Nekkar — Interim / Quarterly Report 2014

Aug 20, 2014

HIGHLIGHTS FOR THE 2^ND QUARTER 2014.

Highlights for the quarter were the following:

• EPS for the quarter was NOK-0.41 and YTD NOK-0.95.
• Turnover in the quarter was MNOK 617, a 19% reduction compared to the same period of 2013, mainly due to lower activity within the Offshore & Heavy lift division.
• EBITDA in the quarter was negative MNOK 10 $\bullet$
• Order intake was MNOK 691, up 7% compared to the previous quarter, and $\bullet$ was in line with same period of 2013. In addition the gross order intake from the joint venture companies was more than MNOK 350, mainly related to hatch covers, cargo and marine cranes for the Chinese market.
• Order backlog at the end of second quarter 2014 was MNOK 3 377 against 2 376 in Q2 2013.

	Q 2		Q 2 YTD	Full Year
MNOK	2014	2013	2014	2013	2013
Turnover	617	758	1 170	1489	2693
EBITDA	$-10,3$	36,8	$-38,7$	60,0	$-130,3$
EBITDA margin (%)	$-1,7$	4,9	$-3,3$	4,0	$-4,8$
Order intake	691	755	1 3 3 5	1 2 4 8	2913
Order backlog*	3 3 7 7	2 3 7 6	3 3 7 7	2 3 7 6	2971
EPS (NOK) Total	$-0,41$	0,18	$-0.95$	0,28	$-2,36$
EPS (NOK) Continued (*) Order backlog includes 50% of Joint venture backlog.	$-0,41$	0,18	$-0,95$	0,28	$-2,63$

KEY FIGURES

Turnover for the Group was decreased compared to last year, mainly due to decreased activity level in the Offshore & Heavy Lift division.

The EBITDA for the second quarter of 2014 was negative MNOK 10. The main reasons for the loss are low margins and low utilization for the Offshore & Heavy Lift division. In the Marine division the EBITDA margin was good for RoRo projects, partly offset by deck equipment and port equipment which report weaker results than expected.

Order intake for the second quarter of 2014 was slightly below the second quarter of 2013, however so that the total order intake for the first half of 2014 is 7% above the same period of 2013. Order intake in the Marine division has been good both for car carriers and deck equipment. A number of new heavy lift orders have been received in the second quarter.

The order backlog was MNOK 3 377, up from MNOK 2 971 at the end of 2013 and MNOK 2 376 twelve months ago. This includes order backlog of MNOK 838 in the joint ventures which has increased significantly due to the high activity in shipbuilding in China.

TOTAL ASSETS AND NET INTEREST BEARING DEBT

Total assets at the end of 2^nd quarter 2014 was MNOK 2 107, a reduction of MNOK 117 since 2013. The change is mainly due to reduced receivables and cash during the first half year. Net working capital has increased with approximately MNOK 12 during this quarter. The net working capital is negative MNOK 60.

Net interest bearing debt has increased by MNOK 36 to MNOK 304 in the $2^{nd}$ quarter of 2014.

TTS has covenants for both equity ratio and 12 months rolling EBITDA in the loan agreements with Nordea and DNB. In 3^rd quarter 2013, TTS received a waiver for 12 months rolling EBITDA for the period up to and including $2^{nd}$ quarter 2014. The covenant requirement for equity including subordinated convertible loan is 27.5%. At 30^th of June 2014, TTS was in breach with the loan covenants. In July 2014, TTS received waivers from the banks on the breach of loan covenants. MNOK 100 bank loan has been reclassified to short term debt in the reported balance at 30^th of June. TTS is in dialogue with the banks to renegotiate the loan covenants.

There were no conversions in the subordinated convertible bond in the second quarter.

ACCOUNTING PRINCIPLES

The company has prepared the interim financial report in accordance with IAS 34. The accounting principles applied are explained in detail in the 2013 annual report. There were no changes to the accounting principles in 2014.

