// Annual report // Contents

Transcription

1 Annual report 2015

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3 // Annual report // Contents // Welcome on board as our guest! s. 5 // A win-win situation for freight carriers and the environment s. 9 // Annual report for 2015 s. 12 // Consolidated income statement Fjord Line Group s. 21 // Consolidated balance Fjord Line Group s. 22 // Cash flow statement Fjord Line Group s. 25 // Accounting policies Fjord Line Group s. 27 // Notes Fjord Line Group s. 30 // Income statement Fjord Line AS parent company s. 47 // Balance sheet Fjord Line AS parent company s. 48 // Cash flow statement Fjord Line AS parent company s. 51 // Accounting policies Fjord Line AS parent company s. 52 // Notes Fjord Line AS parent company s. 55 Life is a journey. From A to B, and from one experience to another. We move people. At sea and on land, across borders and across generations. We are the world s top Scandinavian travel experts. Born and raised in Norway. Scandinavian at heart. We are Fjord Line. We move people.

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5 // Annual report 2015 // Welcome on board 5 // Welcome on board as our guest! When you travel on one of Fjord Line s ferries, you are not just a passenger and a traveler; you are our guest. Fjord Line employees have an expression that sums up how our guests should be treated: Yes of course! No task is too big or too small. No question is left unanswered. Everything must be dealt with in the best interests of our guests, with a smile, in line with the company s values of drive, responsibility, respect and commitment. Guest satisfaction is namely the key to success. It must infuse each of the around 900 employees in Fjord Line, whether they are greeting their guests during booking and ticket control, directing effective boarding and parking on the vehicle deck, making dinner on board a fantastic culinary experience or in other ways trying to make the voyage a memorable experience and much more than a regular ferry trip. OVER ONE MILLION GUESTS When Elisabeth and Stein Otto Hole from Bergen arrived at the terminal to board the cruise ferry MS Stavangerfjord on Wednesday 28 October 2015, they were showered with roses, escorted to the luxury suite, treated to a complimentary dinner and taken to meet the captain. Although everyone on board is treated as guests, this reception was a bit unusual. The arrival of the Bergen couple represented a milestone for Fjord Line; one million passengers, and with two months left in the year. In 2015 Fjord Line carried a total of 1,115,199 passengers on the routes between Norway, Denmark and Sweden, representing an increase of 27 percent on the previous year. There was a similar increase in the number of accompanying vehicles on the sailings. The company s annual report notes that this growth bodes well for the coming years. An increase of 27 percent on ,115,199 GUESTS IN 2015

6 6 GUEST INSIGHTS WITH IMPORTANT FEEDBACK Guest satisfaction does not happen by itself. This is why employees complete a YES Service Program with our own specially trained coaches. It is also very important to get feedback from guests, both positive and negative. All guests are invited to submit comments after their trip, and many of these are published on Fjord Line s intranet. And the comments can sometimes be quite personal. I want to give a compliment. Kristian Bloch served me and my colleagues at the buffet. You can be proud of him wrote a guest who sailed with MS Bergensfjord from Hirtshals to Stavanger on16 February You are a step ahead of your competition, everything just works well, and the staff was very friendly THROUGHOUT THE WHOLE TRIP, starting at the ticket office, those who directed us on board and everyone on the ship. I think you deserve to hear from someone who travels frequently with you wrote a Danish truck driver on 27 March The staff treats everybody equally. Everyone receives great help, and they can answer every question and the like. They treat you with respect and courtesy, even though some guests are argumentative and difficult wrote a regular guest on MS Oslofjord between Sandefjord and Strömstad on 9 February I am now back in Norway and I must say that Fjord Line deserves a very positive review. Nice and clean, very pleasant service not exaggerated but tactful; the whole ship worked together as a family. I usually let people know if something is not right, but with you EVERYTHING was right! wrote a guest on 21 January 2016 after traveling with MS Bergensfjord and MS Stavangerfjord. We would also like to commend the staff who worked hard all the time to make us as comfortable as possible in the midst of the bad weather. I hope you will pass this compliment on to the staff who looked after us. You must have trained your staff well! was the feedback received on 2 February 2016 from a tour leader for a group on board MS Stavangerfjord.

7 // Annual report 2015 // Welcome on board 7 THE FJORD CLUB FAMILY Another way to create guest satisfaction is of course to offer competitive prices, whether for trip tickets, food and drink, products sold on board the ships, or offers from our partner hotels and attractions onshore. If you become a member of Fjord Club, you have a better chance of getting a good bargain through special member prices and discounts. You also earn bonus points and receive newsletters and invitations. You can become a Fjord Friend and create your own profile with interests and preferred travel days and in this way meet likeminded travelers on board and have an even more enjoyable trip. Fjord Club is intended to create a sense of belonging and loyalty. It is Fjord Line s way of showing that we appreciate our guests. At the end of March 2016 Fjord Club had 160,000 members, and the number is constantly growing. Welcome on board Fjord Line as our guest! 160,000 MEMBERS as of per 30 April 2016

