2013/14 (financial year 1/5-30/4) UNI-TANKERS A/S. CVR No

Transcription

1 ANNUAL REPORT 2013/14 (financial year 1/5-30/4) UNI-TANKERS A/S CVR No

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3 i Contents Page Management's Statement and Auditor's Report Management's Statement 1 Independent Auditor's Report 2 Management's Review Company Information 4 Group Chart 5 Financial Highlights of the Group 6 Review 7 Consolidated and Parent Company Financial Statements Consolidated Statement Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement 14 Notes to Consolidated Annual Report Parent Company Income Statement Parent Company Balance Sheet 20 Parent Company Statement of Changes in Equity 22 Notes to Parent Company Annual Report 23 Accounting Policies 28 ) 1

4 Management's Statement The Exeeutive and Supervisory Boards have today presented and adopted the Annual Report of Uni-Tankers A/S for the finaneial year 1 May April The Annual Report was prepared in the Danish Financial Statements In our opinion, the Parent Company Financial Statements and the Consolidated Financial Statements give a true and fair view of the finaneial position of the Parent Company and the Group at 30 April and of the results of the Parent Company and Group operations and Consolidated cash In our opinion, Management's Review includes a true and fair account of the matters addressed in the Review. We recommend that the Annual Report be adopted at the Annual General Meeting. Middelfart, 2014 The Annual Report was presented and adopted at the Annual General Meeting of the Company on 2014 Chairman

5 Independent Auditor's Report To the Shareholder of Uni-Tankers A/S Report on Consolidated Financial Statements and Parent Company Financial Statements We have audited the Consolidated Financial Statements and the Parent Company Financial Statements of Uni-Tankers A/S for the finaneial year 1 May April 2014, which prise income statement, balance sheet, statement of changes in equity, cash flow statement, notes and summary of significant accounting policies for both the Group and the Parent Company. The Consolidated Financial Statements and the Parent Company Financial Statements prepared in accordance with the Danish Financial Statements Management's Responsibility for the Consolidated Financial Statements and the Parent Company Financial Statements Management is responsible for the preparation of Consolidated Financial Statements and Parent Company Financial Statements that give a true and fair view in accordance with the Danish Financial Statements Aet, and for such internal control as Management determines is necessary to enable the preparation of Consolidated Financial Statements and Parent Company Financial Statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on the Consolidated Financial Statements and the Parent Company Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements in accordance with Danish audit regulation. This requires that we with requirements and plan and perform the audit to obtain reasonable assurance whether the Consolidated Financial Statements and the Parent Company Financial Statements are free from material misstatement. An audit involves performing audit procedures to obtain audit evidence about the amounts and disclosures in the Consolidated Financial Statements and the Parent Company Financial Statements. The audit procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the Consolidated Financial Statements and the Parent Company Financial Statements, whether due to fraud or error. In those risk assessments, the auditor considers internal control relevant to the preparation of Consolidated Financial Statements and Parent Company Financial Statements that give a true and fair view in order to design audit procedures that are appropriate in the but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit includes evaluating the of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the Consolidated Financial Statements and the Parent Company Financial Statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. The audit has not resulted in any qualification.

6 Independent Auditor's Report Opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the position of the Group and the Company at 30 April and of the results of the Group and Parent Company operations and cash flows for the year 1 May April 2014 in accordance with the Danish Financial Statements Statement on Management's Review We have read Management's Review in accordance with the Danish Financial Statements We have not performed any procedures additional to the audit of the Financial Statements. On this basis, in our opinion, the information provided in Management's Review is eonsistent with the Consolidated Financial Statements and the Parent Company Financial Statements. Trekantområdet, June PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab State Authorised Public Accountant Carsten Dahl State Authorised Public Accountant 4

7 Company Information The Company Uni-Tankers A/S Turbinevej DK-5500 Middelfart Telephone: Facsimile: No.: Financial year: 1 May 30 April Municipality of reg. office: Middelfart Supervisory Board Michael Keldsen, Chairman Klaus Nyborg, Deputy Chairman Torben Østergaard-Nielsen Torben Janholt Peter Frederiksen Nina Østergaard Nielsen Morten Hultberg Buchgreitz Peter Korsholm Auditors Board Torben Østergaard-Nielsen Torben Andersen PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab Herredsvej 32 Vejle 5