SEGMENTS

TTS reports its operations in 3 divisions.

Marine division

	Q2		Q 2 YTD		Full Year
MNOK	2014	2013	2014	2013	$2013$ (**)
Turnover	309	307	593	644	1 2 6 4
EBITDA	24,4	36,9	33,8	52,8	$-0,2$
EBITDA margin (%)	7.9	12,0	5,7	8,2	$-1,6%$
Order backlog (*)	2 508	1569	2508	1569	2 1 2 5

(*) Order backlog includes 50% of Joint venture backlog.

(**) 2013 figures restated, to include former Marine Division plus former Port & Logistics division.

The Marine division reports revenue in line with same quarter last year. While there has been high activity on PCTC projects, this is partly offset by lower activity in deck equipment and port and terminal projects. The EBITDA for the 2^nd quarter of 2014 is reduced compared to the same period of last year, mainly due to weak margins within deck and port and terminals. The board and administration are currently assessing restructuring alternatives for deck equipment.

The outlook for the division is positive, as order backlog has increased by 60% from $2^{nd}$ quarter last of year and reflects the good market over the last 12 months.

Offshore & Heavy Lift division

	Q 2		Q 2 YTD		Full Year
MNOK	2014	2013	2014	2013	2013
Turnover	165	349	315	627	982
EBITDA	$-41,6$	$-6.9$	$-80.8$	$-1,0$	$-148.4$
EBITDA margin (%)	$-25,2$	$-2,0$	$-25.7$	$-0.2$	$-15.1$
Order backlog (*)	869	807	869	807	846

The turnover is negatively influenced by the termination of the STX drillship project and a weak market for heavy lift cranes. EBITDA reflects that several projects show heavy cost overruns.

The division initiated cost cutting measures in the quarter to adjust to the drop in activity level by implementing a workforce reduction in both Norway and Germany. The downsizing process has been finalized during the $2^{nd}$ quarter, and is expected to provide an improvement in profitability in the second half of 2014.

The order backlog is increased with MNOK 62 from 2^nd quarter 2013, mainly due to new contracts within heavy lift.

JEIVICES UIVISIUII
	Q 2		Q 2 YTD		Full Year
MNOK	2014	2013	2014	2013	2013
Turnover	142	102	263	218	446
EBITDA	12.8	11.9	19,3	19.3	43,0
EBITDA margin (%)	9,0	11.7	7,3	8,8	9,6

Services division

Turnover in the 2^nd quarter has increased by 40 % compared to the same period of last year. In the 2^nd quarter, TTS established a service unit in Brazil, and during 3^rd quarter a service unit will be set up in Houston.

OUTLOOK

The marine market is improving in line with higher shipbuilding activity in most segments. The offshore market has been quieter in the period, and is expected to remain unchanged. Signs of increased activity for the heavy lift market have led to new contracts in the quarter, and the positive trend has continued into the first part of the 3^rd quarter. The service market remains influenced by the low bulk charter rates. The initiatives implemented to improve profitability are expected to contribute positively in the future.

Responsibility statement

We confirm, to the best of our knowledge, that the condensed set of financial statements for the period 1 January to 30 June 2014 has been prepared in accordance with IAS 34 – Interim Financial Reporting and gives a true and fair view of the Company's and the Group assets, liabilities, financial position and profit as a whole. We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, a description of the principal risks and uncertainties for the remaining six months of the financial year, and major related parties transactions.