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9 // Annual report 2015 // Freight and environment 9 // A win-win situation for freight carriers and the environment Moving heavy transport from road to sea on one of Fjord Line s modern cruise ferries reduces emissions and benefits the community through reduced road wear and safer traffic. When the Sandnes-based company Ørland Transport AS signed an agreement with Fjord Line on large-scale special transport of heavy concrete elements on the ferry from western to eastern Norway, it was not just fuel cost savings that counted; environmental considerations were equally important. On Thursday 7 April 2016, MS Stavangerfjord sailed from Stavanger with the first three load carriers filled with concrete elements safely secured to the vehicle deck. Each load weighed 25 tonnes. In the first phase, tonnes of concrete elements will be transported by ferry to Langesund for use as walls and floor or roof components in office buildings under construction in Porsgrunn, Oslo and other locations. Later in the year even heavier concrete loads will be coming on board the ferries. With this we are making our contribution to comply with the goal of moving heavy transport from road to sea to save the environment and reduce wear on the road system, said General Manager Kjell Haugland in Ørland Transport following the first major shipment of concrete elements on Fjord Line s cruise ferry. NEW DOMESTIC ROUTE IN WESTERN NORWAY For the cargo department in Fjord Line, the transport agreement with Ørland Transport is a good example of how ferry capacity can be used for the benefit of both freight carrier customers and the environment. The company has long argued that there are significant environmental benefits to be gained by shipping cargo and heavy transport by ferry, not least because Fjord Line s two cruise ferries MS Stavangerfjord and MS Bergensfjord are powered by liquefied natural gas (LNG) and emit significantly lower levels of greenhouse gases and particles than ships using more conventional fuels. Consequently, the decision to relax the Norwegian customs and excise rules from 1 January 2016 was important to Fjord Line, since it allows the company to use its ports of call in Bergen and Stavanger for domestic transport during the daily sailings to Hirtshals in Denmark.

10 Bergen Oslo Sandefjord Stavanger Langesund Strömstad Hirtshals Gothenburg Killingholme London Zeebrugge Fjord Line CLdN

11 // Annual report 2015 // Freight and environment 11 54,038 TRAILER TRUCKS IN 2015 An increase of six percent on By simply distinguishing between domestic and international passengers on board the ferries, a significant amount of unused cargo capacity between the two western Norwegian cities could be marketed and utilized. The possibility of domestic shipping between Bergen and Stavanger has given Fjord Line access to a whole new market for cargo and passengers. Since its launch, interest in this domestic service has been steadily increasing, and the company has high hopes for the new route along a beautiful stretch of Norway s west coast. EUROPEAN SHIPPING COOPERATION Another exciting shipping market has opened up through the commercial partnership between Fjord Line and maritime shipping company CLdN ro-ro SA. From February 2016 Fjord Line gained access to CLdN s European cargo transport network. As part of the agreement, CLdN will add Hirtshals in Denmark as a stop on their shipping route between Zeebrugge in Belgium and Gothenburg in Sweden. In this way Fjord Line can combine CLdN s shipping route with its own cargo transport on the Bergen-Stavanger-Hirtshals and Langesund-Hirtshals routes. Fjord Line s cargo department can now offer fast and cost efficient shipping to and from Zeebrugge in Belgium, where there are frequent onward connections by sea to London (Purfleet) and Killingholme in the UK, and overland transport onwards through continental Europe. Similarly, Fjord Line can offer transportation of cargo between Gothenburg in Sweden and the two major cities in western Norway, in addition to Langesund in Telemark County. We are proud to contribute to reducing environmental emissions, sparing a heavily used road network from further wear, and improving traffic safety. - RUNE HETLAND, CARGOSJEF INCREASED NUMBER OF TRAILER TRUCKS ON BOARD Fjord Line has long held a solid share of the market for trailer truck transport by sea on its ferries between its ports of call in Norway, Sweden and Denmark. In 2015 Fjord Line transported trailer trucks, representing an increase of six percent on the year before. The new domestic route in western Norway and the new shipping partnership with CLdN give hope for further growth in Fjord Line s cargo transport by sea in the future and for benefiting the environment, not least.

12 12 // Annual report for 2015 Fjord Line AS THE GROUP Fjord Line AS («Fjord Line») is the parent company in the Fjord Line-Group («The Group»). The Group has main office in Egersund, and has offices in Bergen, Stavanger, Kristiansand, Langesund, Sandefjord, Strömstad and Hirtshals. The Group had 723 employees per 31 December Fjord Line is an emerging player within European Short Sea Shipping and operates three routes between Norway and Denmark and one route between Norway and Sweden as well as domestic transportation route between Bergen/Stavanger and Langesund in On 1 January 2016 Fjord Line opened a new route between Bergen and Stavanger. Efficient transport by sea is important to European industry, trade and travel business. In order to meet these markets Fjord Line has invested in offering efficient transport on the routes Bergen/Stavanger Hirtshals, Bergen/ Stavanger Langesund, Langesund Hirtshals, Kristiansand Hirtshals and Sandefjord Strömstad, and by offering high quality cruise on the route Bergen/Stavanger Hirtshals/ Langesund. The main market for Fjord Line has been the Western Norway ( Vestlandet ), but from 2014 the company has also experienced a significant increase in the Eastern Norway market ( Østlandet ) with passengers and cargo from the ports in Sandefjord and Langesund. From 1 January 2016 Fjord Line has also offered domestic transport of passengers and cargo between the cruise ferries ports of destination Bergen and Stavanger. The Group has the youngest and most modern fleet within the cruise ferry segment in Europe. The fleet consists of four highly cost efficient ships. The ships sail under the Danish flag.

