 December 24,000 24, , , % 0.33% In 2007, before the flotation on the stock exchange, the company acquired nominally DKK 240 thousand treasury shares for USD 448 thousand as part of its preparations for stock exchange listing. Following the listing, the company has not exercised the option to acquire treasury shares. Financial statements 57

60 21 Finance loans Group Payables to financial institutions are recognised in the balance sheet as follows: USD 1000 USD 1000 Non-current liabilities 109, ,294 Current liabilities 7,926 11, , ,166 Nominal value 118, ,723 At 31 December, the group had the following loans and credits: Carrying Carrying Fixed/ amount amount Currency Maturity Floating USD 1000 USD 1000 USD 2015 Floating 0 15,916 USD 2015 Floating 0 35,306 USD 2015 Floating 20,855 18,977 USD 2021 Floating 20,827 20,532 USD 2021 Floating 20,827 24,589 USD 2025 Floating 33,103 0 USD 2023 Floating 11,600 12,400 USD 2022 Floating 11,200 12,000 Borrowing costs -1, Calculated interest not yet due on finance loans , ,166 Of which falling due within one year 7,926 11, , ,294 Falling due within one year 7,926 11,872 Falling due between one and two years 6,959 11,872 Falling due between two and three years 6,959 11,872 Falling due between three and four years 6,959 11,872 Falling due between four and five years 6,959 11,872 Falling due after 5 years 81,817 79, , , Financial statements

61 Finance loans Parent company Payables to financial institutions are recognised in the balance sheet as follows: USD 1000 USD 1000 Non-current liabilities Current liabilities Nominal value At 31 December, the parent company had the following loans and credits: Carrying Carrying Fixed/ amount amount Currency Maturity Floating USD 1000 USD 1000 USD 2015 Floating USD 2015 Floating USD 2015 Floating Borrowing costs Calculated interest not yet due on finance loans Of which falling due within one year Falling due within one year Falling due between one and two years Falling due between two and three years Falling due between three and four years Falling due between four and five years Falling due after 5 years The fair value of the group s and parent company s liabilities other than provisions corresponds to the carrying amounts as a result of the floating interest. Payments of interest are not included in the amounts stated for future maturities. The loan agreements contain minimum requirements (financial covenants) to the liquidity, solvency and debt ratio based on the market values of the vessels. These financial covenants have been complied with, and based on the group s expected future earnings, cash flow and the development of the value of the vessels, etc., Nordic Tankers expects to comply with those requirements and covenants until the maturity of the loan agreements. Financial statements 59

62 22 Deferred tax Parent company Group USD 1000 USD 1000 USD 1000 USD 1000 Deferred Deferred Deferred Deferred tax tax tax tax liabilities liabilities liabilities liabilities USD 1000 USD 1000 USD 1000 USD Deferred tax at 1 January Changes in deferred tax Changes in deferred tax due to reduction of tax rate Deferred tax at 31 December 0 0 The company opted for the tonnage tax scheme with effect from the 2002 accounting period for a binding period of 10 years. The company did not own any vessels on entry into the tonnage tax scheme; consequently, the company has no deferred taxes from the transitional period. 23 Trade payables Parent company Group USD 1000 USD 1000 USD 1000 USD ,032 1,693 Suppliers of goods and services 2,519 3, Other suppliers ,097 1,769 3,083 3,574 The carrying amount corresponds to the fair value of the liabilities 60 Financial statements

63 24 Other payables Parent company Group USD 1000 USD 1000 USD 1000 USD 1000 Wages, salaries, A tax, social security contributions, holiday pay, etc. payable ,401 Derivative financial instruments 2, ,879 Other expenses payable 3, ,022 5,345 6,101 1,119 The carrying amount of payables relating to A tax, social security contributions, holiday pay, etc., financial instruments and expenses payable corresponds to the fair value of the liabilities. The holiday pay obligations represent the group s obligation to pay wages during the holidays that employees have accrued at the balance sheet date for payment during the subsequent financial year. Under other expenses payable, USD 2 million has been included for special liabilities, cf. note Remuneration for auditors elected by the annual general meeting Remuneration for the parent company s auditor elected by the annual general meeting for the financial year Parent company Group USD 1000 USD 1000 USD 1000 USD Audit Non-audit services Changes in working capital Parent company Group USD 1000 USD 1000 USD 1000 USD Changes in amounts tied up in inventories on vessels Changes in receivables ,483 Changes in trade payables, etc. 2, ,712 2,448 1,106 Financial statements 61

