Polarcus 2009 Annual Report by Polarcus

Polarcus Limited

ANNUAL REPORT 2009

Po-lar-cus n.

(pō-lăr’kus)

[from the Latin polus, pole and arcus, bow, a curved structure.] Polarcus is a pure play marine geophysical company with a pioneering environmental agenda, specializing in high-end towed streamer data acquisition from Pole to Pole. Polarcus is launching a fleet of modern 3D seismic vessels using the innovative ULSTEIN X-BOW® design and incorporating advanced maritime technologies for improved operational efficiency with a reduced environmental footprint. Polarcus offers contract seismic surveys and multi client projects worldwide and has its principal office in Dubai, United Arab Emirates.

Content 4. 6. 8. 10. 12. 17. 19. 20. 22. 23. 24. 26. 28. 34. 36. 44. 92. 108. 111.

Polarcus Comes of Age Letter from the Chairman Letter from the CEO Service Offering Passionate About Seismic Donâ&#x20AC;&#x2122;t Just Explore, Explore Green Arctic Operations Polarcus Fleet Responsibility, Innovation, Excellence Corporate Structure Board of Directors Executive Management Board of Directors Report Share Information Corporate Governance Commitments Consolidated Financial Statements Parent company unconsolidated Financial Statements Auditors Report Addresses

Polarcus Comes of Age 2009 has seen Polarcus evolve successfully from a start-up company focused on a new build vessel program, to a fully funded and operational high-end 3D marine seismic acquisition company listed on the Oslo Axess exchange in Norway. The Company started the year with 56 full time employees and ended 2009 with 186 full time employees, of whom 65 are based in Dubai, UAE, 1 in Houston, USA, 1 in London, UK, and 119 are field engineers and experienced maritime and seismic crews for the Company’s first two 3D seismic vessels, both now operational in West Africa.

2009 began with construction of all six of the Company’s ULSTEIN X-BOW® design 3D seismic vessels well underway at Drydocks World – Dubai in the United Arab Emirates, with the keel laying of hull numbers NB69, Polarcus Samur, and NB71, Polarcus Asima, taking place on 31 January and 07 May respectively. These two vessels are the Company’s first Arctic-ready vessels incorporating a high ice class notation, ICE-1A, from the Det Norske Veritas (DNV) classification society. The keel laying of Polarcus Asima was shortly followed by the launch to sea of the Company’s first two seismic vessels, Polarcus Nadia and Polarcus Naila on 25 June and 30 July respectively. The Polarcus vessels are all modern 3D seismic vessels built to the ULSTEIN SX124, SX133, and SX134 designs combining the latest developments in maritime technology with the most advanced seismic systems commercially available.

On 03 March Polarcus signed an agreement with ION subsidiary GX Technology Corporation (GXT) under which GXT will provide seismic data quality control and data processing services onboard the Polarcus vessels. The agreement furthermore extends to the provision of advanced onshore seismic data processing capacity and services in one of GXT’s established geophysical service centers as and when required in conjunction with combined acquisition and processing projects. On 07 June Det Norske Veritas AS awarded Polarcus the International Safety Management (ISM) Interim Document of Compliance, issued under the provisions of the International Convention for the Safety of Life at Sea and under the authority of The Commonwealth of the Bahamas.

On 31 July Polarcus announced the sale of two of the six vessel owning companies, Polarcus 4, owning the rights to Polarcus Selma, and Polarcus 6, owning the rights to Polarcus Alima, in order to reduce the Company’s overall capital needs and consequently increase the Company’s financial flexibility during a time of considerable turmoil in the global financial markets. The two vessel owning companies were sold to Zickerman Holding Limited and Zickerman Group Limited (together “ZL”), the founders of Polarcus Limited. As part of the transaction Polarcus received an option to repurchase them for a price equal to the cost incurred of completing each vessel. Through this transaction Polarcus has therefore been able to maintain the ambition of being a six vessel company whilst reducing its short term capital requirements.

Subsequent to the sale, Polarcus announced the closing of the debt financing for the remaining four vessels after securing a long-term senior secured facility of USD 80 million from DVB Bank together with Eksportfinans guaranteed by GIEK (Garanti-instituttet for eksportkreditt). The facility provides for long term financing over a five- and twelve-year period at an average interest rate of LIBOR + approximately 4.5% and concludes the full debt financing requirement under the current newbuilding program.

first refusal options. Meanwhile on 29 October Polarcus received a Letter of Intent for a 1,500 square kilometer program from Noble Energy Cameroon Limited and subsequently signed a binding services contract on 02 December. The project was awarded to Polarcus Naila, the Company’s second 12 streamer 3D seismic vessel, which together with the TGS award firmed up backlog for the Company well into Q2 2010.

Polarcus subsequently announced on 28 September the successful completion of its Initial Public Offering, raising gross proceeds of NOK 726,250,000 from the offering of 161,388,889 new shares (before over- allotment) at a price of NOK 4.50 per share. The Board

of Oslo Børs subsequently resolved to admit shares in Polarcus Limited for listing on the Oslo Axess and share trading in Polarcus Limited commenced on 30 September 2009. The Polarcus shares are traded under the symbol PLCS. On 01 September TGS-Nopec (TGS) signed a conditional Letter of Intent (LOI) with Polarcus for the charter of Polarcus Nadia, the Company’s first 12 streamer 3D seismic vessel, for a 3 month seismic program offshore West Africa. The LOI further included a right of first refusal option for TGS to extend the charter in two separate 6 month increments under pre-agreed commercial terms. On 10 December TGS extended the initial charter from 2,000 square kilometers to 5,000 square kilometers whilst retaining the two 6 month rights of

On 24 November Polarcus held a double Naming Ceremony for the Company’s first two vessels, Polarcus Nadia and Polarcus Naila, at the Drydocks World – Dubai shipyard and Polarcus Nadia was subsequently delivered to Polarcus on 14 December. The vessel mobilized shortly thereafter for West Africa to commence her first contract for TGS, offshore Liberia. Polarcus Naila was delivered to the Company on 24 February 2010 prior to mobilizing to West Africa for her first contract for Nobel Energy Cameroon Limited.

Letter from the Chairman Dear Polarcus shareholders, on 24 November 2009, we celebrated the post launch naming of Polarcus Nadia and Polarcus Naila. The names were derived from female Arabic names, with Nadia aptly meaning ‘the beginning, first’ and Naila meaning ‘the acquirer, one who succeeds’. As we reflect on this occasion we have much to be proud of and even more to look forward to. Thanks to the dedicated efforts of our outstanding employees and field crew, 2009 was another very eventful year for us, with our first vessel delivered and our successful listing on the Oslo Axess exchange. We closed 2009 having reported a successful restructuring, a new debt facility of USD 80 million, a successful IPO raising USD 125 million and the delivery of Polarcus Nadia. In parallel the world witnessed possibly the worst financial crisis since the Great Depression of the 1930s. It contributed to meaningful declines in consumer wealth and a significant decline in economic activity. In this environment, with reduced credit availability and damaged investor confidence, our success in raising USD 205 million was no small feat and was we believe a reflection of our strong business plan. As we move through 2010, we remain confident that we can achieve the goal we set when we launched the company: by 2012 to be the most environmentally responsible towed marine seismic supplier, with a strong focus on risk management, specializing in the high end 3D market and the Polar regions whilst achieving long term shareholder value. Consistent with that original goal, we continue to focus on the high end 3D segment and on offering clients the service and equipment they need in the modern world. Our clients today enjoy a brand new vessel, an offering shortly to be expanded to encompass a modern fleet, with a low environmental footprint and state of the art equipment for reliable operations. Most importantly, innovation, excellence and responsibility will continue to be our trademark and safety our watchword. Whilst we know that strong operating performance is essential to running a good seismic company, we continue to emphasize the importance of our one team philosophy with a combined maritime and seismic operation in house. We look positively to the future and our expectation for 2010 is for the oil price to increase somewhat, for E&P spending to grow and for rates in the seismic market gradually to strengthen. We anticipate some additional

economies of scale to benefit our organization as we hope to be in a position to call our options for further vessels. Additionally, we will continue to focus on ways to improve our efficiency and to better utilize technologies to enhance service and further reduce costs. In 2010, we are scheduled to take delivery of three new vessels. The new vessel types Ulstein Design SX133 and SX134, two featuring ice class ICE-1A offer great synergy with our first vessel and will permit us to service new markets, offer an extended season in the Arctic and an increased ability to pick up diverse surveys thanks to their exceptional transit speed. The three new vessels will be configured with 10, 6 and 12 streamers respectively, offering further flexibility to our clients. Demand for seismic services and the health of financial markets permitting, we expect our fleet to grow to a total of 8 vessels over the next 3 years; which will include the optional vessels with ZL and the options secured with Drydocks World - Dubai. As we prepare to take delivery of our new vessels, we remain focused on controlled and sustainable growth and to keeping our small company spirit alive. To support this rate of growth, we have been increasing our staff significantly and have opened offices in London and Houston. As a rapidly growing company in a capital intensive industry, we recognize the importance of a strong balance sheet and are committed to a prudent approach to debt management. Consequently, all four of our committed vessels are now financed. We know that the most important ingredient in our growth plan and the key to delivering excellence is our people. As we focus on growing yet keeping the intimate feel of a small company, we’ have built a recruitment plan to support the hiring and training of the brightest talent and we are committed to implementing many of the latest industry innovations concerning crew welfare, health, safety, security, and general well-being so that we can protect and retain our workforce. We have spent the past year preparing for delivery of our vessels and we have been successful in recruiting some of the industry’s best talent. Last year, we received over 3,500 applications to work at Polarcus yet we hired just 130 people through the year.

As we look to the future, our commitment to you, our shareholders, is to focus our efforts on building and developing Polarcus for the long-term. The company has been very well received over our first two years by both clients and investors. However, we know we must consistently demonstrate our ability to deliver safe and secure seismic operations, compete hard for every job, keep our industry- leading offering fresh and continue to offer a workplace for our employees that is secondto-none. On behalf of our 186 dedicated Polarcus employees, we thank you for your continued interest in and support of Polarcus.

Sincerely,

Peter M. Rigg Chairman

â&#x20AC;&#x153;

As we prepare to take delivery of our,

new vessels

we remain focused on controlled and sustainable growth and to keeping our

small company spirit alive.

â&#x20AC;&#x153;

Letter from the CEO Dear Polarcus shareholders, 2009 has been one of the most challenging years on record for our industry as well as for most other industries. Despite the challenges this presented to our young company, we responded quickly and implemented measures to attack the problems at hand. And problems there were. First, we had the formidable task of funding the company in an extremely difficult financial market as well as a sluggish seismic outlook. Being a newcomer did not ease this challenge. Second, we had an equally great challenge of not only building the vessels on time and cost, to the quality we aspire to achieve, but also to secure contract backlog and transform the company from a “vessel building company” to an operational service provider to the oil and gas industry. In order to meet these challenges we required top quality people, both onshore and offshore. The challenge in recruiting and attracting such top industry talent has been an immense task of paramount importance. It is people that build the company and at Polarcus we truly believe that our people are our greatest assets. I am proud to say that we have achieved the tasks we set ourselves at the beginning of the year and that we have managed to accomplish this whilst staying true to our vision and overall goal of being the most environmentally responsible towed marine service provider. We stayed focused on the task in hand and did not deviate from our pure play commitment and the building of a fleet of innovative high-end seismic vessels. We did announce a restructuring plan whereby two of our six vessels under construction were sold in order to reduce the company’s overall capital needs and consequently increase our financial flexibility. As part of the restructuring we received options to repurchase the vessels for a price equal to the cost incurred for completing the vessels. Through this transaction we therefore managed to maintain the original ambition of being a six vessel company. The restructuring plan also helped us refocus on spending habits and we made a concerted effort to reduce SG&A costs. Our employees met the challenge of working smarter and we ended the year with a saving of USD 13 million in SG&A cost compared to budget as we continued to drive efficiency across our company. The restructuring together with our solid business plan enabled us to secure a long-term loan facility of USD 80 million backed by Eksportfinans and GIEK as well as raise more than NOK 725 million in an Initial Public Offering. This capital injection meant that all four of our committed vessels became financed.

Although we did guide a minor correction to the delivery schedule of our vessels, we did take delivery of Polarcus Nadia in December 2009 followed shortly thereafter by the delivery of Polarcus Naila in February 2010. We are further progressing well with the construction of the remaining vessels. We are pleased with their quality, and we are delivering in accordance with guided capital expenditure and well below the budget we originally set ourselves when we formed the company. Having the bargaining power of ordering six vessels has clearly been a significant factor in securing competitive prices for the various components and systems required to build modern 3D seismic vessels. Our achievement has been made possible to a great extent by the caliber and commitment of the people we have recruited since our launch. Our vision and core values have proven to be a strong attraction for those who support our belief that Polarcus can bring something new to the seismic industry; that we can be a pioneer of responsible exploration. As a result we closed 2009 with a strong and highly respected office team together with highly experienced and expert field crews for our first two vessels. This will enable us to move successfully to the next phase of the company’s development and assure Polarcus’ strong competitiveness in the high end 3D seismic market. As we grow further, we will not lose focus on the necessity to keep our company ‘‘feeling small’’. Our goal is to recruit and retain the best people in the industry as we recognize our success depends on our employees who enjoy working at Polarcus and who are proud of the job they do. Listening and responding to our people and working together as one team will help us build and maintain a secure future. In 2010, after having the first two vessels successfully delivered from the yard, we are taking the huge step from being a “vessel building company”, to that of an operational seismic service provider. In preparation for this we have developed all required tools and implemented our management system that will guide our operations and company development forward. The first vessel is in solid production, and the ULSTEIN XBOW® has already proven to be a very effective design in the heavy seas experienced during her transit. We are well aware, as any start-up company with all new tonnage would be, that there will be issues to deal with and that operational performance, although solid, has room for improvement. We are continually monitoring our operations and establishing improvement plans in line with the management system that we believe will quickly and efficiently transform our early operations into world class performance.

We have an ongoing commitment to operational excellence, an aggressive but sustainable growth plan, and focused sales efforts, all while maintaining our strong and vibrant service-oriented culture for delivering long-term value to our stakeholders. We are pleased to see backlog already established throughout 2010 for Polarcus Nadia and into Q3 for Polarcus Naila which is positioning Polarcus well for taking delivery of the following two vessels, Polarcus Asima and Polarcus Samur in Q2 and Q3 2010 respectively. We have much more work to do and 2010 will no doubt present many new challenges, but we are pleased with the direction we are heading. Going forward, we commit to you that Polarcus will continue to focus on financial discipline, operational excellence and customer as well as employee satisfaction. The actions we take today determine our future. The hard work and dedication of all our people will spur our progress and ensure our success. We believe we have excellent people that offer top quality service and products to our clients and we are excited about the future. We also believe we have the right plan in place to continue to grow profitably, improve our operational and financial health and further strengthen our competitive position.

Sincerely,

â&#x20AC;&#x153;we commit

to you that Polarcus will continue its focus on

Rolf Ronningen Chief Executive Officer

financial discipline, operational excellence and

customer and employee satisfaction.

â&#x20AC;&#x153;

Service Offering Polarcus is at the forefront of maritime and seismic innovation, well positioned to meet the current and future demands of the industry. Our worldwide service capabilities encompass conventional 3D surveys, sophisticated wide and multi-azimuth projects, high density 3D and 4D production surveys, and marine seismic operations in areas of environmental sensitivity ranging from the tropics to the Arctic, the latter being an area currently receiving significant attention from the major international oil companies. Polarcus also places a high emphasis on ‘Geophysical Excellence’ and is building a strong reputation for survey design and technology solutions best designed to meet the clients’ project objectives. The expansion of the industry into frontier and other environmentally sensitive sea areas is also expected to drive a much higher level of environmental compliance worldwide as new requirements on emissions to air and water are adopted, either through legislation or as a condition of tender. Polarcus places major emphasis on “green” investments and technologies in order to meet these challenges and seeks to become the preferred supplier in areas of environmental sensitivity. Design features such as the DP2 dynamic positioning system, double hull, selective catalytic reduction (SCR) catalysts, bilge water cleaning and ballast water treatment

systems, and the CLEAN DESIGN class notation all contribute to reducing the vessels environmental footprint and are projected to play an increasingly important role in tendering qualification for certain regional markets. Within 2010 Polarcus will be the sole operator of 3D seismic vessels combining the high ice class notation, ICE-1A, with a double hull and other environmental and safety features, providing a unique competitive advantage for Arctic operations. Considerable attention has been placed on the Company’s sales and marketing efforts in order to secure backlog in the “contract market”, with two regional marketing offices now open, in London and Houston, and a third planned for 2010 within the Asia-Pacific region. The Company has also engaged a number of commercial agents worldwide to assist in the development of regional markets such as Brazil, Egypt, and some of the African countries where such agents are a normal requirement for business development. Polarcus also places a special focus on the Arctic, seeking opportunities for operations within this region from 2010 onwards. Other regional markets such as Asia-Pacific remain under constant review to identify opportunities for contracts that make it economically viable to penetrate these markets early.

Polarcus is planning the development of a world-class Multi Client Projects (MCP) library to complement the contract market business. Polarcus has entered into an agreement with GeoPartners Limited, a UK based company specializing in the design, promotion, and marketing of multi client surveys, to develop project opportunities through Europe and Africa, and is actively seeking similar cooperation opportunities worldwide. Polarcus plans to be active in the multi client business within 2010, initially adopting a low risk appetite requiring high prefunding. Operating in both the contract market and the multi client projects business provides more flexibility for vessel scheduling and market entry as well as generating steady income in all phases of the seismic life cycle. In line with the Company’s pure play strategy, Polarcus has entered into an agreement with a reputable and non-aligned processing company GX Technology Corporation (GXT) in order to offer a ‘full service’ operation to clients. Under this agreement GX Technology provides seismic data quality control and data processing services onboard the Polarcus vessels, and advanced onshore seismic data processing capacity and services at one of their global Data Processing Centers as and when such services are part of the scope of surveys awarded to or required by the Company.

Polarcus is a core member of the International Association of Geophysical Contractors (IAGC) and the Company’s CEO is a member of the IAGC Board of Directors. Polarcus has been successfully audited by a number of leading international oil and gas companies and is additionally pre-qualified to tender on acquisition services by the majority of oil and gas companies worldwide. The Company is an approved supplier under the Achilles joint supplier qualification system for Norway and a Verified Supplier within the FPAL (First Point Assessment) supplier database for the United Kingdom.

Passionate about Seismic It is a well recognized fact that seismic surveys are an integral component for the successful exploration and exploitation of newly discovered and existing oil and gas fields. For more than 75 years the seismic industry has been at the forefront of adopting cutting edge data acquisition and processing technologies to increase the resolution of sub-surface imaging and lithologic attribute extraction. The application of new technologies has also dramatically increased the safety and efficiency of seismic field operations on land and at sea. In the offshore environment, today’s fleet of seismic survey vessels is capable of deploying very large receiver spreads, powerful and reliable sources, and very accurate and repeatable positioning systems. The Polarcus fleet of seismic vessels continues this tradition with the introduction of a new generation of large capacity seismic vessels designed for high operational efficiency with reduced environmental impact. Additionally, all Polarcus vessels are equipped with start-of-the-art seismic acquisition and navigation and positioning systems. Taken together, the vessels and the data acquisition systems provide complete flexibility for Polarcus to meet the entire range of seismic survey objectives possible using marine towed streamer techniques. Technology on its own, however, is not the full story. What is equally, or even more important is the intelligent application of technology. For example, with the large streamer capacities of modern marine 3D seismic vessels, including the Polarcus fleet, it is often very tempting to routinely propose large streamer spreads to maximize operational efficiency, and thus reduce competitive pricing. However, consideration of efficiency factors alone can obscure some fundamental geophysical issues that can significantly impact the overall quality of the seismic data, and therefore jeopardize the overall objectives of a survey.

The full value of seismic can only be realized when technology is made available to geophysicists with the knowledge and experience to effectively formulate survey design parameters with respect to a project’s geophysical objectives and operational environment. The old adage that “every survey is unique” needs to be remembered at the beginning of any project. All sorts of geophysical and environmental aspects of a particular project need to be recognized, prioritized, and balanced within the constraints of available time and budgets. This can only happen when the project geoscience team knows what they want and understands how to get it. Accepting a technology solution on blind faith is not the answer. The Polarcus team includes significant experience and expertise in marine seismic acquisition survey design and seismic data processing that can be leveraged by our customers’ geoscience teams early in the planning phases of a project. Such cooperative efforts can result in effective survey designs where technologies are applied intelligently to meet the explicit geophysical objectives of each project. The preferred solutions will always be those that balance quality, cost, and safety. Remember, the most expensive seismic survey is the one that provides little or no value in meeting a project’s geophysical and geologic objectives.

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BII

Itâ&#x20AC;&#x2122;s really quite simple...

Don’t Just Explore, Explore Green The challenges of climate change, the protection of species and sustainable development have become global concerns. Whilst alternative energy solutions are sought, our world remains dependent for energy on hydrocarbons and our industry has a key stewardship role to play in making every effort to operate in an environmentally responsible manner.

pollutants were reducing the average lifespan of every European by several months with particulates of soot and the compounds of sulfur and oxygen being some of the primary culprits. As a result the European Union is planning Europe’s first low-emissions marine zones, designed to cut pollution from shipping in certain designated areas of the North Sea, English Channel and the Baltic Sea from 2015.

At Polarcus we approach this from the perspective of concerned citizens and with the company as a whole seeking global solutions and we recognize that we must be willing to invest now in order to avoid negative future consequences of inaction. We are well aware that we have a significant opportunity within the maritime sphere of our industry to perform our work cleaner and greener.

At Polarcus we take these concerns seriously and have invested in a number of systems and technologies to substantially reduce harmful emissions, in some cases by up to 98% and adopted design features such as a double hull to reduce the risk of accidental pollution to sea. All our seismic vessels at Polarcus will meet the stringent Det Norske Veritas (DNV) CLEAN-DESIGN and BWM-T notations that regulate emissions to air and water. The Polarcus fleet will also carry the International Maritime Organization (IMO) Green Passport that regulates environmental and occupational health and safety risks through the life of the vessel, from shipbuilding to eventual recycling.

In launching Polarcus we are building an environmentally responsible company that we envision as being a model for others. Our beliefs are embedded in our corporate values of respect, innovation and excellence, and are apparent throughout the corporate lifecycle from the design of our seismic fleet through their operation, to their eventual recycling. Our corporate values are the foundation for what we call “our pioneering environmental agenda”. To be a pioneer we choose to lead by example.

The emission footprint and the index include CO2, NOx and SOx emission gases, making this footprint and index solely an emission-to-air-index. Polarcus strives to be in a position to measure all gaseous, liquid, solid, acoustic emissions in order to reduce them going forward.

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Since the advent of modern maritime transport, the emissions of noxious gases and other pollutants have gone largely unnoticed and by virtue of its international nature generally outside the reach of most national laws controlling pollution. Today there is a rapidly increasing awareness of the issue and government regulators are starting to introduce legislation that seeks to control these harmful emissions. A recent study published by the European commission suggested that shipping

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Reducing harmful Emissions

Mill Euro per year

The emission index is a measure of the emission efficiency of a ship design, given a typical operational profile of the ship type. By referring to the index we should know if a specific ship is emission-wise better or inferior with respect to their emission footprints, and if it is performing above or become inferior to the average emission performance of a certain relevant fleet sample.