13 // Annual report 2015 // Annual report for TONNAGE The cruise ferries MS Stavangerfjord (2013) and MS Bergensfjord (2014) serve the routes Bergen Stavanger Hirtshals and Hirtshals Langesund. The two cruise ferries are nearly identical and are both equipped with fuel efficient single fuel LNG-engines, which involves that pollutant emissions to air and water are virtually eliminated. The ships have received a number of prizes for their environmentally friendly profile and modern design. The modern day ferry MS Oslofjord (formerly MS Bergensfjord) was subject to a substantial reconstruction in first half of MS Oslofjord is tailored for the route between Sandefjord and Strömstad and was put into operation as the company s first ship on the route on 20 June In 2015 the ship was honored with The Shippax Award for impressive reconstruction and design. The high-speed catamaran HSC Fjord Cat was constructed in 1998 and serves the route Kristiansand - Hirtshals in the summer season. The ship is one of the world s fastest passenger and car ferries. With a crossing of only 2 hours and 15 minutes Fjord Line offers the fastest ferry connection between Norway and Denmark with HSC Fjord Cat. OPERATIONS 2015 Rickard Ternblom acceded as new Group CEO in Fjord Line 1 january Fjord Line has experienced a significant growth in number of passengers and cargo units since the four-year new construction- and reconstruction program for MS Stavangerfjord, MS Bergensfjord and MS Oslofjord was completed in was the first full year of operations for MS Bergensfjord and MS Oslofjord. Fjord Line carried 1,115,199 passengers in 2015, compared to 876,527 in 2014, which constitutes an increase of 27 per cent. Fjord Line carried 341,972 cars and 54,038 trailers in 2015, compared to 266,849 cars and 50,752 trailers in 2014, an increase of 28 and 6 per cent respectively. Fjord Line originally applied for a morning departure from Sandefjord port during the time a.m., with corresponding afternoon departure time p.m. From the start-up 20 June 2014 Fjord Line sailed with morning departure from Sandefjord at a.m. From 2012 till late 2015 the company has used considerable internal and external resources to achieve competitive sailing hours on the route Sandefjord Strömstad. A trial against Color Line and Sandefjord minicipality should have started in Sandefjord District Court on 14 september 2015, but received its final outcome through the conclusion of a court settlement between the parties 24 August The court settlement involves that Fjord Line with effect from 1 October 2015 moved the morning departure from Sandefjord from a.m. till a.m., while the afternoon departure was moved from p.m. to p.m. In addition Fjord Line has been secured competitive sailing hours from Sandefjord port till The court settlement also secures Fjord Line equivalent access to important infrastructure in both Sandfjord and Strömstad Fjord Line has experienced steadily raising market shares on the route between Sandefjord and Strömstad subsequent to the sailing hours being changed 1 October The total market is also rising. The regularity has been relatively good for all ships in Further on, Skangas has completed a fuelling pipe in Risavika at Stavanger in first quarter of 2015, which has enabled Fjord Line to refuel the two cruise ferries in accordance with originally intended refuelling time from second quarter With the pipe in place the refuelling time has been reduced from approx. 15 hours per week per ship to approx. 4 hours per week per ship. As a consequence Fjord Line has been able to change to more customer friendly sailing hours. The reduced refuelling time also makes it possible for Fjord Line s cruise ferries to sail at reduced speed, which has resulted in considerable savings in the fuel consumption compared to // The financial statements ACCOUNTING PRINCIPLES Fjord Line AS is a Norwegian private limited company. The financial consolidated statements have previously been presented in accordance with NGAAP (Norwegian Gererally Accepted Accounting Principles). From 2015 the consolidated financial statements are presented in accordance with simplified IFRS (International Financial Reporting Standards). The financial