64 27 Acquisition of enterprises in 2007 During the 2007 financial year, the group acquired the following enterprises, in which the group had 50% pre-acquisition holdings: Holding Cost acquired (%) USD 1000 Nordic Copenhagen Shipping Co. Pte. Ltd., Singapore, acquired on 29 June ,361 Nordic Oslo Shipping Co. Pte. Ltd., Singapore, acquired on 2 July ,667 Cost of acquisition 54 12,082 The companies own and operate the vessels NORDIC COPENHAGEN and NORDIC OSLO. Nordic Nordic Oslo Copenhagen USD 1000 USD 1000 Carrying amount of the vessels at the date of acquisition 17,654 17,082 Adjustment of fair value 9,346 9,918 Fair value of the vessels 27,000 27,000 Lubricant stocks Trade receivables Other receivables Prepayments Cash 1,939 3,426 Bank loans -12,800-12,400 Payables to shareholders -5,563-5,607 Other payables Total fair value 11,334 12,720 Cost paid in cash, 50% of total fair value 5,667 6,360 Acquisition costs Cash and cash equivalents taken over, cf. 50% of above ,713 Net cash flow effect 4,724 4,674 After the acquisition, Nordic Oslo Shipping Co. accounted for USD 202 thousand and Nordic Copenhagen Shipping Co. accounted for USD 315 thousand of the consolidated profit of USD 21,622 thousand. If the two companies had been acquired with effect from 1 January 2007, group revenue for 2007 would have amounted to USD 42,968 thousand and profit for the year would have amounted to USD 22,505 thousand. When determining proforma figures for revenue and earnings for the year, property, plant and equipment were depreciated based on the fair values in the pre-acquisition balance sheet rather than the original carrying amounts. 62 Financial statements

65 28 Divestment of enterprises in 2007 During the 2007 financial year, Nordic Tankers A/S, cf. notes 6 and 8, sold its 50% holding in the company Sichem Pearl Shipping Co. Pte. Ltd., Singapore, and its 80% holding in the discontinued multi-purpose segment, which included the companies: K/S Diko Daisy, K/S Difko Delta, Komplementarselskabet Difko Daisy ApS and Komplementarselskabet Difko Delta ApS. Divestment of the enterprises may be specified as follows: Parent company and group Delta/Daisy Pearl USD 1000 USD 1000 Carrying amount of the vessels 3,478 4,787 Lubricant stocks Receivables from sales Other receivables Prepayments 0 41 Cash 1,142 1,816 Bank loans -1,348-2,624 Payables to shareholders 0-2,812 Trade payables Other payables Carrying amount of divested net assets 3, Gains from sales 3,940 3,212 Selling price received in cash 7,383 4,146 Cash disposed of, cf. above -1,142-1,816 Net cash flow effect 6,241 2,330 Financial statements 63

66 29 Operating lease commitments The parent company has entered into a car lease with a member of the Executive Board. The term of the agreement is 36 months. At 31 December 2008, the remaining term was 16 months. The fixed annual payment amounts to DKK 128 thousand, and DKK 128 thousand falls due within one year, while the rest of the commitment, DKK 43 thousand, falls due between one and two years. 30 Contingent liabilities, collateral and contractual obligations The parent company has provided a guarantee under which it assumes primary liability to lenders in Nordic Oslo Shipping and Nordic Copenhagen Co. Pte. Ltd., Singapore for finance loans which at 31 December 2008 amounted to USD 22.8 million. Moreover, the parent company has given a guarantee for the group s bankers share of the involvement in Nordic Seaarland Tankers B.V., which amounted to USD 74.8 million at 31 December The following has been provided as security vis-à-vis the parent company s bankers: The group s vessels have been pledged as security. The carrying amount totals USD million. Cash, USD 12.1 million for the group and USD 7.5 million for the parent company, has been pledged as security. The parent company s investment in subsidiaries, USD 12.1 million, has been pledged as security. The group s freight receipts have been pledged as security. Contractual obligations Nordic Tankers A/S has entered into an administration agreement with Difko Administration A/S. The agreement was terminated on 31 December 2008 with a notice of one year. The annual fee currently amounts to DKK 3.0 million, which is index-linked. The parent company has contracted to acquire a vessel valued at USD 51.9 million, of which USD 10.4 million was deposited on 31 December Contractual obligations amounting to USD 41.5 million remained outstanding at 31 December The vessel is scheduled for delivery in April Moreover, the group has, via the Dutch joint venture, contracted for two newbuildings at a total value of USD 83.9 million, of which the group s share amounts to USD 42.0 million. A prepayment of USD 17.1 million has been made, of which the group s share amounted to USD 8.55 million at 31 December Contractual obligations of USD 66.8 million for these two vessels under construction remained outstanding at 31 December 2008, of which the group s share amounted to USD 33.4 million. The vessels are scheduled for delivery in May and July Financial statements