External Emission Costs (theoretical)

Assumed external costs for pollutants: CO2 based on estimates of the cost of reaching the Kyoto target in 2010 (Capros and Mantzos, 2000). For NOx and SOx the figures are taken from Holland et al (2005)

“Where you would

rather

“

Peter Zickerman EVP & Head of Strategic Investments

Conventional hull

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12mm

Double hull

800mm

Arctic Operations As attention is focused upon the discovery and exploitation of petroleum resources in offshore Arctic regions, all phases of the E&P process will be highly scrutinized for potential negative environmental impacts. Seismic operations in cold climates require more than just satisfying basic class and ice rules. Much more is needed for a safe and reliable operation. The Arctic Ocean often presents extreme hazards to seismic operations that can substantially increase risks to both the crew and to the environment. Conscious of these risks and aware that the industry is expanding into this new frontier Polarcus has built the industry’s first true ‘Arctic Standard’ 3D seismic vessels. Incorporating such design features as a double hull, ICE-1A class notation, Winterized, DP2 dynamic positioning, advanced ballast water treatment, and a host of other innovative features, the Polarcus vessels can mitigate many of the everyday hazards of working in the Arctic and enable us to safely and responsibly make the most of the short operating season. It is safe to assert that seismic surveys will be a mandatory tool required to help find potential plays and assess the commercial viability of production and development of those plays. As one of the first steps in the exploration process, seismic surveys have traditionally attracted a great deal of scrutiny in terms of potential environmental impacts. This will be especially true in Arctic areas. Stringent environmental safeguards, as important as they are, are only one aspect of the operational and technological complexity required for successful Arctic seismic projects. The Arctic region is remote and unforgiving of those not prepared for its harsh climate and weather conditions. At Polarcus we recognize that all ship and seismic equipment must be thoroughly winterized to protect against freezing and icing conditions that could severely impact the safety and efficiency of the whole operation. Additionally, the health and safety of our personnel require special training, clothing, and procedures for working in Arctic conditions. To meet these challenges, Polarcus has put the necessary equipment on our vessels and instituted the appropriate procedures and training to ensure maximum protection of physical assets and personnel as well as the overall survey objectives.

Assuring vessel integrity For many years the seismic industry has been dominated by the use of conversions and older vessels. The integrity of many of these older vessels, all with single hulls, belies the increase in crew numbers and equipment that characterizes a modern multi-streamer 3D seismic vessel. At Polarcus we have taken a number of measures that enable us to provide additional protection for vessel integrity, including double hulls on all vessels and the additional requirements for compliance that enable our vessels to meet the DNV SF notation for controlled stability and floatability.

Eliminating invasive Species Emissions to air are only one part of the issue in today’s environmentally conscious world. A new issue that is starting to gain recognition around the world is the equally damaging discharge of untreated ballast water that causes the introduction of invasive marine species into new environments. This standard practice has been identified by the International Maritime Organization as one of the four greatest threats to the world’s oceans, on par with land based sources of marine pollution, the overexploitation of living marine resources and the physical destruction of marine habitat. When invasions do occur, the consequences are often severe. In the United States for example the invasive zebra mussel has cost the government billions of dollars to clear whilst in the Black Sea and the Baltic, the Mnemiopsis leidyi comb jelly have depleted native plankton stocks and collapsed commercial fisheries. Toxic dinoflagellates, commonly known as “red tide” algae, can also be transported via ballast water and are harmful to humans when consumed via contaminated shellfish. In response the International Maritime Organization is introducing new regulations some commencing from 2010. At Polarcus we are taking the concerns seriously and are fitting the IMO’s first type-approved ballast water treatment system now on four of our six vessels. These four vessels also carry a high ice class designation and will be operating at times in the Arctic, an area where the effects of invasive marine species could be especially damaging to the local environment.

Taken as a whole, the Polarcus focus on Arctic seismic operations is to offer seismic survey services that ensure delivery of quality data in a safe, efficient, and environmentally sound manner.

Polarcus Fleet

“I

joined Polarcus for the once in a lifetime opportunity of really being able to fully utilize 17 years of seismic experience in a small, new, state of the art seismic company with a unique and environmentally aware agenda. To build a new team on board the Polarcus Nadia - a new purpose built vessel, of the revolutionary ULSTEIN X-BOW® vessel design, equipped with the latest technology carefully chosen to bring maximum benefit to the client in producing the best possible data set whilst having the minimum impact on the environment, has proven to be an exciting challenge.

“

Neil Boughton Party Manager Polarcus Nadia

“I

was attracted to Polarcus as they were employing both marine and seismic crews to operate their new innovative ULSTEIN X-BOW® vessels. With many years in the seismic and geotechnical industry my experience was rewarded with a posting to Dubai. I joined the site team where Polarcus Nadia and her sisters were under construction. In December 2009 I had the honour of being Master of the most modern seismic vessel in the world and proudly captained the maiden voyage to her first survey in West Africa.

“

Nigel Booth Master Polarcus Nadia

Polarcus Nadia & Polarcus Naila Launched in December 2009 and February 2010 respectively Polarcus Nadia and Polarcus Naila are 12 streamer 3D seismic vessels built to the ULSTEIN SX124 design. These vessels are capable of towing up to 12 streamer cables of 8,000m length with a lateral separation of up to 75m, or 10 streamer cables of 8,000m length with a lateral separation of 100m. They have an LOA of 88.8m, a draft of 6.6m and a maximum speed of 15 knots, and carry the ICE-C class notation enabling them to operate safely in light ice conditions.

Polarcus Asima Launching in 2010 Polarcus Asima is a 12 streamer 3D seismic vessels built to the ULSTEIN SX134 design. The vessel will be capable of towing up to 12 streamer cables of 8,000m length with a lateral separation of 100m. She has an LOA of 92.0m, a draft of 7.5m and a maximum speed of 15 knots, and carry the high ice class notation, ICE-1A, enabling her to operate safely in the Arctic Ocean.

Polarcus Samur Launching in 2010 Polarcus Samur is a versatile 6 streamer 3D vessels built to the ULSTEIN SX133 design. The vessel is capable of towing up to 6 streamer cables of 8,000m length with a lateral separation of up to 200m. She has an LOA of 84.2m, a draft of 6.0m and a maximum speed of 18 knots, and carries the high ice class notation, ICE-1A, enabling her to operate safely in the Arctic Ocean.

100 88 73

% %

Overall construction progress as of 1 March 2010

Our Vision

Goal

To be a pioneer in an industry where the frontiers of seismic exploration are responsibly expanded without harm to our world.

The Company’s corporate goal is “by 2012 to be the most environmentally responsible towed marine seismic supplier, with a strong focus on risk management, specializing in the high end 3D market and the Polar Regions whilst achieving long term shareholder value”.

Our Mission Our mission is to deliver superior performance and shareholder value in marine acquisition services whilst demonstrating leadership in environmental responsibility. Our core values are the foundation stone for achieving this goal, and we are seeking to build on these values by attracting the best industry talent to join us.

Our Values

Strategy To achieve the Company’s corporate goal a seven point business strategy has been defined comprising the following key elements:

One of our key strengths is our people. We are recruiting the highest talent into our company, and we are committed to implementing many of the latest industry lessons learned around crew welfare, health, safety, security, and general well-being so that we can protect and retain our workforce.

•

Pioneer the environmental agenda

•

Optimize fleet configuration and composition

•

Recruit, develop and retain the highest caliber industry professionals

•

Develop a world-class service offering

Responsibility – for our actions, for each other, and for the environment and the world around

•

Maximize operational performance

•

Develop and maintain an effective marketing and sales organization

•

Build a strong risk management culture and ensure adoption in key decision making processes

•

Secure and optimize start-up financing requirements

•

Establish an optimal organizational structure and cost control programs

Innovation – in business and in operations Excellence – in delivery for shareholders and clients alike

Dubai, UAE London, UK Houston, USA Rio de Janeiro, Brazil Cairo, Egypt

Polarcus Limited Cayman Island Polarcus 1 Cayman Islands Polarcus 2 Cayman Islands

Polarcus DMCC Dubai

Polarcus Seismic Limited Cayman Islands Polarcus Egypt

Polarcus UK Limited United Kingdom

Polarcus do Brasil Ltda Brazil

Hull 69 Polarcus Samur

Polarcus 3 Cayman Islands

Polarcus Nadia AS Norway

Polarcus Naila AS Norway

Hull 71 Polarcus Asima

Polarcus 5 Cayman Islands

Hull 66 Polarcus Nadia

Hull 67 Polarcus Naila

Board of Directors Alan Locker

Non-Executive Director Alan (born 1952) has extensive technical experience, with his most recent position being Chief Technical Officer at Drydocks World LLC, and prior senior positions at Dubai Ports Authority and Eurotunnel Services Ltd. He holds an Engineering degree from the UK. Shareholding in Polarcus: 125,000 Independent of the Company and management

Carl-Gustav Zickerman Non-Executive Director

Carl-Gustav (born 1948) has substantial experience in the seismic industry gained from his involvement in the startup of Eastern Echo Ltd. and prior to that, as Director and Partner with SeaBird Exploration Ltd. Shareholding in Polarcus: 30,356,616 Warrants: 7,500,000 Representing Zickerman Holding Ltd

Carl-Peter Zickerman Executive Director

Carl-Peter (born 1972) holds valuable experience in the seismic industry, gained from his prior start-up ventures, Eastern Echo Ltd, and GeoBird Ltd.At present he is working in the capacity of Executive Vice President & Head of Strategic Investments at Polarcus. Shareholding in Polarcus: 21,600,001 Warrants: 7,500,000 Part of the Executive Management team of the Company and representing Zickerman Group Ltd

Peter M. Rigg

Chairman of the Board Peter (born 1948) has an extensive background in investment banking with 21 years experience working in Asia and Europe, principally for Credit Suisse First Boston as a Worldwide Managing Director responsible for Asian Equity Capital Markets. Peter is a qualified Solicitor. He is also an independent non-executive Director of Shroderâ&#x20AC;&#x2122;s Oriental Income Fund Limited, and of two Asian private equity funds. Shareholding in Polarcus: 275,000 Independent of the Company and management and independent of major shareholders

Geoff Taylor

Non-Executive Director Geoff (born 1953) has held the position of Chief Executive Officer of Drydocks World LLC since 2004. He is also a member of the Board of Drydocks World LLC, Dubai World LLC and EZ World LLC. Shareholding in Polarcus: 300,000 Independent of the Company and management but representing Drydocks World LLC

Tore Karlsson

Non-Executive Director Tore (born 1953) is an independent consultant and partner/founder in Memetree Ltd, UK, MoVa AS, Norway and GeoPublishing Ltd. He has an MSc. in Geophysics and has held senior roles within the seismic industry encompassing line management, strategy, marketing and geophysics. He was Chairman of the Board of Eastern Echo Ltd prior to its acquisition by Schlumberger Ltd in 2007. Shareholding in Polarcus: 349,000 Independent of the Company and management and independent of major shareholders

Kitty Hall

Non-Executive Director Kitty (born 1956) has over 30 years experience within the geophysics industry and is currently Chief Executive of ARKeX Ltd, UK, where she is also the founding shareholder. Kitty was a Board Member of Eastern Echo Ltd. Shareholding in Polarcus: 300,000 Independent of the Company and management and independent of major shareholders

Jogeir Romestrand Non-Executive Director

Jogeir (born 1961) is owner and director of Norwegian private investment firm Rome AS. He has over 20 years experience within marine technology and has previously worked in various management capacities within the ODIM Group since 1985, and held the position of CEO and President from 2003 to 2009.

Hege Sjo

Non-Executive Director Hege (born 1968) is currently consulting for Hermes Investment Management Ltd., London; prior to which she was employed there in the capacity of Manager for European Governance and Engagement. Hege is the author of “Investor Relations in Practice” and serves as an alternate member of Statoil’s corporate assembly. Shareholding in Polarcus: 100,000 Independent of the Company and management and independent of major shareholders

Shareholding in Polarcus: 444,000 Independent of the Company and management and independent of major shareholders

Executive Management Rolf RĂ¸nningen

Christian Fenwick

Rolf (born 1957) has over 29 years of seismic industry experience and has held senior positions at GECO and PGS, most notably as the President of Marine Acquisition at PGS Geophysical AS. Most recently he held the position of CEO of Eastern Echo Ltd. His experience covers both technical and operational management of towed streamer seismic vessels and seabed operations.

Christian (born 1960) has over 26 years of industry experience and has held senior positions at Merlin Geophysical, Schlumberger Geco-Prakla, Schlumberger Information Solutions, and most recently was the Vice President Multi Client & Business Development at Eastern Echo Ltd. His experience covers business development, marketing, sales, operations and project management.

Chief Executive Officer

Carl-Peter Zickerman

Executive VP & Head of Strategic Investments Carl-Peter (born 1972) holds valuable experience in the seismic industry, gained from his prior start-up venture, Eastern Echo Ltd where he held the position of Executive Vice President Business Development. Prior to this he was the Managing Director and founder of GeoBird Ltd., a marine seismic service provider, later sold to SeaBird Exploration Ltd. His experience covers both maritime and seismic operations, including vessel conversions and new builds. Carl-Peter is a Member of the Board of Polarcus Ltd.

Eirin M. Inderberg

Trygve Reksten

Senior VP Contract Sales Trygve (born 1963) has over 18 years of industry experience and held several management positions at PGS, most recently as Head of Contract Sales Asia Pacific Region, prior to joining Eastern Echo Ltd as Senior Vice President Contract Sales. His experience covers onboard technical roles, operations, sales, business development, procurement and market analysis.

Christopher Griffin

VP Environment, Health, Safety & Quality

Eirin (born 1968) has over 15 years experience as a lawyer and was formerly General Counsel of Eastern Echo Ltd. Prior to this she worked for the law firm Wikborg Rein & Co. in Oslo and London, and as a lawyer at the Oslo Stock Exchange. Her expertise includes Norwegian securities law, company law and ship financing.

Christopher (born 1961) has over 24 years of industry experience both onshore and offshore with Western Geophysical, Horizon Exploration, PGS and, most recently with Eastern Echo Ltd where he held the position of Vice President Environment, Health, Safety & Quality. His experience covers both onshore operations and project management, including 12 years in the field and 6 years in EHS&Q management.

Tom Henrik Sundby

Svein Johnny Naley

Tom Henrik (born 1967) has over 16 years financial management and business development experience gained from the consulting services and commodities industries. He started his career with KPMG Norway, first as an auditor and then as a management consultant. Mr. Sundby then joined TINE Norway, a top 25 industrial company in Norway, where he was Head of Controlling department and Head of M&A. Most recently he was Managing Director of TINE UK Limited, based in London.

Svein Johnny (born 1965) has over 16 years of industry experience and has held senior positions at PGS, Reservoir Exploration Technology (RXT), and most recently at Eastern Echo Ltd. where he was responsible for the companyâ&#x20AC;&#x2122;s fleet new build project as the Executive Vice President Technical & Engineering. Svein Johnny is a Maritime Engineer, specializing in mechanical /electroautomation. His expertise includes project management of vessel new builds and conversions, seismic and maritime support and operations management.

General Counsel

Chief Financial Officer

Senior VP Business Development & Multi Client

Senior VP Technology

Jeff Corkhill

Paul Lionel Hanna

Jeff (born 1960) has over 26 years of industry experience, and has held several senior positions at Schlumberger WesternGeco, Caspian Geophysical and AGO. Jeff was also VP Operations for WesternGeco Marine Electromagnetic Services. His most recent position was that of Vice President Operations at Eastern Echo Ltd. His experience covers operations management, marine sales, marketing and region management, including eight years in the field.

Paul (born 1964) has over 23 years of industry experience and has held senior positions in various divisions of the Schlumberger group, including Connectivity Services Manager and Career Planning Manager for Schlumberger Information Solutions, London, UK; Data Services Business Manager for Data Consulting Services, Cairo, Egypt; and Area/Vessel Operations Manager for WesternGeco Gatwick, UK. His experience includes the technical, personnel and operational management of marine seismic vessels.

Senior VP Operations

Senior VP Human Resources

Magnus Oberg VP IT

Magnus (born 1970) has over 21 years of experience managing IT systems in large and medium size maritime companies. He joined Polarcus from Eastern Echo where he was VP Information Technology, and prior to that he held several senior management positions within Gulf Agency Company before becoming the Group IT Research & Development Manager based in Dubai. His expertise includes networking, security, and highavailability infrastructure solutions.

Board of Directors Report Polarcus is a pure play marine geophysical company with a pioneering environmental agenda, specializing in high-end towed streamer data acquisition from Pole to Pole. Polarcus is launching a fleet of modern 3D seismic vessels using the innovative ULSTEIN X-BOW® design and incorporating advanced maritime technologies for improved operational efficiency with a reduced environmental footprint. Polarcus offers contract seismic surveys and multi client projects worldwide. The Group operates on a worldwide basis with its principal office in Dubai in the United Arab Emirates.

2. Financial results for 2009

1. Key developments 2009

The total loss includes an impairment loss of USD 5,148,000 relating to the sale of vessel owning entities Polarcus 4, owning the rights to Polarcus Selma and Polarcus 6, owning the rights to Polarcus Alima. The vessels were sold to the Group’s main founders Zickerman Holding Limited and Zickerman Group Limited (together “ZL”).

•

Signed agreement with ION subsidiary GX Technology Corporation under which GX Technology will provide seismic data quality control and data processing services onboard the Polarcus vessels.

•

Obtained the Interim Document of Compliance from Det Norske Veritas AS.

•

Entered into a transaction that reduced overall capital needs and consequently increased the Group’s financial flexibility. Polarcus sold two of the Group’s six vessel owning companies and received an option to repurchase them for a price equal to the cost incurred of completing each vessel. Polarcus maintained the ambition of being a 6 vessel company, but reduced its short term capital requirements.

•

Concluded the full debt financing requirement under the current new building program through a USD 80 million debt facility from DVB Bank together with Eksportfinans of Norway guaranteed by GIEK (Garanti-instituttet for eksportkreditt).

•

Successfully completed an Initial Public Offering securing NOK 726 million (USD 125 million) and a subsequent listing on the Norwegian Stock Exchange, Oslo Axess.

•

Took delivery of the Company’s first vessel, Polarcus Nadia.

•

Firmed up backlog well into Q2 2010 for the Group’s first two vessels, Polarcus Nadia and Polarcus Naila, with a letter of award from Noble Energy Cameroon Limited for a 1,500 square kilometers 3D survey offshore Cameroon, and a charter agreement with TGS for a 5,000 square kilometer survey off West Africa.

The Group has not recognized any revenue in 2009 as the first vessel only commenced production in January 2010. Total Vessel Operating Expenses of USD 805 are solely related to the transit to the first prospect after taking delivery of Polarcus Nadia on 14 December. Total loss for the year ended 31 December 2009 is USD 19,034,000 compared to a total loss of USD 2,388,000 in 2008.

Net Finance costs are USD 4,946,000 compared to USD 5,075,000 in 2008. Interest expenses capitalised to vessels under construction offsets the increased interest accrued on the various debt instruments. Net finance income is 11,136,000 compared to 13,918,000 in 2008 mainly due to lower interest rates. A non-cash profit of USD 7,728,000 is related to revaluation of fair value of liabilities on warrants issued. In 2008 the non cash profit on the same item was USD 7,782,000. As a result of cash flow hedges the group booked a net gain of USD 4,589,000. This is booked directly against the balance sheet and is shown in the Total Comprehensive Income. The hedge was done by buying NOK to cover the cost of the Norwegian equipment to be delivered.

3. Financing The total cash requirement for completing four vessels is estimated at USD 714 million. Of this expenditure for seismic vessels and equipment is estimated at a total of USD 551 million and other expenditure at USD 163 million. Other expenditure includes financing costs, costs related to options for vessels 7 and 8, SG&A, working capital and buyback options for the two vessels which were sold during restructuring. Expenditure for seismic vessels and equipment of USD 551 million are USD 34 million less than originally budgeted. In 2009 Polarcus completed an Initial Public Offering securing USD 125 million and subsequent listing on the Norwegian Stock Exchange, Oslo Axess. With these

proceeds the Group has secured the financing required to complete the construction of its four vessels including the working capital requirement.

Polarcus has through options with various suppliers’ secured long lead items to build two additional vessels which would be vessels number 7 and 8 in the fleet.

As of 31 December 2009, the Group has secured the following financing totaling USD 737 million: Equity USD 337 million Senior secured bond USD 55 million Convertible bond USD 35 million Sale & lease back (on first two vessels) USD 180 million Vendor financing USD 50 million Loan facility USD 80 million

Polarcus Selma and Polarcus Alima, the vessels which Polarcus has options to repurchase, are scheduled for delivery in Q4 2010.

The Group has received an option from ZL to repurchase each of Polarcus Selma and Polarcus Alima or the corresponding vessel owning companies at a price equal to the remaining cost of completing each vessel. The options are valid until delivery of each vessel, and subsequently are replaced with a right of first refusal to purchase each of the vessels. The remaining carrying value of respectively USD 20 million for Polarcus Selma and USD 21 million for Polarcus Alima will be subtracted from the purchase price if the Group exercises its right to repurchase one or both of these vessels. This amount is shown as Vessel buyback options under Non-current Assets in the Group’s Consolidated Balance Sheet. If the options are exercised, which is the current intention of the Company, additional capital expenditure financing of approximately USD 250 million will be required. If the Group chooses not to, or is unable to exercise the buyback options the above values will be written-off as an impairment loss.

4. New build program Polarcus’ new build program consists of 4 high end seismic vessels, where the first 2 vessels are built to the SX-124 design capable of towing 12 streamers. 1 vessel is being built to the SX-133 design capable of towing 6 streamers and 1 vessel is being built to the SX-134 design capable of towing 12 streamers. In addition the Group has options to repurchase 1 additional SX-133 and 1 additional SX-134 currently being built at Drydocks World – Dubai.

5. Risk 5.1. Financial market Risk

Access to financial funding The Group may require additional capital in the future due to unforeseen liabilities or in order to take advantage of opportunities for acquisitions, joint ventures, exercise of options or other business opportunities that may be presented to it. Any negative development in sales, gross margins or sales processes, may lead to a strained liquidity position and the potential need for additional funding through equity financing, debt financing or other means. Any additional equity financing may be dilutive to existing shareholders. Future contract awards and credit risks As is customary in the industry, contracts for Polarcus’ services are occasionally modified by mutual consent and in certain instances they may be cancelled by the customer at short notice without penalty. Consequently, Polarcus’ backlog as of any particular date may not be indicative of actual operating results for any succeeding period. Financial leverage and breach of covenants The financial leverage of the Group or any breach of covenants (or other circumstances which entail loans falling due prior to their final maturity date) may have several adverse consequences, including the need to refinance, restructure, or dispose of certain parts of the Group’s businesses in order to fulfill the Group’s financial obligations. Fluctuations in Exchange rates and currency risks The Group’s costs are primarily in USD and to some extent NOK, GBP and EUR. The majority of revenues

The vessel delivery schedule with progression per 1 March 2010 was as follows: Vessel

Steel Cut

Steel Constructed

Overall Construction

To be Delivered

Polarcus Nadia

100%

Delivered 14 Dec 09

Polarcus Naila

100%

Delivered 24 Feb 10

Polarcus Asima

100%

88%

Q2 10

Polarcus Samur

100%

73%

Q3 10 29

are expected to be in USD. A depreciation of the USD will therefore have a negative impact on margins as the Group will typically have higher revenues than expenses denominated in USD. Long term financing is in USD. To manage the Group’s foreign exchange risk arising from future commercial transactions, primarily the NOK commitments under the vessel construction program, the Group maintains NOK cash accounts to cover a major part of these future commitments. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency, which is USD. The company’s shares are traded in NOK. The NOK trading price is affected by the underlying activities of the Group which are primarily denominated in USD. Currency fluctuations relative to the NOK of an investor’s currency of reference may also adversely affect the value of an investor’s investments.