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15 // Annual report 2015 // Annual report for statements of the parent company are still presented in accordance with NGAAP. RESULT FOR THE GROUP AND THE PARENT COMPANY The Group s operating income was MNOK in 2015, compared to MNOK in was the first full year of operation for the route Sandefjord Strømstad and also the first full year of operation with daily sailings on the routes Bergen-Stavanger-Hirtshals and Hirtshals- Langesund. This is the main reason for the increased revenues both in the passanger and the cargo segment. The Group s operating expenses ex. depreciation were MNOK in 2015 compared to MNOK in The underlying causes for the increase in operating expenses are the same causes that have led to the increase of revenues. However, elimination of non-recurring costs related to startup of new routes and ships in combination with implemented cost savings program has caused that the expense increase has been considerably lower than the increase in revenues. The Group s EBITDA shows a profit of MNOK 36.1 in 2015, compared to a corresponding deficit of MNOK 75.1 in Operating result (EBIT) in 2015 shows a deficit of MNOK 113,1, compared to a corresponding deficit of MNOK in Further on, the Group s financial items shows a deficit of MNOK in 2015, compared to a corresponding deficit of MNOK 85.3 in Included is a foreign exchange loss of MNOK related to borrowing in EUR/DKK. MNOK 99.1 of this loss has been compensated through foreign exchange gain on intergroup loans in DKK to subsidiaries. In total a loss on exchange of MNOK 25.7 has been recognised in 2015, compared to a corresponding loss on exchange of MNOK 1.5 in Result before tax for the Group was a loss of MNOK in 2015, compared to a corresponding loss of MNOK in Result after tax was a loss of MNOK in 2015, compared to a corresponding loss of MNOK in The parent company Fjord Line AS` result before tax was negative by MNOK in 2015, while the company had a corresponding loss of MNOK in Fjord Line s accounting loss of MNOK after tax is proposed to be covered by transfer from other equity. Subsequently the book equity of the parent company amounts to MNOK Fjord Line has accumulated basis for deferred tax asset of MNOK 1,215.3 which implies a deferred tax asset (25 %) of MNOK at full recognition. Deferred tax asset is recognised in the balance sheet to the extent that it can be substantiated that it can be utilized. For prudential reasons, in relation to the requirements in NRS(F) Income tax for the recognition of deferred tax assets, the Board of Directors has reduced recognised deferred tax asset to MNOK 50.0 The Board of Directors are of the opinion that the accounting figures for 2015 have to be considered in light of the circumstances described under Operations The company has also suffered considerable non-recurring costs in 2015 related to start-up of the route Sandefjord- Strømstad. The financial statements for 2015 have been charged with legal expenses amounting to MNOK 14 related to obtaining competitive sailing hours on the route Sandefjord Strömstad. The Board of Directors do not find the result for 2015 satisfactory. CASH FLOWS The Group s liquid funds have increased by MNOK 50.9 in Correspondingly liquid funds were increased by MNOK 16.5 in The increase is as follows for the key figures: Cash flow from operational activities: MNOK 56.2 (MNOK per 31 December 2014). Cash flow from investing activities: MNOK 8.2 (MNOK 1,209.4 per 31 December 2014). Cash flow from financing activities: MNOK (MNOK 1,341.4 per 31 December 2014). BALANCE SHEET AND FINANCING The Group s total balance sheet value is MNOK 3,428.5 per 31 December 2015, compared to MNOK 3,337.9 per 31 December Fjord Line AS total balance sheet is MNOK 2,979.6 per 31 December 2015 compared to MNOK 3,013.7 per 31 December Interest bearing debt made MNOK 2,322.2 per 31 December 2015 compared to MNOK 2,328.5 pr 31 December 2014.

16 16 The Group s equity amounts to MNOK per 31 December 2015, compared to an equity of MNOK per 31 December Brokerage provided for the fleet promise that there are substantial added values in the ships compared to carrying values. These added values are not reflected in the accounting figures, but are central in the understanding of the Group s real equity per 31 December The ships are valued in EURO, and according to the brokerage the total real value of the ships per 31 December 2015 is MNOK higher than the carrying value. Fjord Line received 3 November 2015 an offer from Ferd AS to subscribe for 40 million shares in the company at subscription amount NOK 5.00 per share, that is a total subscription amount of MNOK 200. The offer was accepted by the Board of Directors in Fjord Line. Further on, all existing shareholders, with the exception of Kontrari AS/ Kontrazi AS, were offerd to sell their shares to Ferd AS at NOK 5.00 per share. In fourth quarter 2015 Fjord Line has renegotiated the Group s long term debt and the company has negotiated an agreement with all involved finance institutions which implies exemption from repayment in first half of 2016 and an option for 50 per cent repayment deferral in second half of The financial key figures covenants («net interest bearing debt to EBITDA ratio») have also been reduced. Through the capital increase and the renegotiation of the long term debt Fjord Line is secured to have a good liquidity situation in Beyond this, a capital increase of MNOK was carried out in February Further information about the capital increase is provided in the paragraph concerning events after the balance sheet date. The Group s liquid funds made MNOK per 31 December 2015, inclusive of an unused credit facility of MNOK 15. OWNERSHIP The Group s major owners per were as follows: 19,4% Kontrazi AS 38,4% Kontrari AS 38,5% Ferd AS FINANCIAL RISK Per 31 December 2015 the company has interest bearing debt of MNOK 2,322.2, including loan in EUR/DKK, constituting in total MNOK 2,021. The Group is exposed to interest risk and currency risk on these loans. The risk is, however, partly eliminated through the fact that parts of Fjord Line s revenues are denominated in EUR/DKK. At the end of the year the interest bearing debt of Fjord Line AS amounts to MNOK 2,291.3 The Group is to some extent exposed to currency risk since both purchase and sales are denominated in EUR, NOK and DKK. The Group is also exposed to fluctuations in the exchange rate of USD through purchase of fuel. The Group is exposed to general fluctuations in the price of fuel. The Group is continuously assessing the appropriateness of any financial instruments to reduce this risk. Per the Group had financial debt covenants connected to liquidity and booked and value adusted equity. The company s Board of Directors and management are continuously monitoring the financial debt covenants, and per the company had satisfactory positive margin. The Group had also satisfactory positive margin into first quarter of 2016 and this has been further strengthened through a capital increase of MNOK in February The Group s main objective is to secure profitability and to maintain cost efficient operations. Fjord Line is working purposefully to improve profitability, with a strong focus on competitive frame conditions, cost- and rationalisation programs. Further on the Group has implemented a «top-line program» which is expected to contribute to continued revenue growth in Market risk is considered to be limited for the company, as the target Group comprises a large number of and various types of customers. PROSPECTS During 2015 the Group has put behind substantially all of the non-recurring costs related to starting-up of new ships and new routes. Further on, the Group has completed a comprehensive financial restructuring through fourth quarter of 2015 and into first quarter of 2016 through both issues and refinancing of debt.