67 31 Foreign exchange, interest rate and credit risks and application of financial instruments Parent company Group USD 1000 USD 1000 USD 1000 USD 1000 Foreign exchange, interest rate and credit risks and application of financial instruments Available-for-sale financial assets Available-for-sale financial assets Receivables from sales 3,386 3,224 11,373 6,747 Loans to jointly controlled entities 0 0 1,787 2,314 Other receivables 2,320 1,988 1,675 7,472 Cash 12,118 10,275 15,830 17,175 Loans and receivables 17,824 15,487 Derivative financial instruments used to hedge future 821 2,445 cash flows (interest rate swaps and collar) 2, ,445 Financial liabilities used as hedging instruments 2, ,785 20,147 Finance loans 117, ,166 1,097 1,769 Trade payables 3,083 3, ,944 Other payables 3,347 1,028 71,813 24,860 Financial liabilities measured at amortised cost 124, ,768 Financial statements 65

68 The group s risk management policy Due to its operations, investments and financing, the group is exposed to fluctuations in foreign exchange rates and the level of interest. The parent company monitors and manages the group s financial risks centrally and coordinates the group s liquidity management, including funding and investment of excess liquidity. The group pursues a finance policy which operates with a low risk profile, ensuring the foreign exchange, interest and credit risks arise only on the basis of commercial factors. Thus, it is group policy to exclusively use financial instruments to hedge risks. For further information on accounting policies and methods, including recognition criteria and basis of measurement, please see the section on accounting policies. Foreign exchange risks The group s foreign enterprises are only mildly sensitive to exchange rate fluctuations as earnings and costs are denominated in USD. The parent company is only mildly sensitive to exchange rate fluctuations as earnings and costs are primarily denominated in USD, except for staff costs and administrative expenses, which are denominated in DKK. Transactions in DKK and other currencies are not hedged. It is group policy not to hedge limited foreign exchange risks. As a result of the fact that the group s and parent company s earnings and costs as well as assets and liabilities are denominated and measured in USD, the foreign exchange risk is very limited, and no hedging instruments have been used to hedge cash flows or assets and liabilities. Because of the insignificant foreign exchange risk, no sensitivity analysis of fluctuations between USD and DKK has been prepared. Interest rate risk It is group policy to hedge interest rate risks on the group s borrowings when the management assesses that interest payments may be hedged at a satisfactory level compared with the associated costs. Hedging is generally accomplished using interest rate swaps, under which floating-rate loans are converted to fixed-rate loans, or using interest rate collars, under which maximum and minimum rates of interest are fixed for the portion covered. The group The fair value of the group s outstanding interest rate swaps contracted to hedge interest rate risks on floating-rate loans amounts to a liability, USD -1,614 thousand ( : a value of USD 572 thousand). The outstanding interest rate swaps have a nominal value of USD 27,500 thousand and run until 30 September 2010 ( : USD 27,500 thousand and until 2010). The fair value of the group s outstanding interest rate collars contracted to hedge interest rate risks (maximum/ minimum rate of interest) on floating-rate loans amounts to a liability, USD -1,148 thousand ( : a value of USD 334 thousand). The outstanding interest rate collar has a nominal value of USD 30,000 thousand and runs until 24 May 2010 ( : USD 30,000 thousand). The group s bank deposits are held in call accounts. Interest rate fluctuations affect the group s finance loans. A one percentage point increase in interest rates compared with the realised interest level would have had an adverse impact of USD 1.2 million (2007: USD 1.1 million) on results for the year and equity. A corresponding fall in interest rates would have had a corresponding positive impact on results for the year and equity. Parent company The fair value of the parent company s outstanding interest rate swaps contracted to hedge interest rate risks on floating-rate loans amounts to a liability, USD -1,254 thousand ( : a value of USD 487 thousand). The outstanding interest rate swaps have a nominal value of USD 20,500 thousand and run until 30 September 2010 ( : USD 41,000 thousand and until 30 September 2010). The fair value of the parent company s outstanding interest rate collar contracted to hedge interest rate risks (maximum/minimum rate of interest) on floating-rate loans amounts to a liability, USD -1,148 thousand ( : a value of USD 487 thousand). The outstanding interest rate collar has a nominal value of USD 30,000 thousand and runs until 24 May 2010 ( : USD 30,000 thousand). The parent company s bank deposits are held in call accounts. Interest rate fluctuations affect the parent company s finance loans. A one percentage point increase in interest rates compared with the realised interest level would have had an adverse impact of USD 0.8 million (2007: USD 0.8 million) on results for the year and equity. A corresponding fall in interest rates would have had a corresponding positive impact on results for the year and equity. The group s and parent company s interest-bearing financial assets and liabilities expose them to interest rate risks. In respect of the group s and parent company s financial assets and liabilities, the following contractual dates of reassessment and maturity, whichever is earlier, are listed below. 66 Financial statements

