Awilco LNG

Annual Report • Mar 31, 2020

ANNUAL REPORT 2019

AWILCO LNG ASA ANNUAL REPORT 2019 3

Table of contents

Contents

Description of Awilco LNG
Vessel Overview
Shareholder Information
Board of Directors' report
Statement of Responsibility

Consolidated Financial Statements and Notes

Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement

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• Consolidated Statement of Comprehensive Income
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• Consolidated Notes to the Financial Statements
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• Parent Company Statement of Changes in Equity
  -
• Parent Company Notes to the Financial Statements

Parent Company Financial Statements and Notes

54	Parent Company Income Statement
55	Parent Company Balance Sheet
56
56	Parent Company Cash Flow Statement
57
68	Auditor's Report
74	Corporate Governance
80	Social Responsibility
85	Alternative Performance Measures

04

07

08

12

19

22

22

23

24

25

26

COMPANY OVERVIEW

The Awilco LNG Group (the Group or Awilco LNG) is a fully integrated owner and operator of LNG vessels. The Group owns two 156,000 cbm 2013-built LNG TFDE membrane vessels, WilForce and WilPride.

HISTORY

Awilco LNG ASA (the Company) was incorporated in February 2011 by Awilco AS, a company in the Awilhelmsen Group which has fostered several companies previously listed on Oslo Stock Exchange, for the purpose of acquiring three second-hand LNG vessels.

Three LNG vessels WilGas, WilPower and WilEnergy were acquired for an aggregate price of USD 67 million in 2011, financed through private placements and shareholder loans that were subsequently converted to equity. The three vessels were sold in 2015 and 2016 for combined net proceeds of USD 50 million.

In May 2011 Awilco LNG signed shipbuilding contracts for the construction of two LNG carriers, which were part financed through a private placement of NOK 534.8 million.

In September 2011 the Company's shares were listed on the Oslo Stock Exchange under the ticker ALNG.

In September and November 2013, the Group took delivery of its two vessels WilForce and WilPride respectively. Both vessels were financed through sale/leaseback arrangements, financing about 75 % of the delivered cost.

In 2017 a comprehensive refinancing was completed, comprising an amended and more flexible financial lease agreement for WilForce and WilPride, and an equity issue of USD 26.8 million to re-establish a robust financial platform.

In January 2020 WilForce and WilPride were refinanced with a new 10-year sale/leaseback facility at improved terms.

Description of Awilco LNG

JON SKULE STORHEILL C h i e f E xe c u t i ve O f f i ce r

Prior to his appointment as CEO of Awilco LNG ASA Mr. Storheill was Managing Director of Awilco AS, Director of S&P/Projects with Frontline Management and Director/Partner of shipbroking company P.F. Bassøe AS. Mr. Storheill has also been the Chairman of the Board of Wilhelmsen Marine Services AS in addition to serving with various board positions in the industry. Mr. Storheill has more than 30 years of shipping experience and is a Norwegian citizen.

IAN S. WALKER SVP Chartering

Mr. Walker previously held a similar position within Golar LNG, and before that held various commercial, marketing and project development positions in LNG projects for both BG and Shell. Mr. Walker has been involved in the natural gas & shipping industry for more than 35 years. Mr. Walker is a Scottish citizen and resides in Norway.

Ø Y V I N D R Y SS DA L C h i e f F i n a n c i a l O f f i ce r

Mr. Ryssdal came from the position as VP Finance & Controlling of the Company, a position held since 2012. Prior to that he served as an auditor with EY. Mr. Ryssdal is a state authorised public accountant and a Certified Financial Analyst (AFA) from NHH. Mr. Ryssdal is a Norwegian citizen.

JAN ESPEN ANDERSEN H e a d o f O p e ra t i o n

Mr. Andersen was previously Head of Operations at Höegh LNG. He is a certified Master Mariner and has held various shore side marine related positions since 1997 following 7 years at sea. Mr. Andersen has more than 30 years of shipping experience and is a Norwegian citizen.

MANAGEMENT

Awilco LNG had eight employees at the end of 2019. The Group handles commercial and technical operations of the vessels from its office in Oslo.

The Group purchases certain administrative services from Awilhelmsen Management AS and technical sub-management services from Awilco Technical Services AS, both companies in the Awilhelmsen Group.

Organisation

Board of Directors

SIGURD E. THORVILDSEN Chairman and Non-Executive Director

Mr. Thorvildsen is the CEO of the Awilhelmsen group and Chairman of the Board of Awilco Drilling Plc. Mr. Thorvildsen has extensive experience from the shipping- and offshore industry, and has previously held several senior positions, among them the position as CEO of Awilco AS, the Chairman of the Board of Awilco Offshore ASA and Awilco Heavy Transport ASA (later Ocean HeavyLift ASA). He holds an MSc in Business and Economics from the Norwegian School of Management. Mr. Thorvildsen is a Norwegian citizen. Mr. Thorvildsen is a member of the Remuneration Committee.

JON-AKSEL TORGERSEN N o n - E xe c u t i ve D i re c t o r

Mr. Torgersen is the former CEO of Astrup Fearnley AS, the parent company of a number of investment and broker companies. Mr. Torgersen has extensive board experience from a number of companies in the property, shipping, finance and offshore sectors, and serves as Chairman of the Board of Atlantic Container Line AB and Finnlines Plc. He is also a member of the board of Transportation Recovery Fund. Mr. Torgersen holds an MBA (Finance) from Hochschule St. Gallen. Mr. Torgersen is a Norwegian citizen. Mr. Torgersen is a member of the Remuneration Committee.

HENRIK FOUGNER N o n - E xe c u t i ve D i re c t o r

Mr. Fougner is the COO of the Awilhelmsen group, and serves on the board of Awilco Drilling Plc. Mr. Fougner has extensive experience from the shipping- and offshore industry, and has previously held several senior positions, among them the position as CEO of Awilco Offshore ASA and CFO of Awilco AS. He holds an MBA from the Norwegian School of Economics and Business Administration. Mr. Fougner is a Norwegian citizen. Mr. Fougner is a member of the Audit Committee.

ANNETTE MALM JUSTAD N o n - E xe c u t i ve D i re c t o r

Mrs. Malm Justad previously held positions as CEO in Eitzen Maritime Services, Vice President and Head of Purchasing at Yara International ASA, Vice President and Fleet Manager at Norgas Carriers AS and has held various technical and commercial positions for Norsk Hydro ASA. She also serves as Chairman of the Boards of American Shipping Company ASA and Store Norske Spitsbergen Kulkompani AS, and as board member of Småkraft AS and the Port of London Authority. Mrs. Malm Justad holds a Master in Technology Management from NTH/NHH/MIT and a Master in Chemical Engineering from NTH. Mrs. Malm Justad is a Norwegian citizen.

SYNNE SYRRIST Non-Executive Director

Mrs. Syrrist has work experience as an independent consultant and as financial analyst at Elcon Securities ASA and First Securities ASA. She has also extensive non-executive experience from both listed and private companies and is currently among others a member of the boards of Awilco Drilling Plc, AqualisBraemar ASA and Eidesvik Offshore ASA. Mrs. Syrrist holds a MSc from NTNU and is a Certified Financial Analyst (AFA) from NHH. Mrs. Syrrist is a Norwegian citizen. Mrs. Syrrist is the chairman of the Audit Committee.

WILFORCE

WILPRIDE

Vessel overview

Awilco LNG owns two 156,000 cbm 2013-built LNG TFDE vessels WilForce and WilPride.

		(as per 31.12.2019)

Shareholder information

Awilco LNG share price development (ticker: ALNG)

20 largest shareholders (as per 31.12.2019)

WNERSHIP O	NUMBER OF SHARES SHAREHOLDER/	WNERSHIP O	NUMBER OF SHARES SHAREHOLDER/
38.6 %	AWILCO AS 51 114 080	1.0 %	PATRONIA AS 1 322 988
8.5 %	STRAWBERRY CAPITAL AS 11 216 756	0.9 %	Morgan Stanley & Co. Int. Plc. 1 136 346
8.0 %	UTHALDEN AS 10 600 930	0.8 %	B.O. STEEN SHIPPING AS 1 100 000
6.6 %	ASTRUP FEARNLEY AS 8 692 270	0.8 %	TVECO AS 1 000 000
2.1 %	GLAAMENE INDUSTRIER AS 2 726 706	0.8 %	TORSTEIN TVENGE 1 000 000
2.0 %	BARCLAYS CAPITAL SEC. LTD FIRM 2 593 291	0.7 %	HELMER AS 908 847
1.9 %	SES AS 2 500 000	0.6 %	SKIPS AS TUDOR 781 429
1.9 %	VERDIPAPIRFONDET ODIN GLOBAL 2 492 803	0.6 %	PORTIA AS 742 272
1.5 %	Credit Suisse Securities (Europe) 2 035 000	0.5 %	Pegus Holding AS 719 458
1.5 %	Nomura International Plc 2 000 000	19.4 %	OTHER SHAREHOLDERS 25 943 736
1.4 %	SONGA TRADING INC 1 921 699

10 AWILCO LNG ASA ANNUAL REPORT 2019 AWILCO LNG ASA ANNUAL REPORT 2019 11

Board of Directors' report Global seaborne LNG trade has doubled the last 10 years, and the LNG volume growth seen in 2018 continued in 2019. Total LNG trade increased by 11 % in 2019, from 325 MT in 2018 to 361 MT in 2019 according to shipbrokers Fearnleys LNG.

LNG demand in 2019 was not able to keep up with the strong supply growth, and global gas prices fell by about 50 % on average in 2019. Although trade war and muted demand from certain key LNG importers in the Far East negatively impacted average sailing distances, total shipping demand as expressed by growth in ton-mile increased by about 8.5 % in 2019, more than offsetting fleet growth of 7.3 %, according to Fearnleys LNG.

Despite the well supplied current market and the resulting low gas prices, final investment decisions on new LNG liquefaction capacity hit an all-time high of 71 MTPA in 2019, underpinning gas as an important and increasing part of the global energy mix. 28 MTPA of new LNG production capacity started in 2019 and a further 121 MTPA of capacity currently under construction is set for start-up in 2020 to 2026.

The orderbook as at end 2019 stood at 110 vessels, of which about 1/3rd are assumed available for contract.

The WilForce and WilPride financial leases were refinanced in early January 2020 with a new 10-year sale/ leaseback facility provided by CCB Financial Leasing Co. Ltd. (CCBFL). Both vessels were sold for a gross consideration per vessel of USD 175.0 million including non-amortizing and non-interest bearing pre-paid charter hire of USD 43.75 million per vessel, enabling a full take out of the previous sale/leaseback financings. The vessels are chartered back on bareboat basis to wholly owned subsidiaries of the Company for a period of up to 10 years.

Awilco LNG's finance cost is initially expected to be reduced by about USD 9.0 million annually at current forward interest rates as of end March 2020, subject to interest rate fluctuations compared to the previous financing arrangement. The bareboat rate, which includes amortisation, is expected at about USD 42,000 per day/per vessel in 2020 at current forward interest rates as of end March 2020. The Group has rolling repurchase options starting after three years and repurchase obligations at maturity of the facility at USD 37.5 million per vessel.

Board of Directors' report

BUSINESS SUMMARY

The Awilco LNG Group (Awilco LNG, ALNG or the Group) is a fully integrated pure play LNG transportation provider, owning and operating LNG vessels. The Group currently owns two 2013-built TFDE LNG carriers. The parent company Awilco LNG ASA is listed on Oslo Axess with ticker ALNG. Awilco LNG's registered business address is Beddingen 8, Oslo, Norway.

Commercial management is performed by Awilco LNG ASA. Technical management of the vessels is performed by a wholly owned subsidiary.

At the start of 2019 WilPride traded in the spot market and WilForce was employed on a 9-12-month contract to an oil and gas major.

In May 2019 WilForce completed machinery repairs and certain upgrades at yard in Singapore. Shortly after leaving the yard she was struck by another vessel which caused only hull damage and no harm to life or the environment. Due to the prolonged off-hire period required for repairs the parties agreed to cancel the balance of the 9-12-month time charter contract. Repairs at yard in Singapore were completed in mid-September 2019. Some of the lost earnings incurred during the repair period was covered by loss of hire insurance at USD 65,000 per day. Based on an assessment of facts and legal advice Awilco LNG holds the other vessel fully and completely liable for the collision, and the Group expects to recover costs, expenses and losses from the owner of the other vessel, including insurance deductibles, off-hire and lost time charter hire, in due course.

WilPride was delivered on an 8-month contract in mid-July 2019. Subsequent to repairs WilForce was delivered on an 80- 100-day contract in mid-November 2019.

Due to off-hire and repairs of WilForce vessel utilisation in 2019 ended at 72 %, down from 80 % in 2018. Adjusted for days covered by loss of hire insurance utilisation in 2019 ended at 83 %.

LNG market

According to Fearnleys LNG the assessed spot day-rates for modern TFDE vessels started 2019 at USD 110,000, falling to a shoulder-season low of USD 35,000 in March before reaching a high of USD 130,000 in October and ending the year at USD 91,000. Average assessed TFDE spot rate per day for the year was about USD 69,000, down from USD 86,000 in 2018.

Global seaborne LNG trade increased by 36 MT in 2019, a

growth of about 11 % compared to 2018. Fearnleys LNG reported average transport distances down by 3.4 % in 2019 compared to a 3.4 % increase in 2018, and according to same the total shipping demand as expressed by growth in ton-mile increased by about 8.5 % in 2019 compared to a fleet growth of 7.3 %.

The reduction in average trading distances in 2019 was due to muted LNG demand in the Far East where imports to Japan and South Korea were both down 8 % on 2018 imports due to mild weather and higher nuclear power generation. Imports to China and India grew by 16 and 5 % respectively. Due to the trade war with China the share of US LNG cargoes transported to the Far East fell from 43 % in 2018 to 27 % in 2019 according to Fearnleys LNG. With LNG demand unable to keep up with LNG supply in the short term, global gas prices fell to their lowest in 10 years in 2019. Europe has been the main buyer of incremental LNG volumes in 2019, growing imports by 61 % y-o-y to 91 MT and taking advantage of low gas prices to switch its energy mix from coal to gas.

28 MTPA of new LNG production capacity started in 2019 and 22 MTPA is scheduled to come on stream in 2020. A further 99 MTPA of capacity currently under construction is set for start-up in 2021 to 2026. About 50 % of the production capacity scheduled to start in 2020-2026 is being built in the US. Despite the currently well supplied product market and the resulting low gas prices, final investment decisions on new LNG liquefaction capacity hit an all-time high of 71 MTPA in 2019, equal to about 20 % of the total LNG trade in 2019.

In 2019 38 vessels were delivered and 43 newbuilding orders were placed. The total fleet of LNG carriers above 125,000 cbm was 512 vessels end 2019, of which 68 vessels built prior to 2000 and 15 vessels in lay-up. According to shipbrokers the current orderbook year end 2019 for LNG vessels above 150,000 cbm (excl. FSRU and FLNG) was 115 vessels, of which about 35 are assumed available for contract. 43 vessels are scheduled for delivery in 2020, 44 in 2021, 26 in 2022 and 2 in 2023.

CONSOLIDATED FINANCIAL STATEMENTS

Income statement

Freight income for the year amounted to USD 37.1 million (USD 40.0 million). Considering loss of hire insurance totaling USD 5.5 million presented as other income following the WilForce being struck by another vessel in May 2019, total consolidated income in 2019 amounted to USD 42.6 million. Fleet utilisation for the year ended at 72 %, compared to 80 % in 2018 due to extensive off-hire on the WilForce for the same reason.

Utilisation adjusted for loss of hire insurance was 83 % in 2019. Voyage related expenses were USD 3.4 million in 2019 compared to USD 5.1 million in 2018.

Operating expenses for the year were USD 9.7 million, up from USD 8.0 million in 2018, mainly following extraordinary and nonrecurring maintenance of various machinery on both vessels. A total of USD 6.7 million was expensed towards repairs of vessel damage on the WilForce in 2019 (USD 4.5 million in 2018). Related hull & machinery insurance proceeds of USD 6.2 million was recognised as other income in 2019 (USD 4.0 million in 2018).

Administration expenses amounted to USD 3.7 million in 2019 compared to USD 3.9 million in 2018.

EBITDA for the year was USD 25.2 million compared to USD 22.4 million in 2018.

Depreciation and amortisation was USD 13.1 million compared to USD 13.0 million in 2018.

Net finance expense was USD 20.4 million (USD 20.9 million), of which USD 20.7 million gross (USD 21.5 million gross) in interest charges on the WilForce and WilPride lease obligations.

Income tax expense for the year was NIL, same as in 2018.

Loss before tax and for the period was USD 8.3 million compared to USD 11.4 million in 2018.

Earnings per share

Basic and diluted earnings per share for the year were negative with USD 0.06, compared to negative USD 0.09 in 2018.

Financial position

As at 31 December 2019 the Group's total assets were USD 377.4 million (USD 393.6 million).

The book value of vessels was USD 350.0 million (USD 362.1 million).

Current assets were USD 27.3 million (USD 31.4 million), of which trade receivables were USD 0.1 million (USD 2.7 million), cash and cash equivalents USD 23.5 million (USD 22.5 million) and other current assets USD 3.7 million (USD 6.1 million).

Total current liabilities were USD 269.6 million as at 31 December 2019 (USD 277.6 million), of which USD 260.2 million (USD 266.7 million) was related to the WilForce and WilPride financial lease liabilities refinanced in January 2020 to longterm liabilities as disclosed in note 26 and remaining current liabilities USD 9.5 million (USD 11.0 million).

Total equity at the end of the year was USD 107.3 million (USD 115.6 million), corresponding to a book equity ratio of 28 % (29 %).

Cash flow statement

In 2019 the Group had cash inflows from operating activities of USD 29.2 million (USD 26.5 million). Net cash used in investing activities was USD 1.0 million (USD 11.2 million). Net cash used in financing activities amounted to USD 27.2 million (USD 21.8 million), all related to payment towards the WilForce and WilPride lease obligations. Cash at the end of the year was USD 23.5 million (USD 22.5 million).