17 // Annual report 2015 // Annual report for Important milestones that have been reached in 2015: The fuel pipe between Skangas and Fjord Line s terminal in Risavika was completed in first quarter of This meant faster refuelling, change to more customer friendly sailing hours and significant reductions in the cost of fuel. Fjord Line was secured competetive sailing hours on the route Sandefjord Strömstad with effect from 1 October All legal disbutes were closed during In 2015 the Group suffered substantial legal nonrecurring costs that are not continued. An issue of MNOK 200, combined with payment deferral of existing debt was carried out in fourth quarter Through Ferd s investment in Fjord Line the Group has been supplied with considerable competence and new capital,which together strengthen the Group s possibilities for development.

18 18 At the same time Ferd AS has entered the scene as an important shareholder in Fjord Line. (See milestones on previous page.) This implies that Fjord Line in 2016 and ahead has the necessary financial stability to be able to focus on operations and efficiency improvements both in regard to costs and reveues. With considerably larger capacity and daily departures from all ports Fjord Line experienced a considerable increase in both cargo and passenger volume in 2015 and this development is expected to grow stronger in It is the Board of Directors opinion that Fjord Line through the offensive strategy with new ships and new route structure will develop a competitive and future-oriented concept for the benefit of both customers and shareholders. Daily sailings at regular hours from all departure ports for MS Stavangerfjord and MS Bergensfjord imply that Fjord Line has achieved a cost efficient operation with good frequency and predictability for the travelers. The Group is also expecting positive effects from the company s investments in a new and modern fleet where focus has been on implementing environmentally friendly, future oriented solutions that exceed the international environmental emission standards. The Board of Directors expect a result for 2016 significantly better than The Board of Directors are optimistic about the Group s prospects. GOING CONCERN Through the four-year new building and reconstruction program for ships with accompanying establishment of new route structure, Fjord Line has undertaken a significant expansion of its activities. In accordance with the Accounting Act 3-3a it is confirmed that the financial statements for 2015 have been prepared under the assumption of going concern. EVENTS AFTER THE BALANCE SHEET DATE Fjord Line got permission to operate domestic cargo and passenger traffic between Bergen and Stavanger with effect from 1 January Through this Fjord Line has got access to a completely new market. On 8 January 2016 Fjord Line decided to offer all bond owners under the company s bond loan (MNOK 300) a saleback of bonds with total nominal value maximum MNOK 150 to Fjord Line AS against payment in shares in the company. Bond owners representing total nominal value MNOK chose to accept the offer and 22,091,130 new shares have been issued in Fjord Line at price NOK 5.50 per share. After this Frode Teigen controls 52.2 per cent of the shares in Fjord Line through the companies Kontrari AS/Kontrazi AS, while Ferd AS owns 44.6 per cent of the shares in the company. The Group has entered into hedging contracts in January 2016 for 75 % of the gas consumption in 2016 and 2017, and 75 % of MGO consumption for 2016 at historicaly low levels. The contracts secure a reduction in the fuel expenses of more than 20% compared to As part of the company s strategyto insource all core activity Fjord Line has entered into agreements in March 2016 with existing suppliers of taxfree services on termination of existing contracts so that Fjord Line itself takes over the operation of the tax-free shops onbord our ships during Fjord Line takes over the operation at MS Oslofjord and HSC Fjord Cat from Inflight Serice Europe AB with effect from 26 April 2016, while the operation at MS Bergensfjord and MS Stavangerfjord are to be taken over from Gebr. Heinemann Scandinavia Aps with effect from 31 August The Board of Directors find that in sum this will lead to a significant increase in both turnover and profit for the Group. GENDER EQUALITY Per 31 December 2015 the Group had 723 employees, including 468 men and 268 women. Fjord Line had 234 employees, including 134 men and 100 women. The company is continuously working to avoid discrimination based on gender, age, ethnicity etc. both in regard to existing and new employments. Of the Group s top management comprising six employees, one employee is a woman. The Board of Directors in Fjord Line are composed of