69 Date of revaluation/maturity Group Within Between After Of which 1 year 2-5 years 5 years Total fixed-rate USD 1000 USD 1000 USD 1000 USD 1000 USD Receivables from sales 3, ,386 0 Cash and cash equivalents 12, ,118 0 Finance loans -7,926-27,836-81, ,579 0 FX Forward Collar 30, ,000 30,000 Interest rate swaps 27, ,500 20,500 65,274-27,836-81,817-44,379 50, Receivables from sales 3, ,224 0 Cash and cash equivalents 10, ,275 0 Finance loans -11,872-47,488-79, ,166 0 Collar 30, ,000 30,000 Interest rate swaps 27, ,500 20,500 86,627-47,488-79,806-40, Date of revaluation/maturity Parent company Within Between After Of which 1 year 2-5 years 5 years Total fixed-rate USD 1000 USD 1000 USD 1000 USD 1000 USD 1000 Receivables from sales Cash and cash equivalents 7, ,472 0 Finance loans ,147-20,147 0 FX Forward Collar 30, ,000 30,000 Interest rate swaps 20, ,500 20, , ,147 38,663 50,696 Receivables from sales Cash and cash equivalents 1, ,675 0 Finance loans -6,975-26,436-36,374-69,785 0 Collar 30, ,000 30,000 Interest rate swaps 20, ,500 20,500 66,695-26,436-36,374 3,885 30,000 Financial statements 67

70 Liquidity risks It is group policy in connection with borrowing, etc to ensure the greatest possible flexibility through a diversification strategy whereby borrowings are spread across dates of maturity and renegotiation, including spread across fixed loans and overdraftstyle facilities. The group aims at having sufficient cash resources to enable it always to make appropriate arrangements in the event of unforeseen fluctuations in cash outflows. Cash resources are monitored on a current basis. Maturities of financial liabilities are specified in the notes. Group and parent company cash resources consist of cash and undrawn borrowing facilities. Credit risks It is group policy to cooperate with recognised pool partners on management of the group s earning conditions and the operation of vessels so as to minimise credit risks. The group s credit risk relates to receivables from pool arrangements contracted with recognised business partners. Consequently, this credit risk is deemed to be absolutely minimal and so receivables are not hedged. The group s maximum credit risk associated with receivables corresponds to their carrying amounts. Parent company Group USD 1000 USD 1000 USD 1000 USD 1000 Cash resources consist of the following: 1,675 7,472 Cash 12,118 10,275 26,700 7,345 Undrawn borrowing facilities 7,345 26,700 28,375 14,817 19,463 36,975 Optimisation of capital structure The company s management currently assesses whether the capital structure of the group complies with company and shareholder interests. The overall goal is to ensure a capital structure which supports long-term growth and at the same time maximises yield by optimising the balance between equity and debt, taking into due consideration any obligations to lenders. The group s capital structure is composed of finance loans and equity. Consolidated equity accounted for 46.9% ( : 43.3%) of the balance sheet total. The actual return on consolidated equity amounted to 4.0% in 2008 (2007: 25.8%). The prospectus for the IPO in 2007 stated that Nordic Tankers did not expect to distribute dividend for the first 2-3 years. The company would instead pursue an active investment policy. This strategy has been retained. Breach of loan agreement terms The group has not neglected or breached any loan agreement terms in the financial year or the comparative year. 68 Financial statements