Liquidity

Cash and cash equivalents were USD 23.5 million as at 31 December 2019. The Group's vessels are trading in the spot and short-term market. Spot earnings are exposed to volatility and seasonality in rates and utilisation.

Subsequent to the CCBFL refinancing completed in January 2020 as described in note 26 cash break-even for each vessel is expected at approx. USD 60,000 per day in 2020, subject to interest rate fluctuations. According to the sale/leaseback facility provided by CCBFL the Awilco LNG Group is to maintain minimum consolidated cash and cash equivalents of USD 10.0 million and positive consolidated working capital.

PARENT COMPANY FINANCIAL STATEMENTS

Operating income for the year amounted to NOK 5.7 million (NOK 5.4 million) and administration expenses NOK 21.7 million (NOK 23.3 million). Impairment losses on shares in subsidiaries amounted to NOK 110.3 million (NIL in 2018). The impairment losses were based on an assessment of recoverable amounts.

Net finance income amounted to NOK 6.4 million (NOK 14.9 million).

Loss for the period was NOK 119.9 million (NOK 3.1 million).

The Board of Directors propose that the loss for the period of NOK 119.9 million for the Parent Company is covered by retained earnings.

The Board will propose to the General Meeting scheduled for 24 April 2020 that there will be no dividend distributed for the fiscal year 2019.

GOING CONCERN ASSUMPTION

The consolidated financial statements of the Group, and the parent company financial statements of Awilco LNG ASA, have been prepared on a going concern basis pursuant to the Norwegian Accounting Act § 3-3a.

The Group's ability to continue as a going concern is dependent upon generating sufficient cash flow from operation of the vessels. The Group's vessels are trading in the spot market. Employment in the spot market exposes the Group's financial performance to volatility and seasonality in rates and utilisation, and the ongoing Covid-19 pandemic may also negatively impact the LNG shipping market and the Company's earnings and financial position.

The WilForce and WilPride financial leases maturing 31 December 2019 +/- 60 days in Awilco LNG's option were refinanced in January 2020 with a new sale/leaseback facility provided by CCBFL, please see note 26 for further information.

RISK FACTORS

Shipping market conditions have historically been volatile and consequently the financial results may vary significantly from year to year. The risk factors in the LNG shipping market can be divided into the following main components: market risk, operational risk and financial risk.

Market risk

Market risk relates to the supply of LNG vessels and the demand for LNG transportation. In the past there have been prolonged periods of oversupply of vessels due to delays in the construction of LNG production plants, with correspondingly low utilisation and depressed market rates. In the period 2012 to 2017 a newbuild ordering boom combined with limited growth in LNG production and decreasing average sailing distances resulted in an oversupply of vessels, depressing activity and rates. In 2018 and 2019 the growth in LNG supply has surpassed fleet growth, and the increased average charter rates reflected

that the previous tonnage surplus was gradually absorbed by the market. High ordering activity in 2018 and to a certain extent also in 2019 indicates a risk of an oversupplied market in 2021 onwards, depending on production growth, global economic conditions including possible consequences of the Covid-19 pandemic, the demand for LNG, average sailing distances and notably US – China relations, among other factors.

Projecting the supply of LNG involves uncertainty. Historically new projects were often delayed as liquefactions plants are highly complex construction projects, but project execution has gradually improved, and recent projects commissioned several months ahead of schedule is encouraging. Actual LNG production may fluctuate from one year to another due to for instance scheduled maintenance programs, feed gas issues, war and conflicts or technical issues. Lower LNG production will have an impact on the market rates for LNG vessels, as the oversupply of vessels is likely to reduce rate levels.

The demand for LNG is affected by the importing countries' demand for energy as well as the relative pricing of LNG compared to alternative energy sources. A high relative pricing spread between LNG and other energy sources will reduce the demand for LNG and thereby negatively impact demand for LNG transportation. Due to the massive increase in LNG production in 2018 and 2019 combined with mild winters in the northern hemisphere LNG prices are currently at their lowest since 2009. LNG is currently priced at around 50 % of oil on an energy equivalent basis. In the longer-term low gas prices and the growing supply of molecules is expected to support growth in demand for natural gas as a flexible and clean fuel compared to other fossil alternatives.

Gas price levels in different geographic markets has a significant impact on demand for LNG transportation to execute arbitrage opportunities. In 2019 the global gas prices converged due to the large supply growth, and going forward the arbitrage is difficult to predict as it is closely linked to the gas price level in Europe, the US and Far East, which is highly dependent upon several factors including weather, policies and regulations and the price of alternative energy sources.

Operational risk

Employment risk

The Group's ability to obtain charters will depend upon the prevailing market conditions. If the Group is unable to employ its vessels, revenue will be substantially reduced.

Laws and regulations

The Group's operations and vessels are subject to international

laws and regulations, which have become more proliferate and stringent in recent years. Although the Group is doing its outmost to comply, changes in laws and regulations may expose the Group to liability.

Technical risk

LNG vessels are highly sophisticated, and there is a risk that equipment may fail despite pre-emptive maintenance. The Group has in place loss of hire insurance, but a technical breakdown will affect earnings for a period of at least 14 days due to the deductible period.

Piracy, war and cyber risk

A piracy attack, outbreak of war or cyber-attack may affect the trading and earnings of the vessels.

Crew

The LNG carrier fleet will increase by more than 20 % over the coming years. This exposes the Group to the risk of not being able to attract qualified officers and seafarers. The Group has, and will, continue to take steps in order to mitigate this risk.

Bunker price

The Group is exposed to bunker price risk when the vessels are not on charter.

Financial risk

Financing risk

As at 31 December 2019 both vessels were financed through sale/leaseback agreements with Teekay LNG Partners L.P. The leases matured 31 December 2019 +/- 60-days extension option in Awilco LNG's favor.

The WilForce and WilPride financial leases were refinanced in early January 2020 with a new 10-year sale/leaseback facility provided by CCB Financial Leasing Co. Ltd. (CCBFL). Both vessels were sold for a gross consideration per vessel of USD 175.0 million including non-amortizing and non-interest bearing pre-paid charter hire of USD 43.75 million per vessel, enabling a full take out of the previous sale/leaseback financings. The vessels are chartered back on bareboat basis to wholly owned subsidiaries of the Company for a period of up to 10 years. The Group has rolling repurchase options starting after three years and repurchase obligations at maturity of the facility at USD 37.5 million per vessel.

Currency risk

The companies in the Group have USD as functional currency. Currency risks therefore arise in connection with transactions in other currencies than USD. The Group is to a certain

degree exposed to currency fluctuations as it is exposed to administration expenses denominated in NOK. The Group may use financial derivatives to reduce short-term currency risk, but as at 31 December 2019 no such instruments were entered into.

Liquidity risk

The shipping business is capital intensive. Insufficient liquidity will severely impact the ability to operate the vessels. The Group's approach to managing liquidity risk is to ensure, as far as possible, having sufficient liquidity at all times to meet its obligations without incurring unacceptable losses or risking employees' safety or damage to the Group's reputation. According to the sale/leaseback facility provided by CCBFL the Awilco LNG Group is to maintain minimum consolidated cash and cash equivalents of USD 10.0 million and positive consolidated working capital.

Interest rate risk

The Teekay leases described in the Financing risk section above were fixed rate lease liabilities, and interest rate risk was therefore limited to bank deposits and a floating interest charge on the deferred bareboat hire.

The CCBFL sale/leaseback facility completed in January 2020 is subject to a floating interest rate, and the Group will evaluate using financial derivatives in order to hedge the interest rate exposure.

Counterparty- / credit risk

The Group is exposed to credit risk from its operating activities through freight income trade receivables and from its financing activities, including deposits with banks. The Group aims to do business with creditworthy counterparties only. Charter hire is normally received monthly in advance, effectively reducing the potential exposure to credit risk. Bank deposits are only deposited with internationally recognised financial institutions with a solid credit rating.

HEALTH, SAFETY AND ENVIRONMENT

Based on the long-term goal of environmental excellence, Awilco LNG works continuously towards minimising the environmental impact from its vessels and operations.

Awilco LNG aims to minimise the emissions of CO2, NOx and SOx from engines, boilers, incinerators and cargo and fuel oil tanks and systems through evaporation, and incremental efforts to improve and optimize the Group's operations resulted in reduced vessel emissions of CO2, NOx and SOx per cargounitmile in 2019. In 2019 one of the Group's vessels was upgraded

with certain new equipment, which is a first in the LNG shipping industry. The upgrade reduces boil-off and thereby further reduce the vessel emissions, improves fuel consumption as well as trading flexibility.

The Group has a zero tolerance for environmental spills, emissions of ozone depleting substances and unauthorised disposal of any type of garbage or waste to the marine environment.

The Group has a lean onshore organisation and has outsourced certain services. At year end 2019 the Group had eight onshore employees. There is currently no female representation among management. The Group is aware of this imbalance and is positive to improve this ratio in the future. The Board of Directors of the Company has two female directors, representing 40 % of the Board.

The safety and well-being of Awilco LNG's employees and seafarers has the highest priority. Vessels are to be properly operated and maintained, and safe for crew, visitors, cargo and the environment. The Group's quality of operations is supported by experienced, educated and well-trained staff onboard and onshore. The Group adheres to national and international laws and regulations and promotes best practices identified within its own operations and the industry in order to improve the competence of individual crewmembers and vessel safety performance. ALNG's management is actively engaged in monitoring the Group's performance to further encourage and promote positive trends, and to provide advice and take corrective action where negative trends are detected. To ensure retention of personnel, Awilco LNG aims to ensure a stable and motivating work environment for both onshore and offshore employees. The Group is proactively seeking to identify requirements and needs for additional training through regular audits, master and management reviews.

Absence due to illness for onshore employees was 2.9 % in 2019 (0.8 % in 2018). No onshore work-related injuries were reported in 2019 or 2018. For seafarers, an LTIF (accidents per one million-man hours worked) of 2.1 was reported during the year, same as in 2018.

For further information please see the Social Responsibility section in the annual report, which complies with the requirements under the Norwegian Accounting Act § 3-3c.

CORPORATE GOVERNANCE

Awilco LNG strives to protect and enhance shareholder

equity through openness, sustainability, integrity and equal shareholder treatment, and sound corporate governance is a key element in the basis of the Awilco LNG strategy.

The corporate governance principles of the Company are adopted by the Board of Directors. The principles are based on the Norwegian Code of Practice for Corporate Governance as of 17 October 2018 (the «Code of Practice»). Please see the Corporate Governance section in the annual report, and also the Company's web site www.awilcolng.no.

STRATEGY

The main strategy for Awilco LNG is to create shareholder value through the provision of a quality, sustainable, reliable and customer-oriented service to the market, in the best manner for its shareholders, employees and business connections. The management team shall safely, efficiently and effectively provide LNG transportation services to customers with an objective to secure the most profitable contracts coupled with the highest achievable vessel utilisation.

Awilco LNG shall evaluate growth opportunities in terms of vessel acquisitions and disposals which best complement the Group's financial and operational aspirations.

OUTLOOK

LNG production has grown strongly in 2019 with demand unable to keep up so far. As a result, global gas prices have been under pressure and in addition to being at all-time lows have also converged between the main basins reducing ton-mile demand.

Although increasing LNG volumes are expected to continue to drive tonnage demand, it may be challenging for shipowners to secure utilisation and capture higher charter rates in the near term due to the current muted end-user demand as exacerbated by the Covid-19 pandemic and its uncertain effects on global energy demand. Awilco LNG's two vessels are currently trading in the spot market and the ongoing Covid-19 pandemic may negatively impact the Company's earnings and financial position.

Spot natural gas is currently priced at around 50 % of oil on an energy equivalent basis. With close to 80 % of LNG imports to Asia priced on oil indexation coupled with the oil price falling more than 50 % since the end of 2019, demand from key importers in Asia may increase going forward, generating ton-mile demand. In the longer perspective low prices and the growing supply of molecules is expected to support growth in demand for natural gas as a flexible and clean fuel compared to other fossil alternatives.

In excess of 110 MTPA of new LNG production capacity under construction is expected to start up the next five years. Tonnage demand and supply appear balanced going forward, noting that about 50 % of the new production capacity is being built in the US, which depending on transport distances will underpin demand for LNG carriers beyond current fleet and orderbook. Over the same time period about 75 smaller and less economical steam LNG carriers are expected to roll off long-term contracts, whereby modern vessels have an economic advantage as replacement tonnage. However, periods of volatility and seasonality should be expected.

Statement of responsibility

We confirm to the best of our knowledge that the consolidated financial statements for 2019 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, as well as additional information requirements in accordance with the Norwegian Accounting Act, and that the financial statements for the parent company for 2019 have been prepared in accordance with the Norwegian Accounting Act and generally accepted accounting practice in Norway, and that the information presented in the financial statements gives a true and fair view of the assets, liabilities, financial position and profit/(loss) for the period of Awilco LNG ASA and the Awilco LNG Group as a whole.

We also confirm to the best of our knowledge that the Board of Directors' Report includes a true and fair review of the development and performance of the business and the position of Awilco LNG ASA and the Awilco LNG Group, together with a description of the principal risks and uncertainties that they face.

Oslo, 31 March 2020

Jon-Aksel Torgersen Board member

Synne Syrrist Board member

Sigurd E. Thorvildsen Chairman of the Board

Henrik Fougner Board member

Annette Malm Justad Board member

Jon Skule Storheill CEO

Oslo, 31 March 2020

Jon-Aksel Torgersen Board member

Synne Syrrist

Board member

Sigurd E. Thorvildsen Chairman of the Board

Henrik Fougner Board member

Annette Malm Justad Board member

Jon Skule Storheill CEO

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• 20 AWILCO LNG ASA ANNUAL REPORT 2019 AWILCO LNG ASA ANNUAL REPORT 2019 21
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Consolidated Financial Statements And Notes

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In USD thousands

	Note	31.12.2019	31.12.2018
ASSETS
Non-current assets
Vessels (right-of-use assets)	11	350 000	362 110
Other fixed assets		17	12
Total non-current assets		350 017	362 122
Current assets
Trade receivables	12	120	2 749
Inventory	13	1 000	1 377
Other short term assets	14	2 674	4 772
Cash and cash equivalents	15	23 547	22 540
Total current assets		27 340	31 438
TOTAL ASSETS		377 357	393 560
EQUITY AND LIABILITIES
Equity
Share capital	19	49 407	49 407
Share premium		133 384	133 384
Other paid-in capital	19	18 157	18 157
Retained earnings		(93 624)	(85 356)
Total equity		107 324	115 592
Non-current liabilities
Pension liabilities	8	397	322
Total non-current liabilities		397	322
Current liabilities
Short-term interest bearing debt	22	260 187	266 683
Trade payables		2 344	1 323
Income tax payable	10	-	-
Provisions and accruals	16	7 106	9 640
Total current liabilities		269 636	277 646
TOTAL EQUITY AND LIABILITIES		377 357	393 560

CONSOLIDATED INCOME STATEMENT

In USD thousands, except per share figures

	Note	2019	2018
Freight income	4,5	37 084	39 952
Voyage related expenses	6	3 406	5 133
Net freight income		33 678	34 819
Other income	7	11 618	4 000
Operating expenses	7	9 748	7 987
Vessel repair expenses	7	6 677	4 500
Administration expenses	8	3 657	3 900
Earnings before interest, taxes, depr. and amort. (EBITDA)		25 214	22 432
Depreciation and amortisation	11	13 074	12 989
Earnings before interest and taxes (EBIT)		12 140	9 442
Finance income	17	462	887
Finance expenses	17	20 870	21 765
Net finance income/(expense)		(20 408)	(20 878)
Profit/(loss) before taxes		(8 268)	(11 435)
Income tax expense	10	-	-
Profit/(loss) for the period		(8 268)	(11 435)
Earnings per share in USD attributable to ordinary equity holders of Awilco LNG ASA:
Basic, profit/(loss) for the period	9	(0.06)	(0.09)
Diluted, profit/(loss) for the period	9	(0.06)	(0.09)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Total comprehensive income/(loss) for the period	(8 268)	(11 435)	Oslo, 31 March 2020
Other comprehensive income items	-	-
Other comprehensive income:
Profit/(loss) for the period	(8 268)	(11 435)

Board member

Jon Skule Storheill CEO

Synne Syrrist Board member

Henrik Fougner Board member

Annette Malm Justad Board member

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 31 December 2019

CONSOLIDATED CASH FLOW STATEMENT

In USD thousands

In USD thousands	Share	Share	Other	Retained	Total
	capital	premium	paid-in capital	earnings	equity
Equity at 1 January 2019	49 407	133 384	18 157	(85 356)	115 592
Profit/(loss) for the period	-	-	-	(8 268)	(8 268)
Other comprehensive income for the period	-	-	-	-	-
Total comprehensive income	-	-	-	(8 268)	(8 268)
Balance as at 31 December 2019	49 407	133 384	18 157	(93 626)	107 324

For the period ended 31 December 2018	Share	Share	Other	Retained	Total
In USD thousands	capital	premium	paid-in capital	earnings	equity
Equity at 1 January 2018	49 407	133 384	18 157	(73 921)	127 028
Profit/(loss) for the period	-	-	-	(11 435)	(11 435)
Other comprehensive income for the period	-	-	-	-	-
Total comprehensive income	-	-	-	(11 435)	(11 435)
Balance as at 31 December 2018	49 407	133 384	18 157	(85 356)	115 592

Note	2019	2018

(8 268) - 20 709 13 074	(11 435)
	- 21 543
	12 989
5 104	(2 221)
(1 439)	5 656
29 180	26 532
(969)	(11 182)
(969)	(11 182)
(7 635)	(2 735)
(19 570)	(19 053)
(27 205)	(21 788)
1 007	(6 438)
22 540	28 979
23 547	22 540

Note 1 // Corporate information

Awilco LNG ASA (the Company or Parent Company) is a public limited liability company incorporated and domiciled in Norway. Its registered office is Beddingen 8, 0250 Oslo, Norway. The Company was incorporated 2 February 2011 and is listed on Oslo Axess with the ticker ALNG.

The consolidated financial statements of the Company comprise the Company and its subsidiaries, together referred to as the Group or Awilco LNG.