19 // Annual report 2015 // Annual report for five men. Based on an assessment of number of employees and job category the Board of Directors have not found it necessary to implement special measures with regard to gender equality, the Group will, however, continuously focus on this issue. EMPLOYEES AND SHE The working environment in the Group is considered to be good, and no measures of significance for the working environment have been been considered necessary to initiate in The absence due to sickness in the Group is low. There have been no accidents with personal injury of significance in Sea- and land-based employees regularly conduct safety and emergency drills including lifeboat drills and evacuation exercises, and functional tests of rescue equipment are regularly carried out onboard the ships. It is an important focus area for Fjord Line to increase the satisfaction among the travelers. The employees have carried out a YES -service program based on the company s values: vigour, responsibility, respect and commitment. EXTERNAL ENVIRONMENT Fjord Line endeavors that the Group at any time shall be operated in accordance with applicable national and international regulations. The company operates a business which basically causes pollution of the external environment. There have been no uncontrolled emissions to air or sea in The company complies with applicable laws and regulations in the area and wishes to minimalize the pollution for instance through measures that reduce the emission of NOx. Pollutant emissions to air and water are minimal from the two recently started-up cruise ferries and considerably lower than allowed by current regulations. These two new cruise ferries are emerging as the most environmentally friendly of their kind and the ships have received several international environmental awards. Egersund, 26 May 2016 Peter Frølich Chairman of the Board Kristian Eikre Board Member Frode Teigen Board Member Kristian Falnes Board Member Bo-Lennart Thorbjørnsson Board Member Rickard Ternblom Managing Director

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21 // Annual report 2015 // Income statement Fjord Line Group 21 // Consolidated income statement Fjord Line Group, per 31 December 2015 all figures in NOK Note Group Group Simplified IFRS Simplified IFRS Operating income: Sales revenues 14, Other operating income Total operating income Operating expenses: Cost of goods Wage costs Depreciation of property, plant and equipment and intangible assets 1, 2, Special market and legal expenses Other operating expenses 3, 6, 7, Total oper,ating expenses Operating result Financial items: Interest income Other financial income Interest expenses Other financial expenses Net financial items Ordinary result before tax Tax expense on ordinary result Ordinary result after tax Result for the year Distribution of result group: Majority's share of result Non-controlling interests' share of result Total Consolidated statement of comprehensive income (1,000 NOK) Result for the year, cf. above Items that may be subsequently reclassified to profit or loss Currency translation differences Total Comprehensive income for the year, net of tax Total comprehensive income for the year

22 22 Fjord Line Fjord AS Line - Group AS - Group // Consolidated balance Fjord Line Group, per 31 December 2015 all figures in NOK nsolidated Consolidated balance sheet balance sheet,000 NOK) (1,000 NOK) ETS ASSETS Note Note Group Group Group Group Group Group 31/12/15 31/12/1531/12/14 31/12/14 01/01/14 01/01/14 Simplified IFRS Simplified Simplified IFRS IFRS Simplified Simplified IFRS IFRS Simplified IFRS ed assets Fixed assets angible assets Intangible assets odwill Goodwill 1, 17 1, B-project, WEB-project, concept development concept development etc. etc ferred tax asset Deferred tax asset al intangible Total assets intangible assets perty, plant Property, and equipment plant and equipment ps, including Ships, periodical including maintenance, periodical maintenance, furnishing etc. furnishing etc. 2, 19 2, p under construction Ship under construction ldings, plants Buildings, etc. plants etc er operating Other assets, operating incl. spare assets, parts incl. spare parts al property, Total plant property, and equipment plant and equipment ancial fixed Financial assets fixed assets ancial receivables Financial receivables er investments, Other investments, incl. shares in incl. associate shares in associate al financial Total fixed financial assets fixed assets al fixed assets Total fixed assets rent assets Current assets entories Inventories eivables Receivables de receivables Trade receivables er current Other receivables current receivables 8, 18 8, al receivables Total receivables k deposit, Bank cash deposit, etc. cash etc al current Total assets current assets al assets Total assets