8 Group Chart United Shipping 31 % UNI-TANKERS A/S 6

9 Financial Highlights of the Group Seen over a five-year period, the development of the Group is highlights: by the following finaneial Key figures Tncnme 2013/ / / / /10 USD '000 USD '000 USD '000 USD '000 Revenue 183, ,773 70,162 45,564 35,246 Profit before finaneial income and expenses (38,376) (4,905) (4,098) (7,283) Net financials (5,719) 1,789 (3,411) (3,381) (6,065) Profit before tax 612 (36,587) (8,316) (7,479) (13,348) Net profit for the year 1,534 (37,357) (7,186) (6,611) (11,785) Balance Sheet Balance sheet total 266, , , ,991 Equity 24,578 13,591 44,122 29,622 33,113 flow«cash flows from: - operating activities 8,938 5, (597) - investing activities (19,141) (89,905) (66,741) (1,003) (5,330) - hereof investment in property plant and and intangible assets (33,072) (89,955) (60,041) (1,003) (5,330) - financing activities 5,369 78,773 79, ,001 Change in cash and cash equivalents for the year (4,834) (5,574) 12,895 (217) 1,074 Ratios (%) Gross margin 37.3% 27.6% 35.0% 48.7% Profit margin 3.4% -26.9% -7.0% -9.0% -20.7% Return on equity 8.0% % -19.5% -22.3% -28.6% Liquidity ratio Solvency ratio 9.2% 5.3% 20.1% 18.3% 22.0% 7

10 Review Activities The main activity of the Group is to carry on shipping operations. The main object of the Parent Company is as a holding company to hold shares in the subsidiaries and to to the development of these. activities comprise shipping operations and related administration. The Group's headquarters is domiciled in Middelfart, Denmark, and is represented with offices in France, Turkey, and the USA. Development in the year The Group has realised EBITDA of USD 21.9 million (2012/13: USD 7.6 million), and a net profit of USD 1.5 million (2012/13: loss of USD 37.4 million). At the end of the year, equity to USD 24.6 million (2013: USD 13.6 million). As expected, the finaneial year turned out to be yet another turbulent year for the shipping which to a high degree has the Group's activities. The for small and intermediate tankers is still negatively impacted by overcapacity of tonnage, which tight around every cargo, and freight rates at levels. Especially the last quarter of the finaneial year, though, has shown positive signs of a market in a healthier and the Group has recorded TCE rates at levels higher than seen in recent years. The Group to divest two vessels, both in and them with two newer second vessels, in order to be to accommodate our customers' increasing demands for newer tonnage. The sales have a profit of USD 1.8 million, and the Group now operate a fleet of own vessels averaging 6.7 years of age. The total at the Group's disposal as at the end of the finaneial year comprises 39 vessels, as at the beginning of the year, however now with considerably more time chartered vessels compared to vessels in commercial management. is expected that the fleet increase during the year. Management has initiated implementation of a new strategy for the Group, focusing on streamlining the business and fleet development. The is still to be a safe and efficient tanker transportation provider, with great caution to safety and the and focus on profitability rather than size. Key to the beginning positive development, besides a freight market in better condition, is the staff of committed employees, who are dedicated to the Group a successful shipping company. As an average over the finaneial year the Group has employed 569 time employees, compared to 472 employees the year before. By the end of the finaneial year, on shore staff members counted 60, compared to 53 at beginning of the year. The majority of the on-shore employees are working from the Group's head office in Middelfart, which by August 2013 to new premises ("TurbineHallen") by the harbour in Middelfart. 8

11 Review Development in the year (continued) In spite of the positive net results and the positive signs seen in the market, management still do not that the development is structural, and the market is still very volatile. Under the given market management consider the result for the year satisfactory. At the end of the year, the Parent Company provided a group contribution totalling USD 7.9 million for the restoration of equity in subsidiaries in which the of ships have been written down following impairment tests. Investments recognised at cost in the Parent Company have similarly been written down for impairment by USD 7.9 million. Valuation of property, plant and equipment The net selling price of the fleet is generally determined by obtaining external broker valuations. In Management's opinion, such valuations do not give a true and fair view in a perspective as there is no active market for with ships such as those owned by the Group. In accordance with the accounting policies applied, an impairment test has been made as in previous years by the broker valuations with the calculated Utility value based on continued operation of the Group's fleet stated as the net present value of future estimated net freight income. The value of vessels is heavily affected by the development in freight rates, which is still to material uncertainty. Deviations in freight rates according the Managements' estimates thus affect the value in either positive or negative direction. Management have made their best estimate over development in freight rates etc, and consider the assumptions reasonable. The impairment test has not resulted in need for write downs on the Group's fleet. Capital resources and liquidity To strengthen the capital base of the Group, the parent A/S United Shipping & Trading Company, decided to convert a subordinate of USD 5.1 million to equity. Further than that, A/S United Shipping & Trading Company has injected capital by cash contribution of USD 4.4 million in connection with the purchase of the two new vessels in February The Group's framework agreement with the bank is effective the end of and management considers the current capital resources and liquidity adequate for the continued operations and development of the Group.