The principal activity of the Group is the investment in and operation of LNG transportation vessels. The Group owns and operates two 2013-built TFDE LNG vessels.

The consolidated financial statements for the period ended 31 December 2019 were authorised for issue by the Board of Directors on 31 March 2020 and will be presented for approval at the Annual General Meeting on 24 April 2020.

Note 2 // Summary of significant accounting policies

BASIS OF PREPARATION

The consolidated financial statements of Awilco LNG have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the additional applicable disclosure requirements of the Norwegian accounting act. The consolidated financial statements have been prepared on a historical cost basis, except for liabilities for cash-settled share-based payments which are measured at fair value, pensions which are measured according to IAS 19 and receivables and payables denominated in foreign exchange which are translated at period-end exchange rates.

The consolidated financial statements are presented in US Dollars (USD) rounded off to the nearest thousands, except as otherwise indicated. The consolidated financial statements have been prepared based on a going concern assumption. Please see the Board of Directors' report for further information on this matter.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

BASIS OF CONSOLIDATION

The consolidated financial statements include Awilco LNG ASA and its subsidiaries. The financial statements of the

subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intercompany transactions and balances are eliminated in the consolidation. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control over the subsidiaries, and continue to be consolidated until the date that such control ceases.

REVENUE

Revenue is recognised at an amount that reflects the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer and is presented as freight income net of offhire deductions. Revenue is recognised according to the load-to-discharge principle. Revenue is usually received monthly in advance whereas performance obligations are satisfied as follows:

Revenue is generated by time charter contracts which contain both a lease element and a vessel management element (service agreement). The lease element, as described below under Leasing are recognised in straight-line over the term of the charter as services are provided based on number of days before and after the reporting period. Where the repositioning fees depend upon final redelivery location, they are recognised at the end of the charter when the revenue becomes fixed and determinable.

The vessel management element is considered a performance obligation that is satisfied over time, given that the customer simultaneously receives and consumes the benefits provided by the Group.

Voyage expenses are expensed as incurred and mobilisation expenses are not capitalised.

LEASING

The determination of whether an arrangement contains a lease element is based on the substance of the arrangement. Leases are classified as finance leases if the terms of the lease agreement transfer substantially all the risks and benefits incidental to ownership of the leased item. All other leases are classified as operational leases.

The Group as lessor

Minimum operating lease payments received under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease revenue over the term of the lease. Contingent rent is recognised as revenue in the period in which they are earned.

The Group as lessee

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Leased assets with repurchase obligations at the end of the lease term are separated into components which are depreciated over the useful life of the component. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include repurchase obligations or alternatively the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest based on the effective interest method and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the insubstance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below USD 5,000). Lease payments on short-term leases and leases of lowvalue assets are recognised as expense on a straight-line basis over the lease term.

Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew.

Sale-leaseback arrangements

No gain or loss is recognised in the income statement related to sale/leaseback arrangements where the vessel is sold and subsequently leased back with repurchase obligations to the Group.

FOREIGN CURRENCY

The consolidated financial statements are presented in USD, which is also the functional currency of all entities in the Group. Transactions in foreign currencies are recorded at the rate of exchange on the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate applicable at the reporting date. Realised and unrealised foreign currency gains or losses on monetary items are presented as finance income or finance expense. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates applicable at the dates of the initial transactions.

CLASSIFICATION OF ITEMS IN THE STATEMENT OF FINANCIAL POSITION

Current assets and current liabilities include items that fall due for payment within one year after the reporting date. The shortterm part of long-term debt maturing within 12 months after the balance sheet date is classified as short-term debt.

VESSELS, VESSELS UNDER CONSTRUCTION AND OTHER FIXED ASSETS

Tangible non-current assets such as vessels and other fixed assets are carried at historical cost less accumulated depreciation and impairment losses. Vessels under construction are carried at historical cost less impairment losses.

Costs of acquired vessels include expenditures that are directly attributable to the acquisition of the vessels. Cost of vessels under construction include all directly attributable costs incurred to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Examples of such costs include supervision costs, site team costs, yard installments, technical costs and borrowing costs. Borrowing costs are determined by applying an interest rate to the average amount of accumulated expenditures during the construction period, limited to the interest expense incurred during the reporting period. The interest rate used is the weighted average cost of borrowings in the Group.

Costs of vessels under construction are capitalised, classified as vessels under construction and presented as a tangible asset. The capitalised costs are reclassified from vessels under construction to vessels when the asset is available for its intended use.

In accordance with IAS 16 each component of the vessels with a cost that is significant in relation to the total cost of the item is separately identified and depreciated. Components with similar useful lives will be grouped into a single component. Drydocking is identified as a separate component of cost of vessels and depreciated separately. Depreciable amount of an asset is calculated as cost less residual value and impairment charges. Residual value is based on estimated salvage value of the vessels. Depreciation is calculated on a straight-line basis over the useful life of the assets, and depreciation is commenced when the asset is available for its intended use. Expected useful lives and residual values are reviewed yearly. The following estimated useful lives are applied to the respective components of the asset:

Vessels	40	years
Vessel dry-docking	5	years
Vessel engine overhauls	4	years
Other fixed assets	3 - 5	years

Costs related to major inspections/classifications (dry-docking and engine overhauls) are recognised in the carrying amount of the vessels if certain recognition criteria are satisfied. The recognition is made as the dry-docking or overhaul is being performed, and depreciation is recognised from completion until estimated time to the next dry-docking or overhaul. Any remaining carrying amount of the cost of the previous drydocking or overhaul is de-recognised upon initiation of the next dry-docking or overhaul. The remaining costs that do not meet the recognition criteria are expensed as repairs and maintenance. When vessels are acquired remaining drydocking and overhaul is identified and depreciated as a separate component, based on estimated time to the next dry-docking or overhaul.

Ordinary repairs and maintenance expenses are recognised in the income statement as incurred. Upgrades and material replacement of parts and equipment are capitalised as costs of vessels and depreciated together with the respective component. Replaced parts and equipment are derecognised and presented as impairment losses in the income statement. If it is not practicable to determine the carrying amount of the replaced part, the cost of the replacement is used as an indication of what the cost of the replaced part was at the time it was acquired or constructed.

IMPAIRMENT

Vessels, vessels under construction and other fixed assets are assessed for impairment indicators each reporting period. If impairment indicators are identified the recoverable amount is estimated, and if the carrying amount of an asset or cash generating unit (CGU) exceeds its recoverable amount an impairment loss is recognised. Each vessel is assessed as a separate cash generating unit (CGU) by Awilco LNG.

The recoverable amount is the higher of an asset's fair value less cost to sell (net selling price) and value in use. The fair value is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount; the reversal is limited up until the carrying amount net of accumulated depreciation if no impairment loss had been recognised in prior periods. Such reversals are recognised in the income statement.

NON-CURRENT ASSETS HELD FOR SALE

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through sale rather than continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell and presented separately as assets held for sale and liabilities held for sale in the statement of financial position.

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the plan will be made or that the plan to sell will be withdrawn. In addition, the criteria also include management to be committed to the plan and the sale to be completed within a year. Once classified as held for sale assets are not depreciated or amortised.

INVENTORY

Inventories consist of bunkers and lube oil on board the vessels. Inventories are measured at the lower of cost and net realisable value. Cost is determined in accordance with the first-in-first-out principle (FIFO), and expenses related to inventory are presented as voyage related expenses in the income statement.

PROVISIONS

Provisions are recognised when the Group has a present obligation (legal or constructive) because of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is recognised through profit and loss net of any reimbursement.

FAIR VALUE MEASUREMENT

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, using assumptions that market participants would use when pricing the asset or liability. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level of input that is significant to the fair value measurement as a whole:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

SHARE-BASED PAYMENTS

For cash-settled share-based payments a provision is recorded for the rights granted reflecting the vested portion of the fair value of the rights at the reporting date. The provision is accrued over the period the beneficiaries are expected to perform the related service (vesting period). The cash-settled share-based payments are remeasured to fair value at each reporting date until the award is settled. Any changes in the fair value of the provision are recognised as administration expense in the income statement. The amount of unrecognised compensation expense related to non-vested share-based payment arrangements granted in the cash-settled plans is dependent on the final intrinsic value of the awards. Social security tax liability is recognised on the intrinsic value of the cash-settled share-based payments.

PENSIONS

The Group is required to provide a pension plan towards its onshore employees, and the Group has implemented a defined contribution plan. The plan complies with the requirements in the Mandatory Occupational Pension act in Norway ("Lov om obligatorisk tjenestepensjon"). Contributions on salary up until 12G are funded in a life insurance company, whereas contributions on salary over 12G are funded by the Group. G refers to the Norwegian National Insurance basic amount.

Contributions to the funded plan are recognised as an employee benefit expense in the income statement when they fall due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is expected. The Group has no further payment obligations once the contributions have been paid.

The liability arising from the plan funded by the Group is classified as a non-current liability in the statement of financial position. Changes in the liability are recognised as employee benefit expenses in the income statement in the periods during which services are rendered by employees. The liability becomes payable to the employee upon termination, voluntary or involuntary, of the employment.

TAXES

The income tax expense consists of current income tax and changes in deferred tax.

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.

Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised. Deferred income tax is calculated on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities is determined using tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax liabilities and deferred tax assets are recognised at nominal values and classified as non-current liabilities and non-current assets in the statement of financial position. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on

a net basis or their tax assets and liabilities will be realised simultaneously.

Current income tax and deferred tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

For Group companies subject to tonnage tax regimes, incurred tonnage tax is recognised as an operating expense.

FINANCIAL INSTRUMENTS

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legal right to offset the amounts and intention either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Financial assets

Initial recognition and measurement: Financial assets are classified at initial recognition and subsequently measured at either i) amortised cost or ii) fair value through profit or loss.

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15 Revenue.

In order for a financial asset to be classified and measured at amortised cost it needs to give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent measurement: Financial assets are classified in two categories;

i) Financial assets at amortised cost (debt instruments)

The Group measures financial assets at amortised cost if both of the following conditions are met: i) The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual

cash flows and ii) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured using the effective interest method (EIR) and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group's financial assets at amortised cost includes trade receivables.

ii) Financial assets at fair value through profit or loss

Include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss. This category includes derivative instruments and listed equity investments. Dividends on listed equity investments are also recognised as other income in the statement of profit or loss when the right of payment has been established.

Derecognition: A financial asset is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when either i) The rights to receive cash flows from the asset have expired or ii) the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to

what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets: The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Financial liabilities

Initial recognition and measurement: Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, financial liabilities measured at amortised cost or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of financial liabilities measured at amortised cost, net of directly attributable transaction costs.

Subsequent measurement: The measurement of financial liabilities depends on their classification, as described below:

i) Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in IFRS 9 are satisfied. The Group has not designated any financial liability as at fair value through profit or loss.

ii) Financial liabilities measured at amortised cost: After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.

Derecognition: A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

SHARE CAPITAL

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. Own equity instruments that are acquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Group's own equity instruments. Voting rights relating to treasury shares are nullified and no dividends are allocated to them.

DIVIDENDS

Dividend payments are recognised as a liability in the Group's financial statements from the date when the dividend is approved by the General Meeting.

EARNINGS PER SHARE

The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares.

CASH FLOW STATEMENT

The cash flow statement is presented using the indirect method.

CASH AND CASH EQUIVALENTS

Cash represents cash on hand and deposits with banks that are repayable on demand. Cash includes restricted employee taxes withheld. Cash equivalents represent short term, highly-liquid investments which are readily convertible into known amounts of cash with original maturities of three months or less.

SEGMENT INFORMATION

The Group's current business is operating LNG transportation vessels. The potential market for the vessels is and will be the international global LNG transportation market, and the business will be exposed to the same risks and returns wherever the vessels are employed. The Group's internal reporting does not distinguish between different segments, and as the vessels are managed as one operating segment Awilco LNG has only one reportable segment.

NEW AND AMENDED STANDARDS AND INTERPRETATIONS

IFRS issued and adopted by the group

IFRS 16 Leases was implemented on January 1 2019. The standard did not have any material impact on the Group's financial position or performance.

NOTE 3 // SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of financial statements requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. This presents a substantial risk that actual conditions will vary from the estimates. The key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Critical judgements in applying accounting policies

In general management has to apply judgement in the process of applying the Group's accounting policies, in addition to items involving estimates described below, in the process of preparing the financial statements.

Sale-leaseback agreements WilForce and WilPride. Judgement

has been applied regarding the sale-leaseback arrangements of the vessels WilForce and WilPride completed in 2013, based on the substance of the transaction and by applying criteria in IFRS 16. Based on an overall assessment of the agreements Management has assessed that the agreements represent finance lease agreements. If Management had concluded differently the overall effect on the financial statements would not be material.

Estimates and assumptions

Depreciation of vessels and residual values. Depreciation is based on Management's estimates of the vessels' components, useful lives of the components and the vessels' residual values less costs associated with scrapping at the end of the vessels' useful life. Estimates may change due to changes in scrap value, technological development, competition and environmental and legal requirements. Management reviews the future useful lives of each significant component and the residual values of the vessels annually, taking into consideration the above-mentioned factors. Scrap values are estimated based on forward prices of steel. Any changes in estimated useful lives and/or residual values impact the depreciation of the vessels prospectively. As at 31 December 2019 the vessels had

a carrying value of USD 350.0 million, and a total residual value was estimated at USD 24 million.

Impairment of vessels. Management assesses whether there are any indicators of impairment at each reporting date. The vessels are tested for impairment when there are indicators that the carrying amounts may not be recoverable. The recoverable amount is the higher of an asset's fair value less cost to sell (net selling price) and value in use. Fair value is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal and is based on completed transactions of comparable assets in the market. Estimation of fair value is subject to an active transaction market.

Value in use calculations involve a high degree of estimation and a number of critical assumptions such as time charter rates, utilisation, operational expenses, dry-dockings, useful life, recycling values and discount rates. The key assumptions used in the impairment assessment are disclosed in note 11, together with sensitivity tables showing the effect on recoverable amount from changes in key assumptions.

Changes in circumstances and assumptions may significantly affect the estimated recoverable amounts, and a prolonged weak shipping market may result in future impairment losses. If the Covid-19 situation escalates and negatively impacts LNG shipping activity and rates, there is a risk that the estimated value in use of the vessels may be significantly reduced.

As at 31 December 2019 the vessels had a carrying value of USD 350.0 million. Please see note 11 for further information on impairment of vessels.

NOTE 4 // FREIGHT INCOME

Freight income	2019	2018
WilForce	19 561	22 024
WilPride	17 523	17 927
Total freight income	37 084	39 952

Freight income consists of revenues from time charter contracts with customers, and includes time charter hire, ballast bonuses, misc. income and bunkers compensation. MUSD 0.6 of freight income relates to bunkers compensation received from charterers' on single voyages, which is presented gross in the income statement (MUSD 2.2 in 2018). The vessels are owned by single purpose entities which are owned 100 % by the Company.

Time charter freight income is split into a lease element and a service element. For accounting purposes the latter is recognised as revenue as the Group satisifies its performance obligation of delivering LNG shipping services over time according to the time charter party, concurrent with recognition of the lease element. The following specifies total freight income split into the lease element and the service element:"

Freight income	2019	2018
Lease element	26 849	31 565
Service element	10 235	8 387
Total freight income	37 084	39 952

Contract balances	31.12.2019	31.12.2018
Trade receivables from charterers	-	2 728
Contract assets	-	-
Contract liabilities	5 452	2 728

Contract liabilities arise from prepayment of time charter hire from customers (deferred revenue). Time charter hire is usually paid monthly in advance and is recognised as revenue as the Group's performance obligations are satified over time. Contract assets are reclassified to trade receivables upon invoicing of charter hire.

The following specifies the contractual lease element income assessed as operational lease agreements to be received from 1 January 2020 based on firm charter contracts:

Contracted future freight income	< 6 mon.	6 mon. - 1 yr	> 1 yr	Total
WilForce	6 615	-	-	6 615
WilPride	5 486	-	-	5 486
Total contracted future freight income	12 102	-	-	12 102

NOTE 5 // SEGMENT INFORMATION

Operating segments

The Group currently owns and operates two LNG vessels which operate globally. For internal reporting and management purposes the Group's business is organised into one reporting segment, LNG transportation. Performance is not evaluated by geographical region as the vessels trade globally and revenue is not dependent on any specific country. The Group does not consider the domicile of its customers as a relevant decision making guideline and hence does not consider it relevant to allocate performance to specific geographical locations. Revenue from the Group's country of domicile, Norway, was NIL in 2019, same as in 2018.

Information about major customers

IIn 2019 the Group had three major customers individually contributing with more than 10 % of the Group's revenues at 20, 26 and 38 % of total revenue, compared to four in 2018 contributing 10, 10, 15 and 35 %.

NOTE 6 // VOYAGE RELATED EXPENSES

Voyage related expenses	2019	2018
Bunkers consumption	2 901	4 690
Commissions	433	380
Other voyage expenses	72	62
Total voyage related expenses	3 406	5 133

Bunker consumption relates to periods where the vessels have been idle or repositioning, and for single voyage charters where bunkers consumption has been reimbursed by the charterers (see note 4). When the vessels are on time charter contracts bunker consumption is for the charterer's expense. Commissions paid to related parties are disclosed in note 21.

NOTE 7 // OPERATING EXPENSES AND OTHER INCOME

Operating expenses	2019	2018
Crew expenses	4 993	4 902
Other operating expenses	4 072	2 526
Insurance expenses	650	525
Tonnage tax	33	34
Total operating expenses	9 748	7 987
Vessel repair expenses	2019	2018
Machinery equipment	1 929	4 500
Collision	4 748	-
Total vessel repair expenses	6 677	4 500
Other income	2019	2018
Machinery equipment (hull and machinery insurance proceeds)	2 261	4 000
Collision (hull and machinery insurance proceeds)	3 891	-
Loss of hire insurance proceeds from collision	5 466	-
Total other income	11 618	4 000

In September 2018 damage was incurred to certain non-critical machinery equipment on the WilForce. Repairs at yard were completed in May 2019 at a total cost of MUSD 6.4 (of which MUSD 4.5 was recognised in 2018 and remaining MUSD 1.9 in 2019) of which MUSD 6.2 in hull & machinery insurance proceeds were recognised as other income (of which MUSD 4.0 in 2018 and remaining MUSD 2.2 in 2019). The net cost of MUSD 0.2 reflects a insurance deductible and certain other non-claimable costs.