23 // Annual report 2015 // Balance Fjord Line Group 23 // Consolidated balance Fjord Line Group, per 31 December 2015 all figures in NOK nsolidated Consolidated balance sheet balance sheet,000 NOK) (1,000 NOK) UITY AND EQUITY LIABILITIES AND LIABILITIES Note Note Group Group Group Group Group Group 31/12/15 31/12/ Simplified IFRS Simplified Simplified IFRS IFRS Simplified Simplified IFRS IFRS Simplified IFRS UITY EQUITY id-in equity Paid-in equity are capitalshare capital 10, 11 10, n shares Own shares are premium Share account premium account tal paid-in Total equity paid-in equity her equity Other controlling equity interests controlling interests her equityother equity tal Total tal equity controlling Total equity interests controlling interests n-controlling Non-controlling interests interests 10, 17 10, tal equity Total equity BILITIES LIABILITIES n-current Non-current liabilities/non-current liabilities/non-current provisions provisions sing debt Leasing debt 2, 13 2, nded debtbonded debt n-current debt Non-current to credit debt institutions to credit etc. institutions etc earned income Unearned income nsion liability Pension liability tal non-current Total liabilities/non-current liabilities/non-current provisions provisions rrent liabilities Current liabilities rrent portion Current of non-current portion of liabilities non-current to credit liabilities institutions to credit institutions rrent portion Current of leasing portion debt of leasing debt 2, 13 2, de payables Trade payables earned income Unearned income yable tax Payable tax blic duties Public owingduties owing ergroup balances Intergroup balances her current Other liabilities current liabilities tal current Total liabilities current liabilities tal liabilities Total liabilities tal equity and Total liabilities equity and liabilities ersund, 26 Egersund, May May 2016 ter FrølichPeter Frølich airman of Peter the Chairman Board Frølich of the Board Chairman of the Board Kristian Eikre Board Member Kristian EikreKristian Eikre Board member Board member Frode Teigen Board Member Kristian Falnes Board Member Bo-Lennart Thorbjørnsson Board Member Rickard Ternblom Managing Director

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25 // Annual report 2015 // Cash flow statement Fjord Line Group 25 // Cash flow statement Fjord Line Group, per Cash 31 flow December statement 2015 all figures in NOK - group (TNOK) Cash flows from operational activities Operating result Taxes paid in the period Depreciation Write-down 0 0 Profit/loss from sale of property, plant and equipment/intangible assets Change in inventories Change in trade receivables Change in trade payables Change in other accruals Net cash flows from operational activities Cash flows from investing activities Proceeds from sale of property, plant and equipment and received grants Purchase/manufacturing of property, plant and equipment/intangible assets Net cash flows from investing activities Cash flows from financing activities Raising of interest bearing debt Payment of interest bearing debt Received interest Interest paid Cash contribution share issue (net) Net cash flows from financing activities Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the period Currency translation cash and cash equivalents Cash and cash equivalents at the end of the period Specification of cash reserves at the end of the period Bank deposit and cash

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27 // Annual report 2015 // Accounting policies Fjord Line Group 27 // Accounting policies Fjord Line Group Below are stated significant Accounting Policies used in the preparation of the consolidated financial statements. The consolidated financial statements have been prepared in accordance with simplified IFRS (International Financial Reporting Standards). From the accounting year 2015 the group has prepared the financial statements in accordance with simplified IFRS. Comparative figures for 2014 have been prepared and an IFRS opening balance per has thus also been prepared. CONSOLIDATION AND INVESTMENT IN ASSOCIATED COMPANIES The consolidated financial statements comprise the parent company Fjord Line AS and the subsidiaries Travelserver AS, Fjord Line GmbH (Germany), Fjord Line Danmark A/S, Fjord Skibsholding I A/S, Fjord Skibsholding II A/S, Fjord Skibsholding III A/S and Fjord Skibsholding IV A/S. The five last mentioned companies are domiciled in Denmark and are 100% owned subsidiaries. The Norwegian subsidiary Travelserver AS is a partially owned subsidiary with 51% owner share. Subsidiaries are entities where the group has the power to govern the entity s financial and operational policies (control), normally through shareholding of more than 50% of the voting rights. When the group disposes of a subsidiary/ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. Hirtshals LNG is a partially owned subsidiary 50% owned by Fjord Line Danmark A/S. This is considered as an associated company in the consolidated financial statements. Intercompany transactions, balances etc. have been eliminated in the consolidated financial statements. For consolidation purposes the Danish companies are estimated to have functional currency in DKK. ESTIMATES The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group s accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are deferred tax assets, residual value of ships, useful life of ships, capitalization and depreciation of periodic maintenance and provision for incurred costs. SALES REVENUES Sale of goods is recognised in the income statement at the time of delivery. Time of delivery means the time of transfer of risk and control connected to the delivered goods. Services, including sale of travels and freight, are recognised as executed. The portion of the sales income which relates to future service work is reflected in the balance sheet as unearned income from the sale and is then recognised in line with the service work performed. CLASSIFICATION AND VALUATION OF BALANCE SHEET ITEMS Assets intended for long term ownership or use have been classified as fixed assets. Assets relating to the trading cycle have been classified as current assets. Receivables are classified as current assets if they are to be repaid within one year after the transaction date. Similar criteria apply to liabilities. First year s installment has been classified as current liabilities.