5.2. Operational Risks

Variability of operating results The Company’s revenue may vary from month to month and year on year due to changes in oil companies exploration and production spending. There is no guarantee that Polarcus will be able to secure contracts at profitable rates. In addition, the Group may experience significant off-hires between charters. Supply and Demand risks Demand for offshore geophysical services depends on the demand / supply balance for oil and gas and on the investments by oil and gas companies in exploration and development projects. Low demand or oversupply of oil and gas can lead to reduced capital expenditures by oil and gas companies that in turn may reduce the demand for the Group’s products and services. Other factors that may reduce the demand for the Group’s products and services include but are not limited to, fluctuations in productions levels and disappointing exploration results. Operating and financial history The Company was recently formed and has a limited period of operating history and limited historical financial information for clients and investors to evaluate prior or future performance. Limited track record might be a risk factor affecting the ability to secure contractual work. Access to personnel The Group’s development and business success are largely dependent upon the continued services and performance of its senior management and other key personnel. There is no guarantee that the Group will be

able to attract and retain personnel required for a successful operation, which might have negative effects on the Group’s operating results and financial condition. Dependence on few assets The Group is currently fully funded for four vessels. If Polarcus fails to obtain short or long term contracts for one or more of the vessels, Polarcus could incur financial losses due to less operating vessels to allocate fixed costs to. There is also an operational risk with fewer vessels to operate efficiently covering all markets due to potentially more steaming which in soft markets are paid at a lower rate than regular production. Insurance protection Although Polarcus has insurance coverage normal for its line of business, such insurance arrangement will not carry full coverage of all its operating risks. An incident involving any of the Group’s assets could result in loss of earnings, fines or penalties, higher insurance costs and damage to the reputation of the Group. The Group has established a loss of income insurance, however the loss of, or lasting unavailability of a vessel could have an adverse effect on the Group as the loss of income insurance will have a significant deductable and limited time span and will not cover all eventualities.

5.3. Risk factors particular to the vessels construction project

Construction risk Polarcus has three vessels under construction with Drydocks World LLC. Any material delays related to the construction contracts or other contracts of importance for the construction and equipment of the vessels might have a material adverse effect on the Group and its financial position. Furthermore, cost overruns and technical problems might be experienced during construction and testing of the vessels which might impact the expected delivery time of the vessels as well as the expected financial performance. A potential default by Drydocks World LLC or other counterparties will have an adverse effect on the Group and its financial position. The Group is dependent on the ability of sub-contractors to provide key seismic equipment which meets the specifications, quality standards and delivery schedules of the Company. Failure to meet these requirements might have a material adverse impact on the Company’s operating results and financial position.

6. Health, safety and security Polarcus ensures that the highest priority is placed on all identified health, safety and security issues by utilizing a strong risk based approach to our decision making

processes. Polarcus logs exposure hours for all employees and supplier personnel working at a Polarcus worksite. To date, Polarcus has had zero Lost Time Incidents (LTI’s). Through the same period Polarcus also had zero recordable incidents giving a total recordable case frequency (TRCF) of 0. During 2009, Polarcus obtained the Group Interim Document of Complaince (DoC) from Det Norske Veritas and commenced a review of the Management System in order to achieve future certification under ISO 9001, 14001 and OHSAS 18001. The system was rolled out in March 2009 and has been audited by a number of major Oil Companies in order to prequalify the Group to be placed on bid listings to tender on seismic survey contracts. The modular-based electronic Polarcus Management System provides a fast, efficient and user friendly approach towards inputting and accessing information, in addition to ensuring a well functioning and compliant document management system. An integral part of the focus Polarcus places on health, safety and security is to ensure employee and supplier involvement and buy-in to the system. The no blame culture of Polarcus ensures employees and supplier personnel alike, report not only incidents and non-conformances, but also input to modules provided for Near Miss’s and Improvement suggestions. This offers opportunities not only for decreasing the likelihood and severity of incidents but also facilitates the Group’s continual improvement in these areas.

7. Environment The Group is pursuing an Emission Index for COx, NOx and SOx in the vessel program. The Index uses an algorithm to measure environmental footprint. The goal is to minimize that footprint whilst simultaneously maximizing vessel efficiencies. Emission indexing is being conducted on the global marine seismic fleet by Ulstein International and Det Norske Veritas AS. This will establish benchmarks for existing vessels as well as new builds. It is the Group’s intention to share this data with the industry as it is only together that a timely, effective and pragmatic global solution can be found for the pollution and greenhouse gas challenges. The resultant data will provide customers with the ability to objectively evaluate the sector and select an environmentally responsible contractor. Whilst building the Group nearly every aspect of vessel design and technology selection has come under the green focus. In designing the fleet the Group recognized the importance of reducing atmospheric emissions from the vessels. The Group investigated Selective Catalytic

Reduction Catalysts and through installation of these units Polarcus will realize an investment in our future. Similarly, by utilizing the latest systems for bilge and ballast water treatment the Group will reduce, if not eliminate, the number of contaminants and non-native species being released into our oceans, a lesser debated but equally important area of concern. In parallel to these engineering initiatives, Polarcus is continuously seeking other ways to address the green agenda and this will be a key element of the Group strategy plans for 2010. Polarcus experienced zero pollutants to ground during 2009 and waste is managed in accordance with national and international standards and disposed of according to these standards. Polarcus’ environmental management system is based on ISO 14001 in preparation for certification during 2010. Polarcus’ main office has entered into an agreement with a recycling Group and all paper, plastic and aluminum is recycled and tracked.

8. Employees At the end of the year Polarcus had 186 employees from 30 different nationalities. Of these, 20 are women. Employees include experienced seismic and maritime crew for the first two vessels, Polarcus Nadia and Polarcus Naila. Polarcus field crew has been assisting with final preparations for vessel completion and operational readiness. The Group management system and office structure has been made ready to commence operational support. The Group is committed to being the employer of choice in the marine seismic business and is committed to maintaining a human resource system that is open and fair. The Group aims to be a workplace with equal opportunities and has included in its policies regulations to prevent gender discrimination regarding salary, promotion and recruiting. The Discrimination Act’s objective is to promote gender equality, ensure equal opportunities and rights, and to prevent discrimination due to ethnicity, national origin, descent, skin colour, language, religion and faith. The Group is working actively to encourage the Act’s purpose within our business. All employees are treated equally regardless of ethnic background, gender, religion, age or disability.

9. Internal Control The Group is in 2010 transferring from a project phase into an operational phase and is in a continuous process of establishing appropriate internal controls to cater for this. Polarcus management follows the Company’s

financial status on a daily basis leading to a formal monthly management report including critical factors relating to financial covenants, cash flow, comparison to budget and other key figures. The quarterly financial statements are presented and approved by the Board with a detailed comparison to budget. In 2009 an electronic invoice control system, a detailed authority matrix and payment routines were introduced. In order to sufficiently manage accounts receivables, monthly invoicing routines and weekly monitoring have been put in place. The Company’s costs are monitored monthly and necessary accruals are made.

10. Work of the Board of Directors The Board of Directors consists of Peter Rigg (Chairman), Tore Karlsson (Deputy Chairman), Carl-Gustav Zickerman, Carl-Peter Zickerman, Hege Sjo, Kitty Hall, Geoff Taylor, Alan Locker and Jogeir Romestrand, elected as permanent directors for a two-year period. Rosli Azad Khan resigned as a member of the Board due to conflicting commitments with immediate effect on 1 September 2009. Jogeir Romestrand was elected as a director of the Board at the general meeting held on 11 September 2010. All current directors, with the exceptions of Mr. Carl-Gustav Zickerman and Mr. Jogeir Romestrand, will stand for re-election at the 2010 annual general meeting. The Board of Directors has held 4 physical meetings, 8 telephone meetings and executed 8 written resolutions in 2009. Overall attendance by the directors has been high, in meetings no more than two members were absent and no director was absent in more than one meeting during 2009. The Board of Directors has established three board committees, (i) combined corporate governance and remuneration committee, (ii) nomination committee and (iii) audit committee. Directors are currently not paid any extra remuneration for committee work. Corporate Governance and Remuneration Committee The corporate governance and remuneration committee consists of Mr. Tore Karlsson, Mr. Alan Locker, Mrs. Hege Sjo and Mrs. Kitty Hall. The committee is mandated to regularly review and update the Company’s governance commitments and structure and to review proposals from the executive management on bonus schemes and other benefits as well as general principles for salary and allowance changes. Nomination Committee The nomination committee consists of Mr. Alan Locker, Mrs. Hege Sjo and Mr. Thomas Raaschou. Mrs. Sjo was appointed as committee chair on 10 November 2009 and has later appointed Mr. Locker and Mr. Raaschou

as members, these being representatives of larger shareholders of the Company. The committee is mandated to evaluate and submit a recommendation to the AGM on nominees for election as members and possibly deputy members of the BoD and the Chair of the BoD, remuneration of the BoD and the members of the committee and amendments to the committee terms of reference. Audit Committee The audit committee consists of Mr. Romestrand, Mrs. Sjo and Mr. Rigg. The committee is mandated to regularly review the Company’s proposal for quarterly accounts and various issues related to the accounts, introduction of new and change of existing accounting principles, high-level supervision of the budget process, review and evaluate the Company’s internal financial control and on behalf of the BoD liaise with the Company’s auditor.

11. Outlook Polarcus believes that the underlying industry fundamentals remain solid due to the continuing need for oil companies to replace reserves and address declining production rates in maturing fields. This is further supported through various announcements that both national and international oil companies are increasing their E&P budgets for 2010. The seismic industry witnessed weaker day rates throughout 2009, but Polarcus is seeing encouraging indications that the sector will begin to recover in 2010, led by the high-end 3D seismic acquisition sector. The Board confirms that the 2009 financial statements have been prepared based on the assumption of going concern and that the assumption of going concern is appropriate.

12. Allocation of the parent company’s profit for 2009 The financial statements of Polarcus Limited are prepared in accordance with International Financial Reporting Standards. Loss for 2009 was USD 2.8 million compared to USD 1.2 million in 2008. Polarcus Limited is a holding company with no operating activities. The Board proposes to allocate the 2009 loss for the period to retained earnings/(loss).

Dubai 25 March 2010 Board of Directors

Peter Rigg

Geoffrey Taylor

Tore Karlsson

Carl-Gustaf Zickerman

Carl-Peter Zickerman

Kitty Hall

Hege Sjo

Jogeir Romestrand

Alan Locker

Share Information As of 31-December 2009 Shares in Polarcus were listed on the Oslo Axess under the ticker symbol ‘PLCS’ on 30 September 2009. From listing on Oslo Axess until the end of the year, a total of 71 million Polarcus shares were traded at a value of NOK 255 million. This means that 27 percent of the total number of shares outstanding in Polarcus were traded during the period and more than 1,600 share transactions were completed in Polarcus shares. At the end of the year 2009, Polarcus had a market capitalization of NOK 974 million.

Share capital

Consolidation

At year-end 2009 Polarcus had 329 shareholders. The company’s largest shareholder is Drydocks-World LLC with 14.25 percent. The 20 largest shareholders at year end 2009 held 72.92 percent of the shares in Polarcus.

An Extraordinary General Meeting of the Company on September 11, 2009 decided to consolidate the Company’s shares 2:1 with immediate effect. Following the consolidation, the total number of issued shares and votes in Polarcus amounted to 101,785,927.50

Following the Company’s Initial Public Offering on 27 September 2009 the issued share capital of Polarcus amounts to USD 5,263,496.40 divided into 263,174,820 shares of par value USD 0.02 each. All shares are of the same class and carry equal rights in all respects and each share carries one vote.

Polarcus shareholders

Name

Holding

Drydocks World llc

37,500,000

14.25%

Zickerman Holding ltd

30,356,616

11.53%

Zickerman Group ltd

21,600,001

8.21%

BGL BNP Paribas

19,948,745

7.58%

Awilco Invest as

11,531,000

4.38%

Morgan Stanley & co inc. New York

9,551,126

3.63%

JPMorgan Chase Bank

9,000,000

3.42%

The Northern Trust co.

8,786,000

3.34%

Deutsche Bank AG London

6,844,000

2.60%

Caceis Bank Luxembourg

6,218,833

2.36%

JPMorgan Chase Bank

4,602,000

1.75%

State Street Bank and Trust co.

4,327,000

1.64%

Bank of New York Mellon

4,013,000

1.52%

Brown Brothers Harriman & co

3,095,000

1.18%

Bank of New York Mellon sa/nv

3,086,900

1.17%

JPMorgan chase bank, na

2,545,791

0.97%

Ulstein Shipping AS

2,500,000

0.95%

Boreas capital fund

2,245,000

0.85%

Mp pensjon

2,102,000

0.80%

Klp lk aksjer

2,048,000

0.78%

191,901,012

72.92%

Top 20 Shareholders Others

71,273,808

27.08%

Total

263,174,820

100.00%

Corporate governance commitments The Board of Directors of Polarcus adopted the Company’s current set of corporate governance commitments on 25 March 2010. The commitments are founded on the recommendations of the Norwegian Corporate Governance Code (the “Code”), as applicable at all times. A summary of Polarcus corporate governance commitments and Polarcus’ compliance with its commitments and the Code are provided below. Polarcus Articles of Association, Corporate Governance Document and Terms of Reference for the various bodies of the Board are available on the Polarcus web site, www.polarcus.com.

Code Recommendation 1: Implementation and reporting on Corporate Governance Polarcus believes that focus on corporate governance is critical to its success and long-term growth. Polarcus is committed to maintaining high standards of corporate governance. The governance structure of Polarcus is designed to be appropriate to shareholders’ expectations, to the size, business and the history of the Polarcus Group. It also is designed to adhere to the Norwegian Code of Practice for Corporate Governance (the “Code”), Cayman Islands law and practice and the Memorandum and Articles of Association of Polarcus. The Company implements its corporate governance through a comprehensive and efficient framework of commitments, procedures, checklists and audits and the promotion of a responsible corporate culture throughout the Polarcus Group. The Board of Directors will annually review and evaluate its commitments and the need for any amendments as a consequence of the development of the business of the Company or changes in applicable legislation or in the Code. The Board of Directors will furthermore review, evaluate, explain and report on the Company’s compliance or non-compliance of the individual corporate governance commitments and the applicable corporate governance recommendations of the Code, such report to be included in each annual report of the Company. The Company’s vision and core values are presented on page 22 of this annual report. The “core values” of

the Company are implemented through a set of commitments and procedures. The most important commitments are posted on the Company’s web site www. polarcus.com.

Code Recommendation 2: Business The goals and strategies of Polarcus are presented on page 22 of this annual report. The Company’s business is defined in the Articles clause 3: “The objects for which the Company is established are to carry on, undertake, engage or invest, directly or indirectly, by itself or through subsidiaries or part-owned companies, partnerships or other forms of entities, on a worldwide basis, in any commercial activity within the international oil and oil services business, including oil and gas exploration, production and participation, seismic data services and general offshore energy related business, and whatever else may be considered incidental or conductive thereto, including without limitation the acquisition, construction, equipment, leasing, chartering, operation, agency and manning of any kind of vessels and everything incidental thereto, and the Company shall have full power and authority to carry out any other object not prohibited by the Companies Law of the Cayman Islands (as amended) (the “Law”).”

Code Recommendation 3: Equity and Dividends Polarcus is committed to having an equity capital at a level appropriate to its objectives, strategy and risk profile. The Company’s aim is to have a 60/40 debt to equity ratio. The Company’s current debt to equity ratio is 53/47 and reflects the prevailing financial market conditions. Polarcus is committed to maximizing the shareholder value including, where appropriate, declaring dividends to the shareholders from its profits. Polarcus is under certain of its financing arrangements subject to dividend restrictions. Due to these restrictions and the current phase of the Company, Polarcus will not propose any dividend for the fiscal year 2009. The Board of Directors has the authority to distribute any authorized but not yet issued or reserved shares, currently amounting to 50,522,711 shares of USD 0.02 par value.

The purposes for which the issued share capital may be increased is decided by the Board of Directors. The Board of Directors current intention for the available authorized share capital is to provide for any share issues needed to finance the Company’s acquisition of the two vessels sold under the group restructuring (please see page 68 of this annual report for a description of the restructuring), to finance other viable business opportunities and for general working capital purposes. Due to the system under Cayman law, it will not be possible to limit, in time, the actual authorization. The Company will at the 2010 annual general meeting ask for an increase in the authorized share capital to ensure that the Company has sufficient authorized capital for its future needs. The different purposes for the increased authorized share capital will be defined and divided into separate mandates in the request for consideration by the annual general meeting. In accordance with its Articles, Polarcus may only acquire its own shares if and in so far as approved by the general meeting through an ordinary resolution, such mandate to be for a specific number of shares and for a specific period of time. The Company does not currently hold any mandate to acquire its own shares and will not request such authorization at the 2010 annual general meeting.

Code Recommendation 4: Equal treatment of shareholders and transactions with close associates Polarcus has one class of shares. Polarcus is committed to equal treatment of all shareholders. The Articles of Polarcus do not prescribe any pre-emption rights for shareholders of the Company. In the event that the Company considers it to be in the best interest of shareholders or necessary to perform a share offering, the Company is committed to limiting the level of dilution. The Company will in connection with a share issue carefully consider the purpose and need for new equity, the urgency of such equity, the strategic positioning between the Company and the new shareholders the offering is directed towards, the offer price, the financial market conditions and the need for compensating existing shareholders. Polarcus successfully completed its Initial Public Offering (“IPO”) and was listed on the Oslo Axess on 30 September 2009.

Due to the then prevailing financial market conditions, the Board of Directors did not find a pre-emptive rights issue feasible. Prior to the IPO this was discussed with the directors of the Board representing the three largest shareholders of the Company who fully concurred with the structure of the IPO. Should the Company find it beneficial to shareholders that Polarcus performs a stock repurchase, the Company will comply with best practice and regulations. Polarcus has developed procedures to handle potential conflicts of interest. The executive management of the Company and each director has a duty to notify the CEO and the Board of Directors respectively if it becomes known to any of them that he or she or a related party has any direct or indirect interest in a not immaterial transaction to be entered into by the Company. Any director with such interest shall refrain from voting in respect of such transaction. The executive management shall also inform the Company of any financial interest each of them might have in any other company. In the event of a non-material transaction between the Company and a shareholder or shareholders, directors, members of executive management or close associates of any such parties, the Board shall arrange for a valuation from an independent third party unless the Board of Directors decides to ask the general meeting to resolve on the matter. The restructuring of the Polarcus Group that took place in July 2009 (see page 85 of this annual report for a description of the restructuring), involved a sale of two vessels owned by the Polarcus Group to Zickerman Holding Limited and Zickerman Group Limited and the sale of certain equipment to Drydocks World Dubai LLC, all three related parties of the Polarcus Group. The restructuring was highly beneficial to the Company’s shareholders. Without additional risk the Company has the option to repurchase the vessels sold. Based on the experience of the management in its attempt to sell the vessels and the fact that the option entitles the Company to repurchase the vessels at the remaining cost of completion, external valuation of the vessels were not considered necessary. The equipment sold to Drydocks World Dubai LLC was sold at cost. For all the above reasons, the restructuring was not submitted to the general meeting.

The representatives of Zickerman Holding Limited and Zickerman Group Limited, being directors of the Board of Polarcus, abstained from the Board of Director’s vote on the restructuring.

formation available on the Company’s website at least 21 days in advance of the meeting. The Company will furthermore distribute the notice to all individual shareholders with known addresses.

Code Recommendation 5: Freely negotiable shares

The notice of a general meeting shall always include: •

Date, time and place of the general meeting;

The Company’s Articles provide that upon listing of the shares at a regulated investment market, the shares shall be freely transferable. Notwithstanding this, the Directors may pursuant to the Articles decline to register the transfer of a share where such transfer would, in the opinion of the Directors, be likely to result in 50 per cent or more of the aggregate issued share capital of the Company, being held or owned directly or indirectly by individuals or legal persons resident for tax purposes in Norway or the Company otherwise being deemed a controlled foreign company (CFC).

•

The agenda, a description of or supplemental information on the matters to be discussed with sufficient details and content to enable the shareholders to form a view on all matters to be considered at the meeting, any recommendation of a nomination committee and, where applicable, proposal for resolutions;

•

If necessary, the method and deadline for shareholders to give notice of their intention to attend and vote at the meeting, such notice to be given either by letter, e-mail or fax and the deadline to be earliest the day before the date of the meeting;

•

A form of instrument of proxy that may be used at the shareholders’ discretion and which allows separate voting instructions for each matter to be considered by the meeting and for each board candidate nominated for election, guidelines for completing the proxy and information on who the shareholder can appoint as proxy;

•

At which address an instrument of proxy shall be deposited either in original or in copy by fax or email latest at the time the meeting starts;

•

To whom any proposals or comments to the notice, the agenda for the meeting and any proposal for resolutions can be directed;

•

The web-pages on which the notice and the supporting documents, including the form of instrument of proxy are made available.

The Company’s shares were listed at the Oslo Axess on 30 September 2009. The Board of Directors does not envisage having to use the CFC-provision of the Articles. Certain of the Company’s shares are subject to a shareholder agreement. The agreement restricts the transfer of shares covered by the agreement until six vessels have been completed at Drydocks World Dubai LLC unless otherwise consented to by the Board of Directors. In connection with the restructuring in July 2009 where two vessel-owning companies were sold by Polarcus, the Board of Directors consented to Drydocks World LLC selling their shares covered by the shareholder agreement on 1 September 2010 independent of the number of vessels delivered. The Company believes it is important to maintain the shareholder agreement until that date in order for the Company to reach a phase in its development where the real values are more correctly reflected in the share price. The Board of Directors intends also to consent to the other parties of the shareholder agreement selling their shares at the same date as Drydocks World LLC. Such consent will for all practical purposes result in that the shareholder agreement in its entirety will lapse on 1 September 2010. The shares not subject to the shareholder agreement, including the shares issued in the IPO, do not carry any transfer restrictions.

Code Recommendation 6: General Meetings Notice of GM In accordance with the Code, the Company will make the notice of a general meeting and the supporting in-

The annual general meeting of the Company on 30 April 2009 was called for in full compliance with Polarcus’ commitment and the Code. The Company also called an extraordinary general meeting on 11 September 2009. The meeting was called 7 days in advance and the notice with attachment and proxy form were posted on the Company’s website the same day. The meeting was primarily caused by the deemed need to consolidate the shares of the Company for the preparation for the IPO. As the IPO was to start on 15 September 2009 and the consolidation of the shares had to be made prior to such date, the meeting was called for with a shorter deadline than recommended in the Code. The notice complied with the Company’s Articles and the Code.

The auditor was not physically present at the AGM 2009. As the Company at that time was not in an operational phase and the cost of bringing the auditor to the general meeting was substantial, the Board of Directors did not find this measure required. Participation in a general meeting The Company will ensure that as many shareholders as possible may exercise their rights as shareholders by participating in a general meeting and that the general meeting works as an effective forum for the views of the shareholders, hereunder by implementation of the following measures: If at all required, the deadline for shareholders to give notice of their intention to attend the meeting shall be fixed to earliest the day before the date of the meeting. Normally there will be no requirement for a shareholder to notify its attendance at the general meeting in advance of the meeting; Any shareholder who cannot attend the meeting in person shall be able to vote by proxy either by granting proxy to the chairman of the Board of Directors or the company secretary or to an individual appointed by the shareholder on each matter to be considered at the meeting. The notice of the general meeting will specify at which address the instrument of proxy shall be deposited and that the proxy must be deposited no later than the time for holding the meeting. The chairman of the general meeting may in any event at his discretion direct that an instrument of proxy shall be deemed to have been duly deposited. The chairman of the meeting shall invite the shareholders to participate in discussions of the different issues at the general meeting. The general meeting shall vote separately on each candidate nominated for election to the Board of Directors. The members of the Board of Directors, the CEO, the CFO and the company secretary shall be present at any general meeting. Furthermore, the members of the nomination committee will be present at the annual general meeting. The auditor shall be present at each general meeting where such presence is practical or necessary due to the nature of the business to be transacted at the meeting. Proceedings at general meetings In order for a general meeting to proceed, shareholders representing not less than 10% of voting rights of the Company must be represented either in person or by proxy.