Bergen, 19 August 2014 THE BOARD AND CEO OF TTS GROUP ASA

Trym Skeie CHAIRMAN OF THE BOARD

Bjarne Skeie BOARD MEMBER Jan Magne Galåen BOARD MEMBER

Toril Eidesvik BOARD MEMBER Marianne Sandal BOARD MEMBER

Anita Kråkenes BOARD MEMBER

Jan-Magnar Grøtte BOARD MEMBER

Björn Andersson CEO

TTS Group ASA Q2 2014

Consolidated statement of comprehensive income I Konsolidert oppstilling av totalresultat NOK 1 000	Unaudited/ Urevidert	Unaudite d/ Urevidert	Unaudited/ Urevidert	Unaudited/ Urevidert*
PROFIT AND LOSS ACCOUNT/ RESULTAT	YTD 30.06.2014	YTD 30.06.2013	2 nd quarter 2014	2 nd quarter 2013	YTD 31.12.2013
Income from projects/ Driftsinntekter	1 170 331	1 489 488	616 589	757 742	2 693 167
Other operating income/ Andre driftsinntekter
Total operating income/ Sum driftsinntekter	1 170 331	1 489 488	616 589	757 742	2 693 167
Raw materials and consumables used/ Varekostnad	675 182	1 010 956	374 927	512 572	1871093
Other operating costs/ Andre driftskostnader	537 452	428 989	252 003	216 092	964 321
Result from JV ( - is income)/ Resultat fra JV ( - er inntekt)	$-3575$	$-10480$	6	$-5866$	$-11964$
EBITDA Driftsresultat før avskrivninger	$-38728$	60 022	$-10.346$	34944	$-130284$
Depreciation/ Avskrivninger	19 626	15 436	9891	7867	33 814
Other depreciation/write-downs/ Andre avskrivninger/nedskrivninger
Operating profit/ Driftsresultat	-58 354	44 586	$-20238$	27 076	$-164098$
Financial income/ Finansinntekter	34 191	10 388	13 171	6933	31 296
Financial expense/ Finanskostnader	52 505	19 329	22 689	12 087	68 079
Net finance/ Netto finans	$-18315$	$-8940$	$-9518$	$-5154$	$-36783$
Profit/loss before tax/ Resultat for skattekostnader	$-76669$	35 646	$-29756$	21922	$-200881$
Tax/ Skattekostnad	5 6 9 7	11 428	5 5 6 9	6 2 1 1	26 482
Net result continued businessi Periodens resultat videreført virksomhe	$-82365$	24 217	$-35325$	15 711	$-227363$
Net result divested business/ Resultat fra avhendet virksomhet					22 945
Net result/ Netto resultat	$-82365$	24 217	$-35325$	15711	$-204417$
NET RESULT FOR THE YEAR/ Oppstilling av totalresultatet
Net result for the period/ Periodens resultat	$-82.365$	24 217	$-35325$	15 711	$-204$ 417
Actuarial gain/loss on defined pension benefit plan/ Estimatavvik pensioner					$-10220$
Translation differences/ Omregningsdifferanser	$-12076$	40 229	4 7 9 7	7 3 5 1	71 398
Comprehensive income/ Totalresultat	$-94441$	64 447	$-30528$	23 062	$-143239$
Earnings per share (NOK) continued business/ Fortjeneste pr. aksje (NOK) videreført virksomhet	$-0,95$	0,28	$-0.41$	0.18	$-2,63$
Diluted earnings per share (NOK) continued business/ Utvannet fortjeneste pr. aksje (NOK) videreført virksomhet	$-0.95$	0,28	$-0.41$	0.18	$-2,63$
Earnings per share (NOK) divested business/ Fortjeneste pr. aksje (NOK) avhendet virksomhet					0,27
Diluted earnings per share (NOK) divested business/ Utvannet fortjeneste pr. aksje (NOK) avhendet virksomhet		×			0,27
Earnings per share (NOK)/ Fortjeneste pr. aksje (NOK)	$-0,95$	0,28	$-0,41$	0, 18	$-2,36$
Diluted earnings per share (NOK)/ Utvannet fortjeneste pr. aksje (NOK)	$-0,95$	0,28	$-0,41$	0, 18	$-2,36$
Average number of shares used as calculation basis for diluted EPS (000)/ Gjennomsnittlig antall utestående aksjer som basis for utvannet EPS (000)	86 457	86 466	86 452	86 466	86 486