28 28 Current assets are valued at the lower of acquisition cost and net realisable value. Current liabilities are reflected in the balance sheet at nominal value on the establishment date. Fixed assets are valued at acquisition cost. Property, plant and equipment whose value will deteriorate are depreciated on a straight line basis over the asset s estimated useful life. The fixed assets are subject to impairment to net realisable value if a value reduction occurs which is not believed to be temporary. The impairment is reversed to the extent that the reason for the impairment is no longer present. Non-current liabilities are reflected in the balance sheet at nominal value at the establishment date. INTANGIBLE ASSETS Expenses for intangible assets are reflected in the balance sheet when it is considered likely that the future financial benefits relating to the asset will be received by the company and the acquisition cost of the asset can be reliably measured. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are reflected in the balance sheet and depreciated over the asset s expected useful life on a straight-line basis. Direct maintenance of an asset is expensed under operating expenses as and when it is incurred. Additions or improvements are added to the asset s cost price and depreciated together with the asset. The group s ships with associated additions etc. are owned by the Danish subsidiaries. The book value of ships is recognised in the balance sheet based on historic cost, less depreciation and impairment, if any. In accordance with IFRS 1 Fjord Line has made use of fair value as estimated acquisition cost for property, plant and equipment per Acquisition cost for ships not in progress or reconstruction per have been estimated based on valuations at that time. This concerns the ships Stavangerfjord and Fjord Cat. Paid installments for new constructions are recognised as fixed assets as payment takes place. Investments/expenses that are not included in the contract, as inspection costs, costs connected to project organisation, legal costs, financing costs and other related costs are considered as part of the acquisition cost and recorded in the balance sheet. Grants from the NOx-fund related to investments are recorded/accrued in line with the depreciation profile of the assets that the grants relate to. The accrual is classified as reduction of depreciation cost in the income statement. NOx-grants not recognised over profit or loss are classified as reduction of ship values in the balance sheet. The book value of the group s ships and other operating assets is individually tested for impairment when events or changes in circumstances indicate that the book value is no longer present. If such indications occur and book value exceeds recoverable amount, then the asset is impaired to recoverable amount. PERIODICAL MAINTENANCE OF SHIPS The ships are decomposed into ship/ship furnishing and periodical maintenance for depreciation purposes They are depreciated straight-line over a defined useful life. An assumed residual value of the ships at the expiry of the useful life is taken into consideration. The ships must continuously be presented for control, which implies regular docking and classification. Periodical maintenance is recognised in the balance sheet in connection with docking and depreciated till next assumed docking. LEASING A leasing agreement is classified as financial or operational lease in accordance with the contents of the individual agreement. The agreement is classified as financial lease if the major part of financial risk and control connected to the underlying lease object has been transferred to the lessee. Other leasing agreements are classified as operational. Operational assets in leasing agreements assessed as financial lease are activated in the balance sheet at the value of the compensation in the leasing agreement and depreciated as property, plant and equipment. The principal portion of the leasing liability is recorded as non-current liabilities. The liability is reduced with lease paid less deduction for calculated interest expense. The lease payments are treated as an operating expense which is distributed over the total leasing period for agreements that are classified as operational.

29 // Annual report 2015 // Accounting policies Fjord Line Group 29 INVENTORIES Inventories of purchased goods are valued at the lower of acquisition cost according to the FIFOprinciple and fair value. A write-down is made for any foreseeable obsoleteness. RECEIVABLES Trade receivables and other receivables are reflected in the balance sheet at nominal value after deduction of provision for bad debts. Provision for bad debts is made based on individual assessment of each receivable and in addition a general provision is made for other receivables to cover expected losses. SHORT TERM INVESTMENTS Short term investments (shares, forward contracts and any other derivatives valued as current assets) are considered to be trading portfolio and are valued at fair value at the balance sheet date. Unrealised gain/loss is recognised in the income statement under financial items. Dividend received and other contributions are recognised as other financial income. FOREIGN CURRENCY TRANSLATION Items included in the financial statements of each of the group s entities are measured using the currency of the primary economic environment in which the entity operates («the functional currency»). The consolidated financial statements are presented in NOK, which is the functional currency of the parent company and the group s presentation currency. The results and financial position of all the group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (I) Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet, (II) Income and expenses for each income statement are translated at avreage exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions) Average exchange rate used by translation from DKK to NOK in 2015 is (III) All resulting exchange differences are recognised in other comprehensive income and specified separately. Transactions in foreign currency are translated to the functional currency at the current exchange rate at the transaction date. TAXES The tax expense in the income statement comprises both payable taxes for the period and changes in deferred tax. Deferred tax asset is calculated at relevant tax rate. Deferred tax asset is calculated based on the temporary differences existing between accounting and tax values at the end of the accounting year and carry forward losses for tax purposes at year-end which based on best estimate are expected to be used against future earnings. The Danish ship owning companies are subject to the Danish tonnage tax regime. OPTIONS FOR EMPLOYEES When granting options to the employees a valuation of the options is performed at grant date. Calculated amount is expensed as wages over the term, set off against equity. PENSIONS A defined contribution plan is a pension plan under which the group pays fixed contributions to an insurance company. The group has no legal or constructive obligations once the contributions have been paid. The contributions are recognised as wage costs. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the balance sheet date.