12 Review Financial risks Market risks The Group is exposed to the commercial risks that follow from the general freight market fluctuations. The market risk with respect to the Group's vessels, which form part of a time charter equivalent sharing (TCE) pool, is considered reduced compared to the Group handling the chartering itself. Further than that, focus is on maintaining a healthy balance between spot business and covered business, being by Contracts of Affreightment, time charters etc. Foreign risks USD as it's presentation currency, the Group is affected by transactions taking EUR and DKK. The Group's policy is to hedge material foreign exchange exposures. in Counterparty risk The Group is not exposed to any material risks relating to individual, large customers or business partners. The Group's policy for credit risks implies that all customers and business partners are to current credit rating. Expectations for 2014/15 The Group's earnings are still very dependent on the tanker market rate development which is still under pressure due to continued overcapacity in the market. These conditions are outside the control of the Group. Management look positively on next year knowing that the market will see yet another difficult year as a result of the continued imbalance between the supply and demand for tonnage. er, the operating results for 2014/15 are expected to improve compared to 2013/14. the bal Subsequent events No significant events affecting the assessment of the Annual Report have occurred ance sheet date. Statutory statement on social responsibility, cf. section 99 a of the Danish Financial Statements The Company's policies for corporate social responsibility are disclosed in the Financial Statements of A/S United Shipping & Trading Company for 10

13 Consolidated Income Statement 1 May - 30 April Note 2013/ /13 USD '000 USD '000 Revenue ,773 Direct expenses Other income 1,795 0 s profit 68,638 45,207 Staff expenses 2 29,347 24,073 Other expenses 17,301 13,582 Profit depreciation, etc. (EBITDA) 21,990 7,552 Depreciation, amortisation and impairment losses ,659 45,928 Profit/loss before finaneial income and expenses 6,331 (38,376) Financial income ,453 Financial expenses 4 6,116 6,664 Profit/loss before tax 612 (36,587) Corporation tax 5 (922) 770 Net profit/loss for the year 1,534 (37,357) 11

14 Consolidated Balance Sheet at 30 April Assets Note USD Software S Intangible assets 6 5,057 5,302 Vessels and Fixtures and fittings, tools and equipment Leasehold improvements 226, , Property, plant and equipment 7 227, , , ,111 Inventory offtieland 5,102 3,759 Inventories / receivables from group enterprises Other receivables Deferred tax asset 8 8, ,989 2,625 4,113 5, ,511 3,499 1,347 Receivables 17,889 11,508 and 10,881 15,715 Current 33,872 30,982 Total assets 266, ,093 12

15 Consolidated Balance Sheet at 30 April Equity and liabilities Note '000 capital 5,993 3,099 Retained earnings 18,585 10,492 Equity y A /o 1 1 Pension obligations Provisions loan from group enterprise 0 5,074 Credit institutions 217, ,168 liabilities , ,242 Credit institutions 4,459 0 x 8, Payables to group enterprises 4,262 3,965 Corporation tax Other payables 4,043 Deferred income 1,402 1,279 Short-term liabilities 24,001 18,228 Liabilities 241, ,470 Total equity and liabilities 266, ,093 Deferred tax and contractual obligations Transactions with parties Fee to auditors appointed at the general meeting 13

16 Consolidated Statement of Changes in Equity Retained capital earnings Total USD '000 USD '000 USD ' /14: Equity at 1 May 3,099 10,492 13,591 Capital increase 2,894 6,592 9,486 Exchange rate 0 (33) (33) Net profit/loss for the year 0 1,534 1,534 Equity at 30 April 5,993 18,585 24, /13: Equity at 1 May 2,664 41,458 44,122 Capital increase 435 6,398 6,833 Exchange rate adjustments 0 (7) (7) Net profit/loss for the year 0 (37,357) (37,357) Equity at 30 April 3,099 10,492 13,591 14