Condensed consolidated statement of financial position / Konsolidert oppstilling av finansiell stilling	Unaudited/ Urevidert	Unaudite d/
		Urevidert*
NOK 1000	30.06.2014	30.06.2013	31.12.2013
Intangible assets/ Immaterielle eiendeler	663 014	643 719	673 560
Tangible assets/ Varige driftsmidler	141 611	123 915	136 049
Financial assets/ Finansielle anleggsmidler	93 881	145 559	104 002
Assets available for sale/ Eiendeler tilgiengelig for salg	28 686	28 673	28 686
Sum anleggsmidler/ Total non-current assets	927 192	941 865	942 297
Inventories/ Varer	205 348	167 362	200 801
Total receivables/ Kortsiktige fordringer	886 204	1 050 265	925 957
Bank deposits/cash/ Bankinnskudd/kontanter	87 845	146 965	155 571
Total current assets/ Sum omløpsmidler	1 179 397	1 364 591	1 282 329
Total assets/ Sum eiendeler	2 106 589	2 306 456	2 2 2 4 6 2 6
Share capital/ Aksjekapital	9530	9526	9 5 26
Other equity/ Annen egenkapital	463 455	764 226	557 143
Total equity/ Sum egenkapital	472 985	773 753	566 670
Provisions/ Avsetning for forpliktelser	101 574	93 287	105 612
Long term interest bearing debt/ Langsiktig rentebærende gjeld	86 011	184 129	184 182
Long term liabilities/ Langsiktig gield	187 585	277 415	289 794
Current interest bearing debt/ Kortsiktig rentebærende gjeld	294 712	32 24 2	49 257
Current liabilities/ Kortsiktig gield	1 151 308	1 223 047	1 318 905
Total current liabilities / Sum kortsiktig gjeld	1 446 020	1 255 288	1 368 162
Total liabilities/ Sum gield	1 633 605	1 532 704	1 657 957
Total equity and liabilities/ Sum egenkapital og gjeld	2 106 589	2 306 456	2 224 626

Condenced consolidated statement of cash flows/ Kontantstrømoppstilling	Unaudited/ Urevidert	Unaudite d/ Urevidert
NOK 1000	YTD 30.06.2014	YTD 30.06.2013	YTD 31.12.2013
EBITDA/ Driftsresultat før avskrivninger	$-38728$	60 022	$-130.284$
Change in net current assets/ Endring i netto omløpsmidler	$-131359$	$-160239$	$-7638$
Cash from operations/ Kontantstrøm fra operasjonelle aktiviteter	$-1700087$	$-100217$	$-137922$
Aquisition of non-current assets / Kjøp av varige driftsmidler	$-17510$	$-15383$	-49 534
Proceeds discontinued business/ Netto salgssum avhendet virksomhet	$\sim$	$\sim$	22 945
Other investing activities/ Andre investeringsaktiviteter	5 4 9 5	٠	40 855
Cash from investments/ Kontantstrøm fra investeringsaktiviteter	$-12015$	$-15383$	14 267
New loans and repayment/ Opptak og nedbetaling av lån	141 966	100 354	115 007
Paid-in equity/ Innbetaling av egenkapital	$\sim$	500	500
Payments to shareholders/ Utbetaling til aksjonærer	۰	$-86461$	$-86461$
Net interest paid/ Netto betalte renter	$-14955$	$-5919$	$-32209$
Cash from financing/ Kontantstrøm fra finansieringsaktiviteter	126 981	8473	$-3164$
Change in cash/ Endring i kontantbeholdning	$-55$ 121	$-107127$	$-126.819$
Cash position OB/ Kontantbeholdning IB	155 570	227 666	227 666
Effect of exchange rate changes on cash/ Effekt av valutakursendring bank	$-12605$	26 4 26	54 724
Cash position CB/ Kontantbeholdning UB	87 845	146 964	155 571

Consolidated statement of changes in equity/ Konsolidert oppstilling av endringer i egenkapital