For practical reasons as well as cost considerations, the chairman of the Board of Directors will chair the general meeting, provided the chairman is independent of any major shareholder of the Company. If the chairman of the Board of Directors is prevented from or unable to act as chairman of the general meeting, another independent director elected by the other members of the Board of Directors shall chair the meeting. If no member of the Board of Directors is willing or able to act as chairman, the shareholders present at the meeting shall by ordinary resolution choose one of their number to be the chairman of the meeting. Minutes from the general meeting shall be posted on the Companyâ&#x20AC;&#x2122;s website latest three days after the date of the general meeting.

Code Recommendation 7: Nomination Committee The Company shall have a nomination committee. The first committee shall comprise of one of the independent directors who shall be appointed by the Board of Directors. This independent director shall appoint up to three additional individuals as members of the committee among the 20 largest shareholders. All members shall be independent of the executive management and at least one member must be independent of the Board of Directors. Furthermore, the committee should never comprise of more than two members of the current Board of Directors. The chairman of the Board of Directors shall not be part of the committee. The members of the committee should be selected to take into account the interests of all shareholders. The members of the nomination committee are elected for a period of one year. The nomination committee consists of Mr. Alan Locker, Mrs. Hege Sjo and Mr. Thomas Raaschou. Mrs. Sjo was appointed as committee chair on 10 November 2009 and has later appointed Mr. Locker and Mr. Raaschou as members, these being representatives of larger shareholders of the Company. Mrs. Sjo and Mr. Locker are current directors of the Company. The composition of the first committee shall be proposed and approved by the Companyâ&#x20AC;&#x2122;s annual general meeting in 2010. The composition of the nomination committee does not fully comply with the recommendations in the Code. The Board believes that it well serves its purpose in the Companyâ&#x20AC;&#x2122;s current phase, but does not rule out appointing a committee consisting only of external members at a later stage.

The nomination committee’s mandate is to evaluate and provide a proposal for candidates for directorships. The nomination committee shall also present a proposal for remuneration to the current Board of Directors. The current nomination committee will make a recommendation for the board positions up for election at the 2010 annual general meeting and a proposal for board remuneration.

Code Recommendation 8: Board of Directors: Composition and independence Pursuant to the Articles, the Board of Directors may consist of 2 to 10 directors. The current Board of Directors are presented on page 24 of the annual report. The members of the Board of Directors and the chairman of the Board of Directors shall be elected by the annual general meeting by ordinary resolution. Each director shall serve for a term of two years which expires at the conclusion of the annual general meeting in the year in which the period of office expires. A director is eligible for re-election after the two-year period. All current directors except Mr. Romestrand and Mr. Carl Peter Zickerman are up for re-election at the 2010 annual general meeting. The Board of Directors shall together have qualities, experience and expertise that the Company needs in order for it to develop into a recognized provider of geophysical seismic services world-wide including, but not limited to, geophysical seismic expertise, corporate, financial and investor relation experience and experience within investment banking. The directors shall furthermore have the ability to work efficiently as a team and have sufficient capacity to carry out his/her duties. The Board of Directors shall attend to the common interest of all shareholders and operate independently of any special interests and have a balanced combination of directors representing major shareholders and directors that are independent of any shareholder or shareholder groups. Under no circumstance shall the independent directors count less than two directors. The Company shall furthermore ensure that the majority of the directors are independent of the Company’s executive management and material business contacts. The composition of the current Board of Directors complies with the Company’s corporate governance commitments and provides diversified and valuable expertise and experience to the Company. Four of the directors are independent of major shareholders. The Company feels the Board of Directors reserves sufficient time to

carry out their duties as directors of Polarcus. None of the directors holds such a number of board positions in other companies that such other positions would compromise the time needed to act as directors of Polarcus. The directors’ attendance at the board meetings is high as reflected in the record set out on page 32 of the annual report. Mr. Carl-Peter Zickerman is part of the Company’s executive management, serving as EVP & Head of Strategic Investment. Mr. Zickerman is furthermore one of the major shareholders and a founding shareholder of the Company. The Board of Directors finds it advantageous that he holds office as director as well as attending to critical strategic processes on a daily basis. The directors are encouraged to and all current Directors own shares in the Company. No director shall be entitled to stock options in their capacity as director.

Code Recommendation 9: The work of the Board of Directors The Board of Directors has issued separate terms of reference documents that in detail set out the authorities, responsibilities and duties of the Board of Directors, the chairman, the deputy chairman, a director, the company secretary and board committees. The terms of reference are available on the Polarcus web site, www. polarcus.com. The Board of Directors and each director shall comply and carry out its responsibilities in accordance with at any time applicable instructions and guidelines. The Board of Directors shall regularly consider the appointment of board committees in order to enhance and ensure independent and efficient preparation and consideration of matters. Only directors independent of the executive management team can be members of such committees. A description of the current corporate governance and remuneration committee, the nomination committee and the audit committee and their mandate are included on page 32 of this annual report. The Board of Directors has established a plan for its work for 2010 and has carried out an evaluation of its performance and expertise in 2009. The Board of Directors has held 4 physical meetings, 8 telephone meetings and executed 8 written resolutions in 2009.

Code Recommendation 10: Risk management and internal control Good risk management and quality processes are at the core of the Company’s business. The Company will ensure sound internal control of its business and compliance with all relevant laws, regulations, and market requirements i.a. through its company management system. The management system contains Polarcus commitments (policy statements), Company manuals, corporate identity, risk control, contingency planning and EHSQ covering blanket requirements such as document control, reporting incident investigation, journey management and management of change The commitments, manuals and planning documents are supported by procedures. The procedures provide the necessary reference, standards and instruction for responsibly carrying out the daily tasks of the Group, in many situations aided by checklists that help ensure that the task is carried out as prescribed in the procedure. The Company will regularly carry out internal department audits in accordance with detailed procedures and audit plan in order to ensure sufficient regular monitoring and review of the content of and the compliance with the Group’s management system. The result of these audits are presented and considered by the Board of Directors. As part of the company management system and culture, the employees are required to report near-misses, incidents and non-conformances. Compliance with all aspects of the Polarcus management system shall be one element measured for each employee under the performance based bonus scheme implemented by the Polarcus Group. The executive management and each department of the Polarcus Group shall in its decision-making identify the risk involved and possible mitigation measures available. A standard risk matrix has been developed by the Company for this purpose and the personnel have been trained in the use of such matrix. Furthermore, the executive personnel shall at least once a year review its operation and any risk attached to the operation. The result of such review shall at least annually be presented to the Board of Directors for discussion and consideration. The management system has been subject to audits from and been approved by several prospective clients of the Polarcus Group. The various departments of the Company have throughout 2009 audited their procedures in order to ensure quality and that actual performance of the tasks in question correspond with the pro-

cedures. Audit procedures and audit plans for internal cross-departmental audits have been developed and will be implemented throughout 2010 to ensure sufficient regular monitoring and review of the Group’s compliance with the management system, including suppliers and sub-contractors. The audit results will be presented to the Board of Directors by the end of 2010. In addition, the executive personnel will carry out its review of the main risks attached to the operation of the Polarcus Group and present the results to the Board of Directors during the first half of 2010. The Group is in 2010 transferring from a project phase into an operational phase and is in a continuous process of establishing appropriate internal controls to cater for this new position of the Company. As further described on page 31 of this annual report , Polarcus management follows up its financial status on a daily basis leading into a formal monthly management report including critical factors relating to financial covenants, cash flow, comparison to budget and other key figures. The quarterly financial statements are presented and approved by the Board with a detailed comparison to budget. In 2009 an electronic invoice control system, a detailed authority matrix and payment routines were introduced. In order to sufficiently manage accounts receivables, monthly invoicing routines and weekly monitoring have been put in place. The Company’s costs are monitored monthly and necessary accruals are made quarterly. Also as a measure to assist in the internal control of the Group, the executive management is required to report to the Board of Directors regularly on (i) safety, (ii) financial accounts, hereunder monthly management reporting, (iii) vessels operation status, (iv) sales/marketing measures and status of employment back-log for the vessels, (v) vessels construction progress and (vi) status of recruitment.

Code Recommendation 11: Remuneration of the board of directors The remuneration of the Board of Directors shall reflect the Board of Directors’ responsibility, expertise, time commitment and the complexity of the Company’s activities from year to year. The remuneration shall not be linked to the Company’s performance. The Company is currently in a work-intensive phase and requires considerable input and assistance from the directors. The annual general meeting in 2009 approved an annual remuneration of each director of USD 45,000 and USD 100,000 for the chairman. In September 2009, in a review of the Board of Directors costs, it was resolved that directors who are employee representatives of the Group shall not be entitled to board remuneration. As a consequence only six out of the nine directors now

receive board remuneration. No additional payment is received by directors. Committee work is currently not eligible for additional pay. The nomination committee will make the proposal for board remuneration for 2010 and present its proposal to the annual general meeting 2010. The proposal for remuneration is reflected on page 87 of the annual report for 2009. The Company will not establish options scheme for its directors. However, Mr. Carl-Peter Zickerman owns options in the Company in his capacity as a member of the executive management. All directors, directly or indirectly own shares in the Company. As a general principle, the directors or the director’s companies shall not take on specific assignments for the Company. If a director’s particular expertise is needed by the Company for a period of time, the framework of such assignment as well as the remuneration shall in advance be approved by the Board of Directors.

Code Recommendation 12: Remuneration of the executive management The corporate governance and remuneration committee shall annually review, and propose to the Board of Directors the updated guidelines for the remuneration and benefits package of the members of the executive management, including the CEO. The committee shall when preparing the guidelines take into account the location of the management, the level of remuneration normal within the business of the Group, the phase of the Group’s business and special characteristics of the different positions within the executive management. The guidelines shall include a summary of the characteristics of employee option schemes and bonus schemes applicable to the Group. The guidelines shall be presented to the annual general meeting for approval. Due to the then recent history of the Company, guidelines developed for management remuneration were not communicated to the annual general meeting in 2009. A summary of the updated guidelines for 2010 will be presented for approval to the annual general meeting in 2010. Information on the remuneration of the executive management and the general principles behind the various elements are presented on page 86 of this annual report. A flat bonus of 8% of base salary was granted to the employees for 2009 .

Proposals for employee option schemes and arrangements to award shares to employees shall be approved in advance by a general meeting. The current employee options scheme of the Company has been approved by the general meeting of the Company. The scheme was designed to align employees with shareholder value creation and to attract competent persons in the recruitment phase to a wide range of positions within the Group and to retain employees until the Group is well into its operational phase. The exercise price under the scheme is fixed to the average share price in the 30-days period prior to an employee accepting an offer for employment and the options may be exercised in full after three years of employment. There is no requirement for a minimum period of ownership of the shares. The scheme deviates somewhat from the recommendations of the Code, but the characteristics of the scheme are considered beneficial in the current phase of the Company. The Company is currently considering a new employee share option scheme. The proposal for the new scheme will be presented to the 2010 annual general meeting for approval.

Code Recommendation 13: Information and communications The reporting of financial and other information from the Company shall be based on openness and equal treatment of all participants in the securities market. The Company will comply with detailed reporting requirements applicable for companies whose shares are listed on Oslo Axess. The Company has established complete investor relations and external communication procedures. Legal disclosure obligations and regulations for financial reporting will be strictly followed. All information sent to the shareholders or the market shall simultaneously be published on the Company’s web site. The Company shall in the beginning of each year publish a calendar setting out the announcement of financial reports, the date of the annual general meeting and other major events. The financial calendar for 2010 is presented on the Polarcus web site, www.polarcus.com. Representatives of the management of the Company will twice a year after disclosure of financial accounts visit major shareholders of the Company in order to facilitate a good dialogue and enable shareholders to communicate their particular concerns related to the Company.

Code Recommendation 14: Take-overs The Company has established detailed guiding principles for how the Board of Directors and executive management shall act in the event of a take-over bid. The guiding principles comply with applicable laws and the Code. The guiding principles describe the various phases of a take-over process, include procedures to ensure that sufficient information and time are made available to the shareholders to evaluate the offer of such takeover. Encompassed in the guidelines are principles for the Board of Directors’ evaluation of the offer and the arrangement of fairness opinions. The principles give guidance as to when a general meeting should be called and include which actions the Board of Directors has to take or refrain from taking. Actions and authorizations of the Board differ dependent on whether the take-over situation is a result of an invitation to the Company or is a general offer to shareholders. Under the guidelines, the Board shall not exercise mandates or pass any resolutions with the intention of obstructing the take-over bid unless this is approved by a general meeting following announcement of such bid. The principles authorize the Board of Directors to continue the completion of any transactions it or the management has entered into for commercial purposes prior to obtaining knowledge of the take-over bid, independent of these transactions were made public or not. An exception is the intention to dispose of a majority of its activities, which will be subject to a resolution by a general meeting as long as the Company is subject to a take-over bid. The current authorization approved by the general meeting includes a right for the Board of Directors to issue shares with a takeover situation in mind. It is the view of the Board of Directors that such authorization should only be used if it is clear that this will be beneficial to all shareholders.

pany. The Board of Directors shall in combination with such review meet with the auditor without the presence of the CEO or any other member of the executive management. The auditor shall at least once a year discuss the Company’s internal control procedures with the audit committee, including identified weaknesses and proposals for improvement. The Company has established guidelines as to when it is acceptable to use the Company’s auditor for services other than the audit. This in order to ensure the auditor’s continued independence. In principle, global tax and transfer pricing services may be obtained from the auditor. The executive management shall furthermore carefully evaluate, when instructing consultants, whether any of such consultants can be linked to the auditor and therefore put the independence of the auditor at risk. The Company has during 2009 received advice on tax issues and transfer pricing procedures from Ernst & Young. The Company is confident that these services have not compromised the independence of the auditor. The Board of Directors shall report the remuneration paid to the auditor at the annual general meeting, including details of the fee paid for audit work and any fees paid for other specific assignments. Summary of remuneration to the auditor for services rendered during 2009 is presented in Note 32.2.5 to the Consolidated Financial Statement on page 88 of this annual report.

Code Recommendation 15: Auditor The Company’s auditors are Ernst & Young AS, Oslo, Norway. The Company’s audit committee shall annually request an audit plan from the auditor concerning the audit of the Company’s consolidated financial statements. The Board of Directors shall request and accommodate that the auditor can participates in board meetings that deal with annual accounts. The auditor shall in such meetings review any material changes in the Company’s accounting principles, comment on any material estimated accounting figures and report on all material matters on which there has been disagreement between the auditor and the executive management of the Com-

Polarcus Limited and Subsidiaries

Consolidated Financial Statements year ending 31 December 2009 45. 46. 47. 48. 49. 50.

Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements

Consolidated Income Statement 1 January â&#x20AC;&#x201C; 31 December (In thousands of USD)

Notes

Revenues Vessel operating expenses Sales, general and administrative costs Depreciation and amortization Impairment of vessels under construction

27 6, 9 8

Operating income/(loss) Financial expenses Finance costs Finance income

28 29

Net financial income/(expenses) Profit/(Loss) for the period before tax Income tax expense

Profit/(Loss) for the period

2009

2008 -

(805) (18,553) (718) (5,148)

(11,143) (88) -

(25,224)

(11,231)

(4,946) 11,136

(5,075) 13,918

6,190

8,843

(19,034)

(2,388)

(19,034)

(2,388)

(0.089) (0.114)

(0.036) (0.120)

Profit/(Loss) per share for loss attributable to the equity holders during the period (In USD) - Basic - Diluted

31 31

Consolidated Statement of Comprehensive Income 1 January â&#x20AC;&#x201C; 31 December (In thousands of USD)

Notes

Profit/(loss) for the period Net gain/(loss) on cash flow hedges Other comprehensive income (OCI)/(loss) for the period Total comprehensive income/(loss)

2009

2008

(19,034)

(2,388)

4,589 4,589

(4,589) (4,589)

(14,445)

(6,977)

Consolidated Balance Sheet (In thousands of USD)

Notes

31-Dec-09

31-Dec-08

ASSETS Non-current assets Property, plant and equipment Vessels under construction Vessels buyback options Intangible assets Restricted cash - Long term

6 7 8 9 10

160,158 266,019 40,831 4,279 1,362

1,065 180,081 584 736

472,649

182,466

13,264 2,179 35,163 115,324 165,930

420 424 83,583 105,254 189,681

638,579

372,147

13 13 15

5,264 303,583 7,255 (21,422) 294,680

2,036 188,642 5,904 (6,977) 189,605

14, 16 14, 17 18 19 20 14, 13 21

53,496 30,131 67,745 100,836 7,250 3,207 933 263,598

53,191 29,132 10,934 28 93,285

22 23 24 25 19 20

5,306 2,293 3,862 29,138 9,123 4,327 26,252 80,301

4,709 296 126 84,126 89,257

638,579

372,147

Total non-current assets Current assets Prepaid expenses Other current assets Restricted cash - Short term Cash and bank Total current assets

11 10 12

TOTAL ASSETS EQUITY and LIABILITIES Equity Issued share capital Share premium Other reserves Retained earnings/(loss) Total equity Non-current liabilities 13% Senior secured bonds 8.5% Convertible bonds Advance from sale lease-back fund Long-term finance lease Other long-term debt Liability for warrants Employee pension accrual Total non-current liabilities Current liabilities Interest payable Employee accruals and payables Other accrued expenses Deferred payments to vendors Long-term finance lease current portion Other long-term debt current portion Accounts payable Total Current Liabilities TOTAL EQUITY and LIABILITIES

Consolidated Statement of Cash Flows (In thousands of USD) Cash flows from operating activities Profit/(loss) for the period before tax Adjustment for: Depreciation and amortization Impairment of vessels under construction Finance costs Changes in fair value of financial instruments Stock Options compensation provision Interest income Working capital adjustments: Increase in current assets Increase in trade and other payables and accruals Net cash flows from operating activities Cash flows from investing activities Decrease/(Increase) in restricted cash Purchases of property, plant and equipment Payments for vessels buyback options Payments to acquire intangible assets Interest income Net cash flows used in investing activities Cash flows from financing activities Proceeds from the issuance of ordinary shares Transaction costs on issue of shares Proceeds from the issuance of senior secured bonds Proceeds from the issuance of convertible bonds Receipt from sale lease-back fund Interest income Net cash flows from financing activities Hedged gain/(loss) on revaluation of restricted cash (Other Reserves)

Notes 6, 9 8 28 29 13 29

1 January – 31 December 2009 2008 (19,034)

(2,388)

718 5,148 353 (7,728) 1,351 (414)

88 (7,782) 880 (2,070)

(14,600) 12,660 (21,547)

(843) 1,404 (10,711)

47,794 (255,970) (40,831) (295) (249,302)

(84,318) (93,124) (584) 268 (177,758)

124,625 (6,456) 157,745 414 276,329 4,589

211,972 (2,578) 53,075 33,775 2,070 298,314 (4,589)

10,070 105,254 115,324

105,254 105,254

8 29

18 29

Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

Consolidated Statement of Changes in Equity (In thousands of USD except for number of shares) 17 December 2007 at USD 1.00 per share Balance as of 1 January 2008 Total comprehensive income/(loss) for the period Issue of share capital 9 February 2008 at USD 1.00 per share 18 March 2008 at USD 1.00 per share 19 May 2008 at USD 1.00 per share 21 May 2008 at USD 1.00 per share 29 June 2008 at USD 1.00 per share 2 July 2008 at USD 1.20 per share Transaction costs on issue of shares Issue of warrants to shareholders Issue of convertible bonds Employee stock options provision Balance as of 31 December 2008 Total comprehensive income/(loss) for the period Consolidation of share capital 11 September 2009 (at 2:1 from USD 0.01 to USD 0.02 per share) Issue of share capital 17 September 2009 to avoid fractional shares after consolidation 29 September 2009 at NOK 4.50 (USD 0.77) per share Transaction costs on issue of shares

Issued Share capital

Number of Shares

Total Equity

(6,977)

49,999,999 3,786,855 85,000,000 20,000,000 2,785,000 42,000,000

500 38 850 200 28 420 -

49,500 3,749 84,150 19,800 2,757 49,980 (2,578) (18,716) -

5,024 880

50,000 3,787 85,000 20,000 2,785 50,400 (2,578) (18,716) 5,024 880

203,571,855

2,036

188,642

5,904

(6,977)

189,605

(14,445)

(101,785,928)

3.50

161,388,889

3,228

121,397

124,625

(6,456)

1,351

5,264

303,583

7,255

(21,422)

294,680

Employee stock options provision Balance as of 31 December 2009

Retained Earnings/ (Loss)

Other Reserves

Share Premium

263,174,820

The accompanying notes are an integral part of the consolidated financial statements.

Notes to the consolidated financial statements

1. General Information The consolidated financial statements of Polarcus Limited (the “Company”) and its subsidiaries (together the “Group”) for the period ended 31 December 2009 were authorized for issue in accordance with a resolution of the Board of Directors on 25 March 2010. Polarcus Limited is a pure play marine geophysical company with a pioneering environmental agenda, specializing in high-end towed streamer data acquisition from Pole-to-Pole. Polarcus Limited was incorporated on 17 December 2007 in the Cayman Islands with its registered office at Walker House, 87 Mary Street, George Town, Grand Cayman, Cayman Islands. The Group has its main administration office in Dubai, United Arab Emirates which is the domicile of the Group The Group’s first 12 streamer 3D vessel, Polarcus Nadia, was delivered in December 2009. All four vessels in the Polarcus fleet will be fully operational within 2010.

1.1 Financing

Due to global economic conditions, the Company in July 2009 carried out a restructuring of the Group. Under the restructuring the Company sold two of its vessel owning subsidiaries, Polarcus 4 owning the vessel Polarcus Selma and Polarcus 6 owning the vessel Polarcus Alima, to Zickerman Holding Limited and Zickerman Group Limited (together “ZL”) for a consideration of USD 1 each per vessel. ZL will, after this transaction, carry all financial obligations related to Polarcus 4 and Polarcus 6. The Group has an option to repurchase each of Polarcus Selma and Polarcus Alima or the corresponding vessel owning companies at a price equal to the remaining cost of completing each vessel. The total cash requirement of completing the four vessels is estimated at USD 714 million of which expenditures for seismic vessels and equipment is estimated at a total of USD 551 million and other expenditures at USD 163 million. Other expenditures include financing costs, costs related to option with yard to build vessels 7 and 8, SG&A, working capital and buyback option for the two vessels which were sold during restructuring. Expenditures for seismic vessels and equipment of USD 551 million is USD 34 million less than originally budgeted. As of 31 December 2009, the Group has secured the following financing totaling USD 737 million: Equity Senior secured bond Convertible bond Sale & lease back (on first two vessels) Vendor financing Loan facility

USD 337 million USD 55 million USD 35 million USD 180 million USD 50 million USD 80 million

Accordingly, the Group has secured the financing required to complete the construction of its four vessels including the working capital requirement of the Group. If the Group decides to exercise the buyback options for Polarcus Selma and Polarcus Alima which is the current intention of the Company, additional capital expenditure financing of approximately USD 250 million will be required. The Group has, through an amendment to the shipbuilding contract for Polarcus Asima dated 29 July 2009, entered into a deferred payment arrangement with the shipyard under which all but one installment due under the original shipbuilding contract are deferred from the scheduled milestone payment dates to the actual delivery date of the vessel. The total value of the deferred installments amounts to USD 29 million. An interest rate of LIBOR + 3% per annum applies on each deferred installment from the time such installment should have been paid under the original shipbuilding contract to the time of the contractual delivery date and thereafter an interest rate of 7% per annum applies until the amount is paid to the shipyard.