In May 2019 WilForce was involved in a collision which caused only hull damage and no harm to life or the environment. Repairs at yard were completed in September 2019. Total repair costs were MUSD 4.7 of which MUSD 3.9 in hull & machinery insurance proceeds were recognised as other income. The estimated net repair cost of MUSD 0.8 reflects a deductible and certain other non-claimable cost. Loss of hire insurance at USD 65,000 per day, totalling MUSD 5.5, compensated for some of the lost time charter hire. Based on an assessment of facts and legal advice Awilco LNG holds the other vessel fully and completely liable for the collision, please see note 24 for further information on this claim.

In 2019 there were a total of 577 trading days and 153 off-hire days related to repairs of WilForce as described above (689 trading days in 2018 and 41 off-hire days due to first 5-year dry-docking of both vessels) and NIL lay-up days (NIL in 2018).

Number of seafarers	2019	2018
Seafarers year end	56	57

NOTE 9 // EARNINGS PER SHARE

Basic earnings per share are calculated by dividing profit/(loss) for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the profit/(loss) for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all potentially dilutive ordinary shares to ordinary shares. The Company did not have any potentially dilutive ordinary shares as per 31 December 2019 or 31 December 2018.

Earnings per share	2019	2018
Profit/(loss) for year attributable to ordinary equity holders (KUSD)	(8 268)	(11 435)
Weighted average number of shares outstanding, basic and diluted	132 548 611	132 548 611
Basic/diluted earnings per share (USD)	(0.06)	(0.09)

NOTE 10 // INCOME TAXES

Tax regimes

The Company's subsidiaries in which the vessels are held are subject to Norwegian tonnage tax (NTT). Companies subject to NTT are exempt from ordinary tax on income derived from operations in international waters. The subsidiaries subject to NTT are taxed on a notional basis based on the net tonnage of the companies' vessels. Income and expenses not derived from the operation of vessels in international waters, such as finance income and expenses, are taxed according to ordinary corporate tax in Norway based on the relative composition of financial assets to total assets of the subsidiaries' balance sheets.

The Parent Company and the remaining subsidiaries Awilco LNG Technical Management AS, Awilco LNG 1 AS, Awilco LNG 2 AS and Awilco LNG 3 AS are subject to ordinary corporation tax in Norway.

Income tax expense	2019	2018
Current income tax	-	-
Changes in deferred tax	-	-
Total income tax expense / (income)	-	-

Specification of basis for deferred tax	31.12.2019	31.12.2018
Other fixed assets	2	4
Gain/loss account	2 679	3 384
Pension liabilities	397	322
Currency effects on long term debt	4 244	3 136
Tax loss carry forward	17 455	15 500
Basis for deferred tax asset / (liability)	24 777	22 346
Not recognised deferred tax assets (basis)	(24 777)	(22 346)
Basis for deferred tax asset / (liability)	-	-
Tax rate	22 %	22 %
Deferred tax asset / (liability)	-	-

Recognition of deferred income tax assets is subject to strict requirements in respect of the ability to substantiate that sufficient taxable profit will be available against which the unutilised tax losses can be used. Based on these requirements and an assessment by the Group, deferred tax assets arising from tax loss carry forward has not been recognised. Utilisation of the tax loss carry forward is not limited in time.

2019	2018
(8 268)	(11 435)
(1 819)	(2 630)
1 186	5 005
55	56
380	129
198	(2 560)
-	-

Income tax payable	2019	2018
Current tax payable recognised in income statement	-	-
Current tax payable recognised directly in equity	-	-
Total income tax payable	-	-

2019	2018
1	-
1	l
-	-

Administration expenses	2019	2018
Salaries and other remuneration	1 314	1 566
Social security cost	246	246
Pension	142	138
Other employee related expenses	17	20
Total employee related expenses	1 719	1 970

Total administration expenses	3 657	3 900
Other administrative expenses	711	769
Consultant, legal and auditor's fees	368	320
Management fees	859	841

Information regarding remuneration to key management, management fees to related parties, fees to the Board of Directors and auditor's fees is provided in note 21.

Number of onshore employees	2019	2018
Onshore employees year end	8	7
Average number of onshore work years	7.8	7.0

Pensions

The Group has a defined contribution plan for onshore employees which complies with the requirements in the Mandatory Occupational Pension act in Norway ("Lov om obligatorisk tjenestepensjon"). The pension plan is a defined contribution plan whereby contributions towards salary up until 12G is funded in a life insurance company. Defined contributions towards salary over 12G is funded by the Group. As at 31 December 2019 the Group's pension liability was KUSD 397 (31 December 2018 KUSD 322).

Synthetic option programme

At the Company's General Meeting held 22 August 2011 a synthetic option programme for the Company's employees was adopted. As of August 2018 all awarded and outstanding options lapsed, and no options were exercised throughout the duration of the programme. The programme has not been renewed.

NOTE 11 // VESSELS AND OTHER FIXED ASSETS

Vessels	2019	2018
Cost at beginning of period	429 894	418 711
+Capitalised upgrades, dry-dock, spare parts and replacements	964	11 182
-Disposals	(11 318)	-
Cost as of 31 December	419 540	429 894
Accumulated depreciation and impairment at beginning of period	67 784	54 795
-Depreciation	13 074	12 989
-Disposals	(11 318)	-
Accumulated depreciation and impairment as of 31 December	69 540	67 784
Carrying amount as of 31 December	350 000	362 110
Estimated useful lifes
Vessel main components	20 - 40 years	20 - 40 years
Vessel indirect leasing expenses	2 - 5 years	2 - 5 years
Dry-dock and engine overhauls	4 - 5 years	4 - 5 years
Multi-period spares	10 years	10 years
Estimated remaining useful life	1 - 34 years	1 - 35 years
Depreciation method	Straight line	Straight line

Both WilForce and WilPride are financed by sale/leaseback agreements which as described in note 3 are assessed by Management as finance lease agreements and thus are assessed as right-of-use assets.

Dry-dockings: Both vessels completed their first 5-year special survey and dry-docking in 2018 at an average cost of approx. MUSD 3.4.

Depreciation: Depreciable amount is calculated as cost less residual value. Residual values are calculated based on the vessels' lightweight tonnage and an estimated scrap rate per ton, less related recycling costs. Estimated residual value per vessel is approx. MUSD 12.

Vessels pledged as collateral: The vessels WilForce and WilPride are pledged by the lessor as security for lessor's financing. Awilco LNG has quiet enjoyment agreements in place for both vessels, covering both the bareboat agreements and the repurchase agreements.

Interest expense, cash ouflow etc on lease liabilities: please see note 17 and note 22.

Impairment: The Group has performed an impairment assessment year end 2019, without identifying the need for any impairment charges.

Each vessel is regarded as a separate cash generating unit. The Group considers market charter rates and the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December 2019 the market capitalisation of the Group was below the book value of its equity which indicated a potential impairment of vessels. Year end 2019 recoverable amount of the vessels has been estimated based on a calculation of value in use.

The value in use calculations are based on a discounted cash flow model. The cash flows include contracted cash in-flows of time charter revenue from firm charter parties, and best estimates of non-contracted revenue for the remaining useful lives of each vessel adjusted for estimated utilisation. Net TC rates of USD 57,300 pd and USD 49,200 pd are estimated for 2020 and 2021, respectively, as non-contracted revenue. Cash outflows of estimated operating expenses, commissions and dry-dockings are deducted.

NOTE 11 // VESSELS AND OTHER FIXED ASSETS - CONT

A residual value from recycling at the end of the asset's useful life is estimated and included in the cash inflows, based on forward prices of steel less estimated costs of recycling. Estimated non-contracted revenue and utilisation is benchmarked against independent market analyst sector reports and historical data. Budgets and historical data are used in estimating operating expenses. Inflation forecasts from IMF are used to adjust cash flows to nominal values. Changes in circumstances and assumptions may significantly affect the estimated recoverable amounts. If the Covid-19 situation escalates and negatively impacts LNG shipping activity and rates, there is a risk that the estimated value in use of the vessels may be significantly reduced.

The cash flows are discounted using a weighted average cost of capital (WACC) applicable to the asset, estimated at 7.86 % considering the applicable tax regime. The following key assumptions are made in estimating the WACC:

• Cost of equity is estimated using the capital asset pricing model (CAPM), and is based on a peer group equity beta adjusted for peer specific leverage, and leveraged according to Awilco LNG's target long term capital structure, which is in line with the industry. The U.S. 10 year treasury yield is estimated as the risk free rate and added to the equity risk premium.
• Cost of debt is based on adding the U.S. 10 year swap rate to an estimated debt margin corresponding to the cost of long term funding given the current market conditions, industry outlook and specific credit risk.

The most critical assumptions affecting the estimated value in use is 1) utilisation 2) non-contracted time charter rates and 3) WACC. The headroom on the vessels is 5 - 7 % above book values, on average USD 10 million. Minor changes in the assumptions applied in the value in use calculations may cause future impairment losses, as shown in the following table to illustrate the sensitivities:

Effect on recoverable amount per vessel

1 %-point change in utilisation MUSD 3.7 1 % change in non-contracted time charter rates MUSD 3.0 10 bps change in WACC MUSD 2.4

NOTE 12 // TRADE RECEIVABLES

Trade receivables	31.12.2019	31.12.2018
Trade receivables	120	2 749
Allowance for doubtful debts	-	-
Trade receivables carrying value	120	2 749

According to contract terms freight income is generally paid in advance, and thus the Group has limited amounts of trade receivables. No impairment has been required on trade receivables in 2019 or 2018. See note 4 regarding contract assets and note 20 regarding management of credit risk.

Ageing analysis trade receivables

	Neither past		Past due but not impaired
	Total	due / impaired	‹ 30 days	30-60 days	- 61-90 days	- › 90 days
31.12.2019	120	120	-	-	-	-
31.12.2018	2 749	2 749	-	-	-	-

NOTE 13 // INVENTORY

Inventory	31.12.2019	31.12.2018
Bunkers and lube oils	1 000	1 377
Total inventory	1 000	1 377

NOTE 14 // OTHER SHORT TERM ASSETS

Other short term assets	31.12.2019	31.12.2018
Prepaid expenses	376	221
VAT-receivable	66	70
Insurance claims	1 221	4 000
Other short term receivables	1 011	480
Total other short term assets	2 674	4 772

Please see note 7 for further information on insurance claims. The insurance claims are considered as virtually certain contingent assets.

NOTE 15 // CASH AND CASH EQUIVALENTS

As of 31 December 2019 KUSD 161 was restricted cash related to employee withholding tax (KUSD 90 31 December 2018), KUSD 76 was restricted cash related to requirements from operating the vessels (KUSD 75 31 December 2018) and KUSD 43 was restricted cash provided as deposit towards the office lease (KUSD 43 31 December 2018).

NOTE 16 // PROVISIONS AND ACCRUALS

Provisions and accruals	31.12.2019	31.12.2018
Accrued expenses, invoice not received	1 251	1 824
Deferred revenue (see note 4)	5 452	2 728
Provisions for vessel repairs	-	4 500
Salary related provisions	403	588
Total provisions and accruals	7 106	9 640

Please see note 7 for further information on the provisions for vessel repairs. Deferred revenue relates to time charter hire for January invoiced in December. Please see note 4 for contract liabilities.

		31.12.2019		31.12.2018
Currency	Code	FX rate	Carrying value	FX rate	Carrying value
US dollars	USD	1	22 373	1	21 012
Norwegian kroner	NOK	8.7803	1 174	8.6885	1 528
Total cash and cash equivalents			23 547		22 540

NOTE 17 // FINANCE INCOME AND EXPENSES

Finance income	2019	2018
Interest income	342	506
Currency gains	117	380
Other finance income	3	-
Total finance income	462	887
Finance expenses	2019	2018
Interest expenses finance lease liabilities	20 710	21 543
Currency losses	144	197
Other finance expenses	16	24
Total finance expenses	20 870	21 765

Finance income	2019	2018
Interest income	342	506
Currency gains	117	380
Other finance income	3	-
Total finance income	462	887
Finance expenses	2019	2018
Interest expenses finance lease liabilities	20 710	21 543
Currency losses	144	197
Other finance expenses	16	24
Total finance expenses	20 870	21 765

For further information on finance lease liabilities please see note 22.

NOTE 18 // FINANCIAL INSTRUMENTS

Classes of financial instruments and fair values

Fair value of financial instruments

Fair value of trade receivables, other short term assets, cash and cash equivalents and trade payables approximate their carrying amounts due to the short-term maturities of these instruments, all categorised in fair value level 2.

Financial liabilities at amortised cost	Carrying amount			Fair value
	31.12.19	31.12.18	31.12.19	31.12.18
Finance lease liabilities	260 187	266 683	260 187	266 683
Trade payables	2 344	1 323	2 344	1 323
Total	262 530	268 006	262 530	268 006

Financial assets at amortised cost	Carrying amount		Fair value
	31.12.19	31.12.18	31.12.19	31.12.18
Trade receivables	120	2 749	120	2 749
Other short term assets	2 298	4 550	2 298	4 550
Cash and cash equivalents	23 547	22 540	23 547	22 540
Total	25 965	29 840	25 965	29 840

The fair value of finance lease liabilities and other non-current liabilities is estimated by discounting future cash flows using rates for debt on similar terms, credit risk and remaining maturities, categorised in fair value level 3. The fair value of the these approximates the carrying amounts as there have been no significant changes in the market rates for similar debt financing between the date of securing the debt financing and the reporting date.

NOTE 20 // CAPITAL AND FINANCIAL RISK MANAGEMENT - CONT

Dividend policy

The Group's intention is to pay regular dividends in support of the Group's main objective of maximising returns to shareholders. Any future dividends proposed will be at the discretion of the Board of Directors and will depend upon the Group's financial position, earnings, debt covenants, capital requirements and other factors. There are no current estimates regarding the potential future dividend level or timing of dividend payments.

Following the renegotiation of the sale/leaseback agreements with Teekay LNG Partners L.P. for WilForce and WilPride in 2017, the Group was restricted from paying dividends to its shareholders for as long as parts of bareboat hire was deferred. The Teekay sale/ leaseback agreements were refinanced in early January 2020 with a new sale/leaseback provided by CCB Financial Leasing Co. Ltd. (CCBFL), see note 26 for further information. The CCBFL facility agreements include no specific restrictions on the Group's ability to pay dividends.

Financial risk management

The Group is in its business exposed to financial risks such as market risk, credit risk and liquidity risk. The Group's management identifies, evaluates and implements necessary actions to manage and mitigate these risks. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

Market risk

Market risk from financial instruments is the risk that future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprise three types of risk: interest rate risk, foreign currency risk and price risk. Financial instruments held by the Group are affected by market risk. The Group does not enter into any financial instruments, including financial derivatives, for trading purposes.

Interest rate risk: At the balance sheet date the Group had oustanding deferred bareboat hire and fees totalling MUSD 30.5 that was subject to a floating interest charge (USD LIBOR). A 100 bps change in USD libor would have an effect on the profit/(loss) for the reporting period of KUSD 269 and no direct effect on equity (KUSD 166 and NIL in 2018). The original lease liabilities are repaid with fixed and predetermined monthly payments, and thus subject to a fixed interest rate element. The Group also had bank deposits subject to floating NIBOR and LIBOR rates. No interest rate derivatives have been entered into to mitigate the floating interest rate risk. The Group continually assess the need for hedging interest rate risk.

Foreign currency risk:. The functional currency of all the entities in the Group is USD, and the Group has limited currency risk arising from operations as income and the majority of operating expenses and vessel investments are denominated in USD. However, the Group has exposure to NOK as administration expenses and parts of cash and cash equivalents, other short term assets, trade payables and provisions and accruals are denominated in NOK. Financial instruments denominated in currencies other than USD at 31 December 2019 include trade payables, other short term assets and bank deposits in NOK which represents a net long exposure to NOK. Based on these financial instruments denominated in NOK at 31 December 2019, a 10 % change in the USD/NOK rate would have an effect on the profit/(loss) for the reporting period of KUSD 19 and no direct effect on equity (KUSD 75 in profit/(loss) effect in 2018).

Price risk: The Group will normally have limited exposure to risks associated with bunkers price fluctuations as the bunkers is for the charterers account when the vessels are on contract. The Group has currently not entered into any bunkers derivatives, however this is subject to continuous assessments.

The Group is also subject to price risk related to the spot/short term charter market for chartering LNG carriers which is uncertain and volatile and will depend upon, among other things, the natural gas prices, tonnage supply and energy markets which the Group cannot predict. Currently, no financial instruments has been entered into to reduce this risk.

NOTE 19 // SHARE CAPITAL AND SHAREHOLDERS

Share capital	No. of shares		Par value NOK Share capital USD
Share capital as of 31 December 2017	132 548 611	2.50	49 407
Share capital reduction	-	-	-
Issued shares	-	-	-
Share capital as of 31 December 2018	132 548 611	2.50	49 407
Share capital as of 31 December 2018	132 548 611	2.50	49 407
Share capital reduction	-	-	-
Issued shares	-	-	-
Share capital as of 31 December 2019	132 548 611	2.50	49 407

The share capital is denominated in NOK, and the nominal value per share is NOK 2.50. All issued shares are of equal rights.

Overview of shareholders as of 31 December 2019

Shareholder	No. of shares	In %
AWILCO AS	51 114 080	38.6%
STRAWBERRY CAPITAL AS	11 216 756	8.5%
UTHALDEN AS	10 600 930	8.0%
ASTRUP FEARNLEY AS	8 692 270	6.6%
GLAAMENE INDUSTRIER AS	2 726 706	2.1%
BARCLAYS CAPITAL SEC. LTD FIRM	2 593 291	2.0%
SES AS	2 500 000	1.9%
VERDIPAPIRFONDET ODIN GLOBAL	2 492 803	1.9%
CREDIT SUISSE SECURITIES (EUROPE)	2 035 000	1.5%
NOMURA INTERNATIONAL PLC	2 000 000	1.5%
SONGA TRADING INC	1 921 699	1.4%
Other shareholders	34 655 076	26.1%
Total	132 548 611	100 %

NOTE 20 // CAPITAL AND FINANCIAL RISK MANAGEMENT

Capital management

A key objective in Awilco LNG's capital management is to ensure that the Group maintains a capital structure in order to support its business, maintain investor and creditor confidence and maximise shareholder value. The Group evaluates its capital structure in light of current and projected cash flow, the relative strength of the shipping markets, new business opportunities and the Group's financial commitments. As part of the Group's long term capital management strategy, the Company is listed on Oslo Axess. Capital is managed on the Group level, although each vessel owning company has a capital structure adressing company specific financial and operational requirements and risks.