$\mathcal{L}_{\mathcal{C}}$

NOK 1000	Aksjekapital	Share capital / Treasury shares/ Eqne aksier	Share premium reserve/ Overkursfond	Other equity/ Annen egenkapital	Total
Equity as of 1.1.2014/ Egenkapital 1.1.2014	9 5 2 6	$-16$	149 378	407 781	566 670
Comprehensive income/ Totalresultat		$\overline{\phantom{a}}$	÷	$-94441$	$-94441$
Sale treasury shares/ Salg egne aksjer				153	153
Options cost/ Opsjonsplaner				603	603
Equity CB/ Egenkapital UB	9526	$-16$	149 378	314 096	472 985

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS 2^ND QUARTER 2014

Note 1 General information

Reporting entity

TTS Group ASA is registered and domiciled in Norway, and the head office is located in Bergen.

The consolidated financial statements cover TTS Group ASA including its subsidiaries. The joint ventures are accounted for using the equity method.

The Board of Directors approved the consolidated financial statements for the year ended $31^st$ of December 2013 on $23^rd$ of April 2014. The annual report 2013 for the TTS Group and for TTS Group ASA, including the consolidated financial statements for the TTS Group, the separate financial statements for TTS Group ASA and the auditors' opinion from KPMG, are available at our website www.ttsgroup.com.

Basis of preparation

TTS Group's financial reports are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union.

The unaudited consolidated financial statements for 2^nd quarter 2014 have been prepared in accordance with IAS 34 Interim Financial Statements. The interim accounts do not include all the information required for a full financial statement and should therefore be read in connection with the consolidated financial statements of 2013

The accounting principles applied are the same as those described in the consolidated financial statements of 2013.

This condensed consolidated $2^{nd}$ quarter interim report of 2014 was approved by the Board on 19^th of August 2014.

Judgments, estimates and assumptions

The preparation of the interim report requires the use of judgments, estimates and assumptions that affect the application of accounting principles and the reported amounts of assets and liabilities, income and expenses. Actual future outcome may differ from these estimates.

In preparing these consolidated interim financial statements, the key assessments made by the management in applying the Group's accounting principles and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the financial year ended 31^st of December 2013.

Note 2 Segment information

	Marine		Offshore & Heavy Lift		Services		Corporate / Other		Total
	2014	2013	2014	2013	2014	2013	2014	2013	2014	2013
Turnover / Omsetning	309	307	165	349	142	102			617	758
EBITDA	22.9	36,9	$-41.6$	$-6,9$	12,8	۰a . J	-44	-o.,	$-10.3$	36,8

TTS Group has with effect from 1^st quarter 2014 changed the segment reporting. The reporting, for management purposes is changed to the following segments:

• Marine
• Offshore & Heavy Lift $\bullet$
• Services

The Marine division delivers a wide range of products to the maritime industry. From 1^st auarter 2014, the former Port & Logistics division is included in the Marine division. Main products for the Marine division include solutions for RORO, PCTC, and Cruise in addition to cranes, winches, hatch covers, side doors, cargo handling systems and transport systems for ports as well as production lines and systems for material handling. The joint venture companies in TTS are part of the Marine division.

The Offshore & Heavy Lift division, which delivers all types of cranes primarily focused on heavy lift and offshore cranes, including active heave compensated cranes.

The Services division includes service and after sales for all divisions within TTS. This enables TTS to offer service and after sale worldwide for the full range of its products.

Comparatives are restated to reflect above change.

Note 3 Share capital and equity

As per 30^th of June 2014 TTS Group ASA has issued 86 637 182 shares, each with a face value of NOK 0.11 giving a share capital of total NOK 9 530 090.

In 2nd quarter 2014 TTS Group ASA sold 31 518 shares to employees at a price of NOK 4.85. After the sale TTS Group ASA holds 112 882 own shares.

During the 2^nd quarter 2014 the senior management was awarded 375 000 new share options. Exercise price per share is NOK 6.15. As per the end of $2^{nd}$ quarter 2014 the senior management had 725 000 outstanding share options.