2. Summary of Significant Accounting Policies The principle accounting policies applied in the preparation of these consolidated financial statements are set out below.

2.1 Basis of preparation

These consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments that have been measured at fair value and financial liabilities measured at amortized cost. The consolidated financial statements are presented in USD and all values are rounded to the nearest thousand (USD 000) except when otherwise indicated.

2.2 Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

2.3 Changes in accounting policies 2.3.1 Current changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous financial year except as follows: The Group has adopted the following new and amended IFRS and IFRIC interpretations as of 1 January 2009: • IFRS 7 Financial Instruments: Disclosures effective 1 January 2009 • IAS 1 Presentation of Financial Statements (amended) effective 1 January 2009 • IFRIC 9 Re-measurement of embedded derivatives and IAS 39 Recognition and Measurement effective for periods ending on or after 30 June 2009 • Improvements to IFRSs (May 2008) When the adoption of the standard or interpretation is deemed to have an impact on the financial statements or performance of the Group, its impact is described below: IFRS 7 Financial Instruments: Disclosures The amended standard requires additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments recognized at fair value. In addition, reconciliation between the beginning and ending balance for level 3 fair value measurements is now required, as well as significant transfers between levels in the fair value hierarchy. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. The fair value measurement disclosures are presented in Note 14. The liquidity risk disclosures are not significantly impacted by the amendments and are presented in Note 3.1.5. IAS 1 Presentation of Financial Statements The revised standard introduces the statement of comprehensive income: it presents all items of recognized income and expense, either in one single statement, or in two linked statements. The Group has elected to present two statements.

2.3.2 Future changes in accounting policies and disclosures Certain new standards, amendments and interpretations of existing standards have been published that are mandatory for the Group’s accounting periods beginning on 1 January 2010 or later periods but which the Group has not early adopted, as follows: • • • • •

IFRS 1 First-time Adoption of IFRS (Amended) effective 1 January 2010 IAS 24 Related Party Disclosures (Amended) effective 1 January 2011 IFRS 9 Financial Instruments effective 1 January 2013 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments effective 1 July 2010 Improvements to IFRSs effective 1 January 2010

The interpretations are not expected to have any material impact on the financial position of the Group. The Group plans to implement the new standards, amendments and interpretations when they are effective and approved by the EU.

2.4 Consolidation 2.4.1 Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement. Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated but considered as an impairment indicator of the asset transferred.

2.5 Foreign Currency Translation 2.5.1 Functional and presentation currency 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 USD, (the presentation currency). The parent and all the subsidiaries have the USD as their functional currency.

2.5.2 Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in equity as qualifying cash flow hedges.

Translation differences on non-monetary financial assets and liabilities such as equity instruments held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss.

2.6 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable for the sale of services in the ordinary course of Groupâ&#x20AC;&#x2122;s activities. Revenue is presented net of discounts, rebates, returns and sales taxes or duty. The Group defers the unearned component of payments received from customers for which the revenue recognition requirements have not been met. The Groupâ&#x20AC;&#x2122;s revenue recognition policy on different types of revenue is described below;

2.6.1 Sales of Multi Client library data Pre-funding arrangements

The Group obtains funding from a limited number of customers before a seismic project is commenced. In return for the pre-funding, the customer typically gains the ability to direct or influence the project specifications and access data as it is being acquired at discounted prices. The Group recognizes pre-funding revenue as the services are performed on a proportional performance basis. Progress is measured in a manner generally consistent with the physical progress on the project, and revenue is recognized based on the ratio of the project's progress to date, provided that all other revenue recognition criteria are satisfied.

Late sales

The Group grants a license to a customer, which entitles the customer to have access to a specifically defined portion of the multi client data library. The customer's license payment is fixed and determinable and typically is required at the time that the license is granted. The Company recognizes revenue for late sales when the customer executes a valid license agreement and has received the underlying data or has the right to access the licensed portion of the data and collection is reasonably assured. During the year 2009 the Group has not acquired any multi client library data hence no pre-funding was obtained and no late sales revenue recognized.

2.6.2 Proprietary sales/contract sales The Company performs seismic services under contract for a specific customer, whereby the seismic data is owned by that customer. The Company recognizes proprietary/contract revenue as the services are performed and become chargeable to the customer on a proportionate performance basis over the term of each contract. Progress is measured in a manner generally consistent with the physical progress of the project, and revenue is recognized based on the ratio of the project's progress to date, provided that all other revenue recognition criteria are satisfied.

2.6.3 Other services Revenue from other services is recognized as the services are performed, provided all other recognition criteria are satisfied.

2.7 Property, Plant and Equipment

Property, Plant and Equipment are stated at cost less accumulated depreciation and impairment charges. Cost includes expenditure that is directly attributable to the acquisition, construction or installation of the items, including borrowing costs capitalized according to the Groupâ&#x20AC;&#x2122;s policy which is described further below.

2.7.1 Useful life and depreciation Depreciation is calculated on a straight-line basis over the useful life of the asset once the asset is ready for use. The estimated useful life of major assets is as follows: Seismic vessels Seismic equipment Maritime equipment Furniture and fixtures Office IT equipment

30 Years 3-30 Years 5-30 Years 3-5 Years 3-5 Years

Each component of the vessels, with a cost significant to the total cost, is separately identified and depreciated on a straight-line basis over that componentâ&#x20AC;&#x2122;s economic life. Day-to-day maintenance costs are charged to the income statement during the financial period in which they are incurred. The cost of major renovations and periodic maintenance of vessels is capitalized and depreciated over the useful lifetime. Maintenance and classification costs for vessels are capitalized and charged to expenses over the period up to the next occasion when maintenance is carried out, normally 30 months. Maintenance and repairs, including periodic maintenance and class surveys for seismic vessels, are expensed as incurred. When vessels are acquired or constructed a proportion of the acquisition cost is capitalized as periodic maintenance. The assetsâ&#x20AC;&#x2122; residual values and useful lives are reviewed and adjusted if appropriate at least every balance sheet date. Adjustments, where applicable, are made on a prospective basis. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are presented net in the income statement.

2.7.2 Vessels under construction Vessels under construction are carried at cost, less any impairment loss. Cost includes project related overheads capitalized and for qualifying assets, the borrowing costs capitalized in accordance with the Groupâ&#x20AC;&#x2122;s accounting policy as described below. Depreciation of these vessels commences when the vessels are ready for their intended use.

2.8 Leases

The determination whether an arrangement is or contains a lease is based on the substance of the arrangement at the inception date and whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

2.8.1 Group as a lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased asset, are capitalized at the commencement of the lease at the fair value of the leased asset or, if lower, at the present value of minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in the income statement. Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and lease term. Operating lease payments are recognized as an expense in the income statement on a straight line basis over the lease term.

2.9 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is

recognized in the income statement or capitalized in accordance with the accounting policy for borrowing costs as mentioned below, over the period of the borrowings using the effective interest method. Interest payable on borrowings is classified as a current liability unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

2.9.1 Convertible Bonds Convertible bonds are separated into a debt liability and an equity component based on the terms of the contract. On issuance of the convertible bonds, the fair value of the debt liability excluding conversion option is measured at the fair value of expected cash flows at inception and is recorded under non-current liabilities in the balance sheet. The debt liability component is amortized to the redemption value over the bond life, accruing interest at the effective rate. The rest of the convertible bond issue proceeds are recorded as equity. Transaction costs are apportioned between the debt liability and equity components of the convertible bonds based on the allocation of the proceeds of the debt liability and equity components when the instruments are initially recognized.

2.10 Borrowing Costs

Borrowing costs are recognized as an expense in the period in which they are incurred, except for borrowing costs which are directly attributable to the acquisition, construction or production of a qualifying asset. Such borrowing costs are capitalized as part of the cost of that asset. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization on that asset is determined as the actual borrowing costs incurred from the borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that funds are borrowed generally and used for the purpose of obtaining qualifying assets, the amount of borrowing costs eligible for capitalization is determined by applying a capitalization rate to the expenditures on those assets. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalized during a period does not exceed the amount of borrowing costs incurred during that period.

2.11Transit and mobilization costs

Transit costs are costs related to moving a vessel from one location to another. Mobilization or demobilization costs are onsite costs such as positioning, deploying and retrieval of equipment at the beginning and end of a project. The transit, mobilization and demobilization costs related to multi client survey are capitalized as part of the multi client library. Transit and mobilization costs on exclusive surveys are deferred and charged to expense based upon the percentage of completion of the project. Both for multi client and exclusive projects, the estimated probable future economic inflows which are documented at inception should cover the costs that are capitalized or deferred. If the projects are not able to cover all of the costs which could be capitalized or deferred, only the costs that are recoverable are capitalized or deferred.

2.12 Intangible assets

Costs associated with developing or maintaining computer software programs are recognized as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets.

Computer software development costs recognized as assets are amortized over their estimated useful lives once the individual asset is available for use (not exceeding three years). Computer software not yet available for use is tested annually for impairment.

2.13 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Cash and cash equivalents that are restricted for the Group’s use are disclosed separately in the consolidated balance sheets and are classified as current or non-current depending on the nature of the restrictions. For the purpose of the cash flow statements, changes in restricted cash are disclosed as part of the “Investing activities”.

2.14 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.

2.15 Trade payables

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

2.16 Provisions

A provision is recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that there is an outflow of resources embodying economic benefits.

2.17 Employee Benefits 2.17.1 Pension Plan The Group recognizes a provision for pensions payable to the employees based on the contractual obligation between each employee and the Group. The accrued pension liability calculated based on the contractual obligation varies from 21 days to 1 month’s basic salary for each year completed pro rata based on date of joining of each employee.

2.17.2 Bonus Plans The Group recognizes a provision for bonuses where bonuses are a contractual obligation or where there is a past practice that has created a constructive obligation. The Group recognizes a liability and an expense for bonuses prescribed in the employment contracts.

2.17.3 Share-based compensation The Group has a share option plan. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted measured at grant date. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

2.18Derivative financial instruments and hedging

The Group uses derivative financial instruments to reduce risk exposure related to fluctuations in foreign currency rates and interest rates. Such derivative financial instruments are initially recognized in the consolidated balance sheet at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting and any ineffective hedges are taken directly to the income statement. The Group applies either fair value or cash flow hedge accounting when a transaction meets the specified criteria. To qualify for hedge accounting, the instrument should be designated as a hedge at inception of a hedge relationship. At the time a financial instrument is designated as a hedge, the Group documents the relationship between the hedging instrument and the hedged item. Documentation includes risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. Accordingly, the Group formally assesses, both at the inception of the hedge and on an ongoing basis, whether the hedging derivatives have been â&#x20AC;&#x153;highly effectiveâ&#x20AC;? in offsetting changes in the fair value or cash flows of the hedged item. Hedge accounting will be discontinued when (a) the Company determines that a derivative is not, or has ceased to be, highly effective as a hedge, (b) the derivative expires, or is sold, terminated or exercised, (c) the hedged item matures or is sold or repaid, or (d) a forecast transaction is no longer deemed highly probable.

2.18.1 Fair value hedges The Group applies fair value hedges whilst hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (except for foreign currency risk). The change in fair value of the hedging instrument is recognized in the consolidated income statement. The change in fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the consolidated income statement. When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the consolidated income statement.

2.18.2 Cash flow hedges Cash flow hedging is applied to hedge the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment. The effective portion of the gain or loss on the hedging instrument is recognized directly in other comprehensive income (OCI), while any ineffective portion is recognized immediately in the consolidated income statement. Amounts recorded in OCI are transferred to the consolidated income statement when the hedged transaction affects profit or loss. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts taken into OCI are transferred to the initial carrying amount of the non-financial asset or liability. If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in OCI are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in OCI remain in OCI until the forecast transaction or firm commitment occurs.

2.19Financial assets and liabilities

Financial assets and liabilities are recognized when the Group becomes party to the contractual obligations of the instrument and are initially recognized at fair value. Financial assets and liabilities are classified as per below.

2.19.1 Financial assets and liabilities measured at fair value through consolidated income statement This includes the financial assets and liabilities held for trading and financial assets and liabilities measured at fair value upon initial recognition with change in fair value recognized through the consolidated income statement. Subsequent to initial recognition, financial assets and liabilities in this category are measured at fair value at the end of each reporting period with unrealized gains and losses being recognized through the consolidated income statement. Financial assets and liabilities are classified as held for trading if they are acquired for the purpose of selling in the near future. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains and losses on financial assets held for trading are recognized in the consolidated statements of operations.

2.19.2 Financial assets and liabilities measured at amortized cost This category includes loans and receivables and other non-derivative financial assets and liabilities with fixed or determinable payments that are not quoted in an active market. Financial assets and liabilities in this category are initially recognized at fair value, with addition for directly attributable transaction costs. After initial measurement financial assets and liabilities in this category are subsequently carried at amortized cost using the effective interest method less any allowance for impairment.

2.19.3 Financial assets and liabilities measured at fair value through equity This category includes financial assets and liabilities that are non-derivatives and are either designated as available-forsale or not classified in any of the other categories. After initial measurement, financial assets and liabilities in this category are measured at fair value with unrealized gains or losses being recognized directly in share holders’ equity. When the asset or liability is disposed of, the cumulative gain or loss previously recorded in shareholders’ equity is recognized in the consolidated income statement. The fair values of quoted financial assets and financial liabilities are based on current bid/ask prices. If the market for a financial instrument is not active, the Company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis and option pricing models. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity instruments designated as available-for-sale, a significant or prolonged decline in the fair value of the instrument below its cost is considered as an indicator that the instrument is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit and loss – is removed from shareholders’ equity and recognized in the consolidated income statement. Impairment losses recognized in the consolidated income statement on equity instruments are not reversed through the consolidated income statement. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value through the consolidated income statement.

2.20 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or Cash Generating Unit’s (CGU) fair value less costs to sell and its value in use is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an

asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. 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 and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. When the carrying amount of an asset does not yet include all the cash outflows to be incurred before it is ready for use or sale, the estimate of future cash outflows includes an estimate of any further cash outflow that is expected to be incurred before the asset is ready for use or sale. This is the case for the vessels under construction.

2.21 Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For diluted earnings per share, diluted potential ordinary shares are determined independently for each period presented. When the number of ordinary shares outstanding changes (e.g. share split) the weighted average number of ordinary shares outstanding during all periods presented is adjusted retrospectively.

2.22 Consolidated statement of cash flows

The Companyâ&#x20AC;&#x2122;s consolidated statement of cash flows is prepared using the indirect method. Cash flows from operating activities are incorporated as a part of the cash flow statement and the cash flows are divided into operating activities, investing activities and financing activities.

2.23 Accounts receivable

Receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment if any. A provision for impairment of accounts receivables is made when there is objective evidence that the Group will not be able to collect all amounts due according to original terms of receivables. The amount of such provision is the difference between accounts receivableâ&#x20AC;&#x2122;s carrying amount and the present value of estimated future cash inflows, discounted at the effective interest rate. The carrying amount of the accounts receivable is reduced through a loss being recognized in the income statement. If an accounts receivable becomes uncollectible, it is written off through the income statement. Subsequent recoveries of amounts previously written off are credited to the income statement.

3. Financial risk management 3.1 Financial Risk Factors

The Group is, through its activities exposed to a variety of financial market risks, operational risks and construction risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

3.1.1 Financial Market Risk Access to financial funding The Group may require additional capital in the future due to unforeseen liabilities or in order for it to take advantage of opportunities for acquisitions, joint ventures, exercise of options or other business opportunities that may be presented to it. Any negative development in sales, gross margins or sales processes, may lead to a strained liquidity position and the potential need for additional funding through equity financing, debt financing or other means. Any additional equity financing may be dilutive to existing shareholders.

Future contract awards and credit risks As is customary in the industry, contracts for Polarcus’ services are occasionally modified by mutual consent and in certain instances they may be cancelled by the customer at short notice without penalty. Consequently, Polarcus’ backlog as of any particular date may not be indicative of actual operating results for any succeeding period.

Financial leverage and breach of covenants The financial leverage of the Group or any breach of covenants (or other circumstances which entail loans falling due prior to their final maturity date) may have several adverse consequences, including the need to refinance, restructure, or dispose of certain parts of the Group’s businesses in order to fulfill the Group’s financial obligations.

Fluctuations in Exchange rates and currency risks The Group’s costs are primarily in USD and to some extent NOK, GBP and EUR. The majority of revenues are expected to be in USD. A depreciation of the USD will therefore have a negative impact on margins as the Group will typically have higher revenues than expenses denominated in USD. Long term financing of the Group is in USD. To manage the Group’s foreign exchange risk arising from future commercial transactions, primarily the NOK commitments under the vessel construction program, the Group maintains NOK cash accounts to cover a major part of these future commitments. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency, which is USD. The company’s shares are traded in NOK. The NOK trading price is affected by the underlying activities of the Group which are primarily denominated in USD. Currency fluctuations relative to the NOK of an investor’s currency of reference may also adversely affect the value of an investor’s investments.

Cash flow and fair value interest rate risk

The Group has significant interest-bearing assets which results in the Group’s income and operating cash flows being dependent on changes in market interest rates. The interest-bearing assets with variable interest rates expose the Group to cash flow interest rate risk. Interest earned and received on these balances fluctuates with changes in market interest rates. During the period, the Group’s financial assets at variable rates were denominated in USD and NOK. The Group is subject to interest rate risk on debt, including capital leases. The risk is managed using a combination of fixed and variable rate debt. As of 31 December 2009 the Group has USD 302 million interest bearing debt of which only 10% is with variable interest rate. The interest rate and maturity analysis of the Group’s borrowings as per the reporting date are shown in the table below: Effective interest rate (%)

Maturity

Deferred payments for vessel 4 to the shipyard

LIBOR +3.00

Not applicable

Deferred payments for vessel 5 to the shipyard

LIBOR +3.00*

Q2-10

Deferred payments for vessel 6 to the shipyard

LIBOR +3.00

Not applicable

(In thousands of USD)

31-Dec-09

31-Dec-08

Current

‐

10,935

29,138

11,818

‐

11,818

29,138

34,571

Non-current 13% Senior Secured Bonds (refer to Note:16)

14.49

30-Jul-13

53,496

53,191

8.5% Convertible Bond (refer to Note:17)

13.39

30-Jul-13

30,131

29,132

83,627 82,323 *An interest rate of 7% is applicable for the deferred payments from the contractual delivery date being 1 February 2010 to the actual delivery date of Polarcus Asima. Deferred payments for the vessels 4 and 6 are no longer recognized as a liability of the Group as these vessels were sold as part of the restructuring of the Group on 30 July 2009 (refer to Note 32 Related-party transactions for details). The deferred payments for vessel 5, Polarcus Asima is not payable until the delivery of the vessel from the shipyard, Drydocks World Dubai (“DWD”). Shifts in market interest rates will impact the fair value of the warrants to shareholders and options to employees and hence impact the Group’s income statement. The susceptibility of the value of warrants to a possible shift in interest rates (the management’s best range of estimates) is disclosed in Note 4.

3.1.2 Operational Risks Variability of operating results The Company’s revenue may vary from month to month and year on year due to changes in oil companies exploration and production spending. There is no guarantee that Polarcus will be able to secure contracts at profitable rates. In addition, the Group may experience significant off-hires on transit period between charters.

Supply and Demand risks Demand for offshore geophysical services depends on the demand / supply balance for oil and gas and on the investments by oil and gas companies in exploration and development projects. Low demand or oversupply of oil and gas can lead to reduced capital expenditures by oil and gas companies that in turn may reduce the demand for the Group’s products and services. Other factors that may reduce the demand for the Group’s products and services include, but are not limited to, fluctuations in productions levels and disappointing exploration results.

Operating and financial history The Company was recently formed and has a limited period of operating history and limited historical financial information for clients and investors to evaluate prior or future performance. Limited track record might be a risk factor affecting the ability to secure contractual work.

Access to personnel The Group’s development and business success are largely dependent upon the continued services and performance of its senior management and other key personnel. There is no guarantee that the Group will be able to attract and retain personnel required for a successful operation, which might have negative effects on the Group’s operating results and financial condition.

Dependence on few assets The Group is currently fully funded for four vessels. If Polarcus fails to obtain short or long term contracts for one or more of the vessels, Polarcus could incur financial losses due to less operating vessels to allocate fixed costs to. There is also an operational risk with fewer vessels to operate efficiently covering all markets due to potentially more transit which in soft markets are paid at a lower rate than regular production.

Insurance protection Although Polarcus has insurance coverage normal for its line of business, such insurance arrangement will not carry full coverage of all its operating risks. An incident involving any of the Group’s assets could result in loss of earnings, fines or penalties, higher insurance costs and damage to the reputation of the Group. The Group has established a loss of income insurance. However the loss of, or lasting unavailability of, a vessel could have an adverse effect on the Group as the loss of income insurance will have a significant deductable and limited time span and will not cover all eventualities.

3.1.3 Risk factors particular to the vessels construction project Construction risk Polarcus has three vessels under construction with Drydocks World LLC. Any material delays related to the construction contracts or other contracts of importance for the construction and equipment of the vessels might have a material adverse effect on the Group and its financial position. Furthermore, cost overruns and technical problems might be experienced during construction and testing of the vessels which might impact the expected delivery time of the vessels as well as the expected financial performance. A potential default by Drydocks World LLC or other counterparties will have an adverse effect on the Group and its financial position. The Group is dependent on the ability of sub-contractors to provide key seismic equipment which meets the specifications, quality standards and delivery schedules of the Company. Failure to meet these requirements might have a material adverse impact on the Company’s operating results and financial position.

3.1.4 Credit Risk

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with a minimum rating of investment grade or higher are accepted by the Group. The Group’s maximum exposure to credit risk for the components of the balance sheet is shown in the table below:

(In thousands of USD)

31-Dec-09

31-Dec-08

Financial assets Non-current restricted cash Cash and short-term deposits

1,362

736

150,560

188,873

151,922

189,609

3.1.5 Liquidity Risk Prudent liquidity risk management implies maintaining sufficient cash and having availability of funding through an adequate amount of committed credit facilities. Management constantly manages the forecast of the group’s liquidity reserve on the basis of expected cash flows. The Group has secured the financing required to complete the construction of its remaining three vessels under construction including the working capital requirement, but not for the options. See Note 8 for more information regarding the buyback options. The table below analyses the Group’s financial liabilities broken into different maturity groups based on the remaining period from 31 December 2009 to the date of contractual maturity. The amounts disclosed in the table are the contractual undiscounted cash flows.

Between 1-2 Years -

Between 2-5 Years 90,000

Interest payment on borrowings

10,125

20,250

Minimum future payments under finance leases

34,081

(In thousands of USD) Bond loan borrowings

Other long term liabilities

Less than 1 Year

Total

90,000

5,906

36,281

60,280

74,273

214,295

382,929

4,327

7,596

11,923

797

516

1,313

57,390

106,720

88,642

170,179

214,295

579,836

Interest payments on other long term liabilities Trade and Other payables

Over 5 Years

The bond borrowings – senior secured bond loan of USD 55 million and convertible bond loan of USD 35 million mature on 30 July 2013. Polarcus Nadia was delivered on 14 December 2009, Polarcus Naila is scheduled for delivery in February 2010 and the next two vessels in Q2 and Q3 2010 respectively. The vessels are expected to generate revenues to support the Group’s operations and service the debts.