The Group monitors its capital using the book equity ratio:

Equity ratio	31.12.2019	31.12.2018
Book equity	107 324	115 592
Total assets	377 357	393 560
Book equity ratio	28 %	29 %

NOTE 20 // CAPITAL AND FINANCIAL RISK MANAGEMENT - CONT

Credit risk

Credit risk refers to the risk that a counterparty defaults on its contractual obligations resulting in financial loss to the Group. The Group is exposed to credit risk from its operating activities through trade receivables and from its financing activities, including deposits with banks.

The Group aims to do business with creditworthy counterparties only. Prior to entering into a charterparty the Group evaluates the credit quality of the customer, assessing its financial position, credit rating, past experience and other factors. If the counterparty is not assessed as of adequate credit quality the Group may demand guarantees and/or prepayment of charter hire to reduce credit risk to an acceptable level. Charter hire is generally paid in advance, effectively reducing the potential exposure to credit risk. The credit quality of outstanding trade receivables as at 31 December 2019 is assessed as very good. The Group has measured the expected credit loss for the coming twelve months and estimated it to NIL. Furthermore, as disclosed in note 12, none of the trade receivables outstanding as at 31 December 2019 are past due. Bank deposits are deposited with internationally recognised financial institutions with a high credit rating. Currently bank deposits are with banks rated Aa2 to Aa3 by Moody's, hence the assessed credit risk is minimal.

Awilco LNG has not provided any material guarantees for third parties' labilities, and the maximum exposure to credit risk is represented by the carrying amount of financial assets in the statement of financial position.

Liquidity risk

The Group's approach to managing liquidity risk is to ensure, as far as possible, that it has sufficient liquidity and/or undrawn commited credit facilities at all times to meet its obligations without incurring unacceptable losses or risking damage to the Group's reputation. To ensure this, the Group continuously monitors the maturity of the financial assets and liabilities and projected cash flows from operations. Please see the liquidity risk section in the Board of Directors' report for further information.

The following tables show the contractual maturities of financial liabilities on an undiscounted basis, which reflects that deferred bareboat hire and renegotiation fees towards the two finance leases was settled in January 2020 following the refinancing as disclosed in note 26:

Per 31 December 2019	‹ 3 mon.	3-12 mon.	1-5 yrs	› 5 yrs	Total
Trade payables	2 344	-	-	-	2 344
Finance lease liabilities	260 187	-	-	-	260 187
Interest on finance leases	253	-	-	-	253
Total	262 784	-	-	-	262 784
Per 31 December 2018	‹ 3 mon.	3-12 mon.	1-5 yrs	› 5 yrs	Total
Trade payables	1 323	-	-	-	1 323
Finance lease liabilities	1 079	264 828	-	-	265 907
Interest on finance leases	4 951	15 395	-	-	20 346
Total	7 353	280 223	-	-	287 576

NOTE 21 // RELATED PARTIES

To provide the Group with access to important and required knowledge and services, the Group has entered into the following agreements and transactions with related parties:

Related party	Description of service	No.
Awilco Technical Services AS (ATS)	Technical Sub-management Services	1
Awilhelmsen Management AS (AWM)	Administrative Services	2
Fearnleys AS	Ship Brokering Services	3

NOTE 21 // RELATED PARTIES - CONT

(1) The Group's in-house technical manager, Awilco LNG Technical Management AS (ALNG TM), has entered into a sub-management agreement with ATS, whereby ATS assists ALNG TM in management of the Group's fleet. The sub-management services also include management for hire of the managing director in ALNG TM. ALNG TM pays ATS a management fee based on ATS' costs plus a margin of 7 %, cost being time accrued for the sub-manager's employees involved. The fee is subject to quarterly evaluation, and is regulated according to the consumer price index in Norway. The agreement can be terminated by both parties with three months notice. ATS is 100 % owned by Awilco AS.

(2) AWM provides the Group with administrative and general services including accounting and payroll, legal, secretary function and IT. The Group pays AWM approx. MNOK 2.1 in annual management fee based on AWM's costs plus a margin of 5 %. The fee is subject to semi-annual evaluation, and is regulated according to the consumer price index in Norway. The agreement can be terminated by both parties with three months notice. AWM is 100 % owned by Awilhelmsen AS, which owns 100 % of Awilco AS.

(3) One of the Company's Board Members is employed by Astrup Fearnley AS. Fearnleys AS, a subsidiary of Astrup Fearnley AS, delivers ship brokering services on a competitive basis to the Group.

Purchases from related parties	2019	2018
Awilco Technical Services AS	629	597
Awilhelmsen Management AS	230	244
Fearnleys AS	94	104

Purchases from related parties are included as part of Administration expenses in the income statement, except from commissions paid to the Fearnleys AS, which were included in Voyage related expenses.

Balances with related parties (liabilities)	31.12.2019	31.12.2018
Awilco Technical Services AS	-	28
Awilhelmsen Management AS	-	27
Fearnleys AS	-	-

Balances with related parties (liabilities) are presented as Trade payables or Provisions and accruals in the statement of financial position.

Balances with related parties (assets)	31.12.2019	31.12.2018
Awilco Technical Services AS	-	11

Balances with related parties (assets) are presented as Trade receivables in the statement of financial position.

Remuneration to key management

2019 Remuneration	Salary	Bonus	Pensions	Other	Total
CEO Jon Skule Storheill	395	-	55	7	457
CFO Øyvind Ryssdal	191	-	18	6	215
Total	586	-	72	13	671
2018 Remuneration	Salary	Bonus	Pensions	Other	Total
CEO Jon Skule Storheill	403	87	56	8	554
CFO Øyvind Ryssdal	191	44	20	5	261
Total	595	131	76	13	815

2019 Remuneration	Salary	Bonus	Pensions	Other	Total
CEO Jon Skule Storheill	395	-	55	7	457
CFO Øyvind Ryssdal	191	-	18	6	215
Total	586	-	72	13	671
2018 Remuneration	Salary	Bonus	Pensions	Other	Total
CEO Jon Skule Storheill	403	87	56	8	554
CFO Øyvind Ryssdal	191	44	20	5	261
Total	595	131	76	13	815

Group - figures in USD

NOTE 21 // RELATED PARTIES - CONT

Loans, advances and guarantees

Awilco LNG has not provided any loans, advances or guarantees to key management.

Statement regarding compensation to key management

The statement regarding compensation to key management has been prepared in accordance with section 6-16 a of the Norwegian Public Limited Liability Companies Act and is adopted by the Board of Directors.

The principles set out for determination of salaries and other remuneration applies to the CEO and the CFO of the Company. The following guidelines were applied in 2019:

General policy: The Company shall offer competitive terms of compensation for senior executives to enable the Company to recruit, motivate and retain senior executives. Competitive terms are defined as terms at the same level as those offered by comparable businesses. The total remuneration shall reflect the responsibility and obligations of senior executives, and promote added value to the Company and its shareholders. The remuneration should not be of such a nature or extent that it may negatively impact the Company's reputation.

Salary and remuneration other than synthetic share options: Remuneration to senior executives consists of fixed and variable compensation. The fixed compensation consists of a base salary and also includes insurance and pension schemes, car allowance, parking, newspaper and communications to the extent deemed appropriate. The fixed compensation will normally constitute the main part of the remuneration to senior executives.

The Company offers a defined contribution plan whereby pension contributions towards salary up to 12G are funded in a life insurance company. Contributions towards salary above 12G are funded by the Company. The plan complies with the requirements in the Mandatory Occupational Pension Act in Norway.

The variable compensation consists of variable bonus. Bonus to senior executives shall be related to collective and individual goals, partly based on defined parameters (KPIs) and partly a discretionary evaluation of the Company's and employee's performance. Bonus payments shall reflect the values brought to the Company and its shareholders, as well as individual achievements. The potential bonus to the CEO is not limited, while the potential bonus to the CFO is limited to 12 months salary.

The Company's CEO has an agreement of 18-month severance payment including a six-month period of notice in case of involuntary resignation or by redundancy.

The Company has no current plans to offer senior executives warrants, options or other forms of remuneration related to shares or the development of the share price in the Company or other companies within the Awilco LNG Group. Issue of shares or granting of sharebased payments to senior executives shall only take place upon the General Meeting's approval. This shall not prevent senior executives from taking part in equity issues on the same terms as other investors.

Evaluation of compensation to key management in the previous year: The compensation to key management in the previous year was in accordance with the same principles described above. Further details regarding remuneration to key management is specified above.

Remuneration to Board of Directors

Remuneration to the Board of Directors consists of a Director's fee which is fixed for the year depending on the role on the Board as well as compensation for other Board elected committees. The Board's fees are approved by the Annual General Meeting.

NOTE 21 // RELATED PARTIES - CONT

		Audit	Remuneration
2019 Remuneration	Director's fee	committee fee	committee fee	Total
Sigurd E. Thorvildsen	39	-	6	45
Jon-Aksel Torgersen	22	-	6	28
Henrik Fougner	22	6	-	28
Annette Malm Justad	22	-	-	22
Synne Syrrist	22	6	-	28
Total compensation for the period	127	12	12	151

		Audit	Remuneration
2018 Remuneration	Director's fee	committee fee	committee fee	Total
Sigurd E. Thorvildsen	43	-	6	49
Jon-Aksel Torgersen	24	-	6	30
Henrik Fougner	24	6	-	30
Annette Malm Justad	24	-	-	24
Synne Syrrist	24	6	-	30
Total compensation for the period	139	12	12	163

Directors' and key management's shares and options in the Company

gurd E. Thorvildsen
n-Aksel Torgersen
nrik Fougner
nette Malm Justad
nne Syrrist
al

Ordinary shares	Syntetic options
-	-
427 564	-
-	-
-	-
-	-
427 564	-

Key management	Ordinary shares	Syntetic options
CEO Jon Skule Storheill	140 000	-
CFO Øyvind Ryssdal	-	-
Total	140 000	-
Auditor's fee	2019	2018
Statutory audit (expensed)	62	50
Other assurance services	-	-
Tax advisory	8	3
Total fees to auditor, excl. VAT	70	53

NOTE 22 // FINANCE LEASE LIABILITIES

Subsequent to delivery in 2013, WilForce and WilPride were sold to companies in the Teekay LNG Partners L.P. Group (Teekay) for MUSD 205 less MUSD 50 in pre-paid charter hire each, and chartered back by Awilco LNG on bareboat basis with repurchase obligations at the end of the lease period. The sale-leaseback agreements are assessed as financial lease arrangements by the Company, and MUSD 155 per vessel was recognised as a lease liability at commencement in 2013.

In May 2017 the bareboat agreements for both vessels were renegotiated. The leases were extended to 31 December 2019 +/- 60 days in Awilco LNG's option, and flexibility through rolling repurchase options was introduced. Furthermore, the amended agreements also include a front-loaded reduction in the bareboat hire payable to the lessor through the deferral of up to MUSD 29 in charter hire.

The contractual bareboat hire per day was USD 49,100 per vessel. From July 2017 to March 2018, the bareboat hire payable was USD 28,500 per day, from April 2018 to March 2019 USD 33,500 per day, and from April 2019 to December 2019 USD 38,500 per day. The deferred bareboat hire will become payable at maturity of the agreements. Deferred charter hire as of 31 December 2019 was MUSD 28.5 in total for both vessels.

The purchase obligations at maturity of the lease agreements end December 2019 are MUSD 113.3 and MUSD 114.5 for WilForce and WilPride, respectively, in addition to the deferred hire.

According to the amended lease agreements a fee of MUSD 2 is payable to the lessor. The fee is payable either following voluntary prepayment of all, or parts, of the deferred amounts or on repurchase of the vessels. The fee has been capitalised as cost price of the vessels and depreciated over the term of the lease.

Deferred bareboat hire and outstanding fees are subject to an interest charge of LIBOR + 200 bps.

The Teekay lease agreements were refinanced in early January 2020 by new sale/leaseback facilities as provided by CCB Financial Leasing Co. Ltd, please see note 26 for further information.

Changes to the renegotiated lease agreements are recognised prospectively over the remaining part of the lease as the cash flows are modified but material rights such as the contractual bareboat rate and the Group's obligation to repurchase the vessel at maturity of the lease period remains unchanged.

Carrying amount

The net carrying amount of the finance lease liabilities is presented as follows:

	31.12.2019	31.12.2018
Short-term interest bearing debt	260 187	266 683
Total	260 187	266 683

As the sale-leaseback agreements mature 31 December 2019 +/- 60 days they are presented as current liabilties as at 31 December 2018 and 2019. The MUSD 2 fee and MUSD 1.9 accrued interest described above is included in short-term interest bearing debt.

Future minimum lease payments and their present value

Per 31 December 2019

	‹ 1 year	1-5 yrs	› 5 yrs	Total
Minimum lease payments	260 440	-	-	260 440
Present value of min. lease payments	260 187	-	-	260 187

Per 31 December 2018

	‹ 1 year	1-5 yrs	› 5 yrs	Total
Minimum lease payments	286 243	-	-	286 243
Present value of min. lease payments	266 683	-	-	266 683

Payments towards finance lease liabilities

		2019
	Principal	Interest	Total
Lease payments WilForce	3 786	9 817	13 603
Lease payments WilPride	3 849	9 753	13 603
Total	7 635	19 570	27 205
		2018
	Principal	Interest	Total
Lease payments WilForce	1 336	9 558	10 894
Lease payments WilPride	1 399	9 495	10 894
Total	2 735	19 053	21 788

Reconciliation of movements of liabilities to cash flows arising from financing activities

			Liabilities
	Interest payable		Other non	Long-term interest	Short-term
		current liabilities	bearing debt	interest bearing debt	Total
Balance as at 1 January 2019	-	-	-	266 683	266 683
Repayment of borrowings	-	-	- -	(7 635)	(7 635)
Interest and borrowing costs paid	(19 570)	-	-	-	(19 570)
Total changes from financing cash flows	(19 570)	-	-	(7 635)	(27 205)
Liability related changes
Non-cash movements		-	-	1 139	1 139
Balance as at 31 December 2019		-	-	260 187

NOTE 22 // FINANCE LEASE LIABILITIES - CONT

NOTE 23 // SUBSIDIARIES

The consolidated financial statements include the financial statements of Awilco LNG ASA and its subsidiaries listed in the table below:

			Ownership/
Company name	Country Principial activity	Date incorporated	voting share
Awilco LNG 1 AS	Norway Former vessel SPV	2 February 2011	100 %
Awilco LNG 2 AS	Norway Former vessel SPV	2 February 2011	100 %
Awilco LNG 3 AS	Norway Former vessel SPV	2 February 2011	100 %
Awilco LNG 4 AS	Norway Owner of LNG/C WilForce	6 May 2011	100 %
Awilco LNG 5 AS	Norway Owner of LNG/C WilPride	6 May 2011	100 %
Awilco LNG Technical Management AS	Norway Technical management	17 September 2012	100 %

The subsidiaries' registered office is Beddingen 8, 0250 Oslo. All subsidiaries are included in the consolidated financial statement from their respective dates of incorporation.

NOTE 24 // COMMITMENTS, CONTINGENCIES AND GUARANTEES

Contingent assets

As disclosed in note 7 WilForce was involved in a collision in May 2019 which caused only hull damage and no harm to life or the environment. Based on an assessment of facts and legal advice Awilco LNG holds the other vessel fully and completely liable for the collision, and the Company expects to recover costs, expenses and losses beyond proceeds from the Group's insurers from the other party, including insurance deductibles, off-hire and lost time charter hire, in due course. This claim will not be reflected in Awilco LNG's financial statements until the awarded compensation is determined, as it is for accounting purposes considered a contingent asset.

NOTE 25 // GOING CONCERN

Awilco LNG's consolidated financial statements have been prepared on a going concern basis. The Group's ability to continue as a going concern is dependent upon generating sufficient cash flow from operation of the vessels. The Group's vessels are trading in the spot market. As described in the Outlook section of the Board of Directors' report, employment in the spot market exposes the Group's financial performance to volatility and seasonality in rates and utilisation.

NOTE 24 // COMMITMENTS, CONTINGENCIES AND GUARANTEES

Operating lease commitments

The Group has operating lease commitments related to office rental. The contractual amounts fall due as follows:

	31.12.2019	31.12.2018
Within 1 year	24	96
1 to 5 years	-	-
After 5 years	-	-
Total	24	96

As the office lease had a duration of less than 12 months in 2019 its total cost of KUSD 149 (2018 KUSD 149) was expensed directly to profit/(loss).

NOTE 26 // EVENTS AFTER THE REPORTING DATE

Refinancing

The WilForce and WilPride financial leases with Teekay were refinanced in early January 2020 with a new 10-year sale/leaseback facility provided by CCB Financial Leasing Co. Ltd. (CCBFL), a wholly owned subsidiary of China Construction Bank (CCB). CCBFL is a leading leasing house in China and CCB is one of the largest banks in the world.

Both vessels were sold for a gross consideration per vessel of USD 175.0 million including non-amortizing and non-interest bearing pre-paid charter hire of USD 43.75 million per vessel, enabling a full take out of the Teekay sale/leaseback agreements. The vessels are chartered back on bareboat basis to wholly owned subsidiaries of the Company for a period of up to 10 years. The facility bears a 14-year straight line amortisation profile and carries a floating interest rate structure based on 3-month USD libor plus a margin of 370 bps.