Note 4 Earnings per share

Earnings per share (EPS) are based upon on the weighted average number of shares outstanding during the period. Diluted EPS includes the effect of the assumed conversion of potentially dilutive instruments.

The components of the numerator for the basic and diluted EPS are as follows:

Earnings per share/ Resultat per aksie:	YTD	YTD	PTD	PTD	YTD
	30.06.2014	30.06.2013	Q2 2014	Q2 2013	31.12.2013
Net income available to shareholders, continued business/ Resultat tilordnet selskapets aksjonærer, viderefert
virksomhet	$-82.365$	24 217	$-35325$	15710	$-227363$
Effect of dilution/ Utvanningseffekt				$-1907$
Diluted net income available to shareholders, continued business/ Utvannet resultat tilordnet selskapets aksionærer,
viderefort virksomhet	$-82365$	24 217	$-35325$	13803	$-227363$
Net income available to shareholders, divested business/ Resultat tilordnet selskapets aksionærer, avhendet
virksomhet					22945
Effect of dilution/ Utvanningseffekt			$\sim$
Diluted net income available to shareholders, divested business/ Resultat tilordnet selskapets aksionærer, avhendet
virksomhet					22 945
Net income available to shareholders/ Utvannet resultat tilordnet selskapets aksjonærer	$-82365$	24 217	$-35.325$	15710	$-204418$
Effect of dilution/ Utvanningseffekt			Sec	$-1907$
Diluted net income available to shareholders/ Utvannet resultat tilordnet selskapets aksionærer	$-82365$	24 217	$-35325$	13803	$-204418$

The components of the denominator for the calculation of basic and diluted EPS are as follows:

	30.06.2014 30.06.2013 Q2 2014 Q2 2013				31.12.2013
Weighted average number of shares outstanding/ Gjennom snittlig utestaende ak sjer	86 457	86 349	86 452	86 387	86 406
Effect of dilution/ Utvanningseffekt
Diluted numbers of shares/ Utvannet gjennomsnittlig utestaende aksier	86 457	86 466	86 452	86 387	86 486

Accordingly, the basic and diluted EPS for the quarter is as follows:

. .
Earnings per share (NOK)/ Fortjeneste pr. aksje (NOK)	$-0.953$	0.280	$-0.409$	0.182	$-2,366$
Diluted earnings per share (NOK)/ Utvannet fortjeneste pr. aksje (NOK)	$-0.953$	0.280	$-0.409$	0,182	$-2.364$

Note 5 Restatement of the 4^th quarter 2013 interim financial report

In the period between the issuance of the $4^th$ quarter 2013 interim financial report and the 2013 annual financial report, TTS Group identified a significant increase in cost-estimates for several projects in production. When issuing the annual financial report on 24 April 2014, increased operating cost of MNOK 90 was reported to Oslo Stock Exchange. The effect of the increased cost is shown below:

NOK 1000 Restatement 4th quarter 2013 interim financial report/ Omarbeidet 4. kvartal 2013 delårsrapport	Reported 4Q13/ Rapportert 4Q13	Additional cost Marine division / Økt kostnad Marine division	Logistics division / Økt kostnadPort & Logistics division	Additional cost Additional cost Port & Offshore & Heavy Lift Restated division / Økt kostnad Offshore Omarbeidet	4Q2013/
EBITDA Driftsresultat før avskrivninger	$-19993$	$-40000$	$-8000$	& Heavy Lift divisjon $-42000$	4Q2013 $-109.993$
Net result/ Netto resultat	$-64687$	$-40,000$	$-8000$	$-42000$	$-154687$
Earnings per share (NOK)/ Fortjeneste pr. aksje (NOK) Diluted earnings per share (NOK)/ Utvannet fortjeneste pr. aksie (NOK)	$-0.75$ $-0.75$				$-1,79$ $-1.79$

Note 6 Related parties

Note 21 and accounting principles section 2.2 in the consolidated financial statement of 2013 describe the principles related to elimination of transactions between group subsidiaries. Eliminated transactions have no significance for the financial position and profit for the period.