17 Consolidated Cash Flow Statement 1 May - 30 April 2013/ /13 USD '000 USD '000 Profit/loss for the year before tax Reversal of depreciation, amortisation, profit from sale of assets, and exchange rate adjustments the year Changes in inventories Changes in receivables Changes in payables and other debt, etc Pension obligations ,849 (1,343) (7,255) 855 (10) (36,587) 45,946 (1,546) (698) (2,185) 3 Cash flows from ordinary activities 6,708 4,933 Corporation tax received 2, Cash flows from operating activities 8,938 5,558 Purchase of property, plant and equipment Sale of property, plant and equipment Purchase of intangible assets (32,645) 13,931 (427) (89,747) 50 (208) Cash flows from investing activities (19,141) (89,905) Capital increase Repayment/raising of loans from credit institutions (net) Repayment/raising of loans from group enterprises (net) 9, (5,074) 6,833 71, Cash flows from activities 5,369 78,773 Change in and cash (4,834) (5,574) Cash and cash equivalents at 1 May 15,715 21,289 Cash and cash equivalents at 30 April 10,881 15,715 15

18 Notes to the Consolidated Annual Report 2013/ /13 r 1 Segment information The Group's activities are considered one segment. 2 Staff expenses Rented crew 10,482 8,096 Wages and salaries 8,692 Pensions Social security expenses Other staff expenses 6,537 6,476 29,347 24,073 Average number of employees The figures include rented crew on ships Financial income Exchange adjustments 366 8,371 Other finaneial income ,453 expenses Intercompany interest expenses Exchange adjustments Other finaneial expenses 6,233 6,116 6,664 Corporation tax (209) 496 Change in tax re. previous years 0 Change in deferred tax (905) (922) 770

19 Notes to the Consolidated Annual Report Goodwill on consolidation Software USD USD '000 6 Intangible assets Cost at 1 May 5, Additions for the year April 5, Depreciation and amortisation at 1 May Depreciation and amortisation for the year Depreciation and amortisation at 30 April 1, at 30 April 4, Fix. & fit., Vessels and tools and improve- USD USD '000 Property, plant and equipment Cost at 1 May 309, Additions for the year Disposals for the year 53, Cost at 30 April 287,923 1, Depreciation and impairment losses at 1 May 87, Depreciation for the year 14, Reversed depreciation on disposals for the year 41, Depreciation and impairmenttossesat 30 April 61, amount at 30 April 226,

20 Notes to the Consolidated Annual Report '000 '000 Deferred tax asset Deferred tax at 1 May (3,499) (4,401) beginning of year 2, of tax rate Exchange adjustment (116) 60 Change for the year (1,392) 274 Deferred tax at 30 April (2,625) (3,499) Deferred tax relates to tax losses the next year. and is not expected to be fully utilised in 9 Equity The share capital consists of shares of DKK or multiples hereof Within the last 5 years following changes has been made to the Company's share capital: - increased with USD 2,894k - increased with USD 435k - increased with USD 870k 10 Long-term part of installments falling due within 1 year are recognised as short-term liabilities in the balance sheet. 11 Deferred tax Tax on transitional balance and equalisation balance relating to vessels amounts to USD 18

21 Notes to the Consolidated Annual Report 12 Security and contractual obligations The Group has provided security totalling USD 270,794k in vessels and equipment for debt to credit institutions. At the balance sheet date, the carrying amount assets provided as security was USD 226,662k. The Group has concluded contracts with the following obligations: - Tenancy contract with parties with a total obligation of USD 65k. - Tenancy contract with group enterprises with a total obligation of USD 2,202k. - Operating leases with a total obligation of USD 486k. - Time charter contracts with a total obligation of USD 27,399k. The Danish group enterprises are jointly and severally liable for tax on the Consolidated jointly taxed income etc. The total corporation tax payable is shown in the Annual Report of Selfinvest ApS, which is the management joint taxation. The Danish group enterprises are moreover jointly and severally liable for Danish taxes. Any subsequent adjustments of corporation tax and withholding taxes that the Company is liable for a higher amount. 13 Transactions with related parties Related parties comprise the Supervisory Board, the Board and senior in the group enterprises as well as in which these persons have significant interests. In the year, there have been no transactions with the Supervisory Board, the Exeeutive Board, senior officers, significant shareholders, group enterprises or other related parties, except for transactions which have been eliminated in the Consolidated Financial Statements and consuking fees settled on an basis. The Company is included in the Consolidated Financial Statements Company, A/S Shipping & Trading Company. Parent Controlling interest is exercised through the immediate Parent Company, A/S Unked Shipping & Trading Company. The Company's ukimate Parent Company which prepares Consolidated Financial Statements is in which Torben Østergaard- Nielsen, CEO, exercises control. 19