3.2 Capital Risk Management

Capital includes equity attributable to the equity holders of the parent company. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to maximize shareholder value, and maintain an optimal capital structure in order to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may (i) adjust the amount of dividends paid to shareholders, (ii) return capital to shareholders, (iii) issue new shares or (iv) sell assets to reduce debt. The Company is subject to dividend restrictions under certain of its financing arrangements. Due to these dividend restrictions and the current phase of the Company, Polarcus will not propose any dividends to the shareholders for the fiscal year 2009. The Group aims to have equity capital of a level appropriate to its objectives, strategy and risk profile. The Group monitors its capital structure on the basis of total equity to total assets ratio. As of 31 December 2009 the Group has a book equity ratio of 46%. It is the Group’s policy that the said ratio shall be approximately 40% during its current early growth stage.

4. Critical accounting estimates and judgments The preparation of financial statements in accordance with IFRS requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these estimates due to changes in general economic conditions, changes in laws and regulations, changes in the Group’s future operating plans and the inherent imprecision associated with estimates. Certain amounts included in or affecting the financial statements and related disclosure must be estimated, requiring the Group to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. A ‘‘critical accounting estimate’’ is one which is both important to the portrayal of the Group’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The management evaluates such estimates on an ongoing basis, based upon historical results and experience, consultation with experts, trends and other methods considered reasonable in the particular circumstances, as well as forecasts as to how these might change in the future. The following is a summary of which estimates and judgments could have a material effect on the accounts.

4.1 Critical accounting estimates and assumptions 4.1.1 Impairment The Group assesses long-lived assets for possible impairment upon the occurrence of indicators. Events that can trigger assessments for possible impairments include, but are not limited to (a) significant decreases in the market value of an asset, (b) significant changes in the extent or manner of use of an asset, and (c) a physical change in the asset. Estimating undiscounted future cash flows requires the management to make judgments about long-term forecasts of future revenues and costs related to the assets subject to review. These forecasts are uncertain as they require assumptions about demand for our products and services, future market conditions and future technological developments. Significant and unanticipated changes in these assumptions could require a provision for impairment in a future period. Given the nature of these evaluations and their application to specific assets and specific times, the management cannot reasonably quantify the impact of changes in these assumptions.

4.1.2 Fair value of financial instruments The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Management uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. The primary assumptions used in the valuations are interest rates, share price, expected life of instruments, volatility and likelihood of certain events happening. The employee stock option was priced using a Black Scholes formula for equity options. For the simulation of “Change of Control”, the event was drawn from a uniform distribution in the simulations. Financial instruments carried at fair value include warrants issued to founding shareholders. Assumptions used in the calculations of fair value of the financial instrument that are more sensitive are the following:

Market price of the Company’s shares (warrants)

Volatility of the share price (warrants)

Probability of change of control event (warrants)

4.1.3 Warrants The Group has issued 21,250,000 warrants where the strike price might vary dependent upon circumstances outside of the control of the Group. The warrants are classified as a liability and measured at fair value through profit or loss. No cash outflows will arise in relation to the warrants. As of 31 December 2009, the value of the warrants was calculated to be USD 3.21 million using 58 % volatility and a share price of USD 0.64 (NOK 3.70 at USD exchange rate of 5.78). The table below presents a calculation of the sensitivities related to the valuation of warrants. The table shows effect on net income based on 10% change (plus or minus) in volatility, share price and market interest rate. The fair value of the warrants, and consequently the liability relating to the change of control clause, is strongly dependent on the value and the volatility in the shares.

(In thousands of USD except for shares price) Volatility used at 31.12.2009

58%

Effect of -10%

1,001

Share Price

10%

(964)

used at 31.12.2009

Effect of -10%

$0.64

626

Interest Rate

10%

(729)

used at 31.12.2009

2.30%

Effect of -10%

10%

(23)

The effect of change in fair value of the warrant liability on net income is not linear to changes in the share price. The table below shows the effect on net income based on increased share price in NOK 3 increments. (In thousands of USD except for shares price) Share price used at 31.12.2009 NOK 3.70 ($0.64)

Effect of share price being NOK 6 NOK 9 NOK 12 (5,245)

(13,729)

(23,067)

4.2 Critical accounting judgments in applying the entity’s accounting policies For the purpose of applying the Company’s accounting policies, management is required to exercise a judgment as to whether lease arrangements should be considered an operating or finance lease.

5. Segment Information

For a major part of the year ended 31 December 2009, the Group was in a pre-commercial phase focusing on building seismic vessels and an organization. The Group’s first seismic vessel was delivered in December 2009 and was set in transit for its first job. All these activities are conducted and monitored within the Group as one business segment, thus in accordance with IFRS 8, no further segment information has been disclosed in these consolidated financial statements.

6. Property, Plant and Equipment (In thousands of USD) Seismic vessels and equipment

Furniture and fixtures

Office IT Equipment

Office Equipment under construction

Total

Year ended 31 December 2008 Costs Balance at 1 January 2008

Additional capital expenditures

529

482

142

1,153

Disposals

Balance as of 31 December 2008

529

482

142

1,153

Balance at 1 January 2008

Depreciation for the period

Disposals

Balance as of 31 December 2008

As of 1 January 2008

As of 31 December 2008

488

435

142

1,065

529

482

142

1,153

22,632

165

22,819

137,060

142

159,692

551

647

160,890

417

108

118

644

417

149

165

732

488

435

142

1,065

As of 31 December 2009

159,275

402

482

160,158

Carrying amounts held under finance leases as of 31 December 2009

136,783

Depreciation and impairment losses

Carrying amounts

Year ended 31 December 2009 Costs Balance at 1 January 2009 Additional capital expenditures Assets under finance leases Disposals Balance as of 31 December 2009 Depreciation and impairment losses Balance at 1 January 2009 Depreciation for the period Disposals Balance as of 31 December 2009 Carrying amounts As of 1 January 2009

Above components of property, plant and equipment also include the seismic vessels and equipment that are under finance lease arrangement. In December 2009, the Group took delivery of its first vessel, Polarcus Nadia. The cost of the vessel incurred up to the delivery was USD 114.4 million. Polarcus Nadia is subject to a sale lease-back financing arrangement. Details of this arrangement are available in Note 18 Sale and Lease-back arrangement and Note 19 Long-term Finance Lease. The cost of streamer equipment included in property, plant and equipment is USD 45.3 million.

7. Vessels under Construction

The vessels under construction are capitalized at cost amounting to USD 266 million as of 31 December 2009. This value is made up as follows; (In thousands of USD) Vessel Name

Polarcus Nadia

Polarcus Naila

Polarcus Samur

Polarcus Selma

Polarcus Asima

Polarcus Alima

(Option1)

(Option2)

Vessel Type

SX 124

SX 133

SX 134

Total

Year ended 31 December 2008 Opening balance

40,740

33,383

22,499

22,567

23,849

23,845

3,450

173,783

262

157

262

1,362

2,827

615

750

4,942

41,002

33,645

25,483

23,339

24,861

24,857

3,450

180,087

68,076

57,805

37,560

20,055

62,733

25,146

319

272,013

Project Overheads

2,845

2,335

1,492

621

1,519

395

9.207

Project Financing costs

2,534

248

7,455

963

3,345

1,003

15,548

44,978

51,401

96,379

114,457

94,033

71,990

92,458

3,769

Additions in the year: Vessel and equipment Project Overheads Project Financing costs WIP value per vessel as of 31 December 2008

Year ended 31 December 2009 Additions in the year: Vessel and equipment

Disposals Transferred to property, plant & equipment WIP value per vessel as of 31 December 2009

114,457

266,019

The vessel Polarcus Nadia was delivered on 14 December 2009. Refer to Note 6 Property, Plant and Equipment for further details. Vessels Polarcus Selma and Polarcus Alima were sold to ZL on 30 July 2009 as part of the Groupâ&#x20AC;&#x2122;s restructuring. Refer to Note 1 Financing and Note 8 Vessel Buyback Options for further details.

The vessel Polarcus Naila is subject to a sale and lease-back financing arrangement. Details of this arrangement are available in Note 18 Sale and Lease-back arrangement. The vessel Polarcus Samur is pledged as security for the senior secured bond loan and interest accrued thereon. The details of this loan are available in Note 16 Senior secured Bonds. The details of capitalized borrowing costs are available in Note 28 Finance Costs and Note 29 Finance Income. The Group has on 14 September 2009 entered into a facility agreement with Eksportfinans ASA and DVB Bank SE for a USD 80 million loan facility. The Eksportfinans tranche of the facility (USD 55 million) relates to financing of Norwegian equipment onboard the vessels Polarcus Samur and Polarcus Asima. This has been guaranteed by the Norwegian Guarantee Institute for Export Credits (GIEK). The DVB Bank tranche (USD 25 million) relates to financing of vessel Polarcus Asima. The vessel Polarcus Asima has been pledged as security for this loan facility. The facility can be drawn post delivery of the vessel from the shipyard. Commitments outstanding under vessel construction contracts as of 31 December 2009 are as per below; (In thousands of USD) Vessel Name

Polarcus Nadia

Polarcus Naila

Polarcus Samur

Polarcus Asima

(Option 1)

(Option 2)

Vessel Type

SX 124

SX 133

SX 134

Total

Total commitments

113,824

109,819

103,488

133,610

3,769

468,279

Total incurred

111,866

93,786

61,707

88,362

3,769

363,259

1,958

16,033

41,781

45,248

105,020

Total

All of the above commitments are due within one year from 31 December 2009. Related to the construction options 1 and 2, the Company is committed to pay a cancelation fee of approximately USD 2 million if the options are not exercised before October 2010.

8. Vessel Buyback Options On 30 July 2009 the Group sold two of its vessel owning entities Polarcus 4, owning the rights to vessel Polarcus Selma, and Polarcus 6, owning the rights to vessel Polarcus Alima, to its main founders Zickerman Holding Limited and Zickerman Group Limited (together “ZL”). ZL will complete the maritime work on Polarcus Selma and Polarcus Alima and include all fixed equipment that is required in order to constitute each vessel as a fully prepared seismic vessel. Polarcus has cancelled the orders for movable seismic and positioning equipment related to these vessels. The Group has the option to repurchase each of Polarcus Selma and Polarcus Alima or the corresponding vessel owning companies from ZL at a price equal to the remaining cost of completing each vessel. The options are valid until delivery of each vessel, and subsequently are replaced with a right of first refusal to purchase each of the vessels. The Group had already invested USD 46 million in these two vessels at the date of sale. An impairment loss of USD 5 million relating to prepaid seismic equipment that was cancelled, capitalized internal interest costs and expenses, was recorded as impairment of vessels under construction at the time of the transaction. The remaining carrying value of USD 20 million for Polarcus Selma and USD 21 million for Polarcus Alima will be subtracted from the purchase price if the Group exercises its right to repurchase one or both of these vessels. This amount is recorded as Vessel buyback options under Non-current Assets in the Group’s Consolidated Balance Sheet. If the options are exercised, which is the current intention of the management, additional capital expenditure financing of approximately USD 250 million will be required. If the Group chooses not to, or is unable to exercise the buyback options, the above values will be written-off as an impairment loss.

The value of vessel buyback options as of 31 December 2009 are made up as per below; (In thousands of USD) Polarcus Selma

Polarcus Alima

Total

Total amount invested by the Group as of the date of sale

22,060

23,919

45,979

Impairment loss booked

(2,153)

(2,995)

(5,148)

Total

19,907

20,924

40,831

The Group will continue to supervise the ongoing construction of the vessels and liaise with the suppliers of equipment related to the vessels. The cost related to this work is estimated to USD 1.7 million per vessel (USD 3.4 million in total) and is recorded as an intangible asset with credit in other accrued expenses as consideration for the options to buy back vessels Polarcus Selma and Polarcus Alima. If the Group chooses not, or is unable to exercise the buyback option(s), the USD 1.7 million per vessel will be written-off as an impairment loss. Also refer to Note 32 Related-party transactions for details of the restructuring transactions.

9. Intangible Assets The net book value of intangible assets is made up of as follows;

(In thousands of USD) Industry specific applications under development

ERP System

Consideration for vessel buyback options

Total

Year ended 31 December 2008 Costs Balance as of 1 January 2008

Additions

584

Disposals

Balance as of 31 December 2008

584

Balance as of 1 January 2008

Amortization for the period

Disposals

Balance as of 31 December 2008

As of 1 January 2009

As of 31 December 2009

584

344

369

3,400

4,113

344

609

3,400

4,353

584

270

609

3,400

4,279

Amortization and impairment losses

Carrying amounts

Year ended 31 December 2008 Costs Balance as of 1 January 2009 Additions Capitalized during the year Balance as of 31 December 2009 Amortization and impairment losses Balance as of 1 January 2009 Amortization for the period Disposals Balance as of 31 December 2009 Carrying amounts As of 1 January 2009 As of 31 December 2009

The useful lives of ERP system and industry specific applications are considered to be finite and these assets are depreciated over three years from the date when these assets are ready for its intended use. Further details of Consideration for vessel buyback options are available in Note 8 ‘Vessel Buyback Options’.

10. Restricted Cash 10.1 Long-term (In thousands of USD) Cash margin deposits for bank guarantees* - in United Arab Emirates Dirham (AED) In equivalent USD

31-Dec-09

31-Dec-08

5,000

2,700

1,362

736

*These bank guarantees are put in place for securing residence visas for Polarcus employees based in Dubai, United Arab Emirates.

10.2 Short-term (In thousands of USD) Letter of credit escrow account to secure payment to suppliers

31-Dec-09

31-Dec-08 284

28,285

Senior secured bond loan escrow account

22,849

55,268

Other short term deposits*

12,030

Total

35,163

83,583

*Other short term deposits comprise of USD 12 million deposit pledged in the favor of the lenders of the USD 80 million loan facility as further described in Note 7.

11. Prepaid Expenses (In thousands of USD) Prepaid rent

31-Dec-09

31-Dec-08 418

182

100

188

138

Prepaid charter hire under finance lease arrangement

4,305

‐

Receivables from other related parties*

8,274

‐

13,264

420

Prepaid insurance Other prepaid miscellaneous expenses

Total

*These are receivables towards the equipment sold to DWD during the restructuring of the Group. Refer to Note 32 Related-party transactions for the details of the restructuring. These payments were fully reimbursed to the Group subsequent to the balance sheet date.

12. Cash and Bank Cash and cash equivalents include cash-in hand, deposits held at call with banks, other short-term highly liquid investments. The Group’s cash and cash equivalents are denominated in the following currencies as of the balance sheet date; (In thousands of equivalent USD)

31-Dec-09

31-Dec-08

AED

128

USD

103,525

86,951

EUR

353

5,040

NOK

10,667

13,170

GBP

598

SEK

115,324

105,254

Total

13. Share capital, Share options and Warrants 13.1 Share capital

The Company’s authorized share capital is USD 7,040,000 divided into 352,000,000 shares of par value USD 0.02. The total issued share capital of the Company as of 31 December 2009 is USD 5,263,497 divided into 263,174,820 shares at par value of USD 0.02. All issued shares have been paid in as of 31 December 2009. As of 31 December 2008 the Company had issued and paid-in share capital of USD 2,035,718.55 divided into 203,571,855 shares at par value of USD 0.01. On 11 September 2009 an Extraordinary General Meeting of the Company consolidated the 203,571,855 issued shares of par value USD 0.01 each into 101,785,927.50 issued shares of par value USD 0.02 each. Shareholders holding an odd number of shares as of 11 September were rounded up in the consolidation to mitigate fractions of shares. Consequently, the Company issued 3.5 new shares on 17 September 2009 resulting in an issued share capital of USD 2,035,719 divided into 101,785,931 Shares of par value USD 0.02 each. On 27 September 2009, subsequent to the Company’s Initial Public Offering, the Board of Directors of the Company resolved to issue 161,388,889 new shares at par value of USD 0.02 each. These shares were fully paid in on 29 September 2009. (In thousands of USD except for number of shares) Number of shares Proceeds from shares issued Transaction cost of share issue Warrants to founding shareholders Balance as of 31 December 2008 Consolidation of share capital (on 11 September 2009 at 2:1 from USD 0.01 to USD 0.02 per share) Shares issued to avoid fractional shares after consolidation Proceeds from shares issued

Issued share capital

Share premium

Total

203,571,855 203,571,855

2,036 2,036

209,936 (2,578) (18,716) 188,642

211,972 (2,578) (18,716) 190,678

(101,785,928)

3.50 161,388,889

3,228

121,397

124,625

Transaction cost of share issue Balance as of 31 December 2009

263,174,820

5,264

(6,456) 303,583

(6,456) 308,847

Assuming full conversion of convertible bond loan, warrants and share options, the total number of Shares issued would increase by 38,302,469 Shares. Dilutive Instrument

Number of equivalent shares

Shares associated with convertible debt

10,802,469

Shares associated with the warrants

21,250,000

Shares associated with the stock options Total

6,250,000 38,302,469

Apart from potential shares that could be issued under the terms of the share warrants, stock option plan or convertible bonds, the board of directors have no restrictions on issuing remaining authorised share capital. The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.

13.2 Warrants

The Group has issued 21,250,000 warrants to the founding shareholders, each giving the right to subscribe for one new ordinary share. All the warrants were issued on 14 March 2008 and no further warrants were issued during the year ended 31 December 2009. The warrants are exercisable at a price of USD 0.02 on or before 31 December 2012 and can only be exercised if all of the following conditions are met; -

Delivery of all six seismic vessels on or before 1 April 2011; Effective employment of all six vessels; and The shares of the Company being traded on an internationally recognized marketplace or stock exchange at a volume weighted average price per share of at least NOK 22.00 (or equivalent) for more than 30 trading days.

In the event of a change of control of the Company prior to the warrant expiration date, the shareholders may, regardless of whether or not the previous conditions are met, exercise the warrants at a price per share of; -

NOK 11 if the shares trade at an average price of less than NOK 22.00 for the 10 consecutive business days following such change of control or if the validity period of the offer is less than 10 trading days.

USD 0.02 if the shares trade at an average share price of above NOK 22.00 for the 10 consecutive business days following such change in control.

The warrants have been determined to be a liability because they fail to meet the requirements of fixed amount of cash or fixed amount of a Companyâ&#x20AC;&#x2122;s own shares as required by IAS 32. Consequently, the fair value of the warrants at the issue date of USD 18.7 million has been recorded as a distribution to shareholders directly in Equity. Subsequent to issuance, the liability is recorded at fair value at each balance sheet date and the resulting change in fair value is recognized in the income statement within changes in fair value of financial instruments â&#x20AC;&#x201C; net. A gain of USD 7.7 million has been recorded during the year ended 31 December 2009. During the year 2008 a gain of USD 7.8 million was recorded. Also refer to Note 28 Finance Costs and Note 29 Finance Income. As of 31 December 2009 no warrants were exercisable.

13.3 Stock options

The Group has granted share options to executive management and other selected employees. As of 31 December 2009 the Group has issued 4,525,000 options of which 825,000 were issued during the year ended 31 December 2009. The exercise price of options is based on the weighted average price of the shares for the 30 days prior to acceptance of employment offer. The options cliff vest three years after grant date and can be exercised up to five years after the grant date. The exercise of the options is conditional on the employee completing three years of service (the vesting period) and being an employee of the Group at the exercise date. The options are only available for settlement in equity. The total fair value of options granted up to 31 December 2009 is USD 4.11 million calculated using the BlackScholes model, assuming all options will be exercised. For the year ended 31 December 2009, the Group has expensed USD 1.35 million towards stock options granted as employee compensation. As of 31 December 2009 none of the options were exercisable. The following table shows the number, weighted average exercise price of and movements in share options during the year ended 31 December 2009; Stock option plan

Number

Granted during the year ended 31 December 2008 Reduction in share option granted due to share capital consolidation (Refer to Note 13.1) Adjusted share options granted in prior years Granted during the year ended 31 December 2009 Forfeited from employees left during year 2009

WAEP (USD)

7,710,000

1.00

(3,855,000)

1.00

3,855,000

2.00

825,000

1.19

(155,000)

Outstanding as at 31 December 2009

4,525,000

1.86

Exercisable as at 31 December 2009

The range of exercise prices for options outstanding as of 31 December 2009 is USD 0.76 â&#x20AC;&#x201C; USD 2.60. The following table lists the inputs to the models used for the valuation of share option plan; 31-Dec-09 Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of option (years) Weighted average share price

31-Dec-08 -

2.95

2.50

1.16

1.05

The value of the option is estimated by a tree implementation of the Black Scholes formula for the pricing of equity call options. The expected life of the options is based on the maturity date and is not necessarily indicative of exercise patterns that may occur. The expected volatility is based on the historical volatility of the share price since the Company shares were available for public purchase and reflects the assumption that historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.

14. Other Financial Assets and Liabilities Financial liabilities measured at fair value through profit or loss are as per below; (in thousands of USD) Liability for warrants (refer to Note 13.2) Total liabilities at fair value through profit and loss Financial liabilities at fair value through profit or loss (refer to Note 29) Net gain or (loss) on financial liabilities at fair value through profit or loss

31-Dec-09 3,207 3,207

31-Dec-08 10,934 10,934

7,728

7,782

7,728

7,782

31-Dec-09 53,496 30,131 83,627

31-Dec-08 53,191 29,132 82,323

Financial liabilities measured at amortized cost are as per below; (in thousands of USD) 13% Senior Secured Bonds (refer to Note 16) 8.5% Convertible Bonds (refer to Note 17) Total financial liabilities measured at amortized cost

14.1 Fair values (in thousands of USD)

31-Dec-09 Carrying Fair value Amount

31-Dec-08 Carrying Fair value Amount

Financial assets Cash and deposits

151,849

151,848

189,572

14,390

843

166,239

166,238

190,415

26,252

83,997

3,207

10,934

13% Senior secured bonds

53,496

51,150

53,191

36,025

8.5% Convertible bonds

30,131

24,325

29,132

21,438

Finance lease liabilities

109,959

Other financial liabilities

120,854

5,287

Total

343,899

335,747

182,541

157,681

Other financial assets Total Financial liabilities Accounts payable Liability for warrants

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. As of 31 December 2009, the Group held the following financial instruments measured at fair value: (in thousands of USD) Financial liabilities at fair value through profit & loss:

31-Dec-09

Warrants (Refer to Note 13.2)

Level 1

3,207

Level 2 -

Level 3 -

3,207

During the reporting period ending 31 December 2009, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements. Reconciliation of opening and closing balances of Level 3 financial items; (in thousands of USD) Balance at 1 January Value of warrants recognized in equity on recognition Recorded in profit and loss in the year Balance at 31 December

Level 3 Financial assets 31-Dec-09 31-Dec(4,589) 4,589 (4,589) (4,589)

Level 3 financial 31-Dec31-Dec(10,934) (18,716) 7,728 7,782 (3,207) (10,934)

14.2 Cash flow hedges

The Group held cash in foreign currency to hedge against capital commitment costs for purchase of equipment related to the construction of the vessels. The fair value of hedged assets and the gain and loss recognized through OCI are as per below; (in thousands of USD) Fair value of Cash flow hedge assets Net FX gain/(loss) recognized in OCI in respect of cash flow hedge

31-Dec-09 4,589

31-Dec-08 (4,589) (4,589)

The hedging instrument was a bank account denominated in NOK. The hedging instrument was used to protect against the risk of a negative change in the foreign currency exchange rates between the Groupâ&#x20AC;&#x2122;s functional currency, USD, and contracted future payments in NOK. The remaining cash flows relating to the hedging instrument occurred in 2009 and by the year end the cash flow hedge had been fully utilized.