Awilco LNG's finance cost is initially expected to be reduced by about USD 9.0 million annually at current forward interest rates as of end March 2020, subject to interest rate fluctuations compared to the previous financing arrangement. The bareboat rate, which includes amortisation, is expected at about USD 42,000 per day/per vessel in 2020 at current forward interest rates as of end March 2020, of which amortisation about USD 25,700 per day/per vessel. Bareboat hire is payable quarterly in arrears.

The Group has rolling repurchase options starting after three years and repurchase obligations at maturity of the facility at USD 37.5 million per vessel.

The facility contains a minimum value clause in addition to financial covenants that require the Group to maintain consolidated minimum cash and cash equivalents of USD 10 million and positive consolidated working capital.

Covid-19 pandemic

The ongoing Covid-19 pandemic may negatively impact the LNG shipping market and the Companys earnings and financial position. Please see the Going Concern and Outlook sections in Board of Directorsreport and note 3 and 11 for further information.

Reconciliation of movements of liabilities to cash flows arising from financing activities

			Liabilities
	Interest	Other non	Long-term interest	Short-term interest
	payable	current liabilities	bearing debt	bearing debt	Total
Balance as at 1 January 2018	-	2 000	263 907	2 682	268 589
Repayment of borrowings		-	-	(2 735)	(2 735)
Interest and borrowing costs paid	(19 053)	-	-	-	(19 053)
Total changes from financing cash flows	(19 053)	-	-	(2 735)	(21 788)
Liability related changes
Reclass from long-term to short-term		(2 000)	(263 907)	265 907	-
Non-cash movements		-	-	830	830
Balance as at 31 December 2018		-	-	266 683

NOTE 22 // FINANCE LEASE LIABILITIES - CONT

52 AWILCO LNG ASA ANNUAL REPORT 2019 AWILCO LNG ASA ANNUAL REPORT 2019 53

Parent Company Financial Statements and Notes

INCOME STATEMENT

In NOK thousands

	Note	2019	2018
Operating income	6	5 666	5 383
Administration expenses	3	21 706	23 315
Earnings before interest, taxes, depr. and amort. (EBITDA)		(16 040)	(17 932)
Depreciation and amortisation		1	-
Impairment (reversals) of shares in subsidiaries	6	110 300	-
Earnings before interest and taxes		(126 341)	(17 932)
Finance income	4	8 784	16 807
Finance expenses	4	2 359	1 940
Net finance income/(expense)		6 425	14 867
Profit/(loss) before taxes		(119 916)	(3 066)
Income tax expense	5	-	-
Profit/(loss) for the period		(119 916)	(3 066)
Allocations/transfers of profit/(loss) for the period:
Allocated to/(transferred from) retained earnings		(119 916)	(3 066)

Total allocations and transfers (119 916) (3 066)

BALANCE SHEET

In NOK thousands

ASSETS
Non-current assets
Current assets
EQUITY AND LIABILITIES
Equity
Non-current liabilities

	Note	31.12.2019	31.12.2018
ASSETS
Non-current assets
Other fixed assets		89	46
Shares in subsidiaries	6	918 065	1 028 365
Loans to subsidiaries	6	85 603	-
Total non-current assets		1 003 758	1 028 411
Current assets
Short term receivables subsidiaries	6	2 046	2 215
Other short term assets		780	2 811
Cash and cash equivalents	7	39 883	134 446
Total current assets		42 709	139 471
TOTAL ASSETS		1 046 467	1 167 882
EQUITY AND LIABILITIES
Equity
Share capital	8	331 372	331 372
Share premium		748 849	748 849
Other paid-in capital	8	101 683	101 683
Retained earnings		(143 885)	(23 969)
Total equity		1 038 018	1 157 935
Non-current liabilities
Pension liabilities	3	3 483	2 799
Total non-current liabilities		3 483	2 799
Current liabilities
Short term payables subsidiaries	6	1 341	1 315
Trade payables		346	146
Provisions and accruals	9	3 279	5 687
Total current liabilities		4 965	7 148
TOTAL EQUITY AND LIABILITIES		1 046 467	1 167 882

Current liabilities

Oslo, 31 March 2020

Board member

Synne Syrrist Board member

Henrik Fougner Board member

Annette Malm Justad Board member

STATEMENT OF CHANGES IN EQUITY

For the period ended 31 December 2019

In NOK thousands			Other
	Share capital	Share premium		paid-in capital Retained earnings	Total equity
Equity at 1 January 2019	331 372	748 849	101 683	(23 969)	1 157 935
Profit/(loss) for the period	-	-	-	(119 916)	(119 916)
Balance as at 31 December 2019	331 372	748 849	101 683	(143 885)	1 038 019

For the period ended 31 December 2018

In NOK thousands	Other
	Share capital	Share premium		paid-in capital Retained earnings	Total equity
Equity at 1 January 2018	331 372	748 849	101 683	(20 903)	1 161 000
Profit/(loss) for the period	-	-	-	(3 066)	(3 066)
Balance as at 31 December 2018	331 372	748 849	101 683	(23 969)	1 157 935

CASH FLOW STATEMENT

In NOK thousands

	Note	2019	2018
Cash Flows from Operating Activities:
Profit/(loss) before taxes		(119 916)	(3 066)
Items included in profit/(loss) not affecting cash flows:
Depreciation and amortisation		1	-
Impairment of shares in subsidiaries	6	110 300	-
Changes in operating assets and liabilities:
Other short term assets		2 031	(1 735)
Short term receivables/payables subsidiaries		194	(414)
Trade payables, provisions and accruals		(1 525)	1 508
i) Net cash provided by / (used in) operating activities		(8 915)	(3 706)
Cash Flows from Investing Activities:
Loans to/from subsidiaries	6	(85 603)	-
Investment in other fixed assets		(44)	-
ii) Net cash provided by / (used in) investing activities		(85 647)	-
Cash Flows from Financing Activities:
iii) Net cash provided by / (used in) financing activities		-	-
Net change in cash and cash equivalents (i+ii+iii)		(94 563)	(3 706)
Cash and cash equivalents at start of period	7	134 446	138 152
Cash and cash equivalents at end of period	7	39 883	134 446
Interest paid		987	1 887
Interest received		3 482	4 199

NOTE 1 // CORPORATE INFORMATION

Awilco LNG ASA (the Company) is a public limited liability company incorporated and domiciled in Norway. Its registered office is Beddingen 8, 0250 Oslo, Norway. The Company was incorporated 2 February 2011 and is listed on Oslo Axess with the ticker ALNG.

Awilco LNG ASA is through its subsidiaries engaged in the operation of and investments in LNG transportation vessels.

NOTE 2 // SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis for preparation

The financial statements of Awilco LNG ASA have been prepared in accordance with the Norwegian accounting act and generally accepted accounting principles in Norway. The financial statements are presented in Norwegian kroner (NOK) rounded off to the nearest thousands, except as otherwise indicated. The financial statements are prepared in English, as approved by the Norwegian Directorate of Taxes.

The principal accounting policies applied in the preparation of these financial statements are set out below.

Shares in subsidiaries

Shares in subsidiaries are measured at cost less accumulated impairment losses. Such assets are impaired to fair value when the decrease in value is for reasons not considered being of a temporary nature and must be deemed necessary based on generally accepted accounting principles. Impairment losses are reversed when the rationale for the recognised impairment loss no longer applies. Dividends, group contributions and other distributions from subsidiaries are recognised in the same period as they are recognised in the financial statement of the subsidiary. If dividends and group contributions exceed withheld profits after the acquisition date, the excess amount represents repayment of invested capital and will be deducted from the carrying value of the subsidiary in the balance sheet of the Company.

Foreign currency

The functional currency of the Company is USD whereas the presentation currency is NOK. Transactions in foreign currencies are recorded at the rate of exchange on the date of the transaction. Monetary assets and liabilities denominated in other currencies are translated at the exchange rate applicable at the balance sheet date. Realised and unrealised foreign

currency gains or losses on monetary items are presented as finance income or finance expense.

Revenue recognition

Revenues from the sale of services are recognised in the income statement once services have been rendered.

Other fixed assets

Other fixed assets are capitalised and depreciated linearly over the estimated useful life. Costs for maintenance are expensed as incurred. If carrying value of other fixed assets exceeds the estimated recoverable amount, the asset is written down to the recoverable amount. The recoverable amount is the greater of the net realisable value and value in use. In assessing value in use, the discounted estimated future cash flows from the asset are used.

Classification of items in the balance sheet

Current assets and current liabilities include items that fall due for payment within one year after the reporting date. The shortterm part of long-term debt is classified as short-term debt.

Loans and receivables

Loans and receivables are initially recognised at fair value net of any transaction costs. The assets are subsequently carried at amortised cost using the effective interest method, if the amortisation effect is material, and the carrying amount is subsequently reduced by any impairment losses.

Taxes

The income tax expense consists of current income tax and changes in deferred tax.

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year.

Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statement.

Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilised. Deferred income tax is calculated on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Company.

Current income tax and deferred tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity.

Share-based payments

For cash-settled share-based payments a provision is recorded for the rights granted reflecting the vested portion of the fair value of the rights at the reporting date. Administration expense is accrued over the period the beneficiaries are expected to perform the related service (vesting period), with a corresponding increase in provisions. The cash-settled sharebased payments are remeasured to fair value at each reporting date until the award is settled. Any changes in the fair value of the provision are recognised as administration expense in the income statement. The amount of unrecognised compensation expense related to non-vested share-based payment arrangements granted in the cash-settled plans is dependent on the final intrinsic value of the awards. Social security tax liability is calculated based on the intrinsic value of the cashsettled share-based payments.

Pensions

The Company is required to provide a pension plan towards its onshore employees, and the Group has implemented a defined contribution plan. The plan complies with the requirements in the Mandatory Occupational Pension act in Norway ("Lov om obligatorisk tjenestepensjon"). Contributions on salary up until 12G are funded in a life insurance company, whereas contributions on salary over 12G are funded by the Group. G refers to the Norwegian National Insurance basic amount.

Contributions to the funded plan are recognised as an employee benefit expense in the income statement when they fall due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. The Company has no further payment obligations once the contributions have been paid.

The liability arising from the plan funded by the Group is classified as a non-current liability in the balance sheet. Changes in the liability are recognised as employee benefit expenses in the income statement in the periods during which services are rendered by employees. The liability becomes payable to the employee upon termination, voluntary or involuntary, of the employment.

Cash and cash equivalents

Cash represents cash on hand and deposits with banks that are repayable on demand. Cash includes restricted employee taxes withheld. Cash equivalents represent short-term, highly-liquid

investments which are readily convertible into known amounts of cash with original maturities of three months or less.

Dividends

Proposed dividend payments from the Company are recognised as a liability in the Group's financial statements on the reporting date 31 December current year.

Cash flow statement

The cash flow statement is presented using the indirect method.

NOTE 3 // ADMINISTRATION EXPENSES

Administration expenses	2019	2018
Salaries and other remuneration	8 578	10 867
Social security cost	1 930	1 875
Pension	1 163	1 074
Other employee related expenses	124	145
Total employee related expenses	11 794	13 962
Management fees	1 472	1 428
Consultant, legal and auditor's fees	1 156	2 360
Other administration expenses	7 283	5 566
Total administration expenses	21 706	23 315

Information regarding management fees to related parties is provided in note 6.

Number of employees	2019	2018
Employees year end	5	5
Average number of work years	5	5

Pensions

The Company has a defined contribution plan for its employees which complies with the requirements in the Mandatory Occupational Pension act in Norway ("Lov om obligatorisk tjenestepensjon"). The pension plan is a defined contribution plan whereby contributions towards salary up until 12G is funded in a life insurance company. Defined contributions towards salary over 12G is funded by the Company. As at 31 December 2019 the Company's pension liability was TNOK 3 483 (31 December 2018 TNOK 2 799).

Remuneration to key management

Please see note 21 in the consolidated financial statements for disclosures regarding remuneration to key management.

Remuneration to Board of Directors

Please see note 21 in the consolidated financial statements for disclosures regarding remuneration to Board of Directors.

Auditor's fee	2019	2018
Statutory audit	327	286
Other assurance services	-	-
Tax advisory	-	9
Total fees to auditor, excl. VAT	327	295

NOTE 4 // FINANCE INCOME AND EXPENSES

Finance income	2019	2018
Interest income	2 017	4 143
Interest income group companies	3 482	57
Currency gain	22	7 509
Dividends and group contributions from subsidiaries	1 297	2 215
Other finance income group companies	1 966	2 883
Total finance income	8 784	16 807
Finance expenses	2019	2018
Interest expense	13	55

Total finance expenses	2 359	1 940
Other finance expenses	55	52
Currency loss	1 317	2
Interest expense group companies	974	1 831

Currency gains and losses mainly relate to translation effects from bank accounts and balances with subsidiaries denominated in USD and translated into NOK at the balance sheet date. See note 6 for a specification of finance income and expense group companies.

NOTE 5 // INCOME TAXES

Tax regime

The Company is subject to ordinary corporation tax in Norway at a tax rate of 22 % in 2019.

Income tax expense	2019	2018
Current income tax	-	-
Changes in deferred tax	-	-
Total income tax expense / (income)	-	-

Specification of basis for deferred tax	31.12.2019	31.12.2018
Other fixed assets	13	37
Provisions and accruals	-	-
Pension liabilities	3 483	2 799
Tax loss carry forward	37 226	30 501
Basis for deferred tax asset / (liability)	40 722	33 337
Not recognised deferred tax assets (basis)	(40 722)	(33 337)
Basis for deferred tax asset / (liability)	-	-
Tax rate	22 %	22 %
Deferred tax asset / (liability)	-	-

Recognition of deferred income tax assets is subject to strict requirements in respect of the ability to substantiate that sufficient taxable profit will be available against which the unutilised tax losses can be used. Based on these requirements and an assessment by the Company deferred tax assets arising from tax loss carry forward has not been recognised. Utilisation of the tax loss carry forward is not limited in time.

NOTE 5 // INCOME TAXES - CONT

Reconciliation of effective tax rate	2019	2018
Profit/(loss) before taxes	(119 916)	(3 066)
Tax based on ordinary tax rate (22 % in 2019, 23 % in 2018)	(26 382)	(705)
Effects from:
Permanent differences	24 757	457
Not recognised deferred tax assets	1 625	248
Total income tax expense / (income)	-	-

Reconciliation of effective tax rate	2019	2018
Profit/(loss) before taxes	(119 916)	(3 066)
Tax based on ordinary tax rate (22 % in 2019, 23 % in 2018)	(26 382)	(705)
Effects from:
Permanent differences	24 757	457
Not recognised deferred tax assets	1 625	248
Total income tax expense / (income)	-	-
Income tax payable	2019	2018
Current tax payable recognised in income statement	-	-
Current tax payable recognised directly in equity	-	-
Total income tax payable	-	-

NOTE 6 // RELATED PARTIES AND INVESTMENTS IN GROUP COMPANIES

Transactions with related parties

To provide the Company with access to important and required knowledge and services, the Company has entered into various agreements with related parties. Information regarding these contracts and the transactions and balances with related parties, except for transactions and balances with subsidiaries, is provided in note 21 in the consolidated financial statement. Transactions with subsidiaries are disclosed below.

Subsidiaries

As of 31 December 2019 the Company has the following subsidiaries:

Company name	Country	Principial activity	Date incorporated
Awilco LNG 1 AS	Norway	Former vessel SPV	2 February 2011
Awilco LNG 2 AS	Norway	Former vessel SPV	2 February 2011
Awilco LNG 3 AS	Norway	Former vessel SPV	2 February 2011
Awilco LNG 4 AS	Norway	Owner of LNG/C WilForce	6 May 2011
Awilco LNG 5 AS	Norway	Owner of LNG/C WilPride	6 May 2011
Awilco LNG Technical Management AS	Norway	Technical management	17 September 2012

The subsidiaries' registered office is Beddingen 8, 0250 Oslo, Norway.

	Ownership/		Carrying amount Carrying amount
Company name	voting share	31.12.19	31.12.18
Awilco LNG 1 AS	100 %	8 692	8 692
Awilco LNG 2 AS	100 %	1 146	1 146
Awilco LNG 3 AS	100 %	10 008	10 008
Awilco LNG 4 AS	100 %	373 800	373 800
Awilco LNG 5 AS	100 %	514 300	624 600
Awilco LNG Technical Management AS	100 %	10 120	10 120
Total carrying amount 31 December		918 065	1 028 365

Based on an assessment of the recoverable amount of shares in subsidiaries, an impairment charge of NOK 110.3 million has been recognised towards the shares in Awilco LNG 5 AS. In 2018 no impairment charges were recognised.

NOTE 6 // RELATED PARTIES AND INVESTMENTS IN GROUP COMPANIES - CONT

Balances with subsidiaries

The Company provides financing to its subsidiaries through both long-term and short-term loans. Interest on both long-term loans and short-term receivables/payables is agreed to LIBOR + 3 % for USD denominated loans and NIBOR + 3 % for NOK denominated loans. See below for interest income from subsidiaries.

Balances with subsidiaries as at 31 December 2019

Short-term receivable TNOK 1 297 towards Awilco LNG Technical Management AS relates to group contribution.

Balances with subsidiaries as at 31 December 2018

Short-term receivable TNOK 2 215 towards Awilco LNG Technical Management AS relates to group contribution.

Transactions with subsidiaries

Awilco LNG ASA provides commercial management services to the vessel owning subsidiaries:

Commercial management fees from subsidiaries

Subsidiary	2019	2018
Awilco LNG 4 AS	2 909	2 932
Awilco LNG 5 AS	2 758	2 434
Total	5 666	5 366

Commercial management fees are based on a fixed fee of USD 100 000 per vessel per year and a fixed percentage of gross freight income of 1.25 %.

	Long term loans(+)	Short term	Short term
Subsidiary	/borrowings(-) -	receivables	payables
Awilco LNG 1 AS	-	-	2
Awilco LNG 2 AS	-	-	2
Awilco LNG 3 AS	-	-	2
Awilco LNG 4 AS	29 138	318	-
Awilco LNG 5 AS	56 405	431	-
Awilco LNG Technical Management AS	-	1 297	1 336
Total	85 603	2 046	1 341

Project management fee Awilco LNG Technical Management AS

A subsidiary of the Company, Awilco LNG Technical Management AS, provides project management services to the Company. In 2019 the Company paid a fee of TNOK 936 for these services (TNOK 936 in 2018).