22 Notes to the Consolidated Annual Report Fee to auditors appointed at the general meeting PricewaterhouseCoopers: 2013/ /13 USD USD Fee for statutory audit Assurance 5 0 Tax services 24 services _ 223 MooreStephens: Fee for statutory audit 7 12 Non-audit services 14_

23 Parent Company Income Statement 1 May -30 April Note 2013/ /13 USD '000 USD 25,548 14,285 Other income 11 0 s profit 25,559 14,285 Staff expenses Other external expenses 1 23,819 2,009 13,196 1,223 Profit before depreciation, etc. (EBITDA) (269) (134) Depreciation and amortisation Profit/loss before finaneial income and expenses (473) (260) Impairment in subsidiaries 7 7,900 39,400 Financial income Financial expenses Profit/loss before tax (8,309) (39,425) Corporation tax Net for the year (8,597) (39,760) Distribution of profit Proposed distribution of profit Retained earnings (8,597) (39,760) (8,597) (39,760) 21

24 Parent Company Balance Sheet at 30 April Assets Note ren Software D Intangible assets Fixtures and fittings, tools and equipment Leasehold Property, plant and equipment Investments in subsidiaries 36,144 36,115 asser ,132 36,517 receivables 3 0 Receivables from group enterprises 20,126 10,216 Other receivables Prepayments Receivables 20,488 10,321 Cash and cash equivalents 5,053 13,728 Current assets 25,541 24,049 Total 62,673 60,566 22

25 Parent Company Balance Sheet at 30 April Equity and liabilities Note USD '000 USD '000 Share capital Retained earnings 5,992 12,918 3,099 14,924 Equity 8 18,910 18,023 Subordinate loan from group enterprise 0 5,074 Long-term liabilities 0 5,074 payables Payables to group enterprises Corporation tax Other payables ,267 1, , ,291 Short-term liabilities 43,763 37,469 Liabilities 43,763 42,543 Total equity and liabilities 62,673 60,566 Security and contractual obligations Transactions with related parties Ownership

26 Statement of Changes in Equity Share capital earnings Total '000 USD '000 USD ' /14: Equity at 1 May 3,099 14,924 18,023 of 1, ,207 Capital increase 1,686 6,591 8,277 Net profit/loss for the year 0 (8,597) (8,597) Equity at 30 April 5,992 12,918 18, /13: Equity at 1 May 2,664 48,286 50,950 Capital increase 435 6,398 6,833 Net profit/loss for the year 0 (39,760) (39,760) Equity at 30 April 3,099 14,924 18,023 24

27 Notes to the Parent Company Annual Report 2013/ /13 Staff expenses USD '000 USD '000 crew 1 Wages and salaries 7,255 3,971 Pensions Social security expenses Other staff expenses 5,638 2,023 23,819 13,196 Average of employees Staff include the salaries of crew in the company's subsidiaries. These expenees are to the ship owning and reeognized as Financial income Intercompany interest income Financial expenses Intercompany interest expenses A Exchange adjustments Other finaneial expenses tax Change in tax relating to previous years Corporation tax

28 Notes to the Parent Company Annual Report Software 5 Intangible assets May 188 Additions for the year 427 Cost at 30 April 615 Amortisation at 1 May 25 Amortisation for the year 73 Amortisation at 30 April 98 amount at 30 April 517 Fixtures and fittings, tools Leasehold and USD '000 USD '000 6 Property, plant and equipment Additions for the year Disposals for the year April 634_ 74 Depreciation at 1 May Depreciation for the year 24 Reversed depreciations at disposal Depreciation at 30 April 57 amount at 30 April

29 Notes to the Parent Company Annual Report in 7 Fixed asset investments Cost at 1 May 75,515 Additions for the year 7,929 Cost at 30 April 83,444 Valuation adjustment 1 May -39,400 Impairment losses -7,900 Valuation adjustment April -47,300 amount at 30 April 36,144 Investments in group enterprises are specified as follows: of registered Ownership share hartering A/S Middelfart 100% Uni-Chartering (Gibraltar) Ltd. Gibraltar 100% Uni-Chartering Nice, Frankrig 100% Uni-Tankers m/t "Jutlandia Swan" ApS Middelfart 100% Uni-Tankers m/t "Selandia Swan" ApS Middelfart 100% Uni-Tankers m/t Swan" ApS Middelfart 100% Uni-Tankers m/t 'Erria Swan" ApS Middelfart 100% Uni-Tankers m/t "Mona Swan" ApS Middelfart 100% Uni-Tankers m/t Swan" ApS Middelfart 100% Uni-Tankers m/t Swan" ApS Middelfart 100% Uni-Tankers m/t "Anhout Swan" ApS Middelfart 100% Uni-Tankers m/t Swan" ApS Middelfart 100% Uni-Tankers m/t 'Falstria Swan" ApS Middelfart 100% Uni-Tankers m/t Swan" ApS Middelfart 100% Uni-Tankers m/t Swan" ApS Middelfart 100% Uni-Tankers m/t Swan" ApS Middellart 100% Uni-Tankers m/t 'Feo Swan" ApS Middelfart 100% Uni-Tankers m/t Swan" ApS Middelfart 100% Uni-Tankers m/t 'Fenno Swan" ApS Middelfart 100% Uni-Tankers m/t 'Endelo Swan" ApS Middelfart 100% 27