15. Other Reserves 31-Dec-09

(In thousands of USD) Issue of convertible bonds - fair value of equity component (also refer to Note 17) Employee stock options provision (also refer to Note 13.3) Total

31-Dec-08

5,024

2,231

880

7,255

5,904

16. Senior secured Bonds On 30 July 2008, the Company issued 550 senior secured callable bonds at par value of USD 100,000 each totaling USD 55 million, bearing 13% interest per annum. The net proceeds of the issue are to be employed to part-finance the construction of the vessel Polarcus Samur through the vessel owning company Polarcus 3. The interest is payable semi-annually in arrears on 30 January and 30 July each year. The bonds will mature five years from the date of issue at their nominal value. The bonds, including accrued interest and expenses, are secured by the vessel to be owned by Polarcus 3, a 100% owned subsidiary of Polarcus Limited. During the vessel construction phase, the loan is secured with a pledge of the shares in Polarcus 3, on-demand upstream guarantee from Polarcus 3, floating charges concerning all equipment related to the vessel Polarcus Samur and any intra-group loans, assignment of the shipbuilding contract and the major equipment contracts, the refund guarantees granted and to be granted under the shipbuilding contract and a pledge over the bank account in which all funds at any time not disbursed under the loan are credited. From the delivery date of the vessel, the loan will be secured by a first priority mortgage on the vessel, an assignment of insurances related to the vessel, the pledge of shares in Polarcus 3 as well as the up-stream guarantee form Polarcus 3. Drawing of funds from the loan is subject to evidence that capital subordinated to the loan in an amount equal to or larger than the amount released from the loan, from time to time, has been or is employed in accordance with the purpose of the loan. On the date of issue, net proceeds of USD 53,075,000 have been booked under Non-Current Liabilities. Issue costs amortized and interest accrued for the same are as per below; Years ended (In thousands of USD)

31-Dec-09

Total as of

31-Dec-08

31-Dec-09

305

116

421

Interest payable incurred

7,150

2,979

10,129

Interest paid

7,150

Issue costs amortized

As of 31 December 2009 the Group complies with the covenants set out in the loan agreement.

17. Convertible Bonds On 30 July 2008 the Company issued 350 subordinated unsecured callable convertible bonds at a par value of USD 100,000 each totaling USD 35 million, bearing 8.5% interest per annum. The interest is payable semi-annually in arrears on 30 January and 30 July each year. The bonds mature five years from issue date at their nominal value of USD 35 million or can be converted into a total of 10,802,470 shares at the holdersâ&#x20AC;&#x2122; option at a conversion price of USD 3.24 per share. The conversion price is subject to adjustment upon certain changes of the Companyâ&#x20AC;&#x2122;s share capital and in case of mergers and de-mergers. The convertible bond has been accounted for in separate components â&#x20AC;&#x201C; the value of the liability component has been recognized at its fair value and the remaining part as equity. In measuring fair value of the liability component an estimated market rate (estimated to be 13%) for a similar debt without a conversion right has been used in discounting the cash flow under the loan agreement. The estimated market rate was based on valuations of the interest rate for a non-convertible bond at the date of drawing the loan. There will be no re-measuring of the fair value of the liability and equity components. At issue date the following amounts were recognized for the convertible bond in the financial statements: Fair Value of liability component Fair Value of equity component

USD 28,750,623 USD 5,024,377 USD 33,775,000 The difference between the funds received and the total amount shown above as recognized on issue is due to the issue costs associated with the issue of the bonds. Issue costs amortized and interest accrued for the convertible bond loan are as per below;

Years ended (In thousands of USD)

31-Dec-08

31-Dec-09

999

381

1,380

Interest payable incurred

2,975

1,240

4,215

Interest paid

2,975

Issue costs amortized

31-Dec-09

Total as of

18. Sale and Lease-back arrangement The Group, on 30 June 2008, entered into a sale and lease-back financing arrangement for its first two vessels, Polarcus Nadia and Polarcus Naila. The arrangement was subsequently amended on 29 July 2009. The total cash inflow from this arrangement will be USD 180 million (i.e. USD 90 million per vessel). Under the terms of this arrangement, GSH 2 Seismic Carrier I AS (the ‘lessor’) has agreed to purchase the vessels (excluding the in-sea streamer equipment) at a price of USD 90 million each upon the delivery of the vessels from the shipyard. Immediately upon such transfer of ownership, the Group (as a ‘charterer’) will lease back the vessels from the lessor at a fixed daily charter rate, payable monthly in arrears throughout the duration of the charter period. The Group as a charterer has the option to purchase the vessels from the lessor any time after three years from the date of delivery. The purchase price of USD 90 million per vessel will be paid by the lessor to the Group in installments throughout the vessel construction period, subject to the agreed payment schedule and conditions attached thereto. The charter period shall commence on the delivery date and shall (subject to the Group’s purchase option as per above) continue until the date falling a minimum of 10 years from the delivery date. The charter payments for each vessel are secured by a parent company guarantee from Polarcus Limited, assignment of the vessel earnings and the vessels’ contracts with a duration of more than 6 months, assignment of intra-group loans and assignment of insurances. Furthermore, the Group has established an escrow account with a deposit of USD 12 million that has been pledged in favor of DVB Bank SE and Eksportfinans ASA as financial lenders under the sale-leaseback arrangement. This account pledge will also serve as security for the principal amount and interest under the USD 80 million loan facility described in Note 7. The above arrangement falls under the category of finance lease as described under IAS 17. (Also refer to note 2.8 on Leases). During the year ended 31 December 2009, the following amounts were received from the lessor towards the purchase price of the vessels; (In thousands of USD) Advance payments towards purchase price of vessel Polarcus Nadia Advance payments towards purchase price of vessel Polarcus Naila

Total

31-Dec-09

31-Dec-08

90,000 67,745

157,745

On 14 December 2009, the vessel Polarcus Nadia was delivered from the shipyard and on the same day the vessel was sold to the lessor at the agreed price of USD 90 million. This amount has been fully received during the year ended 31 December 2009 in different installments and has been recognized as a finance lease liability in the Group’s balance sheet. Refer to Note 19 Long-term Finance Lease for further details As of 31 December 2009 the Group has received USD 68 million in advance towards the purchase price of the vessel Polarcus Naila. This amount has been shown under Non-current Liabilities in the Group’s consolidated balance sheet.

19. Long-term Finance Lease Upon delivery on 14 December 2009, the vessel Polarcus Nadia was sold to GSH2 Seismic Carrier I AS (the ‘lessor’) according to the sale lease-back financing arrangement entered into on 30 June 2008 and as amended on 29 July 2009. The purchase price of USD 90 million was fully paid by the lessor to the Group in installments throughout the vessel construction period. Immediately upon the sale of the vessel, the Group leased back the vessel from the lessor at a fixed charter rate of USD 35,000 per day, payable in arrears throughout the duration of the charter period. This arrangement falls under the category of finance lease as described under IAS 17. Accordingly at the inception of the lease USD 90 million has been recorded as a liability. Also refer to Note 18 Sale and Lease-back arrangement for more details. On 7 June 2009 the Company entered into a lease agreement with Sercel Inc, Houston to acquire marine acquisition equipment (the “streamer systems”). The duration of the lease is 30 months and the Company has an option to purchase the streamer systems at any time during the lease period. According to the terms of the lease agreement, the lease period for a part of the streamer systems commenced on 1 September 2009. At the inception of the lease, a liability of USD 22,603,893 being the fair value of the streamer system has been recorded as a liability. The outstanding liability for the above mentioned finance leases as of 31 December 2009 are further classified into long term and short term portions as below; (In thousands of USD) Due after 12 months from 31-Dec-2009

Due within 12 months from 31-Dec-2009

Total

Lease payments for vessel Polarcus Nadia

87,573

1,967

89,540

Lease payments for streamer systems

13,263

7,156

20,419

100,836

9,123

109,959

Total

Payments made towards these lease arrangements during the year ended 31 December 2009 as follows; (In thousands of USD) Principal Lease payments made for vessel Polarcus Nadia

Interest

Total

460

538

998

Lease payments made for streamer systems

2,185

411

2,596

Total

2,644

950

3,594

20. Other Long-term Debt The Company has acquired some of the streamer systems from Sercel Inc, Houston by way of a 40% down payment. The remaining 60% of the purchase price is payable through 36 monthly installments including interest at 8% per annum. The streamer system has been pledged as security for this arrangement. The total value of equipment acquired under this arrangement is USD 22,631,523. As of 31 December 2009, the Company has paid USD 11,054,500 against the total liability and the remaining liability has been classified as long-term and short-term portions as below; 31-Dec-09

31-Dec-08

Installments due after 12 months from the balance sheet date

7,250

Installments due within 12 months from the balance sheet date

4,327

11,577

(In thousands of USD)

Total

21. Employee pension accrual The Group has accrued a liability towards pensions payable to the employees based on the contractual obligation between each employee and the Group. The accrued pension liability is calculated based on the contractual obligation and varies from 21 days to 1 monthâ&#x20AC;&#x2122;s basic salary for each year completed pro rata based on date of joining of each employee.

22. Interest Payable

Interest payable under current liabilities includes; (In thousands of USD)

31-Dec-09

31-Dec-08

Interest accrued on senior secured bonds (refer to Note 16)

2,979

Interest accrued on convertible bonds (refer to Note 17)

1,240

Interest accrued on deferred payments to the shipyard (refer to Note 25)

1,087

490

Total

5,306

4,709

Interest charged and accrued on the convertible and senior secured bonds is calculated using the amortized cost method. The total interest charged in the year is the same as the amount accrued at the end of the reporting period. The net interest charge arising on the bonds less the interest income from investment of bond proceeds was capitalized as vessels under construction (also refer to Note 7 Vessels under Construction).

23. Employee Accruals and Payables (In thousands of USD) Accrued salaries Accrued bonuses

31-Dec-09 116

115

2,169

181

2,293

296

Unused balance of crew welfare fund Total

31-Dec-08

24. Other Accrued Expenses (In thousands of USD) Accrued miscellaneous expenses

31-Dec-09

31-Dec-08

462

126

Consideration for vessel buyback options

3,400

Total

3,862

126

For details of Consideration for vessel buyback options refer to Note 8 Vessel Buyback Options and Note 9 Intangible Assets.

25. Deferred Payments to Vendors The Group has, through an amendment to the shipbuilding contract for Polarcus Asima dated 29 July 2009, entered into a deferred payment arrangement with the shipyard under which all but one installment due under the original shipbuilding contract are deferred from the scheduled milestone payment dates to the actual delivery date of the vessel. The total value of the deferred installments as of 31 December 2009 amounts to USD 29,138,415. An interest rate of LIBOR + 3% per annum applies on each deferred installment from the time such installment would have been paid under the original shipbuilding contract to the time of the contractual delivery date being 1 February 2010 and thereafter a fixed interest rate of 7% per annum applies until actual delivery of the vessel.

26. Vessel Operating Expenses

The vessel operating expenses consist of costs incurred for vessel Polarcus Nadia during the 18 days transit period from 14 December to 31 December 2009. During this period the vessel was in transit from Dubai to the Groupâ&#x20AC;&#x2122;s first seismic data acquisition project in Liberia.

27. Sales, General and Administrative Costs Sales, general and administrative costs consist of the following; Years ended (In thousands of USD) Salaries and other employee benefits

31-Dec-09

Other general and administrative expenses Total

31-Dec-08

12,263

8,046

6,290

3,097

18,553

11,143

27.1Salaries and other employee benefits

The Company offers a fixed base salary to all employees. Employees are also provided with a housing allowance and car allowance based on their location of employment and grades. The Group has an element of variable compensation through a performance-related bonus scheme. Based on overall performance of the Company against certain pre-defined metrics together with performance against individual and team-specific goals, the employees can benefit from a variable compensation in the range of 8% to 60% of annual base salary where the bonus level depends upon the employeeâ&#x20AC;&#x2122;s grade. In addition, the Group has a retention bonus scheme for the key offshore employees who accepted a position in the Company between 1 May 2008 and 31 December 2009. This loyalty bonus is designed to help retain highly experienced crew that is essential for field operations. All employees of the Group are offered a comprehensive employee health protection plan. The Company has implemented a share option program for key employees whose performance will have a significant positive impact on the overall success of the Company. Please find more details about the share option program in note 13.3 Stock options.

Salaries and other employee benefits are comprised of the following; Years ended (In thousands of USD) Salaries

31-Dec-09

31-Dec-08

9,320

3,937

Board Remuneration

436

275

Performance bonus

812

Retention bonus

930

181

5,387

3,367

798

319

1,351

880

Project related personnel cost capitalized

(6,771)

(913)

Total

12,263

8,046

Other Employee benefits Pension Stock Options expense (refer to Note:13) Less;

Subsequent to the reporting period, as payment under the performance-related bonus scheme a bonus equivalent to 8% of base salary (prorated according to the date of joining) for the year ended 31 December 2009 was paid out to all employees who joined the Company on or before 30 September 2009. The Group had a total of 95 full-time employee years during the year ended 31 December 2009 (26 employee years for the year 2008).

28. Finance Costs (In thousands of USD) Years ended 31-Dec-09

31-Dec-08

Interest expenses on senior secured bond

7,455

3,095

Interest expenses on convertible bond

3,974

1,621

588

490

1,197

(10,737)

(5,206)

Net interest expenses

2,477

Realized currency exchange loss

1,251

1,281

Unrealized currency exchange loss

864

3,794

Other losses

353

4,946

5,075

Interest expenses on deferred payments to the shipyard Interest expenses on lease arrangements Interest expenses capitalized to vessels under construction

Total

29. Finance Income (In thousands of USD) Years ended 31-Dec-09

31-Dec-08

414

2,338

(268)

Net interest income

414

2,070

Realized exchange gain

556

2,789

Unrealized exchange gain

2,438

1,277

Financial liabilities measured at fair value through profit and loss

7,728

7,782

Total

11,136

13,918

Interest income from deposit with banks Interest income offset against capitalized interest expenses

The realized currency gain or loss represents the effect of foreign currency payments made and the unrealized currency gain or loss represents the effect of revaluation of foreign currency financial assets other than those treated as cash flow hedging instruments. The financial liabilities measured at fair value through profit and loss represent the profit on revaluation of the fair value of liabilities on warrants issued. Also refer to Note 13 Share capital, share options and warrants.

30. Income Tax Expense Since the Groupâ&#x20AC;&#x2122;s main operations during the year ended 31 December 2009 were in the Cayman Islands and United Arab Emirates, it is not liable to pay any taxes on its income. Accordingly, no deferred or current tax assets or liabilities have been recognized in these consolidated financial statements.

31. Earnings per Share 31.1Basic

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares issued during the period. Years ended (In USD) Profit attributable to equity holders of the Company Weighted average number of ordinary shares issued Basic earnings per share

31-Dec-09

31-Dec-08

(19,034,022)

(2,388,211)

214,180,944

67,600,289

(0.089)

(0.036)

31.2Diluted Years ended 31-Dec-09

(In USD) Loss attributable to equity holders of the Company Gain related to warrants issued Net loss attributable to potential equity holders of the Company Weighted average number of ordinary shares issued Share with dilutive effect for warrants issued Weighted average number of diluted ordinary shares

31-Dec-08

(19,034,022)

(2,388,211)

(7,727,863)

(7,781,936)

(26,761,885)

(10,170,147)

214,180,944

67,600,288

20,704,625

16,791,801

234,885,569

84,392,088

(0.114)

(0.120)

Diluted earnings per share

The share options that have been granted to selected employees as of the end of reporting period (refer to Note 13.3) and the convertible bonds giving the bond holders a right to convert the bonds to equity shares (refer to Note 17) have not been included in the calculation of diluted EPS as they have an anti-dilutive effect for the reporting period. There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

32. Related-party transactions 32.1Subsidiaries

This set of consolidated financial statements includes the financial statements of Polarcus Limited and the subsidiaries listed in the following table; Name of the Subsidiary

Country of Incorporation

Polarcus DMCC Polarcus 1 Polarcus 2 Polarcus 3 Polarcus 5 Polarcus Seismic Limited Polarcus UK Limited Polarcus Egypt Polarcus Nadia AS

UAE Cayman Islands Cayman Islands Cayman Islands Cayman Islands Cayman Islands United Kingdome Egypt Norway

Equity interest as of 31-Dec-2009 100% 100% 100% 100% 100% 100% 100% 100% 100%

32.2Transactions with related parties 32.2.1 Restructuring Zickerman Holding Limited and Zickerman Group Limited (together â&#x20AC;&#x153;ZLâ&#x20AC;?), the founders of the Company, together hold 19.74% of the paid-in share capital of the Company. Due to global economic conditions, the Company in July 2009 carried out a restructuring of the Group. Under the restructuring the Company sold two of its vessel owning subsidiaries, Polarcus 4 owning the vessel Polarcus Selma and Polarcus 6 owning the vessel Polarcus Alima, to ZL for a consideration of USD 1 per vessel. After this transaction, ZL carries all financial obligations related to Polarcus 4 and Polarcus 6. The Group has the option to repurchase each of Polarcus Selma and Polarcus Alima, or the

corresponding vessel owning companies from ZL at a price equal to the remaining cost of completing each vessel. Also refer to Note 8 Vessel Buyback Options for more details of this transaction. In connection with the restructuring, the Company sold certain equipment related to the vessels Polarcus Selma and Polarcus Alima to DWD at cost of total USD 21,729,970. Out of this USD 13,456,073 was paid by DWD to the Company during the year ended 31 December 2009. The balance amount receivable of USD 8,273,897 is treated as a current asset in the Group’s consolidated balance sheet. Also refer to Note 11 Prepaid Expenses and Note 32.2.2 below.

32.2.2 Other transactions with related parties DWD holds 14.25% of the paid-in share capital of the Company as of 31 December 2009. Below is a summary of major transactions between DWD and the Group during the periods reported; Years ended 31-Dec-09 31-Dec-08 95,777 8,840 13,802 40,704 29,138 34,571 42,940 75,275 1,087 490

(In thousands of USD) Payments made in the year under ship building contracts Payments due included in Accounts payable Payable under the deferred payment arrangement Total payable Accrued finance cost at the end of reporting period on deferred payments Equipment sold at cost by the Company during the restructuring (Refer to Note 32.2.1) Payments received towards equipment sold (Refer to Note 32.2.1) Balance receivable towards equipment sold at cost (Refer to Note 11 and Note 32.2.1)

21,730 13,456 8,274

‐ ‐ ‐

32.2.3 Key management compensation The salaries and other benefits paid and accrued as payable to key management personnel for the periods reported are shown in the table below; (In thousands of USD) Year ended 31-Dec-09 Salary Rolf Ronningen Chief Executive Officer Tom Henrik Sundby Chief Financial Officer Carl Peter Zickerman Executive Vice President Other members of executive management (Eight employees) Total

Other Allowances

Pension

Share based payments

Total

400 300 396

165 157 217

33 25 33

100 65 65

698 547 711

1,755

1,261

147

505

3,668

2,851

1,800

238

735

5,624

(In thousands of USD) Year ended 31-Dec-08 Other Allowances

Salary Rolf Ronningen Chief Executive Officer Tom Henrik Sundby Chief Financial Officer Carl Peter Zickerman Executive Vice President Other members of executive management (Eight employees) Total

Share based payments

Pension

Total

300 88 297

129 86 238

25 7 25

75 33 49

529 213 609

1,246

772

106

377

2,501

1,930

1,224

163

534

3,852

The members of the Group’s key management team have entered into agreements with the Company related to provisions of benefits upon the Company’s termination of employment limited to three months’ severance payment, with the exception of the CEO who has been granted 18 months of severance payment and the right to maintain granted share options and the CFO and General Counsel who each have been granted 12 months of severance payment and the right to maintain granted share options. The number of shares, share options and warrants held by key management as of 31 December 2009 are as per below;

Rolf Ronningen

Chief Executive Officer

633,000

Number of Share Options held 290,000

Tom Henrik Sundby

Chief Financial Officer

225,000

190,000

175,000

Carl-Peter Zickerman Other members of executive management (Eight employees) Total

Executive Vice President

21,600,001

190,000

7,500,000

2,682,000

1,470,000

2,275,000

25,140,001

2,140,000

10,325,000

Number of Shares owned

Number of Warrants held 375,000

32.2.4 Board remuneration The total remuneration paid by the Company to its Board of Directors for the periods reported is as per below; (In thousands of USD) Director since Peter M. Rigg, Chairman Carl-Gustav Zickerman Carl Peter Zickerman Geoffrey Taylor Dr. Rosli Khan Alan Locker Hege Sjo Katherine J. Hall Tore Karlsson Jogeir Romestrand Total

20-Jun-08 17-Dec-07 9-Feb-08 19-May-08 19-May-08 20-Jun-08 20-Jun-08 20-Jun-08 20-Jun-08 12-Sep-09

Director till

31-Aug-09

Paid for the year 2009 100 38 38 38 30 45 45 45 45 14 438

Paid for the year 2008 50 45 38 26 26 23 23 23 23 275

32.2.5 Remuneration to the auditors The total fees incurred by the Company to its auditors for the periods reported are as per below; (In thousands of USD) Audit fees Audit related services Tax advisory services Other consultancy services Total

31-Dec-09

31-Dec-08

69 52 201 -

24 7 75

322

106

32.2.6 Major shareholders Name of the Shareholder Drydocks World LLC Zickerman Holding ltd Zickerman Group ltd Bgl Bnp Paribas Awilco Invest AS Morgan Stanley & Co Inc. New York JP Morgan Chase Bank The Northern Trust Co. Deutsche Bank AG London Caceis Bank Luxembourg JP Morgan Chase Bank State Street Bank and Trust Co. Bank of New York Mellon Brown Brothers Harriman & Co Bank of New York Mellon SA/NV JP Morgan Chase Bank, NA Ulstein Shipping AS Boreas Capital Fund Mp Pensjon Klp lk Aksjer Top 20 Shareholders

Number of shares held 31-Dec-09

% of shares held 31-Dec-09

37,500,000 30,356,616 21,600,001 19,948,745 11,531,000 9,551,126 9,000,000 8,786,000 6,844,000 6,218,833 4,602,000 4,327,000 4,013,000 3,095,000 3,086,900 2,545,791 2,500,000 2,245,000 2,102,000 2,048,000 191,901,012

14.25% 11.53% 8.21% 7.58% 4.38% 3.63% 3.42% 3.34% 2.60% 2.36% 1.75% 1.64% 1.52% 1.18% 1.17% 0.97% 0.95% 0.85% 0.80% 0.78% 72.91%

Others

71,273,808

27,09%

Total

263,174,820

100%

Name of the Shareholder Drydocks World LLC Zickerman Holding Ltd Zickerman Group Ltd Euroclear Bank S.A Ulstein Shipping AS Vitgu Shipping AS Marty Zickerman-Quinn Bjarte Henry Bruheim Dnb Nor Navigator Clearstream Banking S.A. Jpmorgan Chase Bank Rolf Ronningen Seami Invest Limited Christopher Joseph Griffin Paul Lionel Hanna Hans-Peter Burlid David John Pryer Dnb Nor Smb Honefoss Invest AS Christian Fenwick Top 20 Shareholders Others Total

Number of shares held 31Dec-08 75,000,000 54,132,295 32,086,117 8,591,300 5,000,000 3,000,000 2,857,143 2,000,000 1,880,272 1,491,000 1,490,000 1,000,000 1,000,000 750,000 750,000 750,000 750,000 661,359 616,000 600,000 194,405,486 9,166,369 203,571,855

% of shares held 31-Dec-08 36.84% 26.59% 15.76% 4.22% 2.46% 1.47% 1.40% 0.98% 0.92% 0.73% 0.73% 0.49% 0.49% 0.37% 0.37% 0.37% 0.37% 0.32% 0.30% 0.29% 95.50% 4.50% 100%

33. Events after the Balance Sheet Date 33.1Polarcus Nadia commenced production

Polarcus announced on 25 January 2010 that after a successful mobilization, the seismic vessel Polarcus Nadia has entered into production on its first project, offshore Liberia. The contract was the previously announced Seismic Charter Agreement that Polarcus entered into with TGS on 10 December 2009. The survey is being acquired with a 10 streamer seismic array, each streamer being 7,200 meters long and with 100 meters separation between streamers.