71 32 Related parties Related parties with a controlling interest There are no related parties with a controlling interest in Nordic Tankers A/S. Supervisory and Executive Boards Nordic Tankers A/S group s related parties with a controlling interest include the members of the Supervisory and Executive Boards of the company as well as their related family members. Moreover, companies in which the above-mentioned persons hold significant interests are also considered related parties. For further information, please see note 5 concerning remuneration for the Supervisory and Executive Boards. The company has engaged in transactions with companies controlled by members of the Supervisory Board in the form of consulting services, which may be shown separately as follows: Member of the Supervisory Board Kurt Bjørndal: USD 8 thousand in 2008 and USD 95 thousand in Advokatfirmaet Bang&Regnarsen (member of the Supervisory Board Mads Roikjer): USD 371 thousand in 2008 and nothing in Nitasco APS (member of the Supervisory Board Jesper Bo Nielsen): USD 1,200 thousand in 2008 and nothing in Holdings of shares by the Supervisory and Executive Board as at 31 December 2008: Name Nominal Holding Holding holding (%) (shares) Mogens Buschard 4,142, ,200 Klaus Kjærulff Svend Rosenmeyer Paulsen Jens Fehrn-Christensen Jesper Tullin 750, ,000 Claus Breitenbauch 127, ,700 Flemming Krusell Sørensen 47, ,798 Other related parties Other related parties with whom Nordic Tankers A/S has had transactions: The subsidiaries, cf. list in note 14. Jointly controlled entities, cf. list in note 15. Transactions with subsidiaries: Dividends of USD 4,995 thousand received in 2007 and no dividend in Loans to subsidiaries of USD 11,373 thousand at 31 December 2007 and USD 6,747 thousand at 31 December Transactions with jointly controlled entities: Guarantees to lenders loaning money to jointly controlled entities, cf. comments in note Shareholder relations Nordic Tankers A/S has registered the following shareholders with more than 5% of the voting rights or nominal value of the share capital: 34 Glumsø Invest ApS: 449,492 shares (6.26%) reported on 15 December 2008 Danstig ApS: 380,000 shares (5.29%) reported on 20 June 2007 Events occurring after the balance sheet date After the balance sheet date, the entire Supervisory Board of the company was replaced at an extraordinary general meeting. No other significant events have occurred after the balance sheet date. Financial statements 69

72 Definitions and calculation formulas Unless otherwise stated, key figures and ratios have been calculated in accordance with the standards laid down by the Danish Society of Financial Analysts in Recommendations & Financial Ratios Gross margin (%) Operating margin (%) Return on invested capital (%) Return on equity (%) Assets/equity Financial gearing Operating asset gearing Revenue/ invested capital Net working capital/revenue Gross profit * 100 Revenue Operating profit * 100 Revenue EBITA * 100 Average invested capital Profit * 100 Average equity of parent company Total asssets Total equity Net interest-bearing debt Total equity Invested capital Total equity Revenue Average invested capital Average net working capital (NWC) Revenue Cash earnings are defined as profit/loss for the year distributed to the shareholders of the parent company plus the share of amortisation, depreciation and impairment losses attributable to the parent company s ownership interest. Net interest-bearing debt is defined as the sum of finance loans less cash and cash equivalents. Invested capital is defined as net working capital (NWC) plus property, plant and equipment and intangibles and less other provisions and other non-current operating liabilities. The equity ratio is defined as equity divided by total assets. This financial ratio is not defined in the Danish Society of Financial Analysts guidelines Recommendations & Financial Ratios Net working capital (NWC) is defined as inventories, receivables and other current operating assets less trade payables and other liabilities other than provisions as well as other current operating liabilities. 70 Financial statements