30 Notes to the Parent Company Annual Report 8 Equity The share capital consists of shares following changes has been made to the Company's share capital: or multiples hereof. Within the last 5 years - increased USD 2,894k - increased with USD 435k - increased USD 870k 9 Security and contractual obligations The Company has issued a joint and several guarantee of USD 223,445k in respect of the obligations of group enterprises toward credit institutions. At the balance sheet date, the obligations of group enterprises amounted to USD 223,445k. Investments in institutions. have been provided as security for loans from credit The Company has an operating lease with a total obligation of USD 253k and a tenancy contract with group enterprises with a total obligation of USD 10 Transactions with related parties Related parties comprise the Supervisory Board, the Exeeutive Board and sentor in the group enterprises as well as in which these persons have significant interests. In the year, there have been no transactions with the Supervisory Board, the Exeeutive Board, senior officers, significant shareholders, group enterprises or other related parties, except for intercompany transactions which have been in the Consolidated Financial Statements and fees settled on an basis. The Danish group enterprises are jointly and severally liable for tax on the Consolidated jointly taxed income etc. The total corporation tax payable is shown in the Annual Report of Selfinvest ApS, which is the management of the joint taxation. The Danish group enterprises are moreover jointly and severally liable for Danish withholding taxes. Any subsequent adjustments of corporation tax and withholding taxes that the Company is liable for a higher amount. 28

31 Notes to the Parent Company Annual Report The following shareholders are in the Company's register of shareholders as holding at 5% of the votes or at 5% of the share capital: A/S United Shipping & Trading Co., Turbinevej Erria A/S, Amager Strandvej 350, 2., DK-2770 Kastrup. DK-5500 Middelfart. The Company is included the Consolidated Financial Statements immediate Parent Company, A/S United Shipping & Trading Company. 29

32 Accounting Policies Basis of Preparation The Annual Report of Uni-Tankers A/S for has been prepared in accordance with the provisions of the Danish Financial Statements Aet applying to large enterprises of reporting class C. Recognition and measurement The Financial Statements have been prepared based on the historie cost principle. Revenues are recognised in the income statement as earned, and all expenses to the earnings for the year are deducted. Expenses include operating expenses, depreciation, amortisation, impairment losses and provisions as well as changes due to accounting esti- Furthermore, value adjustments of finaneial assets and liabilities measured at fair value are recognised in the income statement. Assets are recognised in the balance sheet when it is probable that future economic benefits attributable to the asset will flow to the Group, and the value of the asset be measured reliably. Liabilities are recognised in the balance sheet when it is probable that future economic benefits will flow out of the Group, and the value of the liability can be measured reliably. Assets and liabilities are initially measured at cost. Subsequently, assets and liabilities are measured as deseribed for each item Recognition and measurement take into account profits, losses and risks occurring before the presentation of the Annual Report which relate to affairs and conditions existing at the balance sheet date. USD is used as the measurement All other are regarded as foreign cies. Translation policies Transactions in foreign currencies are translated during the year at the exchange rates at the dates of transaction. Gains and losses arising due to differences between the date rates and the rates at the dates of payment are recognised in finaneial income and expenses in the income statement. Receivables, payables and other monetary items in foreign currencies are translated at the exchange rates at the balance sheet date. Any differences between the exchange rates at the balance sheet date and the transaction date rates are recognised in finaneial income and expenses in the income statement; however, see the paragraph on hedge accounting. Upon recognition of foreign group enterprises and group enterprises presenting finaneial statements in foreign currencies, income statement items are translated into Danish kroner at average exchange rates and balance sheet items are translated at the exchange rates at the balance sheet date. Exchange adjustments arising on this translation are recognised in equity. 30