33.2 Polarcus Naila delivery

Polarcus announced on 24 February 2010 that Polarcus Naila AS, a member of the Polarcus Group, took delivery of the seismic vessel Polarcus Naila, a modern 12 streamer 3D seismic vessel built to the ULSTEIN SX124 design. Polarcus Naila is the sister ship to Polarcus Nadia, delivered to the Polarcus Group in December 2009. The vessel will transit to West Africa to commence a charter for Noble Energy Cameroon Limited.

34. Authorization of financial statements The consolidated financial statements for the year ended 31 December 2009 were authorized for issue in accordance with a resolution of the directors on 25 March 2010.

Peter Rigg

Tore Karlsson

Alan Locker

Geoffrey Taylor

Carl-Peter Zickerman

Kitty Hall

Carl-Gustaf Zickerman

Hege Sjo

Jogeir Romestrand

Polarcus Limited

Parent company unconsolidated financial statements year ending 31 December 2009 93. 94. 95. 96. 97.

Statement of Comprehensive Income Balance Sheet Statement of Cash Flows Statement of Changes in Equity Notes to the Financial Statements

Statement of Comprehensive Income (Unconsolidated Parent Company) (In thousands of USD) Revenues Sales, general and administrative costs Depreciation Impairment of vessels under construction Operating income/(loss) Financial expenses Finance costs Finance income Net financial income/(expenses) Profit/(Loss) for the period before tax Income tax expense Profit/(Loss) for the period/Comprehensive income/(loss) after tax

Notes

1 January â&#x20AC;&#x201C; 31 December 2009 2008 4,938 913

14 2

(8,723) (140) (5,148) (14,011)

(2,937) (2,937)

15 16

(13,530) 25,416 11,886

(8,946) 12,215 3,269

2,813 2,813

1,245 1,245

Balance Sheet (Unconsolidated Parent Company) (In thousands of USD)

Notes

31-Dec-09

31-Dec-08

ASSETS Non-current assets Property, plant and equipment Vessels under construction Vessels buyback options Intangible assets Investment in Subsidiaries Total non-current assets Current assets Prepaid expenses Other current assets Receivable from subsidiaries Restricted cash - Short term Cash and bank Total current assets

2 3 4 5

7 8

TOTAL ASSETS

45,096 7,545 40,831 3,400 91 96,963

8,260 54 8,314

8,380 6 195,386 35,133 114,358 353,263

28 99,056 83,553 104,943 287,580

450,226

295,894

5,264 303,582 7,255 4,058 320,159

2,036 188,641 5,904 1,245 197,826

53,496 30,131 13,263 7,250 3,207 368 107,715

53,191 29,132 10,934 11 93,268

4,219 1,782 3,490 7,156 4,327 1,378 22,352

4,219 296 4 88 193 4,800

450,226

295,894

EQUITY and LIABILITIES Equity Issued share capital Share premium Other reserves Retained earnings/(loss) Total equity Non-current liabilities 13% Senior secured bonds 8.5% Convertible bonds Long-term finance lease Other long-term debt Liability for warrants Employee pension accrual Total non-current liabilities Current liabilities Interest payable Employee accruals and payables Other accrued expenses Long-term finance lease current portion Other long-term debt current portion Other Payables Accounts payable Total Current Liabilities TOTAL EQUITY and LIABILITIES 94

9 9 10 9

11 12 13 10

Statement of Cash Flows (Unconsolidated Parent Company) (In thousands of USD) Cash flows from operating activities

Notes

Profit/(loss) for the period before tax

1 January â&#x20AC;&#x201C; 31 December 2009 2008 2,813

1,245

140 5,148 (7,728) 1,351 1,304 (392)

(7,782) 880 (2,063)

(8,358) 3,026

468 4,811

(2,696)

(2,441)

48,420 (17,672) (40,831) (96,367)

(83,553) (8,260) (99,110)

(106,450)

(190,923)

Cash flows from financing activities Proceeds from the issuance of ordinary shares Transaction costs on issue of shares Proceeds from the issuance of senior secured bonds Proceeds from the issuance of convertible bonds Interest income

124,625 (6,456) 392

211,972 (2,578) 53,075 33,775 2,063

Net cash flows from financing activities

118,561

298,307

Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period

9,415 104,943

104,943 -

Cash and cash equivalents at the end of the period

114,358

104,943

Adjustment for: Depreciation Impairment of vessels under construction Changes in fair value of financial instruments Stock Options compensation provision Finance costs Interest income Working capital adjustments: Increase in current assets Increase in trade and other payables and accruals Net cash flows from operating activities Cash flows from investing activities Decrease/(Increase) in restricted cash Purchases of property, plant and equipment Payments for vessels buyback options Investment in subsidiaries and changes in intercompany receivables Net cash flows used in investing activities

Statement of Changes in Equity (Unconsolidated Parent Company)

(In thousands of USD except for number of shares) 17 December 2007 at USD 1.00 per share Balance as of 1 January 2008

Issued Share capital

Number of Shares

Share Premium

Other Reserves

Retained Earnings/ (Loss) -

Total Equity

1,245

500

49,500

50,000

Total comprehensive income/(loss) for the period

Issue of share capital 9 February 2008

at USD 1.00 per share

49,999,999

18 March 2008

at USD 1.00 per share

3,786,855

3,749

3,787

19 May 2008

at USD 1.00 per share

85,000,000

850

84,150

85,000

21 May 2008

at USD 1.00 per share

20,000,000

200

19,800

20,000

29 June 2008

at USD 1.00 per share

2,785,000

2,757

2,785

2 July 2008

at USD 1.20 per share

42,000,000

420

49,980

50,400

Transaction costs on issue of shares

(2,579)

Issue of warrants to shareholders

(18,716)

Issue of convertible bonds

5,024

Employee stock options provision

880

2,036

188,641

5,904

1,245

197,826

2,813

(101,785,928)

3.50

161,388,889

3,228

121,397

124,625

Transaction costs on issue of shares

(6,456)

Employee stock options provision

1,351

5,264

303,582

7,255

4,058

320,159

Balance as of 31 December 2008

203,571,855

Total comprehensive income/(loss) for the period Consolidation of share capital 11 September 2009 (at 2:1 from USD 0.01 to USD 0.02 per share) Issue of share capital 17 September 2009 to avoid fractional shares after consolidation 29 September 2009 at NOK 4.50 (USD 0.77) per share

Balance as of 31 December 2009

263,174,820

The accompanying notes are integral part of the consolidated financial statements.

Notes to the financial statements (Unconsolidated Parent Company)

1. General information and summary of significant accounting principles

Polarcus Limited (the “Company”) is a holding company. In addition to owning the subsidiaries, the Company conducts the main part of the external debt financing of the Group, and provides loans to Group companies. The Company’s accounting principles are consistent to the accounting principles of the Group, as described in Note 2 of the consolidated financial statements. The notes to the unconsolidated financial statements of the parent company that are substantially different from the notes to the Group’s consolidated financial statements are presented below. Additional reference should be made to the notes to the consolidated financial statements of the Group. Shares in the subsidiaries and receivables from and loans provided to the subsidiaries are evaluated at the lower of cost and fair value. When the value of estimated future cash flows is lower than the carrying value in the subsidiaries, the Company recognizes impairment charges on investments in subsidiaries and intercompany receivables. If and when estimated recoverable amounts increase, impairment charges are reversed. There is no fixed plan for repayment of long-term intercompany receivables. Revenues are mainly sale of Group services to subsidiaries, including employee man hours and associated costs incurred on behalf for subsidiaries’ projects.

2. Property, Plant and Equipment (In thousands of USD) Seismic equipment Year ended 31 December 2008 Costs Balance at 1 January 2008

Additional capital expenditures

Disposals

Balance as of 31 December 2008

Depreciation and impairment losses Balance at 1 January 2008

Depreciation for the period

Disposals

Balance as of 31 December 2008

Carrying amounts As of 1 January 2008

As of 31 December 2008

Year ended 31 December 2009 Costs Balance at 1 January 2009

Additional capital expenditures

22,632

Assets under finance leases

22,604

Disposals Balance as of 31 December 2009

45,236

Depreciation and impairment losses Balance at 1 January 2009 Depreciation for the period Disposals Balance as of 31 December 2009

140 140

Carrying amounts As of 1 January 2009

As of 31 December 2009

45,096

Carrying amounts held under finance leases as of 31 December 2009

22,604

3. Vessels under Construction The vessels under construction are capitalized at cost amounting to USD 8 million as of 31 December 2009. This value is made up as follows: (In thousands of USD) Vessel Name Vessel Type

Construction Option-1 SX 134

Other vessels

Construction Option-2 SX 134

Total

Year ended 31 December 2008 -

â&#x20AC;?Â

Additions in the year

1,360

3,450

8,260

WIP value per vessel as of 31 December 2008

1,360

3,450

8,260

323

322

645

(1,360)

3,773

3,772

7,545

Opening balance

Year ended 31 December 2009 Additions in the year: Disposals WIP value per vessel as of 31 December 2009

The Company has no capital commitments. However, regarding the construction options 1 and 2, the Company is committed to pay a cancelation fee of approximately USD 2 million if the options are not exercised before October 2010.

4. Intangible Assets The net book value of intangible assets is made up of as follows;

(In thousands of USD) Consideration for vessel buyback options Year ended 31 December 2008 Costs Balance as of 1 January and 31 December 2008 Amortization and impairment losses Balance as of 1 January and 31 December 2008 Carrying amounts As of 1 January 2008 As of 31 December 2008

Year ended 31 December 2009 Costs Additions Balance as of 31 December 2009 Amortization and impairment losses Balance as of 1 January and 31 December 2009 Carrying amounts As of 1 January 2009 As of 31 December 2009

100

3,400 3,400

3,400

5. Investment in subsidiaries 31-Dec-09

(In thousands of USD) Unquoted equity shares at cost

31-Dec-08

The Company’s investment in different subsidiaries as of 31 December 2009 is as per below; (In thousands of USD) Name of the Subsidiary

Country of Incorporation

Principal activities

Administrative services Polarcus DMCC UAE Seismic vessel operator Polarcus 1 Cayman Islands Seismic vessel operator Polarcus 2 Cayman Islands Seismic vessel operator Polarcus 3 Cayman Islands Seismic vessel operator Polarcus 5 Cayman Islands Administrative services Polarcus Seismic Limited Cayman Islands Administrative services Polarcus UK Limited United Kingdom Administrative services Polarcus Egypt Egypt Seismic vessel operator Polarcus Nadia AS Norway Total *Voting rights are equivalent to shareholding for all companies.

Equity interest as of 31-Dec-09* 100% 100% 100% 100% 100% 100% 100% 100% 100%

Book value as of 31-Dec-09 54 18 19 91

Polarcus UK Limited, Polarcus Egypt and Polarcus Nadia AS were all incorporated during the year 2009.

6. Prepaid Expenses (In thousands of USD) Prepaid rent

31-Dec-09

31-Dec-08

Prepaid insurance

Other prepaid miscellaneous expenses

Receivables from other related parties

8,274

‐

Total

8,380

7. Restricted Cash 7.1 Short Term (In thousands of USD) Letter of credit escrow account to secure payment to suppliers

31-Dec-09

31-Dec-08

284

28,285

Senior secured bond loan escrow account

22,849

55,268

Other short term deposits*

12,000

35,133 83,553 Total *Other short term deposits comprise of USD 12 million deposit pledged in the favor of the lender of the USD 80 million loan facility.

101

8. Cash and Bank Cash and cash equivalents include cash-in hand, deposits held at call with banks, other short-term highly liquid investments. The Companyâ&#x20AC;&#x2122;s cash and cash equivalents are denominated in the following currencies as of the balance sheet date; (In thousands of equivalent USD)

31-Dec-09

31-Dec-08

USD

102,728

86,718

EUR

353

5,040

NOK

10,626

13,170

GBP

598

SEK

114,358

104,943

Total

9. Other Financial Assets and Liabilities Financial liabilities measured at fair value through profit or loss are as per below; (In thousands of USD) Liability for warrants Total liabilities at fair value through profit and loss Financial liabilities at fair value through profit or loss Net gain or (loss) on financial liabilities at fair value through profit or loss

31-Dec-09 3,207 3,207

31-Dec-08 10,934 10,934

7,728 7,728

7,782 7,782

Financial liabilities measured at amortized cost are as per below; (in thousands of USD) 13% Senior Secured Bonds (refer to Note 16 in the consolidated financial statements) 8.5% Convertible Bonds (refer to Note 17 in the consolidated financial statements) Total financial liabilities measured at amortized cost

102

31-Dec-09

31-Dec-08

53,496

53,191

30,131

29,132

83,627

82,323

9.1 Fair values (in thousands of USD)

31-Dec-09 Carrying Fair value Amount

31-Dec-08 Carrying Fair value Amount

Financial assets Cash and deposits

149,491

188,496

8,386

157,877

188,524

Accounts payable

1,378

193

Liability for warrants

3,207

10,934

13% Senior secured bonds

53,496

51,150

53,191

36,025

8.5% Convertible bonds

30,131

24,325

29,132

21,438

Finance lease liabilities

20,419

Other financial liabilities

21,436

4,811

130,067

121,915

98,261

73,401

Other financial assets Total Financial liabilities

Total

Cash and deposits, accounts payable, other financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair values of senior secured and convertible bonds are measured at a rate prescribed by The Norwegian Securities Dealers Association based upon the secondary market prices of the respective securities. Fair value hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. As of 31 December 2009, the Company held the following financial instruments measured at fair value: (in thousands of USD) Financial liabilities at fair value through profit & loss: Warrants

31-Dec3,207

Level 1 -

Level 2 -

Level 3 3,207

During the year ended 31 December 2009, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

103

Reconciliation of opening and closing balances of Level 3 financial items is as per below: (in thousands of USD) Balance at 1 January Value of warrants recognized in equity on Recorded in profit and loss in the year Balance at 31 December

Level 3 financial assets 31-Dec-09 31-Dec-08 -

Level 3 financial liabilities 31-Dec-09 31-Dec-08 (10,934) (18,716) 7,728 7,782 (3,207) (10,934)

10. Long-term Finance Lease On 7 June 2009 the Company entered into a lease agreement with Sercel Inc, Houston to acquire marine acquisition equipment (the â&#x20AC;&#x153;streamer systemsâ&#x20AC;?). The duration of the lease is 30 months and the Company has an option to purchase the streamer systems at any time during the lease period. According to the terms of the lease agreement, the lease period for a part of the streamer systems commenced on 1 September 2009. At the inception of the lease, a liability of USD 22,603,893 being the fair value of the streamer system has been recorded as a liability. The outstanding liability for above mentioned finance lease as of 31 December 2009 is further classified into longterm and short-term portions as per below: (In thousands of USD) Due after 12 months from 31-Dec-2009

Due within 12 months from 31-Dec-2009

Total

Lease payments for streamer systems

13,263

7,156

20,419

Total

13,263

7,156

20,419

Payments made towards these lease arrangements during the year ended 31 December 2009 as follows: (In thousands of USD) Principal

Interest

Total

Lease payments made for streamer systems

2,185

411

2,596

Total

2,185

411

2,596

11. Interest Payable (In thousands of USD) Interest accrued on senior secured bonds (refer to Note 16 in the consolidated financial statements) Interest accrued on convertible bonds (refer to Note 17 in the consolidated financial statements) Total

31-Dec-09

31-Dec-08

2,979

1,240

4,219

Interest charged and accrued on the convertible and senior secured bonds is calculated using the amortized cost method.

104

12. Employee Accruals and Payables (In thousands of USD)

31-Dec-09

Accrued salaries Accrued bonuses Total

31-Dec-08

1,666

115

116

181

1,782

296

13. Other Accrued Expenses (In thousands of USD) Accrued miscellaneous expenses

31-Dec-09

31-Dec-08

Consideration for vessel buyback options

3,400

Total

3,490

14. Sales, General and Administrative Costs Years ended (In thousands of USD) Salaries and other employee benefits

31-Dec-09

31-Dec-08

6,914

2,181

Other general and administrative expenses

1,809

756

Total

8,723

2,937

14.1Salaries and other employee benefits

The Company offers a fixed base salary to all employees. Certain employees are also provided with a car allowance based on their location of employment and grades. The Company has an element of variable compensation through a performance-related bonus scheme. Based on overall performance of the Company against certain pre-defined metrics together with performance against individual and team-specific goals, the employees can benefit from a variable compensation in the range of 10% to 40% of annual base salary where the bonus level depends upon the employeeâ&#x20AC;&#x2122;s grade. In addition, the Company has a retention bonus scheme for the key offshore employees who accepted a position in the Company between 1 May 2008 and 31 December 2009. This loyalty bonus is designed to help retain highly experienced crew that is essential for field operations. All employees of the Company are offered a comprehensive employee health protection plan. The Company has implemented a share option program for key employees whose performance will have a significant positive impact on the overall success of the Company.

105

Salaries and other employee benefits are comprised of the following; Years ended (In thousands of USD)

31-Dec-09

31-Dec-08

3,176

673

436

275

1,208

181

Other Employee benefits

464

132

Pension

279

Stock Options expense (refer to Note:13)

1,351

880

Total

6,914

2,181

Salaries Board Remuneration Performance bonus

Subsequent to the reporting period, a performance bonus equivalent to 8% of base salary (prorated according to the date of joining) for the year ended 31 December 2009 was paid out to all employees who joined the Company on or before 30 September 2009.

15. Finance Costs (In thousands of USD) Years ended 31-Dec-09 Interest expenses on senior secured bond

7,455

Interest expenses on convertible bond

3,974

658

1,053

1,351

7,893

13,530

8,946

Interest expenses on lease arrangements Realized currency exchange loss Unrealized currency exchange loss Total

106

31-Dec-08

16. Finance Income (In thousands of USD) Years ended 31-Dec-09

31-Dec-08

393

2,063

10,150

236

1,239

Unrealized exchange gain

6,909

1,131

Financial liabilities measured at fair value through profit and loss

7,728

7,782

Total

25,416

12,215

Interest income from deposit with banks Other interest income Realized exchange gain

The realized currency gain or loss represents the effect of foreign currency payments made and the unrealized currency gain or loss represents the effect of revaluation of foreign currency financial assets other than those treated as cash flow hedging instruments. The financial liabilities measured at fair value through profit and loss represent the profit on revaluation of the fair value of liabilities on warrants issued. Other interest income is interest expenses of the Company charged to the subsidiaries and relates to the borrowings of the Company for the specific purpose of financing the vessel construction projects of the subsidiaries.

17. Authorization of financial statement The unconsolidated financial statements of the parent company Polarcus Limited for the year ended 31 December 2009 were authorized for issue in accordance with a resolution of the directors on 25 March 2009.

Peter Rigg

Tore Karlsson

Alan Locker

Geoffrey Taylor

Carl-Peter Zickerman

Kitty Hall

Carl-Gustaf Zickerman

Hege Sjo

Jogeir Romestrand

107

Statsautoriserte revisorer Ernst & Young AS Christian Frederiks pl. 6, NO-0154 Oslo Oslo Atrium, P.O.Box 20, NO-0051 Oslo

To the Annual Shareholders’ Meeting of Polarcus Limited

Foretaksregisteret: NO 976 389 387 MVA Tlf: +47 24 00 24 00 Fax: +47 24 00 24 01 www.ey.no Medlemmer av Den norske Revisorforening

Auditor’s report for 2009 We have audited the accompanying annual financial statements of Polarcus Limited, which comprise the financial statements of the parent company and the group. The financial statements of the parent company comprise the statement of comprehensive income, balance sheet, statements of cash flows and changes in equity as well as the explanatory notes. The financial statements of the group comprise the consolidated income statement, statement of comprehensive income, balance sheet, statements of cash flows and changes in equity as well as a summary of significant accounting policies and other explanatory notes. The Board of Directors and management are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are 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. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, 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 the financial statements 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position of Polarcus Limited and Polarcus Group as of 31 December 2009, and the financial performance, cash flows and changes in equity for the year then ended in accordance with International Financial Reporting Standards.

Oslo, 25 March 2010 ERNST & YOUNG AS

Anders Gøbel State Authorized Public Accountant (Norway)

108

A member firm of Ernst & Young Global Limited

Notes

109

Addresses Polarcus Limited

Polarcus UK Ltd

Polarcus 3

Reg. No: WK 201867 Walker House, 87 Mary Street George Town Grand Cayman KYI – 9001 Cayman Islands

Reg. No: 7068161 St. James House 13 Kensington Square London W8 5HD U.K.

Reg. No: WK- 204064 Walker House, 87 Mary Street George Town Grand Cayman KYI – 9001 Cayman Islands

Polarcus DMCC

Polarcus Egypt Ltd

Polarcus 4

License No: 30852 Almas Tower, Level 32 Jumeirah Lakes Towers Dubai, U.A.E. Correspondence Address: P.O.Box 283373, Dubai U.A.E.

Reg. No: 41735 Cairo 10 Abdel Azim Ashmawy Street Al-Nozha Cairo, Egypt

Reg. No: WK- 204020 Walker House, 87 Mary Street George Town Grand Cayman KYI – 9001 Cayman Islands

Polarcus do Brasil Ltda

Polarcus 5

Polarcus Seismic Ltd Reg. No: WK- 213496 Walker House, 87 Mary Street George Town Grand Cayman KYI – 9001 Cayman Islands

Reg. No: 11.428.425/0001-12 Matriz Registered Address: 1 Andar – Bloco Pao de Acucar Praia de Botafogo 501 Centro Empresarial Mourisco Botafogo, Rio de Janiero, Brasil

Reg. No: WK- 204065 Walker House, 87 Mary Street George Town Grand Cayman KYI – 9001 Cayman Islands

Polarcus Nadia AS

Polarcus 1

Reg. No: 994 063 901 C/O Wikborg, Rein & Co P.O.Box 1513 Vika 0117 Oslo Norway

Reg. No: WK- 204062 Walker House, 87 Mary Street George Town Grand Cayman KYI – 9001 Cayman Islands

Reg. No: WK- 203972 Registered Address: Walker House, 87 Mary Street George Town Grand Cayman KYI – 9001 Cayman Islands

Polarcus Naila AS

Polarcus 2

Reg. No: 995 097 893 C/O Wikborg, Rein & Co P.O.Box 1513 Vika 0117 Oslo Norway

Reg No: WK- 203939 Walker House, 87 Mary Street George Town Grand Cayman KYI – 9001 Cayman Islands

Polarcus 6

www.polarcus.com

Polarcus Limited c/o Polarcus DMCC Almas Tower, Level 32 Jumeirah Lakes Towers P.O.Box 283373 Dubai, U.A.E.