The Group has carried out various transactions with subsidiaries and joint ventures. All the transactions have been carried out as part of the ordinary operations and at arm's length prices.

Balance sheet items to/from Joint Ventures/ Balanseposter til/fra felleskontrollert virksomhet	30.06.2014	31.12.2013
Current receivables/ Kortsiktige fordringer	22 932	22 258
Current liabilities/ Kortsiktig gield	$-5987$	$-4493$
Net receivables $(+)$ liabilities $(-)$ to/from Joint Ventures/ Netto fordringer $(+)$ / gield $(-)$	16 945	17765

Note 7 Tax

TTS Group is taxable in more than one jurisdiction based on its operations. A loss in one iurisdiction may not be offset against taxable income in another jurisdiction. Thus, the Group may pay tax within some jurisdictions even though it might have an overall loss or have tax losses exceeding taxable profit at the consolidated level. Recognized tax in the income statement for the $2^nd$ quarter 2014 is relating to taxes in foreign tax jurisdictions.

Deferred tax

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial purpose and such amounts recognized for tax purposes. The net recognized deferred tax consists of the following:

30.06.2014	31.12.2013
61 876	57 748
$-28995$	$-30929$
32 882	26 819

Gross deferred tax asset is recognized as intangible assets and gross deferred tax liability is recognized as provisions ¹⁾ Brutto utsatt skattefordel er innregnet som immateriell eiendel og brutto utsatt skatteforpliktelse er innregnet som avsetning for forpliktelser

Recognized deferred tax asset is primarily relating to tax losses in the Norwegian companies. The criteria that have been utilized to estimate that future taxable profit can be utilized against deferred tax losses are;

• . The Group will have taxable profits before unused tax losses expire
• The Group has sufficient temporary differences
• . Tax losses result from particular identifiable causes

In general, the assessment of deferred tax asset in the Norwegian companies is unchanged in 2014 compared to 2013. See Note 18 in the consolidated financial statement of 2013 for further description.

Note 8 Goodwill and other intangible assets

TTS Group tests the value of goodwill and other intangible assets annually or at the end of each reporting period if any indication that the assets may be impaired.

For the subsidiary NMF, which was acquired in the $3^rd$ quarter of 2012, the results are weaker than expected. TTS Group expects improved results, and performed an impairment test at year end 2013 which concluded that the value in use was MNOK 47 higher than the book value of goodwill of MNOK 316. Future market development could have a material impact in the impairment test.

TTS Group considers that there are no events, changes in assumptions or other new information indicating a changed assessment of goodwill and other intangible assets from year-end 2013. At 30^th of June 2014 TTS Group has not impaired any goodwill or other intangible assets.

Overview of changes in goodwill and other intangible assets are as follows:

	Goodwill		Other intangible assets
	30.06.2014	31.12.2013	30.06.2014	31.12.2013
Net book value, beginning of period/ Bokført verdi, periodestart	538 119	471 150	77 693	80724
Acquisition/ Oppkiøp		12 000
Divestment/ Avhendelse			$\overline{\phantom{a}}$
Additions/ Tilgang i året			331	1782
Depreciations/Amortizations/ Avskrivninger			$-6583$	$-10233$
Impairment/ Nedskrivninger
Foreign currency differences/ Omregningsdifferanser	$-8789$	54969	367	5420
Net book value, end of period/ Bokført verdi, periodeslutt	529 329	538 119	71809	77 693

Note 9 Non-current assets

	Non-current assets
	30.06.2014	31.12.2013
Net book value, beginning of period/ Bokført verdi, periodestart	136 049	115 034
Acquisition/ Oppkjøp
Divestment/ Avhendelse	$-500$
Additions/ Tilgang i året	17 678	35 751
Depreciations/Amortizations/ Avskrivninger	$-13044$	$-23580$
Impairment/ Nedskrivninger
Foreign currency differences/ Omreaningsdifferanser	1428	8844
Net book value, end of period/ Bokført verdi, periodeslutt	141 611	136 049