33 Accounting Policies Basis of consolidation The Consolidated Financial Statements comprise the Parent Company, Uni-Tankers A/S, and subsidiaries in which the Parent Company or holds more than 50% of the votes or otherwise control. On consolidation, items of a uniform nature are income and expenses, shareholdings, dividends and profits and losses on transactions between the Elimination is made of intercompany as well as of realised and unrealised enterprises. or established enterprises are included in the Consolidated Financial Statements from the time of acquisition or establishment. The difference between cost and net asset value of the enterprise acquired is determined at the date of acquisition after fair value adjustment of the individual assets and liabilities (the purchase This includes allowing for any provisions determined in relation to the enterprise acquired. Positive differences (goodwill) are recognised in intangible assets in the balance sheet as goodwill, which is amortised in the income statement on a basis over its estimated useful however, not 20 years. Changes in the purchase after takeover result in adjustment of the acquisition value of goodwill. Moreover, goodwill is adjusted where, at the time of takeover, the fair value of the net assets taken over turns out to differ from the value assumed. Goodwill is adjusted unthe end of the finaneial year following the year of acquisition. Derivative finaneial instruments Derivative finaneial instruments are initially recognised in the balance sheet at cost and are subsequently remeasured at their fair values. Positive and negative fair values of derivative finaneial instruments are recognised in "Other receivables" and "Other payables", Changes in the fair values of derivative finaneial instruments are recognised in the income statement unless the derivative finaneial instrument is designated and qualify as hedge accounting, see Hedge accounting Fair value hedges: Changes in the fair values of derivative finaneial instruments that are designated and qualify as fair value hedges of a recognised asset or a recognised liability are recognised in the income statement as are any changes in the fair value of the hedged asset or the hedged liability. Hedges future assets or liabilities: Changes in the fair values of derivative finaneial instruments that are designated and qualify as hedges of expected future transactions are recognised directly in retained earnings under equity. the hedged transaction results in an asset or a liability, the amount is transferred from equity to the cost of the asset or the liability, respectively. If the hedged transaction results in an income or an expense, the amount is transferred from equity to the income statement in the period in which the hedged transaction is recognised. The amount is recognised in the same item as the hedged transaction. 31

34 Accounting Policies This is consid Income Statement Revenue Revenue is recognised in the income statement when the sale has been ered the case when has been made before year end; a binding sales agreement has been made; the sales has been determined, and payment has been or with reasonable be expected to be Revenue is recognised exclusive of VAT and duties, and income is cut off and recognised over the duration of the voyages. Direct expenses Direct expenses include bunkers and other voyage expenses. Other income Other income includes profit from sales of assets. Other external expenses Other external expenses include expenses for the repair and expenses, etc. Staff expenses of ships as well as Staff expenses comprise wages and salaries as well as payroll expenses. Income from investments in subsidiaries The item "Income from investments in subsidiaries" includes dividend received from subsidiaries in the year. Financial income and expenses Financial income and expenses comprise interest, realised and unrealised exchange gains and losses, as well as changes in the fair value of finaneial instruments. Tax on the profit/loss for the year The Company's tax is computed to the provisions of the Danish Tonnage Tax On the basis of the Company's planned shipowning operations, the Tonnage Tax does not recapture of depreciation, and therefore deferred tax for these is in the note "Deferred tax". 32

35 Accounting Policies Balance sheet Intangible assets Software is measured at cost less accumulated amortisation. Software is amortised over 5 years. Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost comprises the cost of acquisition and expenses directly related to the acquisition up until the time when the asset is ready for use. Depreciation based on cost by any residual value is on a straight-line basis over the expected useful lives of the assets: Fixtures and fittings, tools and equipment Vessels (newbuilding) Vessels (not newbuilding) Leasehold improvements 3-6 years 25 years up to 25 years lease term Vessels and equipment are measured at cost less accumulated depreciation calculated on a straight-line basis over the period until either the end of the expected useful life or the time of expected phasing out. At the establishment of expected useful life, the condition and age of vessels are considered. At the establishment of the time of expected phasing out, the provisions of the MARPOL are considered. The values of vessels are determined as the selling value after 25 years of use as estimated by external ship broker. expenses are added to the amounts of the vessels at the time of payment and are on a straight-line basis over the expected useful lives of the improvements, on average 2.5 years. Impairment property, plant and equipment The carrying amounts of property, plant and equipment are reviewed on an annual basis to determine whether there is any of impairment other than that expressed by depreciation. If so, an impairment test is earried out to determine whether the recoverable amount is than the carrying amount, and the asset is written down to its lower recoverable amount. 33

