Q4 VIKING SUPPLY SHIPS AB (PUBL)

INTERIM REPORT

2015

Box 11397, SE-411 04 Gothenburg, Sweden For further information, please contact CEO, Christian W. Berg, ph. +45 41 77 83 80 or IR & Treasury Director, Morten G. Aggvin, ph. +47 41 04 71 25.

Front picture: Istock

	3
SUMMARY OF EVENTS IN Q4	4
SUBSEQUENT EVENTS	5
LIQUIDITY AND GOING CONCERN	5
RESULTS AND FINANCE	6
OPERATIONAL HIGHLIGHTS FOR Q4	7
FINANCIAL POSITION AND CAPITAL STRUCTURE	8
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT	10
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	10
CONDENSED CONSOLIDATED BALANCE SHEET	11
CONDENSED CONSOLIDATED CASH FLOW STATEMENT	11
CHANGES IN THE GROUP'S SHAREHOLDERS' EQUITY	12
DATA PER SHARE	12
PARENT COMPANY	12
PARENT COMPANY INCOME STATEMENT	13
PARENT COMPANY BALANCE SHEET	13
CHANGES IN PARENT COMPANY SHAREHOLDERS' EQUITY	13
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	14
DEFINITIONS	19

CEO STATEMENT

The fourth quarter resulted in a negative result for the Group. This was mainly caused by an impairment of the PSV fleet, negative impact of net financials as well as tax impairments related to the restructuring of TransAtlantic AB (TA AB). The market in which Viking Supply Ships A/S (VSS A/S) is operating is still weak, which is impacting both the result of the period as well as the contract backlog. During the quarter the Container operations and Ship Management operations were divested from TA AB, which significantly reduces the exposure towards this segment entering 2016. For the fourth quarter, profit after tax for the Group was negative MSEK 123.

VSS A/S recorded a profit before tax of negative MSEK 92 in the fourth quarter. The profit before tax was negatively impacted by an impairment loss on the PSV fleet of MSEK 77 and an unrealized currency loss of MSEK 22. The offshore market was weak for most of the quarter, but during the latter part of the quarter, the increased amount of vessels in layup combined with harsh weather did give a certain effect. Towards the end of the quarter, Tor Viking returned to the North Sea from its charter with Shell US. The vessel transited the Northern Sea Route unassisted, which has never been achieved this late in the season before.

The market for PSVs is still poor. Despite an increasing number of vessels entering lay-up, the market has not improved and both rates and utilization were weak in the North Sea market throughout the quarter. The Group is currently assessing its options for the two remaining PSVs in operation.

Within the Services segment, Viking Ice Consultancy (VIC) is continuously pursuing contract opportunities with a clear ambition to secure work for the coming seasons.

The restructuring process of TA AB has given positive effects, and with the completed divestments, the risk related to this business segment is significantly reduced as we enter 2016.

OUTLOOK

The downturn within the oil industry has proved to be harder and longer than anticipated. As a result, the offshore market will remain challenging going forward. During 2015 a significant number of vessels have been laid-up, which has gradually improved the market balance in the North Sea. However, due to additional rigs coming off contract during 2016, the overall market conditions are expected to be weak in the coming years, unless more vessels are taken out of the market. Due to the worsened market conditions and the cancellation of contracts, the company's liquidity is strained. As a consequence, we have for some time had a dialogue with the banks, in order to secure a long term, stable financing solution for the company. The dialogue is positive and constructive and the company aims to have a long term solution in place within the first quarter of 2016

It remains the core focus within VSS A/S to increase the contract coverage going forward. However, due to the market conditions, this will be a challenge. Nevertheless, VSS A/S still sees contract opportunities within the core market of harsh environment exploration and production going forward. With the reduced significance of TA AB within the Group it is expected that the financial impact from the industrial shipping segment will decrease going forward.

Gothenburg 29 February, 2016.

Christian W. Berg,

CEO and President

FOURTH QUARTER

Total revenue was MSEK 457 (794)
EBITDA was MSEK 86 (260)

Result after tax was MSEK -123 (108)
Result after tax per share was SEK -0.7 (0.6)

YEAR TO DATE 2015

Total revenue was MSEK 1,977 (3,190)
EBITDA was MSEK 268 (695)
Result after tax was MSEK -440 (200)
Result after tax per share was SEK -2.5 (1.2)