Note 10 Investments in Joint Ventures

	30.06.2014	31.12.2013
Net book value, beginning of period/ Bokført verdi, periodestart	104 002	134 988
Divestment/ Avhendelse
Reclassification/ Reklassifisering
Share of profit (+) / loss (-)/ Andel overskudd (+) / underskudd (-)	3575	11964
Share of dividend received/ Utbytte mottatt	$-5495$	$-40954$
Foreign currency differences/ Omregningsdifferanser	$-8200$	$-1996$
Net book value, end of period/ Bokført verdi, periodeslutt	93 881	104 002

Note 11 Inventories

	30.06.2014	31.12.2013
Inventories, incl non current/ Râvarer og ferdigvarer inkl. ukurans	240 236	243 376
Obsolescence/ Ukurans	$-34888$	$-42575$
Total inventories/ Sum varelager	205 348	200 801

Note 12 Financial assets measured at fair value

The Group has one investment in financial assets measured at fair value in accordance with IFRS 13.

		30.06.2014		31.12.2013
Sigma Drilling AS	Ownership/ Eierandel	Fair value/ Virk elig verdi	Ownership/ Eierandel	Fair value/ Virk elig verdi
	16.1 70	28 673	16.1%	28 673

The investment is classified within Level 3 of the IFRS 13 fair value hierarchy. The valuation principle applied is a risk weighed net present value of estimated future net cash flows. Ref note 8 to the 2013 annual report.

Note 13 Financial risk management

The Group's objectives and principles of financial risk management are consistent with what stated in the consolidated financial statements for the fiscal year 2013.

There has been no execution related to the subordinated bond facility during the second quarter of 2014. The nominal amount and conversion price of the convertible bond loan is unchanged from 4^th quarter 2013 and is MNOK 95.3, giving right to 19 184 104 shares upon conversion.

The overdraft facility of MNOK 300 and the quarantee facility of MNOK 500 have been unchanged during 2^nd quarter of 2014. Ref notes 12 and 13 to the 2013 annual report.

At the end of 2^nd quarter 2014 TTS-group has drawn MNOK 100 of total MNOK 100 of the 3 year term loan facility in the bank agreement established in December 2012. ref Note 12 in the 2013 annual report. In addition the group has drawn MNOK 135 of the total MNOK 300 overdraft facility.

TTS has covenants for both equity ratio and 12 months rolling EBITDA related to its loans with Nordea and DNB. In 3^rd quarter 2013 TTS received a waiver for 12 months rolling EBITDA related to the period up to and including 2^nd quarter 2014. The covenant requirement for equity including subordinated convertible loan is 27.5%. At 30 June 2014, TTS was in breach with the loan covenants. In July 2014, TTS received waivers from the banks on the breach of loan covenants. Bank loans of MNOK 100 have been reclassified to short term debt in the reported balance at 30 June. TTS continues the dialogue with the banks to renegotiate the loan covenants.

Additional information regarding financial risk management is available in the annual report 2013.

Note 14 Subsequent events

Subsequent to 30^th of June 2014, the TTS Group reported the following new contracts:

TTS Group ASA has through its subsidiary TTS Offshore Handling Equipment AS (OHE) in Norway signed a contract for delivery of two offshore cranes worth approximately MNOK 60.

TTS Group ASA has, through its subsidiary TTS NMF GmbH in Hamburg, Germany, signed several new contracts for delivery of multipurpose cranes to China. The total contract value is MNOK172.

TTS Group ASA has, through its subsidiary TTS Marine AB in Gothenburg, Sweden, signed two new contracts for delivery of cargo access equipment to in total six car carriers. The total order value is approximately MNOK 137.