36 Accounting Policies Property, plant and equipment (continued) Impairment property, plant and equipment (continued) The recoverable amount of the asset is calculated as the higher of net selling use. and value in The recoverable amount of ships has been determined on the basis of the value in use as the value in use is considered higher than the fair value. The value in use is calculated by of cash flow estimates of the expected useful life of the vessel based on approved budgets for the coming finaneial year as well as the following estimated development. A discount rate of 8% p.a. after tax and exchange rates at the level of the actual rates of exchange at 30 April have been applied. The most material applied at the of the value in use are as follows: Cash flows are based on normal earnings over the remaining life of the vessel based on the expected total life, accounting policies applied. Freight rates for the coming years are estimated based on experience, knowledge of the market and input from the Company's business partners. As from the finaneial year an annual increase in freight rates corresponding to the market having the expected level in is estimated. Hereafter, an annual increase in freight rates corresponding to 2.5% is estimated. Operating and administrative expenses are based on experience and of the general development in expenses. As from expenses are expected to increase by 2.5% annually. expenses are estimated based on experience and already planned dockings. expenses are expected to increase by 2.5% annually. Investments in subsidiaries in subsidiaries are measured at the lower of cost and net value. Receivables Receivables are measured in the balance sheet at the lower of amortised cost and net realisable value, which to nominal value less provisions for bad debts. Provisions for bad debts are determined on the basis of an individual assessment of Prepayments Prepayments comprise prepaid expenses concerning rent, insurance premiums, and interest. 34

37 Accounting Policies Provisions Provisions are recognised when in of an event before or on the balance sheet date - the Company has a legal or obligation and it is probable that economic benefits must be given up to settle the obligation. Deferred tax assets and liabilities Deferred tax is recognised in respect of all temporary differences between the carrying amount and the tax base of assets and liabilities. However, deferred tax is not recognised in respect of temporary differences concerning goodwill not deductible for tax purposes. Deferred tax is measured on the basis of the tax and tax rates that will be effective under the legislation at the balance sheet date when the deferred tax is expected to crystallise as tax. cases where the computation of the tax base be made to alternative tax rules, deferred tax is measured on the basis of the intended use of the asset and settlement of the liability, respectively. Deferred tax assets, including the tax base of tax loss carry-forwards, are measured at the value at which the asset is expected to be realised, either by elimination in tax on future earnings or by set-off against deferred tax liabilities. Deferred tax assets and liabilities are offset within the same legal tax entity. Current tax receivables and liabilities Current tax receivables and liabilities are recognised in the balance sheet at the amount calculated on the basis of the expected taxable income for the year and adjusted for tax on taxable infor prior years. Tax receivables and liabilities are offset if there is a legally right of set-off and an intention to settle on a net basis or Financial debts Fixed-interest loans from credit institutions, are recognised initially at the proceeds received net of transaction expenses Subsequently, the loans are measured at amortised cost; the difference between the proceeds and the nominal value is recognised as an interest expense in the income statement over the loan period. Other debts are measured at amortised cost, substantially corresponding to nominal value. Deferred income Deferred income payments received in respect of income in subsequent years. Cash flow statement The cash flow statement shows the Group's cash flows for the year broken down by operating, investing and financing activities, changes for the year in cash and cash equivalents as well as the Group's cash and cash equivalents at the beginning and end of the year. No cash flow statement has been prepared for the Parent Company as the Parent Company cash flows are included in the Consolidated Cash Flow Statement. 35

38 Accounting Policies Cash flows from operating activities Cash flows from operating activities are calculated as the net profit/loss for the year adjusted for changes in working capital and operating items such as depreciation, amortisation and impairment losses, and provisions. Working capital comprises current assets less short-term debt excluding items included in cash and cash equivalents. Cash flows from investing activities Cash flows from investing activities comprise cash flows from and disposals of intangible assets, property, plant and equipment as well as fixed asset investments. Cash flows from activities Cash flows from financing activities comprise cash flows from the raising and repayment of long-term debt as well as payment of dividend to shareholders. Cash and cash equivalents Cash and cash equivalents comprise the items "Cash at bank and in well as "Credit institutions" under short-term debt. under current assets as The cash flow statement be immediately derived from the published finaneial 36

39 Accounting Policies Definition of finaneial ratios Gross margin = Profit margin = Return on equity = Liquidity ratio = Solvency ratio = Gross profit x Revenue Profit before financials x 100 Revenue Net profit for the year x Average equity Current assets Short-term debt Equity at year end x Total assets 37

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