SUMMARY OF EVENTS IN Q4

EBITDA for Q4 was MSEK 86 (260).
The average fixture rate in Q4 was NOK 515,000 (497,000) for the AHTS fleet and GBP 4,330 (7,620) for the PSV fleet. The average utilization in Q4 excluding laid-up vessels was 68% (73) for the AHTS fleet and 70% (49) for the PSV fleet.
In December, an early termination of the contract for the AHTS Brage Viking was received, but the vessel will remain on-hire to mid-August 2016. The termination represents a loss of income during the remaining firm period of the contract of MUSD 33 in 2016 and 2017.
Towards the end of the quarter, Tor Viking completed its contract with Shell US. On its way back to the North Sea, the vessel transited the Northern Sea Route unassisted, which has never been performed this late in the season before.
The deteriorated market conditions within the global oil and gas market have continued to negatively impact the earnings and financial position of the Group. The Group's liquidity position is strained and in the current market, the Group is unable to fulfill existing covenant undertakings in its loan agreements. A solution with the Group's lenders is necessary and accordingly, the Group, during Q4, initiated a dialogue with its lenders, with an ambition to secure a long term stable financing solution within the end of Q1 2016 (See note 1, Liquidity and going concern and note 4, Interest bearing liabilities).
The AHTS vessel Odin Viking was laid up during Q4.
Due to the challenging market conditions, VSS A/S has recognized an additional impairment loss during Q4 of MSEK 77 related to the PSV fleet.
The sales of TransAtlantic Container AB and the ship management operations were concluded during Q4 and resulted in a positive book gain of MSEK 35.
TransFighter's earlier freight contract, which expired at the end of Q4, was not renewed due to declining volumes. The vessel is open in the market and new contract opportunities are under evaluation.

SUBSEQUENT EVENTS

Calculations of contract coverage and loan-to-value ratios as at 31 December 2015 showed a requirement for the Group to deposit cash or provide additional security during Q1 2016. No such payments have been made and the Group remains in constructive dialogue with its lenders to find a viable long term financing solution for the Group. As part of this dialogue, VSS AB's majority shareholder, Kistefos AS, has informed the banks of its intention to support an equity issue of MUSD 15 of which Kistefos AS intends to guarantee for its pro-rata share. As the company currently is in breach with loan to value clauses and contract coverage clauses all borrowings are classified as short-term, even though the company has entered into a standstill agreement with the banks (see below, note 4, Interest bearing liabilities and note 6, Operational and financial risk).
VSS A/S and the lenders have in February 2016 entered into a standstill agreement, running up to and including 20 March 2016, where lenders have committed not to request early repayment of loans and the Group is given time to find a long-term solution (see note 1, Liquidity and going concern).
After the end of the quarter, Magne Viking was certified according to the IMO Polar Code. The vessel, which is the first vessel globally to comply with the code, was approved by DNV GL.
Due to family reasons, Christian W. Berg will take temporary leave from the position as CEO of Viking Supply Ships A/S. Mr. Berg will remain CEO of the parent company Viking Supply Ships AB, but to reduce his workload, Mr. Tord Ytterdahl will temporarily take over the responsibilities as CEO of Viking Supply Ships A/S.
The Chief Commercial Officer has resigned from his position. The CEO of Viking Supply Ships A/S will be responsible for VSS A/S' commercial activities going forward.
The subsidiary VSS A/S has from 1 January 2016 changed its functional currency from NOK to USD.
At expiration and redelivery of two bareboat chartered vessels in TA AB there is a residual value guarantee commitment for the Group in favor of the financing bank. The commitment amounts to a total of MSEK 63 and is due for payment. Negotiations with the bank are ongoing in order to postpone this payment.
In a loan agreement regarding one of the vessels within TA AB there is a loan-to-value clause. The bank has invoked this clause and has requested an instalment of MSEK 47. The Group does not agree with the bank's market value assessment of the pledged assets and has initiated discussions with the bank regarding the accuracy in this request.

LIQUIDITY AND GOING CONCERN

The condensed interim financial statements for the twelve months ending 31 December 2015 have been prepared using the going concern assumption. The primary uncertainties and risks in relation to these considerations include a continued weakening of the market conditions.

Conditional of a positive outcome of the dialogue with the lenders, and due to the fact that the Group at 31 December 2015 had a market value adjusted equity of MSEK 2,035, management expects that the Group will be successful in securing a long-term stable financing solution for the Group within the near future.

KEY FINANCIALS	Q4 2015	Q4 2014
Net sales, MSEK	457	794
EBITDA, MSEK	86	260
Result after tax, MSEK	-123	108
Earnings per share after tax, SEK	-0.7	0.6
Shareholders´equity per share, SEK	7.8	11.5
Return on equity, %	-34.4	34.3
Equity ratio, %	33.7	39.0
Market adjusted equity ratio, %	42.7	44.8

RESULTS AND FINANCE

Total revenue for the Group for the full year was MSEK 1,977 (3,190), of which VSS A/S contributed with MSEK 1,114 (1,897) and TA AB contributed with MSEK 863 (1,293).

The Group's EBITDA for the full year was MSEK 268 (695), of which VSS A/S contributed with MSEK 293 (783) and TA AB contributed with MSEK -25 (-88).

Net financial items were MSEK -191 (-267). Financial items include unrealized currency losses of MSEK -81 (-73) and realized value-adjustments on interest rate swaps of MSEK -1 (-3).

The Group's result after tax for the year was MSEK -440 (200), of which VSS A/S contributed with MSEK -332 (345) and TA AB contributed with MSEK -108 (-128). The result for year-to-date was negatively impacted by a total impairment loss in Q3 and Q4 on the PSV fleet of MSEK 262 and restructuring costs and book gains from divestments in TA AB amounting to net MSEK 9.

OPERATIONAL HIGHLIGHTS FOR Q4

ANCHOR HANDLING TUG SUPPLY VESSELS (AHTS)

Total AHTS revenue was MSEK 240 (407) in Q4. Total EBITDA was MSEK 82 (280).

During Q4, three vessels have been operating in the North Sea spot market, while four vessels have been operating on term contracts. In addition, Odin Viking was in October laid up as a result of the weak market conditions in the offshore industry. During Q4, Tor Viking completed the charter with Shell US and the vessel is now back in the North Sea.

The North Sea market was weak for most of the quarter. Increased amount of lay-ups combined with harsh weather did however give a positive effect towards the end of 2015, but rates and utilization still remained at low levels.

The total AHTS contract backlog including optional periods at the end of the quarter was MSEK 741.

AHTS Q4	FIXTURE RATE (NOK)		UTILIZATION (%)
AHTS vessels on term charters	579,600	(536,000)	96	(100)
AHTS vessels in the spot market	279,000	(407,800)	34	(45)
Total AHTS fleet	515,000	(497,000)	68	(73)

Table above excludes one laid-up vessel.

1. Oil major, firm till 1st August 2016 + 1x6 months option

2. Oil major, firm till 31st December 2016 + 2x6 months option

3. Oil major, firm until mid August 2016

Figures in the tables are as of 31 December 2015.

PLATFORM SUPPLY VESSELS (PSV)

Total PSV revenue was MSEK 7 (22) in Q4. Total EBITDA was MSEK -12 (-12). The PSV vessels were during Q4 impaired by MSEK 77, which in addition to the Q3 impairment results in an annual impairment loss of MSEK 262.

During Q4, two vessels were trading in the North Sea spot market, while three vessels remained laid-up in Sweden.

The market balance within the PSV segment is still poor, despite an increased number of vessels entering lay-up. As a consequence, the North Sea spot market has remained weak throughout the quarter.

The total PSV contract backlog at the end of the quarter was MSEK 0.

PSV Q4	FIXTURE RATE (GBP)		UTILIZATION (%)
PSV vessels on term charters	-	(-)	-	(-)
PSV vessels in the spot market	4,330	(7,620)	70	(49)
Total PSV fleet	4,330	(7,620)	70	(49)

Table above excludes three laid-up vessels.

Figures in the tables are as of 31 December 2015.

SERVICES AND SHIP MANAGEMENT

Total Services and Ship Management revenue was MSEK 31 (86) in Q4. Total EBITDA was MSEK -2 (11).

Viking Ice Consultancy (VIC) is continuously pursuing contract opportunities. Despite the reduced activity within the industry, VIC has identified several potential contracts going forward.

VIC is also working together with VSS A/S to prepare for the IMO Polar Code, a project that will continue into 2016.

TRANSATLANTIC AB

The subsidiary TransAtlantic AB recorded revenues of MSEK 179 (279) in Q4. EBITDA was MSEK 18 (-19). Total revenue has been reduced compared to the corresponding period last year due to the sale of TransAtlantic Container AB and TransBrilliante and the redelivery of TransOsprey in November and TransHawk in December. The sales of TransAtlantic Container AB and the Ship Management operations were concluded and all together generated an additional profit of MSEK 35 in December.

The container and bulk freight markets have continued to be weak during the fourth quarter, however the time charter rates reported for Container, small bulk and RoRo vessels are slightly improving. TransPine and TransWood have been sold during Q4 and will consequently be redelivered from the long bareboat charters as planned in early Q1 2016. TransFighter's earlier freight contract, which expired at the end of Q4, was not renewed due to declining volumes. The vessel is open in the market and new contract opportunities are under evaluation.

FINANCING POSITION AND CAPITAL STRUCTURE

At the end of the year, the Group's equity amounted to MSEK 1,386 (equivalent to 7.81 SEK/share). The Equity declined during the year by net MSEK 656 due to the dividend of MSEK 98, the loss for the year of MSEK 440, a positive effect from revaluation of pension obligations of MSEK 2 and a negative change in the translation reserve of MSEK 120 attributable to currency differences on net investments in subsidiaries, mainly related to the weakened NOK against SEK. Gross investments during the year amounted to MSEK 187 (419) mainly related to dockings and the increase in financial assets related to cash which has been deposited as additional security for ship loans (see note 4, Interest bearing liabilities). The sale of the small bulk vessel TransForte was concluded in February 2015. The transaction resulted in a positive cash effect of net MSEK 3 after repayment of the related ship loans.

Viking Supply Ships AB is obliged to publish this report in accordance with the Swedish Securities Act and/ or the Swedish Financial Instruments Trading Act. This report has been prepared in both Swedish and English versions. In case of variations in the contents between the two versions, the Swedish version shall govern. This report was submitted for publication at 8:30 am (CET) on 29 February, 2016.

The undersigned certify that the interim report gives a true and fair picture of the Group's financial position and results, and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.

This interim report is unaudited.

Gothenburg, 29 February, 2016 Viking Supply Ships AB

Christen Sveaas Folke Patriksson Bengt A. Rem Chairman Deputy chairman Board member

Board member Board member CEO

Håkan Larsson Magnus Sonnorp Christian W. Berg

Christer Lindgren Employee representative

ANNUAL REPORT

Viking Supply Ship AB´s Annual Report will be available on the website: www.vikingsupply.com during week 16.

ANNUAL GENERAL MEETING

Viking Supply Ship AB´s Annual General Meeting will be held on Thursday, 10 May 2016. The notice convening the Annual General Meeting will be published not later than four weeks prior to this date.

NOMINATIONS COMMITTEE

Information on the Nominations Committee is available on the website: www.vikingsupply.com

PRESS AND ANALYST CONFERENCE

In conjunction with the publication of this interim report, an earnings call will take place on 29 February 2016 at 10.00 am (CET) with Viking Supply Ships AB's CFO, Ulrik Hegelund and IR & Treasury Director, Morten G. Aggvin. In connection with the conference, a presentation will be available on the company's website, www. vikingsupply.com. Please see Investor Relations/Reporting Center.

FINANCIAL CALENDAR 2016

6 May 2016	Q1 Interim report
10 May 2016	Annual General Meeting
5 August 2016	Q1-Q2 Interim report
10 November 2016	Q1-Q3 Interim report

INVESTOR RELATIONS

Please contact or CFO Ulrik Hegelund, ph. +45 41 77 83 97 or IR & Treasury Director, Morten G. Aggvin, ph. +47 41 04 71 25

The interim report is available on the company's website: www.vikingsupply.com.

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

MSEK	NOTE	Q4	Q4	Q1-Q4	Q1-Q4
		2015	2014	2015	2014
Net sales		457	794	1,977	3,190
Other operating revenue		41	1	41	1
Direct voyage cost		-76	-131	-400	-651
Personnel costs		-165	-190	-669	-743
Other costs		-171	-230	-681	-1 118
Depreciation/impairment	2	-120	-32	-474	-195
Operating result		-34	212	-206	484
Net financial items		-48	-99	-191	-267
Result before tax		-82	113	-397	217
Tax	7	-41	-5	-43	-17
RESULT FOR THE PERIOD	3	-123	108	-440	200

Attributable to:
Parent Company's shareholders		-123	108	-440	200
Non-controlling interests		0	0	0	0
RESULT FOR THE PERIOD		-123	108	-440	200

Earnings attributable to Parent Company's share
holders, per share in SEK (before and after dilution)		-0,7	0,6	-2,5	1,2

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

MSEK	Q4 2015	Q4 2014	Q1-Q4 2015	Q1-Q4 2014
Result for the period	-123	108	-440	200
Other comprehensive income for the period:
Items that will not be restored to the income statemement
Revaluation of net pension obligations	2	-2	2	-2
Items that later can be restored to the income statemement
Change in translation reserve, net	-44	-146	-120	-45
Other comprehensive income	-42	-148	-118	-47
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	-165	-40	-558	153

Total comprehensive income attributable to:
Parent Company's shareholders	-165	-40	-558	158
Non-controlling interests	0	0	0	-5
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	-165	-40	-558	153

CONDENSED CONSOLIDATED BALANCE SHEET

MSEK	NOTE	Q4 2015	Q4 2014
Vessels	2	3,470	3,982
Other tangible fixed assets		2	5
Intangible fixed assets		1	7
Financial assets		213	163
Total fixed assets		3,686	4,157
Current assets	5	431	1,103
TOTAL ASSETS	3	4,117	5,260
Shareholders' equity		1,386	2,042
Long-term liabilities	4	1,008	2,362
Current liabilities	4	1,723	856
TOTAL EQUITY, PROVISIONS AND LIABILITIES		4,117	5,260

VALUATION OF FINANCIAL ASSETS AND LIABILITIES

The valuation of financial assets and liabilities in the balance sheet is based on acquisition value or fair value. The valuation of FX derivatives and interest rate derivatives is based on fair value. The balance items "Long-term liabilities" include derivatives of MSEK 18 (24). Valuation of other financial assets and liability items in the balance sheets are based on acquisition value.

ASSESSMENT OF FAIR VALUE OF FINANCIAL INSTRUMENTS

The valuation of financial instruments is based on classification in three levels: Level 1, fair values based on market values, where the instruments are traded on an active market are available. Level 2, no market values based on an active market are available, valuations are instead based on measurements of discounted cash flows. Level 3, at least one variable is based on own assessments. The fair value valuation of the Group´s FXand interest rate instruments are based on input according to level 2.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

MSEK	Q4 2015	Q4 2014	Q1-Q4 2015	Q1-Q4 2014
Cash flow from operations before changes in working capital	86	276	205	527
Changes in working capital	87	33	147	-97
Cash flow from current operations	173	309	352	430
Cash flow from investing activities	-68	-87	-145	-132
Cash flow from financing activities	-95	-223	-477	-251
Changes in cash and cash equivalents	10	-1	-270	47
Cash and cash equivalents at beginning of period	188	447	450	381
Exchange-rate difference in cash and cash equivalents	-3	4	15	22
CASH AND CASH EQUIVALENTS AT END OF PERIOD	195	450	195	450

CHANGES IN THE GROUP'S SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY (MSEK)	Q4 2015	Q4 2014	Q1-Q4 2015	Q1-Q4 2014
Equity at beginning of period	1,551	2,082	2,042	1,749
New share issue less cost for issuance	-	-	-	145
Dividend	-	-	-98	-
Sale of non-controlling interests	-	-	-	-5
Total comprehensive income for the period	-165	-40	-558	153
SHAREHOLDERS' EQUITY AT END OF PERIOD	1,386	2,042	1,386	2,042

SHARE CAPITAL (MSEK)	Q4	Q4	Q1-Q4	Q1-Q4
	2015	2014	2015	2014
Share capital at beginning of period	177	177	177	148
New share issue	-	-	-	29
Share capital at end of period	177	177	177	177

NUMBER OF SHARES ('000)	Q4	Q4	Q1-Q4	Q1-Q4
	2015	2014	2015	2014
Number of outstanding shares at beginning of period	177,444	177,444	177,444	147,870
New issued shares	-	-	-	29,574
Total number of shares at end of period	177,444	177,444	177,444	177,444
Average number of shares outstanding	177,444	177,444	177,444	164,804

DATA PER SHARE

SEK	Q4	Q4	Q1-Q4	Q1-Q4
	2015	2014	2015	2014
EBITDA	0.5	1.5	1.5	4.2
Result after tax (EPS)	-0.7	0.6	-2.5	1.2
Equity	7.8	11.5	7.8	11.5
Operating cash flow	0.0	0.7	0.3	2.5
Total cash flow	0.1	0.0	-1.5	0.3

PARENT COMPANY

The Parent Company's result after tax for the full year was MSEK -330 (-114). The result was during the fourth quarter impacted by an impairment of a deferred tax asset of 40 MSEK and an impairment of shares in subsidiaries of 200 MSEK.

The activity in the Parent Company mainly consists of the shareholdings in VSS A/S and TA AB, as well as limited Group wide administration.

During June a dividend was paid to the shareholders at the amount of 98 MSEK. At the end of the year the Parent Company's equity was MSEK 1,990 (2,417 on Dec 31, 2014), and total assets were MSEK 2,337 (2,723 on Dec 31, 2014). The equity ratio on the balance day was 85 % (89 on Dec 31, 2014). Cash and cash equivalents at the end of the period was MSEK 34 (97 on Dec 31, 2014) of which 31 MSEK comprised of client funds.

PARENT COMPANY INCOME STATEMENT

MSEK	Q4 2015	Q4 2014	Q1-Q4 2015	Q1-Q4 2014

Net sales	83	88	344	325
Other operating revenue	1	0	1	0
Direct voyage costs	-	-2	-	-2
Personnel costs	-1	-1	-2	-66
Other costs	-82	-85	-342	-261
Depreciation/impairment	-	0	-	0
Operating result	1	0	1	-4
Net financial items	-204	-24	-291	-110
Result before tax	-203	-24	-290	-114
Tax on result for the year	-40	-	-40	-
RESULT FOR THE PERIOD	-243	-24	-330	-114
Other comprehensive income for the period:
Items that will not be restored to the income statemement
Revaluation of net pension obligations	1	-2	1	-2
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	-242	-26	-329	-116

PARENT COMPANY BALANCE SHEET

MSEK	Q4 2015	Q4 2014
Financial fixed assets	2,193	2,612
Current assets	144	111
TOTAL ASSETS	2,337	2,723
Shareholders' equity	1,990	2,417
Provisions	7	8
Long-term liabilities	163	220
Current liabilities	177	78
TOTAL SHAREHOLDERS' EQUITY, PROVISIONS AND LIABILITIES	2,337	2,723

CHANGES IN PARENT COMPANY SHAREHOLDERS' EQUITY

MSEK	Q4 2015	Q4 2014	Q1-Q4 2015	Q1-Q4 2014
Equity at beginning of period	2,232	2,443	2,417	2,388
New share issue less cost for issuance	-	-	-	145
Dividend	-	-	-98	0
Total comprehensive income for the period	-242	-26	-329	-116
SHAREHOLDERS' EQUITY AT END OF PERIOD	1,990	2,417	1,990	2,417

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. LIQUIDITY AND GOING CONCERN

The condensed interim financial statements for the twelve months ending 31 December 2015 have been prepared using the going concern assumption.

The deteriorated market conditions, including downward pressure on rates and utilization, decreasing vessel values and contract backlog, have negatively impacted the liquidity, earnings and financial position of the Group. Despite increasing willingness among ship owners to lay up vessels, there has been no sign of any significant recovery.

The Group's liquidity position is strained and in the current market, the Group does not have sufficient liquidity to service its debt obligations as they fall due going forward including the requirements to deposit the requested cash or additional security as required under contract coverage- and loan-to-value clauses during Q1 2016. Further, the Group has not been able to comply with events of default provisions in loan agreements which together with contract coverage- and loan-to-value clauses in loan agreements makes all borrowings short-term, including loans amounting to MSEK 985, which as at 31 December 2015 have been classified as long-term debt in the balance sheet.

As a consequence, a dialogue with the lenders has been initiated to secure a long-term stable financing solution within the end of Q1 2016. The outcome of this dialogue is that the lenders have committed to a standstill agreement, running up to and including 20 March 2016. This in order to give Viking Supply Ships A/S time for a long-term solution to be put together with a view to establish a formal restructuring, on which Viking Supply Ships A/S can base its continued operations. The plan is conditional upon the lenders undertake to standstill with respect to claims under the loan agreements and that the lenders use reasonable efforts to support and complete a plan for restructuring of Viking Supply Ships A/S' debt. In the standstill period, Viking Supply Ships A/S will service its obligations regarding scheduled interest payments, but is not obliged to service its obligations regarding payment of scheduled instalments.

As part of the dialogue, VSS AB's majority shareholder, Kistefos AS, has informed the lenders of its intention to support an equity issue of MUSD 15 of which Kistefos AS intends to guarantee for its pro-rata share.

In addition to above, there is a residual value guarantee commitment for the Group at expiration and redelivery of two previous bareboat chartered vessels in favor of the financing bank. The commitment amounts to a total of MSEK 63 and is due for payment. Negotiations with the bank are ongoing in order to postpone this payment.

In a loan agreement regarding one of the vessels within TA AB there is a loan-to-value clause. The bank has invoked this clause and has requested an instalment of MSEK 47. The Group does not agree with the bank's market value assessment of the pledged assets and has initiated discussions with the bank regarding the accuracy in this request.

Based on the above description of the outcome of the dialogue with the lenders and a continued belief in securing contracts within the core market segment, management has concluded that the Group will be able to continue as a going concern at least until 31 December 2016. This conclusion is based on management's knowledge of the Group, the expected outcome of the constructive dialogue with the lenders, estimated outlook for 2016 and the uncertainties and risks described above. Thus, management considers it appropriate to base the condensed interim financial statements for the twelve months period ending 31 December 2015 on the going concern assumption.

2. TANGIBLE FIXED ASSETS

Tangible fixed assets are recognized at cost or after deductions for accumulated depreciation according to plan and possible impairment. Straight-line amortization according to plan is applied.

Management has for Q4 evaluated the values of the PSV segment and concluded that the PSV vessels are impaired resulting in an impairment loss of MSEK 77. The impairment is based on average vessel valuations from internationally acknowledged shipbrokers, showing at total PSV fleet value of MSEK 645 (ranging from MSEK 590 to MSEK 684). The value is supported by a calculated value in use based on discounted cash flows using a weighted average cost of capital (WACC) of 9%. Based on key assumptions related to fixture rates, utilization,

contract coverage, cost levels and currency exchange levels as well as an estimated residual value at the end of the forecasted period, discounted cash flow calculations has been prepared covering a period of 15 years. The impairment test is sensitive to changes in the underlying assumptions including the pace and timing of assumed market recovery, which are uncertain due to the current challenging market conditions. The impairment loss of MSEK 77 is in addition to the impairment loss of MSEK 185 in Q3.

The external vessel valuations from internationally acknowledged shipbrokers for the AHTS segment shows market values in excess of the carrying amount of the owned AHTS fleet by 23 % on average.

3. SEGMENT INFORMATION

The segment information is presented in five segments:

-The segments AHTS and PSV comprise 13 offshore vessels that are equipped for and have the capacity to operate in areas with harsh environment, further 7 of the Anchor Handling Tug Supply (AHTS) vessels are equipped to operate in Arctic areas.

-The segment Services provides ice management services and logistical support in the Arctic regions.

-The segment Ship Management is involved in commercial management of five icebreakers owned by the Swedish Maritime Administration.

-The segment TA AB is a focused ship owner and tonnage provider in the RoRo and short sea bulk markets.

Q4 MSEK	AHTS	PSV	SERVICES	SHIP MGT.	TRANS ATLANTIC AB	TOTAL
Net sales	240	7	0	31	179	457
EBITDA	82	-12	-2	0	18	86
Result before tax	19	-109	-2	0	10	-82
Total assets	3,112	725	0	0	280	4,117

Q1-Q4 MSEK	AHTS	PSV	SERVICES	SHIP MGT.	TRANS ATLANTIC AB	TOTAL
Net sales	951	30	0	133	863	1,977
EBITDA	404	-107	-4	0	-25	268
Result before tax	133	-457	-5	0	-68	-397
Total assets	3,112	725	0	0	280	4,117

There are no significant transactions between the segments.

4. INTEREST BEARING LIABILITIES

The vessels owned by the Group are financed through bank loans with pledge in the vessels. Further securities have been given in the form of pledge in revenue and insurance policies. The total interest-bearing debt at the end of the quarter was MSEK 2,334 (2,695).

The interest bearing liabilities are associated with financial covenants, according to which the Group must fulfil certain key ratios. At the balance date all covenants were in compliance (see note 1, liquidity and going concern).

Further, the interest bearing liabilities are also associated with loan clauses, such as contract coverage clauses and loan-to-value clauses, according to which the Group must fulfill certain levels of contract coverage and loanto-value, pursuant to the individual loan agreements. If these levels are not met, then the Group must deposit cash or additional security, according to the terms in the relevant loan agreements. Any such amount in deposit will vary up and down and the variation is dependent upon currency exchange rates, amortizations under the loan and vessel valuations. If the levels of contract coverage and loan-to-value, pursuant to the terms in the individual loan agreements, yet again are met then the obligation of providing additional security will cease. At the balance date the Group had provided the lenders corresponding to MSEK 104 in additional security.

Calculations of contract coverage and loan-to-value ratios as at 31 December 2015 showed a requirement to deposit cash or provide additional security during Q1 2016, partly to be remedied before the end of January 2016. The Group has in 2016 not deposited cash or provided additional security on these loans and the

respective total loan amount of MSEK 1,182 is classified as short-term debt as at 31 December 2015. The Group has asked its lenders to waive such requests for additional deposits, and the Group remains in constructive dialogue with its lenders in order to find a long-term stable financing situation (see note 1, Liquidity and going concern).

Further, the Group has in 2016 received reservation of rights letters from its lenders related to events of default provisions in loan agreements, which together with contract coverage- and loan-to-value clauses in loan agreements makes all of the Group's borrowings short-term debt. This also includes loans amounting to MSEK 985, which as at 31 December 2015 have been classified as long-term debt in the balance sheet.

In March 2012 the Group issued a 5 year senior unsecured bond loan in the Norwegian capital market, with maturity in March 2017, totaling MNOK 300. The bond agreement has a limit of MNOK 750. The bond was listed on Nordic ABM in Oslo on 28 June, 2012. In March 2013 an additional MNOK 85 was drawn in a tap issue. As at balance date the Group is holding nominal MNOK 189 of this bond, implying 196 MNOK is outstanding.

The Group has 44% (41) of its interest bearing debt in USD, 19% (18) in GBP, 1% (3) in EUR and 35% (38) in NOK. The Group has 100% (90) of the total loan portfolio swapped into fixed interest rates within the interval of 90 days up to three years and 0% (10) of the total loan portfolio swapped into fixed interest rates for more than 3 years.

4.1. Classification by type of debt

MSEK	Q4	Q4
	2015	2014
Long-term bond loan	189	205
Short-term bond loan	0	0
Long-term debt to credit institutions	796	2,060
Short-term debt to credit institutions	1,349	430
TOTAL INTEREST BEARING LIABILITIES		2,695

4.2. Debt maturity

5. CASH AND CASH EQUIVALENTS

Consolidated cash and cash equivalents available at the end of the quarter amounted to MSEK 195 (450). Cash assets include client funds of MSEK 53.

MSEK	Q4 2015	Q4 2014

Restricted cash 1)	104	4
Free cash and cash equivalents	195	450
TOTAL	299	454

1) The amount is included in the item "Financial Assets" in the balance sheet.

6. OPERATIONAL AND FINANCIAL RISK

The Group operates in highly competitive markets and is exposed to various operational and financial risk factors. The financial risk is mainly related to liquidity risk, funding risk and currency risk. The Group works actively to identify, assess and manage these risks.

The Groups liquidity is due to the market conditions strained and is in the current market unable to fulfill existing covenant undertakings in loan agreements. A solution with the lenders is necessary and accordingly, a dialogue with the lenders has been initiated during Q4, with an ambition to secure a long-term stable financing solution within the end of Q1 2016 (see note 1, Liquidity and going concern).

The main operational risk factors relate to the overall macroeconomic market conditions, degree of competition, flow of goods in prioritized market segments and finally the overall balance of supply and demand of vessels, affecting rates and profit margins. The objective of the overall risk management policy of the Group is to ensure a balanced risk and return relationship.

The offshore market is to a high degree dependent on the investment level in the oil industry which in turn is driven by the oil price development on the global market. The recent decline in the offshore market has impacted the Group´s profitability and liquidity. The Group has a clear focus on increasing the number of vessels on term contracts within the offshore operations to mitigate fluctuations in rates and utilization.

The business activities in the TA AB segment operate in a competitive market with profit margins under pressure.

Long-term loans are the principal form of financing. Accordingly, interest rate fluctuations have an impact on the Groups earnings and cash flow. To reduce this risk the Group aims to actively manage the interest exposure through various types of hedging instruments.

The foreign exchange risk is primarily reduced by matching the exposure to revenues in various currencies with costs in the corresponding currency. In the same manner, assets in a certain currency are primarily matched with liabilities in the same currency.

7. OTHER INFORMATION

Corporate tax

The general situation for the Group is that taxes payable are limited to foreign entities. Accordingly, recognized corporate tax mainly comprises deferred tax. The divestment of the majority of the remaining Swedish operations during Q4 brought a deferred tax expense of MSEK 40, when an earlier capitalized deferred tax asset related to Swedish tax losses carry forward was impaired. The tax losses carry forward amounted at end of the year, net for Swedish entities, to MSEK 1,057. The recognized net deferred tax asset for the Swedish operations amounted by the end of the period to MSEK 0 (40 on Dec 31, 2014). The recognized deferred tax liability for the operations outside Sweden amounted to MSEK 3 (16 on Dec 31, 2014).

Transactions with closely related parties

Kistefos has, through a consultancy agreement, made management and financial services available to the Group, for which a total compensation of MSEK 0.3 has been paid for during the year. Apart from this, there were no other significant transactions with closely related parties.

Accounting policies

This interim report for the Group was prepared in accordance with the application of IAS 34 Interim Financial Reporting and applicable rules in the Swedish Annual Accounts Act and for the Parent Company, in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's recommendation FRF 2 Accounting for Legal Entities. Unless otherwise noted, the same accounting policies for both the Group and the Parent Company have been applied as those used in the most recent Annual Report.

VSS A/S publishes a separate report as a result of the issued debt certificates. Some values in that report are not comparable to the values in this report, as a result of different acquisition values and depreciation schedules between VSS A/S and the Group. VSS A/S has as of Q3 2011 been built through Group-internal transfers of vessels and operations at then current market prices, which is why differences in acquisition values have arisen.

Number of employees

The average number of full time employees in the Group for the year was 740 (Jan-Dec 2014: 796).

Number of shares

Share distribution on 31 December 2015:
Number of Series A shares	11,634,946
Number of Series B shares, listed	165,809,372
Total number of shares	177,444,318

AHTS

Anchor Handling Tug Supply vessel

EARNINGS PER SHARE

Profit after financial items less 1) current tax, 2) tax on profit for the year (current and deferred tax) in accordance with the consolidated income statement

EBIT

Earnings before interest and taxes

EBITDA

Earnings before interest, taxes, depreciation and amortization, corresponding to profit/loss before capital expenses and tax

EQUITY RATIO

Shareholders' equity divided by total assets

THE GROUP

Viking Supply Ships AB, a Limited Liability Company registered in Sweden, with all subsidiaries

IFRS

International Financial Reporting Standards – an international accounting standard used by all listed companies. Some older standards included in IFRS include IAS (International Accounting Standards)

MARKET ADJUSTED EQUITY RATIO

Shareholders' equity divided by total assets, adjusted for asset market valuations

MARKET VALUE ADJUSTED EQUITY

Shareholders' equity adjusted with the difference between book values and market values.

OPERATING CASH FLOW

Profit/loss after financial income/expense adjusted for capital gains/losses, depreciation/amortization and impairment

OPERATING COST

Operating cost consists of crew, technical and administration costs

OPERATING PROFIT/LOSS

Profit/loss before financial items and tax

OSV Offshore Support Vessels

PROFIT MARGIN

Profit after financial items divided by net sales

PSV Platform Supply Vessel

RETURN ON EQUITY

Profit after financial items less tax on profit for the year, divided by average shareholders' equity

RORO

Roll-on/roll-off ships are vessels designed to carry wheeled cargo, such as automobiles, trucks etc.

TOTAL CASH FLOW

Cash flow from operating activities, investing activities and financing activities

AI Terminal

Viking Supply Ships

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