	- Long term loans(+)	Short term	Short term
Subsidiary	/borrowings(-) -	receivables	payables
Awilco LNG 1 AS	-	-	2
Awilco LNG 2 AS	-	-	2
Awilco LNG 3 AS	-	-	2
Awilco LNG 4 AS	-	-	5
Awilco LNG 5 AS	-	-	7
Awilco LNG Technical Management AS	-	2 215	1 298
Total	-	2 215	1 315

NOTE 6 // RELATED PARTIES AND INVESTMENTS IN GROUP COMPANIES - CONT

Guarantee commission from subsidiaries

The Company has issued guarantees towards the lessor of WilForce and WilPride on behalf of lessees' Awilco LNG 4 AS and Awilco LNG 5 AS respectively, see note 11. A guarantee commission of TNOK 983 was charged each of the two subsidiaries in 2019 (TNOK 1 442 each in 2018).

Interest income from subsidiaries

Subsidiary	2019	2018
Awilco LNG 1 AS	-	-
Awilco LNG 2 AS	-	-
Awilco LNG 3 AS	-	-
Awilco LNG 4 AS	429	17
Awilco LNG 5 AS	3 035	27
Awilco LNG Technical Management AS	17	12
Total	3 482	57

Interest expenses subsidiaries

Subsidiary	2019	2018
Awilco LNG 1 AS	197	158
Awilco LNG 2 AS	33	26
Awilco LNG 3 AS	522	417
Awilco LNG 4 AS	-	495
Awilco LNG 5 AS	-	563
Awilco LNG Technical Management AS	223	172
Total	974	1 831

NOTE 7 // CASH AND CASH EQUIVALENTS

As at 31 December 2019 TNOK 1 267 was restricted cash related to employee withholding tax (31 December 2018 TNOK 703), TNOK 670 was restricted cash related to requirements from operating Awilco LNG's vessels (31 December 2018 TNOK 652) and TNOK 376 was restricted cash provided as deposit towards the office lease (31 December 2018 TNOK 375).

	31.12.2019				31.12.2018
Currency	Code	FX rate	Carrying value	FX rate	Carrying value
US dollars	USD	8.7803	31 898	8.6885	126 271
Norwegian kroner	NOK	1	7 985	1	8 174
Total cash and cash equivalents			39 883		134 446

Awilco LNG's liquidity is organised in a cash pool arrangement in which cash in the subsidiaries formally represents receivables or payables towards the parent company Awilco LNG ASA. The Group companies are jointly and severally liable for the total outstanding amount under the arrangement.

NOTE 8 // SHARE CAPITAL

Information about the Company's share capital is provided in note 19 to the consolidated accounts.

NOTE 9 // PROVISIONS AND ACCRUALS

Provisions and accruals	31.12.2019	31.12.2018
Accrued expenses, invoice not received	151	791
Salary related provisions	3 127	4 896
Total provisions and accruals	3 279	5 687

NOTE 10 // CAPITAL AND FINANCIAL RISK MANAGEMENT

General information regarding capital and financial risk management is provided in note 20 in the consolidated accounts. Awilco LNG ASA presents its financial statement in NOK, and is thus exposed to foreign exchange translation risk on monetary items denominated in foreign currencies.

NOTE 11 // COMMITMENTS, CONTINGENCIES AND GUARANTEES

Please see note 24 in the consolidated accounts. In addition, Awilco LNG ASA has issued certain guarantees on behalf of companies in the Awilco LNG Group:

The Company has issued a guarantee towards the Teekay LNG Partners L.P. Group on behalf of the Company's subsidiaries Awilco LNG 4 AS and Awilco LNG 5 AS, guaranteeing for the performance of the bareboat charter agreements described in note 22 in the consolidated accounts.

NOTE 12 // EVENTS AFTER THE REPORTING DATE

Information on events after the reporting date is disclosed in note 26 in the consolidated accounts.

66 AWILCO LNG ASA ANNUAL REPORT 2019 AWILCO LNG ASA ANNUAL REPORT 2019 67

Parent - figures in NOK

Parent - figures in NOK

Auditor's Report

A member firm of Ernst & Young Global Limited

Statsautoriserte revisorer Ernst & Young AS

Dronning Eufemias gate 6, NO-0191 Oslo Postboks 1156 Sentrum, NO-0107 Oslo

Foretaksregisteret: NO 976 389 387 MVA Tlf: +47 24 00 24 00

www.ey.no Medlemmer av Den norske revisorforening

INDEPENDENT AUDITOR'S REPORT

To the Annual Shareholders' Meeting of Awilco LNG ASA

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Awilco LNG ASA comprising the financial statements of the parent company and the Group. The financial statements of the parent company comprise the balance sheet as at 31 December 2019, the income statement, statements of cash flows and changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies. The consolidated financial statements comprise the balance sheet as at 31 December 2019, income statement, statements of comprehensive income, cash flows and changes in equity for the year then ended and notes to the financial statements, including a summary of significant accounting policies.

In our opinion,

• ► the financial statements are prepared in accordance with the law and regulations;
• ► the financial statements present fairly, in all material respects, the financial position of the parent company as at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway;
• ► the consolidated financial statements present fairly, in all material respects the financial position of the Group as at 31 December 2019 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Basis for opinion

We conducted our audit in accordance with laws, regulations, and auditing standards and practices generally accepted in Norway, including International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company and the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in Norway, and we have fulfilled our ethical responsibilities as required by law and regulations. We have also complied with our other ethical obligations in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for 2019. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements.

Penneo Dokumentnøkkel: 0HUDV-Y15NT-6H1WE-V7UJE-P8UXY-EEEIL

Impairment evaluation of vessels

Spot market conditions are volatile and seasonal, and as a result, management identified impairment indicators related to the vessels and tested recoverable amounts of the vessels. The impairment evaluation of vessels is dependent on estimates and assumptions regarding future day rates, vessel utilization, operating expenses, capital expenditures, useful lives and discount rate. Considering the extent of estimates and assumptions applied in the impairment evaluation, and management's involvement and judgment in establishing them, we assess impairment of vessels as a key audit matter. The Group recognized an impairment of nil in the 2019 consolidated financial statements.

We have performed an evaluation of revenue and utilization assumptions in the cash flows estimated by management through comparison towards the Company's historical data and data from independent market analyst's sector reports. We compared operating expenditures to approved budgets and historical data. Furthermore, we compared the risk premiums used in the weighted average cost of capital with external data and considered management's adjustments for company specific factors. We considered the accuracy of management's prior year assumptions, and evaluated the level of consistency applied in the valuation methodology from previous years. We also tested the mathematical accuracy of the valuation model and performed sensitivity analysis of the assumptions.

Refer to note 3 regarding estimation uncertainties and note 11 regarding vessels, the valuation model and the sensitivity to key assumptions.

Other information

Other information consists of the information included in the Company's annual report other than the financial statements and our auditor's report thereon. The Board of Directors and Chief Executive Officer (management) are responsible for the other information. Our opinion on the financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information, and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Norwegian Accounting Act and accounting standards and practices generally accepted in Norway for the financial statements of the parent company and International Financial Reporting Standards as adopted by the EU for the financial statements of the Group, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the

3

Independent auditor's report - Awilco LNG ASA

A member firm of Ernst & Young Global Limited

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with law, regulations and generally accepted auditing principles in Norway, including ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• ► identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• ► obtain an understanding of internal control relevant to the audit 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 Company's internal control
• ► evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• ► conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• ► evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• ► obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

Opinion on the Board of Directors' report and on the statements on corporate governance and corporate social responsibility

Based on our audit of the financial statements as described above, it is our opinion that the information presented in the Board of Directors' report and in the statements on corporate governance and corporate social responsibility concerning the financial statements and) the going concern assumption is consistent with the financial statements and complies with the law and regulations.

Penneo Dokumentnøkkel: 0HUDV-Y15NT-6H1WE-V7UJE-P8UXY-EEEIL

Opinion on registration and documentation

Based on our audit of the financial statements as described above, and control procedures we have considered necessary in accordance with the International Standard on Assurance Engagements (ISAE) 3000, «Assurance Engagements Other than Audits or Reviews of Historical Financial Information», it is our opinion that management has fulfilled its duty to ensure that the Company's accounting information is properly recorded and documented as required by law and bookkeeping standards and practices accepted in Norway.

Oslo, 31 March 2020 ERNST & YOUNG AS

The auditor's opinion is signed electronically

Finn Ole Edstrøm State Authorized Public Accountant (Norway)

72 AWILCO LNG ASA ANNUAL REPORT 2019 AWILCO LNG ASA ANNUAL REPORT 2019 73

Corporate governance The main strategy for Awilco LNG ASA (the Company or Awilco LNG) is to create shareholder value through the provision of a quality, reliable and customer-oriented service to the market, in the best manner for its shareholders, employees and business connections. Awilco LNG strives to protect and enhance shareholder equity through openness, integrity and equal shareholder treatment, and sound corporate governance is a key element in the basis of the Awilco LNG strategy.

The corporate governance principles of the Company are adopted by the Board of Directors of Awilco LNG ASA (the Board). The principles are based on the Norwegian Code of Practice for Corporate Governance, dated 17 October 2018 (the «Code of Practice»). Below follows a description of the basis that Awilco LNG has implemented the Code of Practice. This description follows the same structure as the Code of Practice and covers all sections thereof. Deviations, if any, from the Code of Practice are discussed under the relevant section.

1 IMPLEMENTATION AND REPORTING ON CORPORATE GOVERNANCE

The Board of Directors shall ensure that appropriate goals and strategies are adopted, that the adopted strategies are implemented in practice, and that the results achieved are subject to measurement and follow-up. The principles shall also contribute to ensure that the activities of the Company are subject to adequate controls. An appropriate distribution of roles and adequate controls shall contribute to the largest possible value creation over time, for the benefit of the owners and other stakeholders.

The Company has defined a mission statement "Marine Transportation through Safety and Environmental Excellence" and identified a set of core objectives that describes the focus and continuous improvement process based on the mission statement. The objectives include policies regarding; safeguarding of people, ships and cargoes, focus on limitation of any negative impact on the environment from our vessels and a separate statement regarding Safety Management & Environmental Protection Policy. This policy document, which is available on the Company's website www.awilcolng.no, describes the basic principles of the corporate values.

Awilco LNG's code of conduct – values and ethics forms an important foundation for Awilco LNG's corporate governance and demands high ethical standards, in which focus on safety and integrity are key factors. The Company has continuous

focus on making sure that the corporate values are practiced in the Company's everyday life. The Company's code of conduct – values and ethics can be found on the Company's website.

2 THE BUSINESS

According to the Company's articles of association, its purpose is to carry out "shipping and other business related hereto". The objectives clause of the Company also includes "acquisitions, management, borrowings and sale of capital assets in the shipping business in addition to investments in shares, bonds and partnership contributions of any type connected with shipping, as well as participation, including ownership stakes in other shipping companies and other business naturally connected hereto."

The principal objectives and strategies of the Company are presented in the annual report and are subject to annual assessments.

The Company's social responsibility is set out in a separate section in the annual report.

3 EQUITY AND DIVIDENDS

The Company's equity is assessed as appropriate based on its objectives, strategies and risk profile. The book equity of the Awilco LNG Group as per 31 December 2019 was USD 107.3 million, which represents an equity ratio of 28 %.

The Company's long-term objective is to pay a regular dividend in support of the Company's main objective to maximise return on invested capital. Any future potential dividends declared will be at the discretion of the Board of Directors and will depend upon the Group's financial position, earnings, debt covenants, capital requirements and other factors. Dividends will be proposed by the Board for approval by the General Meeting. Any proposal to confer to the Board of Directors the mandate to distribute dividends is to be explained.

To the extent it is considered desirable, the Company may raise new equity in the capital markets.

The Board is currently not authorised to purchase own shares in the market.

4 EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH RELATED PARTIES

Corporate governance The Company has one class of shares, and each share has one

vote at the General Meeting.

Where the board resolves to carry out an increase in share capital and waive the pre-emption rights of existing shareholders based on a mandate granted to the Board of Directors, the justification should be publicly disclosed in a stock exchange announcement issued in connection with the increase in share capital.

Any transactions the Company carries out in its own shares are carried out through the stock exchange and at prevailing stock exchange prices.

In the event of any material transactions between the Company and shareholders, Directors or close associates thereof, the transactions will be conducted on arm's length terms and the Board of Directors shall consider arranging for an independent assessment of the transaction.

Awilco LNG has entered into a sub-management agreement with Awilco Technical Services AS (ATS) for assistance in technical management of the fleet. Furthermore, Awilco LNG has entered into an agreement with Awilhelmsen Management AS (AWM) for administrative services. Both ATS and AWM are related companies to Awilco AS, which owns 38.6 % of the shares in Awilco LNG. The management fees are, in the Company's opinion, made at market terms. Information regarding transactions with related parties is described in note 21 to the consolidated financial statements.

5 FREELY NEGOTIABLE SHARES

The shares of Awilco LNG are listed on the Oslo Axess stock exchange. All issued shares carry equal shareholder rights in all respects, and there are no restrictions on transfer of shares. The articles of association place no restrictions on voting rights.

6 GENERAL MEETINGS

The Annual General Meeting will normally take place in the second quarter of each year, and latest by 30 June. Notice of the meeting will normally be published through the Oslo Stock Exchange distribution channel and the Company's website at least 21 days in advance. Documentation containing the information necessary for the shareholders to make decisions on all the items on the agenda will simultaneously be made available on the Company's website and will only be sent to shareholders that request the documentation on paper. The Board may decide by the notice of the meeting that shareholders who intend to attend the General Meeting shall give notice to the Company within five days prior to the General Meeting.

Registration is made in writing or by e-mail. The Board wishes to make efforts to enable as many shareholders as possible to attend. Shareholders who are not able to attend are invited to meet by proxy, and efforts will be made for the proxies to relate to each individual item on the agenda.

The General Meeting will be chaired by the Chairman of the Board unless otherwise agreed by a majority of those shares represented at the meeting.

7 NOMINATION COMMITTEE

According to the articles of association the Company shall have a Nomination committee which has the responsibility of proposing members to the Board of Directors and members of the Nomination committee. The Nomination committee shall also propose fee payable to the members of the Board and the members of the Nomination committee.

The members of the Nomination committee shall be shareholders or representatives of shareholders. The members of the Nomination committee, including its Chairman, are elected by the General Meeting. The members of the Nomination committee's period of service shall be two years unless the General Meeting decides otherwise.

The Nomination committee is to maintain contact with shareholder groups, members of the Board of Directors and the Company's executive personnel in its works with proposing members to the Board of Directors.

The Annual General Meeting held on 26 April 2018 elected the current Nomination committee consisting of Tom Furulund and Henrik Christensen.

8 THE BOARD OF DIRECTORS; COMPOSITION AND INDEPENDENCE

The Company's Board of Directors shall comprise 3 to 6 directors pursuant to the decision of the General Meeting. The Directors are elected for a period of two years unless otherwise determined by the General Meeting. The Board appoints the Chairman amongst the elected Board members.

The composition of the Board of Directors aims to ensure that the interests of all shareholders are represented. Currently three of the five directors are independent from the principal shareholder of the Company. The Board consists of the following members: Sigurd E. Thorvildsen (Chairman), Henrik Fougner, Jon-Aksel Torgersen, Synne Syrrist and Annette Malm Justad.

9 THE WORK OF THE BOARD OF DIRECTORS

The Board's statutory duties include the overall administration and management of the Company. The Board adopts a meeting schedule for the following year in the fourth quarter each year. The directors shall normally meet in person, but if so allowed by the Chairman, directors may participate in any meeting by means of telephone.

The allocation of responsibilities and tasks within the Board of Directors is regularly discussed and monitored. The Board is regularly briefed on the Company's financial situation, the vessels' chartering and market situation, liquidity situation and cash flow forecast, as well as any changes in the competition situation. The Board performs a yearly evaluation of its work.

The Board has established an Audit committee consisting of Synne Syrrist (Chairman) and Henrik Fougner and has implemented an Audit committee charter. The Company's CFO is the secretary of the committee. The auditor shall participate in discussions of relevant agenda items in meetings of the Audit committee. The committee shall hold separate meetings with the auditor and the CEO at least once a year.

Furthermore, the Company has established a Remuneration committee consisting of Sigurd E. Thorvildsen and Jon-Aksel Torgersen. The Remuneration committee prepares guidelines and proposals regarding remuneration of executive personnel, which are reviewed and resolved by the Board of Directors.

10 RISK MANAGEMENT AND INTERNAL CONTROL

The Board ensures that the Company has satisfactory internal control procedures to manage its exposure to risks related to the conduct of the Company's business, including social responsibility, to ensure compliance with laws and regulations and to support the quality of its financial reporting. The Board performs an annual review of the Company's key risks and the internal controls implemented to address these risks. The Board has identified and stated the various risks of Awilco LNG in the Company's annual report. Additionally, the Board is regularly briefed on the Company as described under section 9 above.

The Company has established an Audit committee that regularly evaluates and discusses the various risk elements of Awilco LNG, and potential for improvement. The Audit committee reports to the Board.

Awilco LNG's main goal is safe and efficient ship operation with no accidents, personal injury, environmental damage, or damage to equipment. In order to achieve these goals Awilco

LNG has identified some core objectives that describe our focus and our continuous improvement process. The operation of technical management and newbuildings is closely monitored through dedicated supervision and safety reporting systems. Furthermore, the Company has established contingency plans and executes drills and training in order to improve emergency preparedness.

In addition to its own controlling bodies and external audit, the Company's ship management is subject to external supervision by Det Norske Veritas (DNV) for classification in accordance with ISO.

11 REMUNERATION OF THE BOARD OF DIRECTORS

The remuneration of the Board shall reflect the Board's responsibilities, knowhow, time commitment and the complexity of the business activities. The directors do not receive profit related remuneration, share options or retirement benefits from the Company. The remuneration is proposed by the Nomination committee. More information about the remuneration of the individual directors is provided in note 21 in the consolidated accounts.

Directors or their related companies shall normally not undertake special tasks for the Company in addition to the directorship. However, the Company utilises outsourcing of technical sub-management, accounting and administrative services to ATS and AWM which are related companies. In addition, ship brokering services are purchased on a competitive basis from a group of companies related to one of the Board members. All agreements and fees with related parties are approved by the Board. Furthermore, the members of the Audit committee and Remuneration committee receive a fee for serving on the committees.

12 REMUNERATION OF EXECUTIVE PERSONNEL

The Board has drawn up guidelines for determining remuneration to executive personnel. The remuneration is based on a base salary, bonus and synthetic share options. The Board of Directors' annual statement regarding compensation to key management is enclosed as a separate appendix to the agenda of the General Meeting. The General Meeting is to vote separately on advisory and binding aspects of the remuneration to executive personnel.

For information about remuneration of executive personnel see note 21 in the consolidated accounts.

13 INFORMATION AND COMMUNICATION

The Company aims to keep shareholders, analysts, investors

and other stakeholders continuously updated on the Company's operations and performance. The Company provides information to the market through quarterly and annual reports; investor- and analyst presentations open to the media and by making operational and financial information available on the Company's website. Information of importance are made available to the stock market through notification to the Oslo Stock Exchange in accordance with the Stock Exchange regulations. Information is provided in English.

All stock exchange announcements and press releases, including the financial calendar, are made available on the Company's website.

14 TAKE-OVER

The Company's Articles of Association contains no defense mechanism against the acquisition of shares, and no other actions have been taken to limit the opportunity of acquiring shares in the Company.

In the event of a takeover bid the Board will seek to comply with the recommendations outlined in item 14 of the Code of Practice. If a bid has been received, the Board will seek to issue a statement evaluating the offer and make recommendations as to whether the shareholders should accept the offer or not. Normally it will be required to arrange a valuation from an independent expert. If the Board finds that it is unable to give a recommendation, the Board will explain the reason for not giving a recommendation. The statement should show whether the decision was unanimous, and if not, the background for why certain Board members did not adhere to the statement.

If a situation occurs where the Board proposes to dispose of all or a substantial part of the activities of the Company such a proposal will be placed before the General Meeting.

15 AUDITOR

The auditor is appointed by the General Meeting, which also determines the auditor's fee. The auditor shall annually present an audit plan to the Audit committee. The auditor attends the Board of Director's review and discussion of the annual accounts. The Board of Directors minimum holds one annual meeting with the auditor without the CEO or other members of the executive group being in attendance.

The Company's management regularly holds meetings with the auditor, in which accounting principles and internal control routines are reviewed and discussed.

The auditor shall annually confirm compliance with the

applicable independence rules and regulations in legislation and the audit firm's internal independence standards. The Audit committee has issued guidelines stipulating the management's possibility to undertake consulting services by the auditor. Auditor's fees are disclosed in note 21 in the consolidated accounts.

78 AWILCO LNG ASA ANNUAL REPORT 2019 AWILCO LNG ASA ANNUAL REPORT 2019 79

Social responsibility

INTRODUCTION

The Awilco LNG Group (Awilco LNG or the Company) has implemented a set of objectives, principles and procedures concerning our social responsibility to enable the Company to achieve and maintain its mission statement and objectives. Awilco LNG has implemented the highest standard of safe operation to meet all environmental protection requirements, ensuring safe custody of our vessels, crew, customers' cargoes and owner's interests. Our commitment to our social responsibility ensures that Awilco LNG is a preferable LNG shipping company.

Awilco LNG is engaged in the global marine transportation of LNG. Marine transportation is generally considered the most efficient form of transporting natural gas over long distances. Natural gas is widely accepted as the least pollutive fossil fuel and emits up to 60 % less CO2 than coal when used for electricity generation. Natural gas is widespread, flexible, abundantly available and cheap when comparing to other fossil fuels. The increased use of natural gas is expected to reduce the use of more pollutive fossil fuels such as coal and oil in the global energy mix. According to ExxonMobil's 2019 Energy Outlook, BP's Energy Outlook 2019 and Shell's LNG Outlook 2020 natural gas is projected to be the fastest growing major fuel the next 15-20 years, meeting the rise in global energy demand following population growth and improving standards of living. Awilco LNG's contribution to sustainable economic growth mainly relates to the potential for increased use of natural gas in the global energy mix.

Awilco LNG aims to provide positive impact on the communities we operate in, our employees, clients and suppliers through the Code of Ethics and Conduct (available at our webpage www. awilcolng.no), such as opposing corruption and facilitation payments in any form.

In general, global marine transportation has a significant effect on the environment. Awilco LNG takes this impact seriously, working continuously to reduce our environmental footprint through improving fuel efficiency, optimising trade routes and improving waste management.

This report constitutes Awilco LNG's reporting according to the requirements of the Norwegian accounting act § 3-3c on social responsibility reporting.

SCOPING OF MATERIAL ISSUES FOR AWILCO LNG

A materiality assessment forms the basis for how we prioritise our social responsibility efforts, and thereby also impacts our internal and external reporting on social responsibility. The following issues have been assessed as the most material based on both their importance to Awilco LNG's business and to Awilco LNG's stakeholders such as employees, customers, suppliers, regulators and investors:

The Company's strategy is to integrate sustainability on these matters systematically into all material business processes to ensure Awilco LNG is assessed as a responsible enterprise.

THE MATERIAL ISSUES

Mission statement

Awilco LNG's mission statement is "Marine transportation through safety and environmental excellence".

Health and safety

Company policies and objectives

The safety and well-being of Awilco LNG's employees and seafarers has the highest priority, as set out in the mission statement above and detailed in the Company's Safety Management & Environmental Protection Policy. Our objectives are zero accidents and no personnel injuries. The Group shall adhere to national and international laws and regulations and constantly promote best practices identified within its own operations and the industry to improve the competence of individual crewmembers and vessel safety performance.

Social responsibility

IMPORTANCE TO BUSINESS

How we achieve our objectives

Our objectives are operationalised in the Company's Safety Management & Environmental Protection Policy. The objective of this policy is to ensure that the Company gives the highest priority to the safety of human life and health through the following measures:

• Provide support to ships' operation by implementation of a well-structured Safety Management System (SMS) based on a well-defined management organisation. The SMS is an integral part of all our activities and includes instructions and procedures which contribute to the highest safety standards onboard our ships, ensuring that cargo is handled correctly and preventing situations which threaten safety of our personnel. The SMS is based on national and international requirements and standards for quality and safety, including the ISM code (International Management Code for the Safe Operation of Ships and Pollution Prevention), ISO 14001 (environmental management system), ISO 9001 (quality management system) and the TMSA (Tanker Management and Self-Assessment guidelines) issued by OCIMF (Oil Companies International Marine Forum)
• Operate the vessels with continuously properly trained, informed and motivated crews. Awilco LNG aims to ensure a stable and motivating work environment for both onshore and offshore employees, ensuring high retention rates. The Group is proactively seeking to identify requirements and needs for additional training through regular audits, master and management reviews. A healthy lifestyle is promoted by providing fresh and healthy food and physical exercise opportunities
• Provide, equip and maintain the ships to the necessary standard as required by national regulation and international convention
• Avoid safety hazards through preventive safety measures
• Establish contingency plans and execute drills and training to improve emergency preparedness to meet situations which represent dangers to life, health, environment, ship and cargo
• See to it that a safety management culture is implemented within the Company
• Use a reporting system for accidents, near accidents, non-conformities and improvements, with special attention to the learning effect through feedback of experience and suggestions for improvement
• Use performing measures to continuously improve our operations

To accomplish the objectives Awilco LNG will plan, organise, perform, document and verify performance. Awilco LNG has a comprehensive Risk Management Program which includes detailed step by step risk assessment procedures.

Performance in 2019

The Company's senior management is actively engaged in monitoring Awilco LNG's performance in order to further encourage and promote positive trends, to provide advice and to take corrective action where negative trends are detected. Performance and results are measured using certain Key Performance Indicators (KPIs). KPI targets are resolved by senior management on an annual basis, and results are reported to senior management on a quarterly basis. Procedures and any new initiatives shall be part of the management review and include monitoring and measurements, adjustment of targets, and recording of achieved improvements. The procedures and activities shall be audited on a routine basis. The following main

KPI	DEFINITION	RESULT 2019	RESULT 2018
LTIF (Lost time injury frequency)	Number of accidents per one-million man hours worked	2.1	2.1
	TRCF (Total recordable case frequency) The sum of all work related, lost time injuries, re stricted work injuries and medical treatment injuries	2.1	4.2
Personnel injuries	Number of personnel injuries	2	2
Number of fatalities due to injuries	Number of deaths among the crew resulting from a work injury	NIL	NIL

Going forward

While there has been an improvement from 2018, performance in 2019 was not satisfactory, and in 2020 Awilco LNG will continue efforts to improve and strengthen the safety culture. The Company's objectives are zero accidents and no personnel injuries.

Environmental impact

Background

Awilco LNG's potential environmental impact can be divided in three main components:

• 1. Emissions from fuel consumption
• 1. Major environmental accidents
• 1. Waste management including ballast water and spills

Although the shipping industry contributes with 3 to 4 % of the global annual CO2 emissions to the atmosphere, marine transportation is generally considered as the most efficient form of transporting natural gas over long distances.

Awilco LNG's fleet consists of vessels with tri-fuel propulsion systems, which mainly run on boil-off gas from the LNG cargo. When natural gas is cooled down to its liquefied state at minus 160 degrees Celsius, a certain amount of the LNG will naturally regasify into its gaseous state (boil-off gas). The boil-off gas is produced at a rate dependent on the outside temperature and the level of filling of the tanks and can either be reliquified into LNG or used as fuel for propulsion of the vessels. Due to the cost and energy needed to power a reliquefaction process plant very few vessels are outfitted with such plants. The boil-off gas is thus used for propulsion, which makes sense both economically, as natural gas is significantly cheaper than oil-based alternatives, and also environmentally, as natural gas is a considerably cleaner fuel than oil-based alternatives. Compared to oil-based fuels. natural gas emits 10-20 % less greenhouse-gases, virtually zero SOx and particulate matter and 90 % less NOx. Based on both environmental, logistical and economic factors LNG fueled vessels are considered by many, including DNV GL, as the only currently viable alternative to enable meeting future stricter environmental regulations applicable to the industry.

As LNG vessels carry regular bunkers for ballast voyages the potential for major environmental accidents mainly relate to the risk of a ship suffering a breach and subsequently leak substantial amounts of bunkers oil into the environment.

The last potential impact is waste produced by the vessels, discharge of untreated ballast water and potential spills of chemicals, bilge water and sludge etc. into the environment. Discharge of untreated ballast water may potentially introduce non-native organisms into marine environments worldwide.

Company policies and objectives

Based on the long-term goal of environmental excellence, and as set out in the Company's Safety Management & Environmental Protection Policy, Awilco LNG works toward minimising the environmental impact from its vessels with the goal of zero spills. The Company has adapted a zero-tolerance policy towards:

• Spills to the environment
• Emissions of ozone depleting substances
• Unauthorised disposal of garbage or waste to the marine environment

Additionally, Awilco LNG aims to minimise as far as practically possible the emission of CO2, NOx and SOx from diesel combustion engines, boilers, incinerators and emissions from cargo and fuel oil tanks and systems through evaporation.

Awilco LNG shall adhere to national and international environmental laws and regulations, and constantly promote best practices identified within its own operations and the industry in order to improve the impact on the environment.

How we achieve our objectives

Our objectives are operationalised in the Company's Safety Management & Environmental Protection Policy. The objective of this policy is to ensure that the Company gives the highest priority to the environment through the following measures:

• Provide support to ships' operation by implementation of a well-structured Safety Management System (SMS) based on a well-defined management organisation. The SMS is an integral part of all our activities and includes instructions and procedures which contribute to the highest safety standards onboard our ships, ensuring that cargo is handled correctly and preventing situations which threaten the environment. The SMS is based on national and international requirements and standards for quality and safety, including the ISM code and the TMSA issued by OCIMF

• Management of the fleet is certified according to ISO 14001 and ISO 9001
• Operate the vessels with continuously properly trained, informed and motivated crews
• Provide, equip and maintain the ships to the necessary standard as required by national regulation and international convention. Both WilForce and WilPride were delivered with ballast water treatment systems.
• Establish contingency plans and execute drills and training to improve emergency preparedness to meet situations which represent dangers to life, health, environment, ship and cargo
• See to it that a safety management culture is implemented within the Company
• Use a reporting system for accidents, near accidents, non-conformities and improvements, with special attention to the learning effect through feedback of experience and suggestions for improvement
• Antifouling paint systems with lowest resistance (Jotun X200)
• Hull and engine performance monitoring systems are installed on the vessels and used for monitoring of performance (KYMA system)
• Optimisation of hull and propeller cleaning intervals to reduce drag and fuel consumption
• Replaced bottled water for crew with buying in bulk
• Improved waste handling onboard and increased amount of waste being sent ashore
• Implement a policy of environmentally friendly purchasing with approved vendors based not only on cost and quality but also environmental performance and focus; procurement and purchasing activities shall address environmental aspects such as:
  • o Reducing packaging volumes;
  • o Encouraging recycling activities; and
• o Use of non-disposable and recyclable equipment and materials
• Onshore focus on saving energy, recycling and reducing use of single use plastics
• Use performing measures to continuously improve our operations
• Continuously consider vessel technical improvements and retrofits to reduce fuel consumption and lower environmental footprint
• o In 2019 one of the Group's vessels was upgraded with certain new equipment, which is a first in the LNG shipping industry. The upgrade reduces boil-off and thereby further reduce the vessel emissions, improves fuel consumption as well as trading flexibility

The same risk assessment procedures and continuous improvement tools and initiatives as described under Health and Safety above is utilised in Awilco LNG's work to reduce its environmental impact.

Performance in 2019

The Company's senior management is actively engaged in monitoring Awilco LNG's performance, in order to further encourage and promote positive trends, to provide advice and to take corrective action where negative trends are detected. Performance and results are measured using certain Key Performance Indicators (KPIs). KPI targets are resolved by senior management on an annual basis, and results are reported to senior management on a quarterly basis. Procedures and any new initiatives shall be part of the management review and include monitoring and measurements, adjustment of targets, and recording of achieved improvements. The procedures and activities shall be audited on a routine basis. The following main KPIs are the focus of Awilco LNG with regards to environmental impact:

Going forward

In 2020 Awilco LNG will continue efforts to reduce the Company's environmental footprint.

Anti-corruption

Company policies and objectives

Corruption is generally estimated to cost at least 5 % of global GDP each year. Reduced corruption would increase safety for seafarers, reduce costs of operations and reduce complexity and risk. Awilco LNG is a firm opponent of corruption in any form, and is committed to the highest ethical standard in business conduct worldwide. Awilco LNG desires fair and open competition in all markets, both nationally and internationally. Awilco LNG's policy is to comply with all applicable laws and governmental rules and regulations in the country in which it is operating.

How we achieve our objectives

The Company's anti-corruption policies are described in our Code of Ethics and Conduct document. The following policies to address the objectives have been implemented in the Company:

• No employee of the Company shall directly or indirectly offer, promise, give or receive bribe, illegal or inappropriate gifts or other undue advantages or remuneration in order to achieve business or other personal advantage
• Under no circumstances shall the Company or any of its employees be part of actions that breach applicable competition legislation. Any employee is to confer with his or her immediate superior, the executive management or the board if he or she has a question with respect to the possible anti-competitive effect of particular transactions or becomes aware

of any possible violation of applicable competitive legislation

Implementation of the Company's policies takes place through emphasis on awareness and the use of risk assessments on a Group level.

Performance in 2019

As in previous years, management has not become aware of any breaches of the Company's Code of Ethics and Conduct throughout the year.

Going forward

Going forward Awilco LNG will continue work to ensure that our standards of behavior are according to the Code of Ethics and Conduct, and the Company expects that the positive results from previous years are upheld.

Alternative performance measures (APMs), defined as financial performance measures not within the applicable financial reporting framework, are used by Awilco LNG to provide supplemental information. Financial APMs are intended to enhance comparability of the results and cash flows from period to period, and it is Awilco LNG's experience that these are frequently used by analysts and investors.

These measures are adjusted IFRS measures defined, calculated and used consistently. Operational measures such as, but not limited to, volumes, utilisation and prices per MMBTU are not defined as financial APMs. Financial APMs should not be considered as a substitute for measures of performance in accordance with IFRS. Disclosures of APMs are subject to established internal control procedures.

Awilco LNG's financial APMs:

• Net freight income*: freight income voyage related expenses
• EBIT: Net freight income operating expenses - administration expenses - depreciation and amortisation - impairments
• EBITDA: EBIT + depreciation and amortisation + impairments
• Interest bearing debt: long-term interest bearing debt + short-term interest bearing debt + pension liabilities + other non-current liabilities
• Book equity ratio: Total equity divided by total assets
• TCE (time charter equivalent): net freight income including loss of hire insurance divided by the number of calendar days less off-hire days not covered by loss of hire insurance

Alternative performance measures

*When vessels operate in the spot market, freight income includes bunkers compensation and the fuel element of ballast bonuses, whereas voyage related expenses include the corresponding bunkers costs and other repositioning costs. The APM net freight income adjusts for this grossing up, and provides for improved comparability of the Group's performance between periods

KPI	DEFINITION	RESULT 2019	RESULT 2018
Number of releases of substances to the environment	The number of releases of substances to the environment covered by MARPOL Annex 1-6	NIL	NIL
CO2 efficiency laden voyages	The total mass of emitted CO2 in grams per cargounit-mile	5.76	6.41
NOx efficiency laden voyages	The total mass of emitted NOx in grams per cargounit-mile	0.053	0.058
SOx efficiency laden voyages	The total mass of emitted SOx in grams per cargounit-mile	0.0001	0.0002

AWILCO LNG ASA ANNUAL REPORT 2019 AWILCO LNG ASA ANNUAL REPORT 2019 87

Awilco LNG ASA PO Box 1583 Vika 0118 Oslo Norway

Tel +47 22 01 42 00 Org no. 996 564 894

88 AWILCO LNG ASA ANNUAL REPORT 2019

awilcolng.no