73 Fleet list NORDIC HELSINKI was built in 2007 at the Sekwang yard in Korea and was handed over directly to the company from the yard in November The vessel is wholly owned by Nordic Tankers A/S. NORDIC HELSINKI is 13,035 dwt with 14 tanks with a total volume of 14,352 m 3 for refined oil products and IMO2 chemicals. The vessel s 6-cylinder B&W 6,060 hp main engine gives her a speed of 13.5 knots when fully loaded. Like the NORDIC STOCKHOLM, this vessel has a 1,500 m 3 /hour inert gas system aboard. Eitzen Maritime Services (EMS) is the technical manager. NORDIC OSLO was built in 2005 at the Samho yard in Korea and was handed over in October 2005 to a company jointly owned with Eitzen Chemical ASA, Norway. On 2 July 2007, Nordic Tankers acquired all the shares in the now renamed company, Nordic Oslo Shipping Pte. Ltd. The vessel is now wholly-owned by Nordic Tankers A/S. NORDIC OSLO is 12,975 dwt with 14 tanks with a total volume of 14,300 m 3 for refined oil products and IMO2 chemicals. The vessel s 6-cylinder B&W 5,500 hp main engine gives her a speed of 13.4 knots when fully loaded. Eitzen Maritime Services (EMS) is the technical manager. The vessel is, for now, employed in South East Asia and is based in Singapore. NORDIC COPENHAGEN was built in 2005 at the Samho yard in Korea and was taken over in June 2005 by a company jointly owned with Eitzen Chemical ASA, Norway. On 29 June 2007, Nordic Tankers acquired all the shares in the now renamed company, Nordic Copenhagen Shipping Pte. Ltd. The vessel is now wholly-owned by Nordic Tankers A/S. NORDIC COPENHAGEN is 12,959 dwt with 14 tanks with a total volume of 14,300 m 3 for refined oil products and IMO2 chemicals. The vessel s 6-cylinder B&W 5,500 hp main engine gives her a speed of 13.4 knots when fully loaded. Eitzen Maritime Services (EMS) is the technical manager. For now, the vessel is employed on a fixed time charter in Northwest Europe. NORDIC STOCKHOLM was built in 2007 at the Samho yard in Korea and was handed over to the company in August The vessel is wholly owned by Nordic Tankers A/S. NORDIC STOCKHOLM is 12,885 dwt with 14 tanks with a total volume of 14,055 m 3 for refined oil products and IMO2 chemicals. The vessel s 6-cylinder B&W 5,500 hp main engine gives her a speed of 13.4 knots when fully loaded. The main difference from the two sister vessels NORDIC COPEN- HAGEN and NORDIC OSLO is a 1,500 m 3 /hour inert gas system which boosts the vessel s flexibility and earning power. Eitzen Maritime Services (EMS) is the technical manager. 71

74 NORDIC HANNE was built in 2007 at the G.S.I. yard in China and was acquired in January 2008 by Nordic Seaarland Tankers B.V. Nordic Tankers A/S has a 100% holding in the vessel in this joint venture. NORDIC HANNE is 38,396 dwt with 12 tanks with a total volume of 43,625 m 3 for refined oil products and IMO3 chemicals. The vessel s 6-cylinder B&W 10,710 hp main engine gives her a speed of 15.2 knots when fully loaded. Motia is the technical manager. NORDIC LISBETH was delivered in February 2006 from the Samsung yard in Korea and was taken over by the company in May The vessel is wholly owned by Nordic Tankers A/S. NORDIC LISBETH is 72,718 dwt with a total of 12 tanks of 83,344 m 3 in all for refined oil products. The vessel s 6-cylinder MAN B&W 15,010 hp main engine gives her a speed of around 15.7 knots when fully loaded. Torm is the technical manager. The vessel was sold and delivered to the buyer in December NORDIC PIA was built in 2006 at the G.S.I. yard in China and was acquired in October 2006 by Nordic Seaarland Tankers B.V. Nordic Tankers A/S has a 75% holding in the vessel in this joint venture. NORDIC PIA is 38,471 dwt with a total of 12 tanks with a total volume 43,625 m 3 for refined oil products and IMO3 chemicals. The vessel s 6-cylinder B&W 10,710 hp main engine gives her a speed of 15.2 knots when fully loaded. Motia is the technical manager. NORDIC RUTH was built in 2000 at the Daedong yard in Korea and was bought in July 2006 by Nordic Seaarland Tankers B.V. Nordic Tankers A/S has a 75% holding in the vessel in this joint venture. NORDIC RUTH is 35,820 dwt with a total of 12 tanks with a total volume 42,316 m 3 for refined oil products and a few chemicals. The vessel s 6-cylinder Sulzer 11,100 hp main engine gives her a speed of 14.4 knots when fully loaded. Motia is the technical manager. At end-2008, Nordic Tankers had three newbuildings on order: A 73,000 dwt product tanker for delivery in April 2009 and two 37,400 dwt product tankers for delivery in May and July

75 All ship photos in this annual report were taken in connection with Nordic Pia s call at ConocoPhillips refinery and oil terminal at Wilhelmshaven, Germany in mid-september Nordic Pia arrived in ballast to load oil from an island jetty situated 2 kilometres from the coast in the Jade Bay. Photographer: Eberhard Petzold. Photographer board: Erik Brahl. Design: DanChristensenDesign MDD Print: Tarm Bogtryk A/S

76 Nordic Tankers A/S 44 Soenderlandsgade DK-7500 Holstebro Phone: