2016 - Siem Offshore Highlights for the First Quarter • The Oil spill recovery vessel (“OSRV”) “Siem Marataizes” was delivered from a yard in Brazil and commenced an 8-year

ANNUAL REPORT 2016

Highlights 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Key Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

New Vessels Delivered in 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Vessels in the Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Local presence in key markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

This is Siem Offshore Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Board of Director’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Statements of Financial Position – Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Statements of Financial Position – Equity and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Notes to the Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Responsibility Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Financial Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Highlights for the First Quarter

• The Oil spill recovery vessel (“OSRV”) “Siem Marataizes” was delivered from a yard in Brazil and commenced an 8-year firm contract with options for Petrobras.

• Agreed a 18-month contract with options for the AHTS vessel “Siem Topaz” for operations in Australia.

• Siem Offshore Contractors was awarded a contract for the provi-sion of a walk-to-work service operations vessel for the windfarm sector of the North Sea. The firm charter period is 700 days with options to extend the charter period by up to three additional years.

Highlights tor the Second Quarter

• Agreed a 5-year term contract with 2 x 1-year options for one dual-fuelled PSV for operation in Australia.

• Extension of charter for the scientific research vessel “Joides Reso-lution” until 30 September 2019. The charterer has further options to extend charter until 30 September 2023 on an annual basis.

• Agreed a 6-month extension of the contract for the PSV “Siem Pilot”. • SOC was awarded a turnkey supply and installation of the inner

array grid cable system for the Beatrice Offshore Wind Farm project. The Company acquired 50% of Secunda Canada LP (“Se-cunda”) as part of the recapitalization of Secunda and increased its ownership to 100%.

• Secunda took delivery of the AHTS “Avalon Sea” from a yard in Poland in May and commenced a 6-year contract with an inter-national oil company.

• Terminated charter party for the OSCV “Siem Spearfish” due to default by the charterer.

• Took delivery of the cable-lay vessel (“CLV”) “Siem Aimery” from a yard in Poland in April and commenced employment with Siem Offshore Contractors for project work within the submarine power cable installation, repair and maintenance segment.

• Took delivery of the first of two Well-Intervention Vessels (“WIV”) from a yard in Germany and commenced a 7-year contract.

Highlights for the Third Quarter

• Received approval from all of its financing banks for a financial platform to position the Company for the challenging market expected in the coming years.

• Established a stand-alone AHTS vessel company, Siem AHTS Pool AS (“SAP”), holding ownership in 10 AHTS vessels and in which Siem Offshore holds a 78.16% interest.

• Secunda was awarded 3-year term contracts plus options for two of its PSVs, the “Venture Sea” and the “Siem Hanne”.

• Sold and delivered the PSV “Siem Carrier”.• Extended the bareboat contract for MV “Hugin Explorer” by 15

months to 1 July 2019 and agreed a purchase obligation by the charterer at the end of the period.

Highlights for the Fourth Quarter

• Siem Offshore Contractors (“SOC”) was awarded a contract for the transportation and installation of a portion of the inner array grid cable system of the Hornsea Offshore Wind Farm, Project One in UK waters. SOC was awarded a turnkey contract for the supply and installation of the inner array grid cable system contract for the Trianel Windpark Borkum II.

• Cancelled a shipbuilding contract with Remontowa S.A. in Poland for the 3rd dual fuel PSV in a series of four vessels due to delay in delivery.

• Took delivery of the second of two well-intervention vessels (“WIV”) built at a German shipyard and commenced a 7-year contract.

• Took delivery of the dual fuel PSV “Siem Thiima” from a Polish shipyard and the vessel commenced a 5-year contract with an international oil company for operation in Australian waters.

• Conducted a periodic review of vessel values, receivables and investments in subsidiaries and recorded aggregate impairments of USD 74.0 million.

REVENUE USD 1,000

469 123OPERATING MARGIN USD 1,000

128 295EMPLOYEES

1 058VESSELS IN OPERATION

46

HIGHLIGHTS 2016

SIEM OFFSHORE INC. ANNUAL REPORT 2016 1

KEY FIGURES

Definitions (1) Earnings before interests, tax, depreciation and amortization (EBITDA)(2) Earnings before interests and taxes (EBIT)(3) Total current assets less total current liabilities(4) See Statements of Cash Flows for details(5) Net cash flow from operation divided on weighted average number of shares outstanding(6) Stock Exchange price on December 31 divided on earnings per share(7) Stock Exchange price on December 31 divided on cash flow per share(8) Shareholders’ equity divided on number of outstanding shares (9) Operating margin divided on weighted average number of outstanding shares(10) Book equity divided on total assets(11) Current assets divided on current liabilities

(Amounts in USD 1,000) Consolidated

INCOME STATEMENTS Ref 2016 2015

Operating revenue 469,123 422,449

Operating expenses -340,829 -303,901

Operating margin (1) 128,295 118,548

Operating margin, % 27% 28%

Depreciation and amortization -111,771 -107,025

Impairment of vessels -60,180 -159,465

Impairment of intangibles -1,015 -6,705

Impairment of long-term receivables and subsidiaries -15,379 -

Gain/(loss) on sale of assets -423 16,317

Net gain on bargain purchase 18,312 -

Gain on sale of interest rate derivatives (CIRR) 368 368

Gain/(loss) on currency derivative contracts -7,762 -30,775

Operating profit (2) -49,555 -168,735

Operating profit margin, % -11% -40%

Net financial items -106,994 -21,384

Result from associated companies 19 -1,560

Profit /(loss) before taxes -156,531 -191,679

Profit margin before taxes -33% -45%

Tax benefit/(expense) 626 -4,737

Net profit /(loss) -155,905 -196,416

Non-controlling interest -13,469 -9,729

Net profit/(loss) attributable to shareholders -142,436 -186,687

Net profit margin, % -30% -44%

STATEMENTS OF FINANCIAL POSITION 12/31/2016 12/31/2015

Non-current assets 2,132,652 1,766,916

Current assets 279,639 264,747

Working capital (3) -65,071 34,299

Total assets 2,413,390 2,035,122

Shareholders' equity 549,107 632,215

Non-current liabilities 1,420,695 1,139,165

Current liabilities 344,710 230,448

Total equity and liabilities 2,413,390 2,035,121


STATEMENTS OF CASH FLOWS 2016 2015

Net cash flow from operations (4) 64,841 42,462

Net change in cash (4) -60,364 43,623

KEY FIGURES 2016 2015

Weighted average no. of outstanding shares (1,000) 842,021 518,318

Weighted average no. of diluted outstanding shares (1,000) 842,021 757,123

Earnings per share (USD) -0.17 -0.36

Diluted earnings per share (USD -0.17 -0.36

Cash flow per share in USD (5) 0.08 0.08

Share price per year end (USD) 0.21 0.16

Share price per year end (NOK) 1.85 1.40

Price/earnings per share (P/E) (6) -1.27 -0.44

Price/cash flow per share (P/CF) (7) 2.79 2.00

Book shareholders' equity per share (USD) (8) 0.65 0.75

Operating margin share (9) 0.15 0.23

Book equity ratio (10) 0.27 0.33

Liquidity ratio (11) 0.81 1.15

NewbuildingsVessels in operation

VESSELS

27 TOTAL

34 TOTAL

32 TOTAL

40 TOTAL

44 TOTAL42 TOTAL

45 TOTAL

31/12/2005

31/12/2006

31/12/2007

31/12/2008

31/12/2009

31/12/2010

31/12/201131/12/2012 47 TOTAL

31/12/2013 55 TOTAL

31/12/2015 51 TOTAL31/12/2016 46 TOTAL

31/12/2014 55 TOTAL

0-79%100%

OWNERSHIP

31/12/200531/12/200631/12/200731/12/200831/12/200931/12/201031/12/2011

27 TOTAL34 TOTAL

32 TOTAL40 TOTAL

44 TOTAL

45 TOTAL42 TOTAL

31/12/2012 47 TOTAL31/12/2013 55 TOTAL

31/12/2015 51 TOTAL31/12/2016 46 TOTAL

31/12/2014 55 TOTAL


Siem Helix 1Delivered June 2016

Siem Helix 2Delivered December 2016

NEW VESSELS DELIVERED IN 2016


Siem ThiimaDelivered November 2016

Siem MarataizesDelivered February 2016

Siem AimeryDelivered April 2016

Avalon SeaDelivered May 2016


VESSELS IN THE FLEET

Platform Supply Vessels (PSV) Large-size PSVs

Siem Pride Siem Symphony Siem Atlas Siem Giant Siem Hanne Siem Louisa Sophie Siem Siem Sasha Siddis Mariner Siem Pilot Hugin Explorer Siem Supplier Siem Thiima

Built 2015 2014 2013 2014 2007 2006 2006 2005 2011 2010 2006 1999 2016

Design VS 4411 DF VS 4411 DF STX PSV 4700 STX PSV 4700 VS 470 MK II VS 470 MK II VS 470 MK II VS 470 MK II VS 485 VS 485 MT 6000 MK II MT 6000 VS 4411 DF

Dp Class 2 2 2 2 2 2 2 1 2 2 2 2 2

LOA 89.20 m 89.20 m 87.90 m 87.90 m 73.40 m 73.40 m 73.40 m 73.40 m 88.3 m 88.3 m 86.20 m 83.70 m 89.2 m

Breadth 19.00 m 19.00 m 19.00 m 19.00 m 16.60 m 16.60 m 16.60 m 16.60 m 20 m 20 m 19.70 m 17.70 m 19.00 m

Draught 7.40 m 7.40 m 6.60m 6.60 m 6.42 m 6.42 m 6.42 m 6.42 m approx 7.0 m approx 7.0 m 6.18 m 6.10 m 7.40 m

Dwt 5,500 t 5,500 t 4700 T 4,700 T 3570 T 3570 T 3570 T 3570 T 4500 T 4500 T 3236 T 4250 T 5500 T

Accommodation 28 25 34 34 34 34 34 34 64 64 56 20 25

Cargo Deck Area 980 m2 980 m2 1000 m2 usable 1000 m2 usable 680 m2 usable 680 m2 usable 680 m2 usable 680 m2 usable 970 m2 970 m2 935 m2 912 m2 980 m2

Ownership 100% 100% 100% 100% 100% 100% 100% 51% 51% 51% 100% 100% 100%

Siem Marlin Siem N-Sea Siem Barracuda Siem Spearfish Siem Stingray

Built 2009 2009 2013 2014 2014

Design MT 6017 MK II MT 6017 MK II STX OSCV 11L STX OSCV 03 STX OSCV 03

Dp Class 2 2 2 2 2

LOA 93.60 m 93.60 m 120.80 m 120.80 m 120.80 m

Breadth 19.70 m 19.70 m 22.00 m 23.00 m 23.00 m

Draught 6.30 m 6.30 m 6.60 m 6.60 m 6.60 m

Dwt 4.500 t 4.500 t 5.000 t 5.000 t 5.000 t

Accommodation 68 68 110 110 110

Cargo Deck Area 1046 m2 1046 m2 1300 m2 1,300 m2 1,300 m2

Crane 100 t Offshore/Subsea crane 100 t Offshore/Subsea 250 t Offshore/Subsea 1 X 250 t AHC, 3,000 m 1 X 250 t AHC, 3,000 m

ROV Moonpool - - 7.2 X 7.2 7.2 X 7.2 m 7.2 X 7.2 m

Ownership 100% 100% 100% 100% 100%

Siem Amethyst Siem Opal Siem Garnet Siem Sapphire Siem Aquamarine Siem Topaz Siem Ruby Siem Diamond Siem Pearl Siem Emerald

Built 2011 2011 2010 2010 2010 2010 2010 2010 2009 2009

Design VS 491 CD VS 491 CD VS 491 CD VS 491 CD VS 491 CD VS 491 CD VS 490 CD VS 491 CD VS 491 CD VS 491 CD

Dp Class 2 2 2 2 2 2 2 2 2 2

LOA 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m

Breadth 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m

Draught 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m

Dwt 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T

Accommodation 60 60 60 60 60 60 60 60 60 60

Cargo Deck Area 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2

BHP 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000

Bollard Pull 297 Te 297 Te 282 Te 301 Te 284 Te 306 Te 310 Te 284 Te 285 Te 281 Te

Ownership 78,16% 78,16% 78,16% 78,16% 78,16% 78,16% 78,16% 78,16% 78,16% 78,16%

Offshore Subsea Construction Vessel (OSCV) & Multipurpose field & ROV Support Vessel (MRSV)

Anchor Handling Tug Supply Vessels (AHTS)


7

Platform Supply Vessels (PSV) Large-size PSVs

Siem Pride Siem Symphony Siem Atlas Siem Giant Siem Hanne Siem Louisa Sophie Siem Siem Sasha Siddis Mariner Siem Pilot Hugin Explorer Siem Supplier Siem Thiima

Built 2015 2014 2013 2014 2007 2006 2006 2005 2011 2010 2006 1999 2016

Design VS 4411 DF VS 4411 DF STX PSV 4700 STX PSV 4700 VS 470 MK II VS 470 MK II VS 470 MK II VS 470 MK II VS 485 VS 485 MT 6000 MK II MT 6000 VS 4411 DF

Dp Class 2 2 2 2 2 2 2 1 2 2 2 2 2

LOA 89.20 m 89.20 m 87.90 m 87.90 m 73.40 m 73.40 m 73.40 m 73.40 m 88.3 m 88.3 m 86.20 m 83.70 m 89.2 m

Breadth 19.00 m 19.00 m 19.00 m 19.00 m 16.60 m 16.60 m 16.60 m 16.60 m 20 m 20 m 19.70 m 17.70 m 19.00 m

Draught 7.40 m 7.40 m 6.60m 6.60 m 6.42 m 6.42 m 6.42 m 6.42 m approx 7.0 m approx 7.0 m 6.18 m 6.10 m 7.40 m

Dwt 5,500 t 5,500 t 4700 T 4,700 T 3570 T 3570 T 3570 T 3570 T 4500 T 4500 T 3236 T 4250 T 5500 T

Accommodation 28 25 34 34 34 34 34 34 64 64 56 20 25

Cargo Deck Area 980 m2 980 m2 1000 m2 usable 1000 m2 usable 680 m2 usable 680 m2 usable 680 m2 usable 680 m2 usable 970 m2 970 m2 935 m2 912 m2 980 m2

Ownership 100% 100% 100% 100% 100% 100% 100% 51% 51% 51% 100% 100% 100%

Siem Amethyst Siem Opal Siem Garnet Siem Sapphire Siem Aquamarine Siem Topaz Siem Ruby Siem Diamond Siem Pearl Siem Emerald

Built 2011 2011 2010 2010 2010 2010 2010 2010 2009 2009

Design VS 491 CD VS 491 CD VS 491 CD VS 491 CD VS 491 CD VS 491 CD VS 490 CD VS 491 CD VS 491 CD VS 491 CD

Dp Class 2 2 2 2 2 2 2 2 2 2

LOA 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m 91.00 m

Breadth 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m 22.00 m

Draught 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m 7.95 m

Dwt 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T 3800 T

Accommodation 60 60 60 60 60 60 60 60 60 60

Cargo Deck Area 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2 800 m2

BHP 28000 28000 28000 28000 28000 28000 28000 28000 28000 28000

Bollard Pull 297 Te 297 Te 282 Te 301 Te 284 Te 306 Te 310 Te 284 Te 285 Te 281 Te

Ownership 78,16% 78,16% 78,16% 78,16% 78,16% 78,16% 78,16% 78,16% 78,16% 78,16%

Carajas Brazil – Fleet of 6 vessels

Canada – Fleet of 5 vessels

Type Fast supply vessel (FSV) OSRV/FCS/FSV AHTS/PSV/Field

support

Ownership 100% owned 100% owned 100% owned

Joides Resolution Big Orange XVIII

Type Scientific Core Drilling Vessel (SCDV)

Well Stimulation Vessel (WSV)

Ownership 100% owned 41.3% owned

Installation Support Vessel (ISV)

Cablelay Vessel (CLV) Other

Siem Moxie

Built 2014

Design SX 163 X-Bow

Dp Class 2

LOA 74.00 m

Breadth 17.00 m

Draught 6.40 m

Dwt 2.835 t

Accommodation 60

Cargo Deck Area 200 m2 usable

Ownership 100%

Siem Aimery

Built 2016

Design Vard CLV01

Dp Class 2

LOA 95.3 m

Breadth 21.5 m

Draught 7.1 m

Dwt 5,417 t

Accommodation 60

Cargo Deck Area 350 m2

Ownership 100%

Well Intervention Vessels (WIV)

Siem Helix 1 Siem Helix 2

Built 2016 2016

Design Salt 307 WIV Salt 307 WIV

Dp Class 3 3

LOA 158.65 m 157.60 m

Breadth 31.00 m 31.00 m

Draught 8.50 m 8.50 m

Dwt 12500 t 12500 t

Accommodation 150 150

BHP 36000 35000

Ownership 100% 100%

Anchor Handling Tug Supply Vessels (AHTS)


LOCAL PRESENCE IN KEY MARKETS

Geographicalfootprint

Kristiansand (HQ)

Siem Offshore offices• Kristiansand (Norway)• Rio de Janeiro, Macaé, Aracaju (Brazil)• Leer (Germany)• Groningen (The Netherlands)• Houston (USA)• Accra (Ghana)• Perth (Australia)• Gdynia (Poland)• St. John´s, Halifax (Canada)

Leer

Groningen

Gdynia

St. John´s

Halifax

Houston

AracajuMacaé

Rio de Janeiro

Accra


Perth

TOTAL EMPLOYEES

1058TOTAL NUMBER OF VESSELS

46VESSELS IN OPERATION

46

PSVs: 13WIVs: 2

AHTs: 10OSCVs: 5

CANADIAN FLEET: 5OTHER: 11


Siem Offshore owns and operates one of the world’s most modern fleet of offshore support vessels, equipped to meet the increased requirements from clients and demands from operation in the harshest environments. The Company has a strong involvement in the renewable energy market as a contractor for installation of submarine power cables for offshore wind farms.

Siem Offshore had 46 vessels in operation and had one vessel under construction by year-end 2016.

By end March 2017, the total fleet comprised of 45 vessels, including, among others the following owned ves-

sels, thirteen Platform Supply Vessels (PSVs), five Offshore Subsea Construction Vessels (OSCVs), ten Anchor Handling, Tug and Supply vessels (AHTS), two Well-Intervention Vessels (WIVs), one Installa-tion Support Vessel (ISV), one Cable Lay Vessel (CLV), six Brazilian flagged vessels and five Canadian flagged vessels comprising of both AHTS vessels and PSVs. The fleet provides a broad spectrum of services offered by a highly experienced and competent crew with a strong focus on Health, Safety, Environment and Quality.

The Company’s vision is to become the leading provider and the

most attractive employer offering marine services to the offshore energy service industry. The Company shall deliver quality and reliable contracted services in a timely manner by executing cost-efficient solutions developed in active collaboration and cooperation with our customers.

Siem Offshore commenced operations with effect from 1 July 2005. The Company is registered in the Cayman Islands and is listed on the Oslo Stock Exchange (OSE Symbol: SIOFF). The Company’s headquarters is located in Kristiansand, Norway and additional subsidiary offices are located in Brazil, Germany, the Netherlands, Ghana, USA, Poland, Canada and Australia. The Company is tax resident in Norway.

This is Siem Offshore Inc.

Deck CrewPhotographer: Tove Hertzberg

10 SIEM OFFSHORE INC. ANNUAL REPORT 2016

Siem Offshore Contractors

SIEM OFFSHORE INC., ANNUAL REPORT 2016 1111

We continuously work to

make the values part of the

daily life of the Company,

in particular in training of

leaders throughout the

organization. The values

are established to support

our present and future

business.

Our Values

CARINGWe encourage team spirit and knowl-edge sharing. We strive to perform our daily work correctly, safely and without causing damage to people, environment and equipment.

COMPETITIVEWe behave in a pro-active manner and we are innovative in our way of thinking. Con-tinuous improvement is our key to success.

COMMITTEDWe are driven by integrity. We step up and take charge to fulfil given promises.

REVENUE Amounts in USD 1,000

20 480200679 7992007

87 738200857 9342009

74 6412010

122 9522011

OPERATING MARGIN

5272006

60020076422008

76220098282010

1 0732011

EMPLOYEES

110 3482012

1 0782012

122 6632013

1 1102013

73 5542006159 3422007

192 7732008183 5582009

228 302340 628

2010

2011368 2132012

363 9552013491 312

469 123422 449

2014

20162015

194 125118 548

128 295

201420152016

1 073949

1058

201420152016

Amounts in USD 1,000

The Company

All references to “Siem Offshore” and the “Company” shall mean Siem Offshore Inc. and its subsidiaries and associates unless the context indicates otherwise. All references to “Parent” shall mean Siem Offshore Inc. as the Parent Company only.

Siem Offshore is registered in the Cayman Islands and is listed on the Oslo Stock Exchange (OSE Symbol: SIOFF). The Company’s headquarters are located in Kristiansand, Norway and additional subsidiary offices are located in Brazil, Germany, the Netherlands, Poland, Ghana, United States, Canada, Cayman Islands and Australia. The Company is tax domiciled in Norway.

The Company’s primary activity is the ownership and operation of offshore support vessels (“OSVs”) for the offshore energy service industry. Other significant activities include the installation, trench-ing, termination and testing of inner-array cables for the offshore renewable energy industry.

The Company operated a fleet of 46 vessels at year-end, includ-ing partly-owned vessels and ten vessels in lay-up. During 2016, the total fleet of OSVs conducted operations in the North Sea, West Africa, Argentina, Australia, the U.S. Gulf, Canada and Brazil.

Secunda Holding Limited (“Secunda”) is now a wholly-owned subsidiary following the Company’s acquisition of the remaining 50% ownership during the year. Secunda owns and operates a harsh-weather fleet of five offshore support vessels and is a leader in sup-port services for platform supply, anchor-handling, rescue standby and towage in its primary area of operation offshore Eastern Canada

Siem WIS AS, a 60%-owned subsidiary of the Company, devel-ops applications for managed-pressure drilling (“MPD”) based on a patented seal technology.

Overseas Drilling Limited (“ODL”) is a wholly-owned subsidiary and the owner of the drillship, the “JOIDES Resolution”. The “JOIDES Resolution” is used in scientific research to drill core samples in the ocean floor during expeditions for an international research program.

Siem Offshore do Brasil S.A. is the Company’s wholly-owned Brazilian subsidiary which owns and operates a fleet of eight OSVs in Brazil and provides specialized engineering applications to de-velop and implement combat management systems for vessels in the Brazilian navy.

Financial Results, Position And Risks

IFRS The financial statements for the Company and the Parent are pre-pared in accordance with the International Financial Reporting Standards (“IFRS”) as adopted by the European Union.

Going-ConcernThe financial statements have been prepared under the assumption that the Company and the Parent are going-concerns. This assump-tion is based on the Company’s level of cash and cash equivalents at year-end, forecasted cash-flows, available credit facilities, agree-ments with finance creditors and bondholders and the market value of its assets.

The Board of Directors of Siem Offshore Inc. (the “Board”) presents its report for the fiscal year ended 31 December 2016 together with the audited consolidated financial statements and the audited financial statements for the parent company. The financial statements and related notes were authorised for issue by the Board on 19 April 2017 and will be presented to the shareholders for approval at the Annual General Meeting to be held 5 May 2017.

THE BOARD OF DIRECTORS’ REPORT


The Company began to implement comprehensive cost reduc-tion measures at the end of 2014 with the onset of a slowdown in the industry to reduce the Company’s cost base and to preserve liquidity for ongoing operations.

The current market situation creates uncertainty related to the expected level of future revenues and places pressure on the Com-pany’s cash position used in operations and the servicing of debt.

Following months of negotiations, the Company announced last summer that its proposed Finance Plan had received approval from all of its bank lenders; however, subject to the Company’s reaching agreement with the holders of its two public bonds to extend the maturity dates of the bonds on terms that are acceptable to the banks. The Finance Plan gives support to the Company’s contention that it is a viable, going-concern and provides a solid financial plat-form to meet the challenges presented by the oil and gas services market during the next several years. The bank lenders agreed to up to three-year extension of the final bullet payments of all mortgage debt due before 31 December 2019, deferral of instalments for the fleet of AHTS vessels for 2.5 years with a cash sweep mechanism, and the easing of certain debt covenant requirements from the Company’s banks for the next three years. An agreement with the bondholders was passed by the bondholders´ meeting in the Parent´s two public bonds in April 2017 and the Finance Plan is therefore firm. The bondholders´ meetings approved certain amendments to the terms of the bond issues including the extension of maturity by 2.75 years from original maturity date, easing of financial cov-enants, lower interest coupon and option to payment-in-kind at a higher interest rate. The Company has been granted a call option at par and has agreed to certain restrictions on new debt and new encumbrances outside the ordinary course of business, as well as a restriction on dividend payments. In connection with and subject to certain conditions in relation to the proposed amendments, the Company intends to carry-out a rights issue to generate gross proceeds of NOK190 million for working capital purposes. The Company’s largest shareholder, Siem Europe S.a r.l., has indicated its willingness to fully underwrite the share issue.

The Agreement reached with the bondholders and the raising of new equity through the rights issue will provide the Company with a stronger financial platform during the current downturn and will position the Company to comply with its debt covenants over the next couple of years.

Income StatementThe Company had 46 offshore vessels in operation at year-end. The Company finished its comprehensive newbuilding program with the last six vessels delivered in 2016. All vessels commenced long-term charters after delivery.

In 2016, the Company recorded operating revenue of USD469.1 million and a net loss attributable to shareholders of USD(142.4) million, or USD(0.17) per share, compared to operating revenue of USD422.4 million and a net loss attributable to shareholders of USD(186.7) million, or USD(0.36) per share, in 2015.

The Company’s operating margin for 2016 was USD128.3 mil-lion compared to USD118.5 million in 2015. Net operating margin as a percentage of operating revenue was 27% in 2016 compared to 28% in 2015.

The Company’s operating profit for 2016 was USD(49.6) million compared to USD(168.7) million in 2015 and includes deprecia-tion and amortisation of USD111.8 million (2015: USD107 million). During 2016, the Company conducted periodic reviews of vessel valuations and recorded impairments of USD76.6 million on cer-tain vessels, receivables and intangibles compared to impairment charges of USD166.2 million in 2015. Net currency exchange (losses) of USD(7.8) million (2015: USD(30.8) million) was recorded on forward contracts, of which USD0.9 million (2015: USD2.1 million) was unrealised. The net gain/(loss) on sale of assets was USD(0.4) million (2015: USD16.3 million).

The Company’s net financial items included net expenses of USD(107.0) million (2015: USD(21.4) million) and a revaluation gain of non-USD currency items of USD(3.8) million (2015: USD22.1 million) due to stronger USD during the period. Non-USD currency items are held to match short- and long-term liabilities, includ-ing off-balance sheet liabilities, in similar currency. Net currency gain/(loss) of USD(64.2)million includes a loss of approximately USD(60.3) million in relation to prior years’ currency losses in a cash flow hedge that had accumulated in other comprehensive income in the financial statements of its wholly-owned Brazilian subsidiary, Siem Offshore do Brazil SA.

The Parent company is primarily a holding company owning shares in operating subsidiaries.

The Board proposes that the Parent’s net loss of USD(14.8) mil-lion for 2016 be allocated to retained earnings and that no dividend be paid for 2016.

Financial Position and Cash-FlowsTotal equity for the Company was USD648 million at year-end 2016 (2015: USD666 million), and the book equity ratio was 27% (2015: 33%). Shareholders’ equity was USD549 million (2015: USD632 million), equivalent to USD0.65 per share (2015: USD0.75 per share).

The cash position at year-end was USD101 million (2015: USD149 million).

The Company recorded USD415 million as gross capital expen-ditures in fixed assets during 2016, of which USD334 million related to new vessels delivered from yards or vessels under construction, and USD81 million related to project-specific investments in vessels and capitalised dry-dockings.

The net interest-bearing debt at year-end were equivalent to USD1.4 billion (USD1.0 billion in 2015). The Company made total drawings equivalent to USD456 million under credit facilities during the year. The weighted average cost of debt for the Company was approximately 3.9% p.a. at year-end (2015: 4.3% p.a.).The Company paid debt instalments of the equivalent of USD188 million during the year.

The Company’s cash-flows are primarily denominated in USD,


BOARD OF DIRECTORS’ REPORT

NOK, EUR and BRL. During 2016, the USD weakened by 2.15% to the NOK, 16.54% to the BRL and strengthened by 3.59% to EUR. The average recorded exchange rates were NOK/USD 0.1186, EUR/USD 1.1022 and BRL/USD 0.287 (2015: NOK/USD 0.1236, EUR/USD 1.1134 and BRL/USD 0.3002).

Financial Risks — INTEREST RISK

The Company is exposed to changes in interest rates as approxi-mately 69% of the interest-bearing debt is based on floating interest rates and primarily denominated in USD and NOK. The average 3-month USD LIBOR was 0.7444% p.a. during 2016 (0.31583% p.a. in 2015) and the average 3-month NIBOR was 1.0674% p.a. during 2016 (1.29% p.a. in 2015). The Company held USD70 million in interest rate swap agreements at year-end.

— CURRENCY RISKThe Company is exposed to currency risk as revenue and costs are denominated in various currencies. The Company is also ex-posed to currency risk due to future yard instalments in relation to shipbuilding contracts and long-term debt in various currencies. Forward exchange contracts are entered into in order to reduce the currency risk related to future cash flows.

— LIQUIDITY RISKThe Company is financed by a combination of debt and equity. If the Company fails to repay or refinance its credit facilities, additional equity financing may be required. There can be no assurance that the Company will be able to repay its debts or extend the debt repayment schedule through re-financing of credit facilities. There is no assurance that the Company will not experience cash flow shortfalls exceeding the Company’s available funding sources or to remain in compliance with minimum cash requirements or other covenants. Further, there is no assurance that the Company will be able to raise new equity or arrange new credit facilities on favourable terms and in amounts necessary to conduct its ongoing and future operations should this be required.

Operations

Fleet, Performance and EmploymentThe fleet in operation at end of year 2016 totalled 46 vessels (2015: 45 vessels), including partly owned vessels and vessels in lay-up.

The Company had 13 PSVs in operation at end of the year. The PSV fleet earned operating revenues of USD62.1 million and had 77% utilisation (2015: USD76.5 million and 75%). The operating margin before administrative expenses was USD28.1 million (2015: USD38.7 million) and the operating margin as a percentage of rev-enue was 45% (2015: 51%). The contract backlog at 31 December 2016 is 51% for 2017, 36% for 2018 and 23% for 2019 (2015: 60% for 2016, 31% for 2017 and 24% for 2018).

The Company had five OSCVs in operation at end of the year

and two WIVs in operation at end of the year (2015: five).The OSCV and WIV fleet earned operating revenues of USD97.2 million and had 92% utilisation (2015: USD111.3 million and 94%). The operat-ing margin before administrative expenses was USD44.5 million (2015: USD69.6 million) and the operating margin as a percentage of revenue was 46% (2015: 63%). The contract backlog was 55% for 2017, 43% for 2018 and 29% for 2019 (2015: 88% for 2016, 83% for 2017 and 77% for 2018).

The Company had ten AHTS vessels in operation at end of the year (2015: ten). The AHTS fleet earned operating revenues of USD48.3 million and had 39% utilisation (2015: USD54.7 million and 55% utilization). The operating margin before administrative expenses was USD10.8 million (2015: USD(1.4) million) and the operating margin as a percentage of revenue was 22% (2015: (3)%). The contract backlog is 8% for 2017, and 0% for 2018 (2015: 11% for 2016, 0% for 2017 and 0% for 2018).

The Company had a fleet of five Canadian-flagged offshore support vessels at the end of the year. The Canadian fleet earned operating revenue of USD24.5 million and had 73% utilization. The operating margin before administrative expenses was USD12.5 million and the operating margin as a percentage of revenue was 51%. The results for Secunda were recorded in accordance with the equity method for the first five months and were fully consoli-dated commencing with effect from 1 June 2016, post-acquisition of 100% ownership in Secunda. The contract backlog was 48% for 2017, 45% for 2018 and 26% for 2019.

The Company had a fleet of six smaller Brazilian-flagged vessels at end of the year (2015: seven).This fleet earned operating revenue of USD20.1 million and had 73% utilisation (2015: USD21.3 million and 86%). The operating margin before administrative expenses was USD8.6 million (2015: USD7.1 million) and the operating margin as a percentage of revenue was 43% (2015: 33%). The contract backlog was 69% for 2017, 41% for 2018 and 33% for 2019 (2015: 57% for 2016, 57% for 2017 and 49% for 2018).

The research vessel “Joides Resolution” recorded operating revenues of USD26.4 million (2015: USD26.2 million) with an op-erating margin before administrative expenses of USD15.1 million (2015: USD14.5 million) and the operating margin as a percentage of revenue was 57% (2015: 55%). The contract backlog was 100% for 2017, 100% for 2018 and 75% for 2019. (2015: 73 % for 2016, 0% for 2017 and 0% for 2018).

Siem Offshore Contractors (SOC) recorded operating revenues of USD193.8 million (2015: USD132.3 million). The projects within SOC are accounted for using the percentage-of-completion method and profit margins are not recorded until the respective project’s offshore operation has reached a minimum of 25% technical com-pletion. This has an impact on the overall percentage of operating margin for Siem Offshore on a consolidated basis. Total project margin before administrative expense of USD30.0 million (2015: USD17.5million) was recognized on projects.

The total firm contract backlog for all OSV vessels at 31 Decem-ber 2016 was USD0.9 billion (2015: USD1.2 billion), including the


41%-ownership in the “Big Orange XVIII”. The total vessel contract backlog is allocated with USD194 million in 2017, USD164 million in 2018 and USD565 million in 2019 and thereafter.

The total firm contract backlog for SOC and the firm contract for the “JOIDES Resolution” at 31 December 2016 was USD293 million (2015: USD198 million). The contract backlog is allocated with USD137 million in 2017, USD113 million in 2018 and USD43 million in 2017 and thereafter.

HSEQ

The Company’s target includes zero personal injuries, no harm to the environment and no damage to or loss of equipment and property.

The HSEQ performance improved during 2016 with no Lost Time Injuries throughout the fleet. Considerable efforts are made on various levels to ensure this positive trend continues in 2017.

The number of safety reports is steady, and it is believed that the ongoing training in Root Cause Analysis will ensure improved understanding of incidents in the fleet, which in turn will prevent future incidents. On board and ashore, we believe that the trans-fer of experience is an important factor to create and maintain a professional HSEQ culture and continuously improve our HSEQ performance.

By nature, anchor-handling is one of the most demanding op-erations in the OSV sector. Siem Offshore puts great emphasis on a safe work environment and appropriate time for preparations of every job operation.

Siem Offshore Contractors

GeneralSOC is a well-established prime contractor for the installation, post-lay trenching, termination and testing of submarine composite cables for the inner array grid of offshore wind farms (“OWF”) and for export to shore. SOC has been successful in executing the work offshore by utilising primarily the Company’s specialized new-built vessels, Siem Aimery (Cable Layer) and Siem Moxie (Installation Support), both supported by our experienced offshore and onshore organisation.

Safety & EnvironmentHigh safety and environmental standards have been a first priority within SOC. Risk and opportunity management processes and per-sonnel training ensures that internal personnel and subcontractors have a common safety first mentality, which has delivered zero loss time injuries for another year. Environmental impact is a key area of importance in a market focused on renewable energy. SOC has developed standards to minimize impact of cable installa-tion activities on the environment. SOC has established itself as a leading contractor for quality and safety demonstrated by recent contract execution.

ProjectsThe Baltic 2 OWF project for EnBW Baltic 2 GmbH involved the installation, post-lay trenching, termination and testing of 86 inner array grid submarine composite cables within the German sector of the Baltic Sea. A positive margin was recorded on the project.

The Nordsee One OWF project for Nordsee One GmbH is an EPIC-contract for the supply, installation, post-lay trenching, and testing of 59 submarine composite cables forming the inner array grid and located in the German sector of the North Sea. The project was completed offshore in the fourth quarter 2016.The project recorded a positive margin.

The Nordsee One OWF export cable project for TenneT Offshore GmbH is a contract for the supply, installation, post-lay trenching, and testing of two export cables in the German sector of the North Sea in partnership with J-Power Systems. The cables installation work was completed offshore in the fourth quarter 2016 and final testing is expected in the second quarter 2017. The project recorded a positive margin.

The Veja Mate OWF project for Veja Mate Offshore Project GmbH is an EPIC-contract for the supply, installation, post-lay trenching and testing of 73 submarine composite cables forming the inner array grid, in the German sector of the North Sea. The offshore in-stallation commenced in the fourth quarter 2016 and is progressing ahead of plan. The project recorded a positive margin in 2016 and is planned to complete with a positive margin in 2017.

The Beatrice Offshore OWF was awarded by SHL Offshore Con-tractors BV in June 2016 and is an EPIC-contract for the supply, installation, post-lay trenching and testing of 91 submarine com-posite cables forming the inner array grid located off the northeast coast of Scotland. The project started engineering and preparation for the cables fabrication.

The Trianel Windpark Borkum II OWF project was awarded in November 2016 and is an EPIC-contract for the supply, installation, post-lay trenching and testing of 32 submarine composite cables forming the inner array grid within the German sector of the North Sea. The project started the engineering and preparation for the cables fabrication.

The Hornsea OWF One project was awarded in November 2016 and is a contract for the installation and post-lay trenching of 81 submarine composite cables forming the inner array grid in the UK sector of the North Sea. The project started the engineering work.

The Ocean Breeze Energy walk-to-work charter for the Bard Offshore 1 wind farm in the German sector of the North Sea was awarded in March 2016.

Market OutlookThe tendering activity has been high throughout the year and con-tinues into 2017. SOC has established itself as a reliable turnkey contractor within the offshore renewable energy industry and is well positioned in its segment for the future. Overall, the financial year 2016 was a successful year for SOC and this trend is expected to continue in 2017 and beyond.


Siem WIS

Siem WIS has designed and developed a pressure control device (“PCD”) which can improve managed-pressure drilling (“MPD”) operations. MPD has the capability to mitigate drilling hazards by improving drilling performance and increasing the performance rate. In offshore application, they solve various complex challenges such as reducing lost circulation, extensive mud cost, stuck pipe and well pressure surges. The global managed pressure drilling (MPD) market was valued at USD3.7 billion in 2015 and is expected to reach USD5 billion by 2024.

Siem WIS delivered five successful PCD operations in 2016. Four operations were for Statoil on the Gullfaks field and one operation on the ultra-high pressure/high temperature (“HP/HT”) well “Sola-ris” was for Total. The operations have been delivered without any non-productive time.

In December 2016, Siem WIS entered into a frame agreement with Statoil. Two contracts have been received to date for comple-tion in 2017.

Shareholders And Corporate Governance

Shareholder InformationThe Company’s authorised share capital is USD10,000,000- divided into 1,000,000,000 ordinary shares of a nominal value of USD0.01 each. The issued share capital at 19 April 2017, based on the 842,021,380 Company shares issued and outstanding, is USD8,420,213.80 The Company’s shares are listed on the Oslo Stock Exchange with the ticker symbol SIOFF. The Company’s largest shareholder is Siem Europe S.a r.l., a wholly-owned subsidiary of Siem Industries Inc., with an 83% interest at 19 April 2017. During 2016, the closing share price reached a high of NOK 2.60, a low of NOK 1.35, and closed at NOK 1.85 at year-end.

Corporate GovernanceThe Company has implemented guidelines for corporate governance based on the recommendations and guidelines given by the Oslo Stock Exchange. The purpose of these guidelines is to clarify the division of roles between shareholders, the General Meeting, Board

of Directors and day-to-day Management beyond what follows from the legislation. A detailed summary of our corporate governance principles may be found in a separate section of the annual report.

The Working Environment And The Employees

The Company provides a workplace with equal opportunities. We treat current and prospective employees fairly with respect to sala-ries, promotions and recruitment. The Company offers its employees a sound working environment. We also give possibilities for profes-sional development where men and women are treated equally and where there is no discrimination.

The sick leave for the onshore and offshore employees was 1.9 and 3.46% respectively.

The development of the onshore and offshore organizations continues in order to prepare for increased future activities. The knowledge of the crew is vital for a safe and secure operation of any vessel. Such knowledge includes good seamanship and understand-ing of the demanding assignments to be executed.

Outlook

The low activity within the oil-service industry has led to reduced charter rates and an increased number of vessels in lay-up. A re-covery of the worldwide oil and gas drilling activities will absorb some, but not all, of the current excess capacity. The build-up of the existing fleets by owners and speculative newbuildings based on overly optimistic projections of future requirements is expected to take years to absorb. Fleet owners and their stakeholders must be willing to make the difficult decisions to minimise the current excess capacity by the scrapping of older, less efficient vessels in favour of modern tonnage that has been built to meet today’s increasingly demanding specifications. Such actions are necessary to provide long-term financial stability for the industry.

The financial pressure on the industry has led to consolida-tions among owners, which is positive for an industry that is very fragmented.

Eystein EriksrudChairman(Sign.)

John C. WallaceDirector(Sign.)

Idar HillersøyChief Executive Officer(Sign.)

Kristian SiemDirector(Sign.)

Alexander MonnasDirector(Sign.)

Michael DeloucheDirector(Sign.)

19 April 2017

BOARD OF DIRECTORS’ REPORT


Statement of Policy on Corporate Governance The principles for corporate governance adopted by the Company are based on the “Norwegian Recommendation for Corporate Governance” issued on the 30th October 2014.

As a company incorporated in the Cayman Islands, Siem Offshore Inc. is an exempted company duly incorporated under the laws of the Cayman Islands and subject to Cayman Islands laws and regulations with respect to corporate governance. Cayman Islands corporate law is to a great extent based on English Law. In addition, due to the Company’s listing on the Oslo Stock Exchange, certain aspects of Norwegian Securities law apply to the Company and there is a requirement to adhere to the Norwegian Code of Practice for the Corporate Governance. The Norwegian Code of Practice for Corporate Governance is publicly available at www.nues.no in both Norwegian and English languages. Due to new provisions implemented in the Norwegian Accounting Act, compliance with the regulations for Corporate Governance reporting is now a legal requirement provided that it does not conflict with the Cayman Islands laws and regulations. The Company endeavours to main-tain high standards of corporate governance and is committed to ensuring that all shareholders of the Company are treated equally and the same information is communicated to all shareholders at the same time.

Corporate Governance is subject to annual assessment and review by the Board of Directors.

The Board of Directors has reviewed this statement. It is the opinion of the Board of Directors that the Company complies with the Norwegian Code of Practice for Corporate Governance.

This statement is structured in accordance with The Norwegian Code of Practice for Corporate Governance.

Business

Cayman Islands laws and regulation do not require the objects clause of the Companies Memorandum and Articles of Association to be clearly defined. The Company has however adopted clear objectives and strategies for its business. Siem Offshore aims to grow the company within offshore support vessels, both organically and through combination with other opera-tors, in order to achieve economies of scale and stronger presence in the market.

Siem Offshore aims to become a preferred supplier of marine services to the energy industry based on quality and reliability and

to provide cost-efficient solutions to its customers by understanding their operation and applying technology and experience.

The Company builds its business around a motivated workforce with the appropriate technical solutions. This creates sustainable value for all shareholders.

Reference is made to the Board of Directors’ report for detailed information.

Equity and Dividends

The priorities for the use of Company funds are determined by the Board of Directors and recommendations of Management influenced by existing conditions. At present, priorities for use of funds in order of importance are investment opportunities in the business, repay-ment of debt and the return of capital to the shareholders in form of share buy-back or dividends.

The Board’s mandate to increase the Company’s share capital is limited only to the extent of the authorized share capital of the Company with certain pre-emption rights for shareholders and in accordance with the Company’s Memorandum and Articles of As-sociation which comply with Cayman Islands law.

Under the Articles of Association, the Board can issue new shares, convertible bonds or warrants at any time within the limits of the authorized capital without the consent of the general meeting but with pre-emption rights for shareholders. A General Meeting has further authorized the Board to issue new shares without pre-emption rights to all shareholders up to a limit of 50% of Siem Offshore’ shares at the time the authorization was given. The authority gives the Board flexibility to finance investments, acquisitions and other business combinations on short notice through the issue of shares or certain other equity instruments in the Company. Furthermore, the Board considers the granting of a new standing authority at the time of holding an Annual General Meeting rather than convening an Extraordinary General Meeting at some future time to be in the best interests of the Company, as this will result in cost savings and more effective time management for both the Company’s senior management and its Shareholders.

An extraordinary general meeting was held on 14th of Au-gust 2015 resolving as a Special Resolution that the Company

CORPORATE GOVERNANCE


should increase the authorized share capital of the Company from USD5,500,000 divided into 550,000,000 Common Shares of par value USD 0.01 each to USD10,000,000 divided into 1,000,000,000 Common Shares of par value USD0.01 each, by the creation of an additional 450,000,000 Common Shares of par value USD0.01 each which shall rank pari passu in all respects with the existing Common Shares.

The Board of Directors of the Company resolved to issue 454,430,000 common shares at a share price of NOK 1.80 in a Rights Issue. The Board holds authorization to issue 157,978,620 common shares.

Equal Treatment of Shareholders, Freely Tradable Shares and Transactions with Related Parties

The Company is committed to ensuring that all shareholders of the Company are treated equally and all the issued shares in Siem Offshore, at nominal value US$ 0.01 each, are freely tradable and carry equal rights with no restrictions on voting.

Siem Industries Inc, which owns 83% of the Company, is repre-sented by its Chairman, Kristian Siem, Deputy CEO, Eystein Eriksrud and President, Michael Delouche, on the Board of Directors. The Company pays an annual fee to Siem Industries as compensation for directorships, provision of an office and presence in the Cay-man Islands, and other services. The fee is adopted by the annual general meeting based on a recommendation from the independent Board Members. Related party transactions are disclosed in the notes to the accounts.

Freely Negotiable Shares

All of the shares in the Company carry equal rights and are freely negotiable. The shares are traded according to normal market practice and no special limitations on transactions have been laid down in the Articles of Association.

General Meetings

The Annual General Meeting of the Company will be held at the registered office of the Company on the Cayman Islands, 5 May 2017, at 9:30am Cayman Islands local time and Shareholders can be represented by proxy. Notices of general meetings and related documents are made available to shareholders at the latest 17 days prior to meeting date. Notice of attendance by proxy is to be provided to either (1) the offices of Siem Offshore AS at Nodeviga 14, P.O. Box 425, Kristiansand 4664, Norway, telefax no. +47.37.40.62.86 or (2) the Company’s office at P.O. Box 10597, George Town, Grand Cay-man KY1-1005, CAYMAN ISLANDS, telefax no. +1.345.946.3342, not less than 24 hours prior to the stated time of the annual general meeting. Shareholders are given the opportunity to vote on the election of board members.

Nomination Committee

The appointment of a nomination committee is not a requirement under Cayman Islands Law.

Corporate Assembly and Board of Directors; Composition and Independence

In the nominations to the Board of Directors, the Board consults with the Company’s major shareholders and ensures that the Board is constituted by Directors with the necessary expertise and capac-ity. There is no requirement under Cayman Islands Law for the Company to establish a corporate assembly.

Each Board member is elected for a term of 2 years or such shorter term as shall be specified in the ordinary resolution pur-suant to which the Director shall be appointed. Representatives of the Executive Management are not presently members of the Company’s Board of Directors.

The Board of Directors as a group has extensive experience in areas which are important to Siem Offshore, including offshore services, international shipping, ship broking, finance and corporate governance and restructuring.

Work of the Board of Directors

The Board monitors the performance of management through regular meetings and reporting. The Company has a Compensation Committee and an Audit Committee.

The Compensation Committee consists of two Directors. The mandate of the committee is to review and approve the compensa-tion of the CEO and any bonuses to all executive personnel. Refer-ence is also made to section 12, Remuneration of the Executive Management.

The Audit Committee consists of two Directors. The composition of the committee meets the requirements of the Norwegian Code of Practice for Corporate Governance as regards independence. The committee’s mandate can be summarized as follows:• Ascertain that the internal and external accounting reporting

process are organized appropriately and carried out efficiently, and are of high professional quality.

• Monitor and assess the quality of the statutory audit of the Com-pany’s financial statements.

• Ensure the independence of the external auditor, including any additional services provided by the external auditor.

Risk Management and Internal Control Internal controlA prerequisite for the Company’s system of decentralized respon-sibility is that the activities in every part of the Company meet general financial and non-financial requirements, and are carried out in accordance with the Company’s common norms and values.


The executive management of each subsidiary is responsible for risk management and internal control in the subsidiary with a view to ensuring 1) optimizing of business opportunities, 2) targeted, safe, high-quality and cost-effective operations, 3) reliable financial report-ing, 4) compliance with current legislation and regulations and 5) operations in accordance with the Company’s governing documents, including ethical and social responsibility standards. The Company’s risk management system is fundamental to the achievement of these goals.

Financial reporting process Financial information from subsidiaries is received each month in a reporting package in standard format accommodated necessary information for preparing the consolidated financial statement for the Company. The reporting from the subsidiaries is extended in the year-end reporting process to meet various requirements for sup-plementary information. There are established routines to check the financial data in the received reporting packages to ensure the best quality for the consolidated figures for the Company.

Training and further development of accounting experience within the Company is provided locally by participating on various external courses on a regular basis.

Remuneration of the Board of Directors

The remuneration of the Board members reflect their experience and responsibilities, and is adopted by the annual general meeting based on the recommendation from the Board. The Board members do not have share options or profit-based remuneration.The responsibility statement of the Board of Directors in this report and the notes to the accounts include information about the remu-neration of the Board of Directors.

Remuneration of the Executive Management

The Company has a Compensation Committee which reviews and approves the compensation of the CEO and the bonuses to all execu-tive personnel. The Articles of Association of the Company permit the Board to approve the granting of share options to employees. A long-term Employee share scheme for 8 key employees of the company was introduced in Q1 2013. A second Employee share scheme was implemented in Q2 2014 for 10 key employees of the company. The remuneration of the CEO and the share option scheme are disclosed in the notes to the accounts. Three key employees have left the Company since the implementation of the Employee share schemes.

The Board of Director’s statement on the remuneration of execu-tive personnel is presented as a separate appendix to the agenda for the general meeting. The remuneration statement clearly states which aspects of the guidelines are advisory and which, if any, are binding. The general meeting will vote separately on each of these aspects of the guidelines.

Information and Communications

The Company has a policy of treating all its shareholders and other market participants equally, and communicates relevant and objective information on significant developments which impact the Company in a timely manner.

The Company also seeks to ensure that its accounting and fi-nancial reporting are to the standards of our investors, and the Company presents its financial statements in accordance with the International Financial Reporting Standards (IFRS). The Audit Com-mittee of the Board of Directors monitors the company’s reporting on behalf of the Board.

Notices to the Oslo Stock Exchange and placements of notices and other information, including quarterly and annual reports, may be found on the Company’s website (www.siemoffshore.com).

Take-overs

The shares in the Company are freely tradable and the Articles of Association of the Company does not hold specific defence mecha-nisms against take-over situations. In a take-over situation, the Board of Directors will comply with relevant legislation.

Auditor

The Auditor of the Company is elected at the Annual General Meet-ing which also approves its remuneration. Details of the Company’s remuneration of the external auditor are given in the notes to the accounts.

The auditor reports to the Audit Committee twice a year at a minimum, but more often if necessary. During the latter half of the year, the external auditor presents to the Audit Committee his assessment of risks, internal controls, risk areas and improvement potential in control systems and his audit plan for the following year. The second report to the Audit Committee is the presentation of Year-End Audit. The external auditor presents a summary of the audit process, including comments on audited internal control procedures and key issues in the financial reporting.

The Audit Committee also receives an annual independence report from the external auditor, confirming the external auditor’s independ-ence with respect to the Company, within the meaning of the Nor-wegian Act on Auditing and Auditors. The confirmation also includes services delivered to the Company other than mandatory audit.

CORPORATE GOVERNANCE


INCOME STATEMENTS

PARENT COMPANY CONSOLIDATED

2016 2015 (Amounts in USD 1,000 except for earnings per share amounts) Note 2016 2015

865 145 Operating revenue 4,23 469,123 422,449

-13,187 -9,240 Operating expenses 8,18,19,20,23 -340,829 -303,901

-12,321 -9,095 Operating margin 128,295 118,548

- - Depreciation and amortization 4,5 -111,771 -107,025

- - Impairment of vessels 4.5 -60,180 -159,465

- - Impairment of intangible assets 4.5 -1,015 -6,705

- - Impairment on long-term receivables 9 -13,979 -

- - Impairment of projects 4,5,6 -1,400 -

- - Gain/(loss) on sales of assets 25 -423 16,317

- - Gain on bargain purchase 32 18,312 -

368 368 Gain on CIRR-deposit at off-market rate 12 368 368

- - Loss on currency derivative contracts 21.28 -7,762 -30,775

-11,953 -8,727 Operating loss 4 -49,555 -168,735

7,207 3,491 Financial income 3.21 12,471 11,184

-12,825 -12,225 Financial expenses 3.21 -55,312 -54,677

64 1,265 Net currency gain/(loss) 21 -64,154 22,110

-5,554 -7,469 Net financial items -106,994 -21,384 - - Result from associated companies 7 19 -1,560

-17,508 -16,196 Profit /(loss) before taxes -156,531 -191,679

2,742 - Tax benefit/(expense) 11 626 -4,737

-14,765 -16,196 Net profit/(loss) -155,905 -196,416

- - Attributable to non-controlling interest -13,469 -9,729

-14,765 -16,196 Attributable to shareholders of the Company -142,436 -186,687

- - Weighted average number of outstanding shares (1,000) 842,021 518,318

- - Earnings per share: Basic and Diluted 22 -0.17 -0.36

Comprehensive Income Statements

2016 2015 (Amounts in USD 1,000) Note 2016 2015 -14,765 -16,196 Net profit/(loss) -155,905 -196,416

Other comprehensive income

Items that will not be reclassified to profit or loss

- - Pension remeasurement gain (loss) 230 -1,178

Items that may be subsequently reclassified to profit or loss

- - Cash flow hedges 60,319 -51,245

- - Currency translation differences -23 -9,687

-14,765 -16,196 Total comprehensive loss for the year -95,379 -258,526 - - Attributable to non-controlling interest -9,729 -9,520

-14,765 -16,196 Attributable to shareholders of the Company -85,650 -249,006


STATEMENTS OF FINANCIAL POSITION—ASSETS


12/31/2016 12/31/2015 (Amounts in USD 1,000) Note 12/31/2016 12/31/2015

NON-CURRENT INTANGIBLE ASSETS

- - Deferred tax asset 11 11,467 11,668

- - Intangible assets 5 16,977 16,849

- - Total non-current intangible assets 28,444 28,517

NON-CURRENT TANGIBLE ASSETS

- - Vessels under construction 5,17 8,258 185,064

- - Vessels and equipment 5 1,980,228 1,391,695

- - Capitalized project costs 5 5,623 5,381

- - Total non-current tangible assets 1,994,108 1,582,140

NON-CURRENT FINANCIAL ASSETS

801,099 768,127 Investment in subsidiaries 6

- - Investment in associated companies 7 2,717 16,660

14,300 19,208 CIRR Loan deposit 12 76,215 88,002

59,868 25,867 Long-term receivables 9,14,29 31,168 51,598

875,267 813,202 Total non-current financial assets 110,100 156,260

875,267 813,202 Total non-current assets 2,132,652 1,766,916

CURRENT ASSETS

- - Accounts receivable 2,29 48,230 46,147

5,697 4,169 Other current receivables 9,14,23,29 120,977 60,657

- - Inventories 30 9,109 7,739

- - Derivative financial instruments 15,28,29 - 1,451

195,433 269,293 Cash 2,10,29 101,323 148,753

201,130 273,463 Total current assets 279,639 264,747

- - Asset held for sale 24,25,29 1,099 3,459

1,076,397 1,086,664 Total assets 2,413,390 2,035,122


STATEMENTS OF FINANCIAL POSITION —EQUITY AND LIABILITIES


12/31/2016 12/31/2015 (Amounts in USD 1,000) Note 12/31/2016 12/31/2015

EQUITY

625,219 625,219 Paid-in capital 625,219 625,219

-22,302 -22,303 Other reserves -47,276 -108,151

240,158 249,671 Retained earnings -28,836 115,147

843,075 852,587 Shareholders' equity 26 549,107 632,215

- - Non-controlling interest 98,878 33,293

843,075 852,587 Total equity 647,985 665,508

LIABILITIESNON-CURRENT LIABILITIES

210,807 207,852 Borrowings 2,12,14 1,293,059 1,007,925

14,300 19,208 CIRR Loan 12.29 76,215 88,002

- 4,258 Tax liabilities 11 1,298 5,483

1,050 1,418 Deferred CIRR gain 12 1,050 1,418

- - Pension liabilities 8 1,692 2,195

- - Other non-current liabilities 47,382 34,142

226,157 232,736 Total non-current liabilities 1,420,695 1,139,165

CURRENT LIABILITIES

56 144 Accounts payable 2.29 20,783 8,395

- - Borrowings 2,12,14,29 177,834 114,660

- - Derivative financial instruments 15,28,29 8,358 12,896

-292 -150 Taxes payable 11 2,868 3,496

7,401 1,347 Other current liabilities 13,14,23 134,868 91,001

7,165 1,341 Total current liabilities 344,710 230,448

233,323 234,077 Total liabilities 14 1,765,405 1,369,614

1,076,397 1,086,664 Total equity and liabilities 2,413,390 2,035,122

- - Secured debt 12 1,329,618 992,134

52,494 305,658 Guarantees 16 61,318 310,087


STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED

(Amounts in USD 1,000)Total no.

of sharesShare

capitalShare premium

reservesExchange rate

differencesOther

reservesRetained earnings

Shareholders’ equity

Non-controlling interest

Total equity

Equity as of December 31, 2014 387,591,380 3,876 522,361 -2,095 -43,396 304,237 784,982 38,666 823,649

Change previous periods - - - - -869 -869 - -869

Net loss to shareholders - - - - -186,687 -186,687 -9,729 -196,416

Employee share schemes – value of employee services - - - -1,728 - -1,728 - -1,728

Currency translation differences - - -9,687 - -2,711 -12,398 209 -12,189

Pension remeasurement - - - - 1,178 1,178 - 1,178

Share issues in partially owned subsidiaries - - - - - - 6,276 6,276

Cash flow hedge - - - -65,866 - -65,866 - -65,866

Reclassification to profit or loss - - - 14,621 - 14,621 - 14,621

Capital reduction in partially owned subsidiaries - - - - - - -4,811 -4,811

Impairment of excess value partially owned - - - - - - 2,682 2,682

Share issue in Siem Offshore Inc. 454,430,000 4,544 94,438 - - - 98,983 - 98,983


Change previous periods - - - - -1 682 -1 682 -100 -1 782

Net loss to shareholders - - - - -142 436 -142 436 -13 469 -155 905

Employee share scheme – Value of employee services - - - 516 - 516 - 516

Other - - - 63 -96 -33 1 201 1 168

Currency translation differences - - -23 - - -23 - -23

Pension remeasurement - - - - 230 230 - 230

Share issues in partially owned subsidiaries - - - - - - 77 953 77 953

Reclassification to profit or loss - - - 60 319 - 60 319 - 60 319

Equity as of December 31, 2016 842,021,380 8,420 616,799 -11 805 -35 471 -28 836 549 106 98 878 647 985

Share issues in partially owned subsidiaries 2016 2015

Minority share of new equity Siem WIS AS 885 1,336

Minority share of new equity Siem AHTS Pool AS 77,068 -

Total 77,953 1,336


25

CONSOLIDATED

(Amounts in USD 1,000)Total no.

of sharesShare

capitalShare premium

reservesExchange rate

differencesOther



Non-controlling interest

Total equity


Change previous periods - - - - -869 -869 - -869

Net loss to shareholders - - - - -186,687 -186,687 -9,729 -196,416

Employee share schemes – value of employee services - - - -1,728 - -1,728 - -1,728

Currency translation differences - - -9,687 - -2,711 -12,398 209 -12,189

Pension remeasurement - - - - 1,178 1,178 - 1,178

Share issues in partially owned subsidiaries - - - - - - 6,276 6,276

Cash flow hedge - - - -65,866 - -65,866 - -65,866

Reclassification to profit or loss - - - 14,621 - 14,621 - 14,621

Capital reduction in partially owned subsidiaries - - - - - - -4,811 -4,811

Impairment of excess value partially owned - - - - - - 2,682 2,682

Share issue in Siem Offshore Inc. 454,430,000 4,544 94,438 - - - 98,983 - 98,983


Change previous periods - - - - -1 682 -1 682 -100 -1 782

Net loss to shareholders - - - - -142 436 -142 436 -13 469 -155 905

Employee share scheme – Value of employee services - - - 516 - 516 - 516

Other - - - 63 -96 -33 1 201 1 168

Currency translation differences - - -23 - - -23 - -23

Pension remeasurement - - - - 230 230 - 230

Share issues in partially owned subsidiaries - - - - - - 77 953 77 953

Reclassification to profit or loss - - - 60 319 - 60 319 - 60 319

Equity as of December 31, 2016 842,021,380 8,420 616,799 -11 805 -35 471 -28 836 549 106 98 878 647 985

Share issues in partially owned subsidiaries 2016 2015

Minority share of new equity Siem WIS AS 885 1,336

Minority share of new equity Siem AHTS Pool AS 77,068 -

Total 77,953 1,336


PARENT COMPANY

(Amounts in USD 1,000) Total no. of sharesShare

capital

Share premium reserves

Exchange rate

differencesOther



Equity as of December 31, 2014 387,591,380 3,876 522,360 -100 -22,203 258,675 762,609

Change previous periods - - - - 8,410 8,410

Net loss - - - - -16,196 -16,196

Employee share schemes – value of employee services - - - - -1,218 -1,218

Share issue 454,430,000 4,544 94,438 - - - 98,983


Change previous periods - - - - 4,725 4,725

Other items, CIRR - - - - 368 368

Net loss - - - - -15,134 -15,134

Share option program - - - - 527 527


STATEMENTS OF CHANGES IN EQUITY


STATEMENTS OF CASH FLOWS

PARENT COMPANY CONSOLIDATED2016 2015 (Amounts in USD 1,000) Note 2016 2015

Cash flow from operations -14,765 -16,196 Net profit/(loss) -155,905 -196,416 12,327 12,210 Interest expense 50,115 51,796

- - Cash flow hedge 60,319 - -1,265 -568 Intercompany interest - - -2,809 -2,923 Interest income -8,487 -4,223 2,742 - Tax expense -626 4,737

-12,811 -12,129 Interest paid -52,338 -50,649 -1,384 - Taxes paid -603 -2,272

- - Result from associated companies 7 -19 1,560 - - Gain/(loss) on sale of assets 25 423 -16,317 - - Gain from bargain purchase -18,312 - - - Depreciation and amortization 5 111,771 107,025 - - Impairment of vessels 5 60,180 159,465 - - Impairment of intangible assets 5 1,015 6,705 - - Impairment related to long term receivables/projects 15,379 -

-527 -1,728 Employee share scheme expenses 31 516 -1,728 - - Effect of unreal. gain on currency exchange forward contracts 28 -871 -2,074

4,155 11,255 Changes in short-term receivables and payables -20,938 -25,149 -368 -368 CIRR gain -368 -368 331 - Other changes 23,590 10,373

-14,374 -10,447 Net cash flow from operations 64,841 42,462

Cash flow from investment activities 3,897 3,491 Interest received 8,501 4,233

- - Investment in fixed assets 4.5 -414,802 -149,631 - Proceeds from sale of fixed assets 25 9,751 122,193

- - Proceeds from sale of shares - 2,620 380 Cash acquired in business combination 3,314 -

6,179 13,319 Received from long term loan - - -32,972 -22,071 Investments in subsidiaries -201 -2,510

- - Dividend from associated companies 7 - 1,355 -35,298 - Investments in associated companies 7 - -3,576 -57,814 -5,261 Net cash flow from investment activities -393,437 -25,315

Cash flow from financing activities - 98,983 Proceeds from issue of new equity - 98,983

- - Contribution from non-controlling interest. 885 4,744 - - Proceeds from bank overdraft - -4,014

Proceeds from new long-term borrowing 12 455,706 109,583 -1,671 -36,560 Repayment of long-term borrowing 12 -188,360 -182,820 -1,671 62,422 Net cash flow from financing activities 268,232 26,476

-73,860 46,714 Net change in cash -60,364 43,623 269,293 222,579 Cash at bank as of 1 January 148,753 117,623

- - Effect of exchange rate differences 12,935 -12,494 195,433 269,293 Cash at bank as of 31 December 101,323 148,753


Siem Offshore owns and operates a fleet of offshore support vessels, including Platform Supply Vessels, Offshore Subsea Construction Vessels, Anchor Handling, Tug, Supply Vessels and Well-Intervention Vessels.

1.1 General Siem Offshore owns and operates a fleet of offshore support vessels, including Platform Supply Vessels, Offshore Subsea Construction Vessels, Anchor Handling Tug Supply Vessels and Well-Intervention Vessels. Siem Offshore Inc. commenced operations 1 July 2005, and is an exempted company under the laws of the Cayman Islands and

listed on the Oslo Stock Exchange. The Company’s headquarters is located in Kristiansand, Norway and the Company is tax domiciled in Norway. All references to “Siem Offshore Inc.”, “Consolidated” and “Company” shall mean Siem Offshore Inc. and its subsidiaries and associates unless the context indicates otherwise. All references to “Parent” or “Parent Company” shall mean Siem Offshore Inc. as a parent company only.

Note 1 - Accounting Principles

NOTES TO THE ACCOUNTS


The principal accounting policies applied in preparation of these consolidated and parent financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

1.2 Basis of preparation

The consolidated and parent company financial statements are pre-pared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union.

The financial statements also include any additional applicable disclosures as required by Norwegian law and Oslo Stock Exchange regulations. The financial statements have been prepared under the historical cost convention, as modified by specific financial assets and financial liabilities, namely derivative instruments, at fair value through profit or loss and derivative instruments designated as hedges, which are initially at fair value through other comprehensive income (OCI). The financial statements have been prepared under the assumption of going-concern.

All figures are in USD thousands, unless otherwise stated. Management is required to make estimates and assumptions that

affect the reported amounts of assets and liabilities. In addition, the preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3 Critical accounting estimates and judgments.

1.3 Changes in accounting policy and disclosures

The following new or amendments to standards and interpreta-tions have been issued and become effective during the current period. These include:• Amendments to IAS 16 and IAS 38 – Clarification of acceptable

methods of depreciation and amortisation, for periods beginning on or after January 1, 2016

• Amendments to IAS 1 – Presentation of financial statements for the disclosure initiative, for periods beginning on or after January 1, 2016

• Amendments to IFRS 10 and IAS 28 – to clarify consolidation exceptions for investment companies, for periods beginning on or after January 1, 2016

• IFRS 14 – Regulatory deferral accounts, for periods beginning on or after January 1, 2016

• IFRS 11 – Joint Arrangements, for periods beginning on or after January 1, 2016The above pronouncements are not all relevant for the Group

and there have been no material impact on the financial statements of the Group, beyond disclosures.

The following new or amendments to standards and interpre-

tations have been issued and become effective in years beginning on or after January 1, 2017. The Group is evaluating the impact of these changes on its financial statements:• Amendments to IAS 12 – Recognition of deferred tax assets for

periods beginning on or after January 1, 2017• Amendments to IAS 7 – Disclosures initiative for periods begin-

ning on or after January 1, 2017• IFRS 15 – Revenue from contracts with customers, for periods

beginning on or after January 1, 2018. Management is still as-sessing the impact of the new standard. The impact of the new standard will depend on assessments and conclusions made on the industry level in the coming year.

• IFRS 9 – Financial instruments, for periods beginning on or after January 1, 2018. Management is still assessing the impact of the new standard.

• IFRS 16 – Leases, for periods beginning on or after January 1, 2019. Management is still assessing the impact of the new standard.

• Amendments to IFRS 2 – Share based payments for periods beginning on or after January 1, 2018

1.4 Consolidation

(a) Subsidiaries Subsidiaries are entities over which the Parent has control. The Parent controls an entity when the Parent is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases.

Intercompany transactions, balances, and unrealized gains on transactions between companies are eliminated. Unrealized losses are also eliminated. When necessary, amounts reported by subsidi-aries have been adjusted to ensure consistency with the policies adopted by the Company. (b) Business combinationsThe Company applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred and the liabilities assumed to the former owners of the acquirer and the equity interests issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent con-sideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Company recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.



If the business combination is achieved in stages, fair value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Company is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration of an asset or li-ability are recognized in profit or loss. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity. (c) Associated companies Associates are entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in as-sociates are accounted for using the equity method of accounting and are initially recognized at cost. The Company’s investment in associates includes goodwill identified on acquisition. The share of profit or loss recorded in the consolidated financial statements is based on the after-tax earnings of the associate.

The Company’s share of post-acquisition profit or loss is rec-ognized in the income statement, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognize further losses unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s in-terest in the associates. Unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Company.

1.5 Classification of items in the financial statements

Assets designated for long-term ownership or use and receivables due later than one year after drawdown are classified as non-current assets. Other assets are classified as current assets. Liabilities due later than one year after the end of the reporting period are clas-sified as non-current liabilities. Other liabilities are classified as current liabilities. All derivative financial instruments are classified as current assets or current liabilities.

1.6 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments,

has been identified as the executive management team consisting of the CEO, CFO, CCO and CHRO.

The Company is organized into nine different segments, plat-form supply vessels (“PSVs”), offshore subsea construction vessels (“OSCVs”), anchor-handling tug supply vessels (“AHTS Vessels”), Other Vessels in Brazil (consisting of fast crew vessels (“FCVs”), fast supply vessels (“FSVs”) and oil spill recovery vessels (“OSRVs”), Combat Management Systems (“CMS”), Submarine Power Cable Installation, Scientific Core-Drilling and Other.

1.7 Foreign currency translation

(a) Functional and presentation currency Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in USD, which is the Company’s presentation currency.

(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement line item Net currency gain/loss.

(c) Group companies The results and financial position of all the Group companies (none of which have the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

(iii) all resulting exchange differences are recognized in other com-prehensive income.

As part of the consolidation process, exchange differences arising from the translation of the net investment in foreign operations is recognized directly in Other Comprehensive Income (OCI). When a foreign operation is sold, exchange differences previously recognized


in OCI are reclassified to profit or loss and included in the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences aris-ing are recognized in OCI.

1.8 Non-current tangible assets and maintenance costs

Land and Buildings and Vessels are stated at their historical cost less accumulated depreciation and net of any impairment losses. All non-current tangible assets (excluding Land and Vessels un-der construction) are depreciated on a straight-line basis over the estimated remaining useful economic life of the asset. The vessel residual value is the estimated future sales price for steel less the estimated costs associated with scrapping a vessel. The residual value and expected useful life for all non-current tangible assets is reviewed annually and, where they differ significantly from previous estimates, the rate of depreciation charges is changed accordingly.

The vessels presently owned by the Company have an estimated economic life of 30 years. Some components of the vessels have a shorter economic life than 30 years. Such components are depreci-ated over their individual useful life. Each part of a vessel that is significant to the total cost of the vessel is separately identified and depreciated over that component’s useful lifetime. Components with similar useful lives are included in one component. The Company has identified nine significant components relating to its different types of vessels. See note 5 for additional information. Dry-docking - In accordance with IAS 16 and the cost model, dry-docking costs are a separate component of the ship’s cost at purchase with a different pattern of benefits and are therefore initially recognized as a separate depreciable asset. Subsequently, the cost of major renovations and periodic maintenance costs are capitalized as a dry-docking asset and depreciated over the useful life of the parts replaced. The useful life of the dry-docking costs will be the period until the next docking, normally between two to three years. Day-to-day maintenance costs are immediately expensed during the reporting period in which they are incurred.

Capitalized project cost - Certain vessel contracts require an

investment prior to commencing the contract to fulfil requirements set by the charterer. These investments are capitalized and amortized over the term of the specific charter contract.Gains and losses on the sale of assets and disposals are determined by comparing the sales or disposal proceeds with the net carrying amount and are included in operating profit.

1.9 Newbuild contracts and borrowing costs

Instalments on newbuild contracts are classified as non-current tangible assets. Direct costs related to the on-site supervision and other pre-delivery construction costs are capitalized per vessel.

General and specific borrowing costs directly related to the acquisition, construction or production of qualifying vessels are added to the cost of those vessels, until such time as the vessels are substantially ready for their intended use or sale. All other borrowing costs are recognized in the profit or loss in the period in which they are incurred.

Interest expense eligible for capitalization is only adjusted for the effect of interest rate or cross-currency interest rate swaps that are designated and qualify as an accounting hedge under IAS 39. Currently the Company does not have any interest rate or cross-currency swap contracts designated as hedges.

1.10 Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortization and are tested annually for impairment.

Assets that are subject to amortization are reviewed for impair-ment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. The recoverable amount is established individually for all as-sets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time and the risk specific to the asset that is considered impaired.

The relevant exchange rates vs. USD are:

Average 2016 31.12.2016 Average 2015 31.12.2015

NOK (Norwegian kroner) 0.1186 0.1160 0.1236 0.1135

EUR (Euros) 1.1022 1.0541 1.1134 1.0920

GBP (Pound Sterling) 1.3559 1.2312 1.5279 1.4839

REAS (Brazilian Reals) 0.2869 0.3068 0.3002 0.2561



Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date. A previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Reversal of a previously recognized impairment is limited to an amount that would make the carrying value of the asset equal to what it would have been had the initial impairment charge not occurred.

1.11 Intangible assets

Intangible assets that are acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a busi-ness combination is recognized at fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally-generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is charged against profits in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method are reviewed annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as a change in accounting estimate. The amortization expense on intangible assets with finite lives is recog-nized in the income statement in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impair-ment annually either individually or at the cash-generating unit level. Such intangibles are not amortized. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

Goodwill - Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognized directly in the income statement.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combina-tion. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is

monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a poten-tial impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.Trademarks and licenses - Separately acquired trademarks and licenses are shown at historical cost. Trademarks and licenses acquired in a business combination are recognized at fair value at the acquisition date. Trademarks and licenses have a finite useful life and are measured at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful lives of three to seven years.

Research and development - Research and Development (R&D) relates to the development of a production method for drilling pro-cess; this R&D is part of the Other Segment.

1.12 Financial assets

1.12.1 ClassificationThe Company classifies its financial assets in the following two categories: Financial assets at fair value through profit or loss and Loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.

(a) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. The only financial assets in this category are derivative contracts, which are categorized as held for trading unless designated as hedges. Derivatives in this category are clas-sified as current assets.

(b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for assets with maturities greater than 12 months after the reporting date. These are classified as non-current financial assets. The Company’s loans and receivables include accounts receivable, cash, short and long-term financial receivables and the CIRR loan deposit.

1.12.2 Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the Company commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair


value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within Operating profit as Gain/(Loss) on currency derivative contracts and within net financial items for the interest rate and cross currency swap derivative contracts. See for note 21 for additional information.

1.13 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty. The Company has evaluated all of their derivative contract positions and does not currently have the right to offset the contracts, and therefore reports all derivative positions at gross amounts.

1.14 Inventories

Lubricating oil and bunkers inventories are valued at the lower of cost and net realizable value. Cost is determined using the weighted average cost method. Bunkers and lubricating oil inventories are an integral part of the vessel, and not sold separately. Net realizable value is estimated based on commodity market prices.

1.15 Cash and cash equivalents

In the statement of cash flows, cash and cash equivalents includes cash in hand and other short-term highly-liquid investments with original maturities of three months or less.

Cash and cash equivalents in the Statement of cash flows includes restricted cash balances.

1.16 Accounts receivable

Accounts receivable are recognized initially at fair value and sub-sequently measured at amortized cost, less provision for impair-ment. The interest factor for accounts receivable is considered to be insignificant and therefore not included in the measurement of amortized cost. In the case of an objective evidence of a fall in value, e difference between reported value and the present value of the expected net future cash flows is reported as a loss.

Provisions for losses are recognized when there are objective indica-tors that the Company will not receive settlement in accordance with the original contract terms. Significant financial problems fac-ing the customer, probability that the customer will go bankrupt or undergo financial restructuring, postponements and non-payment are regarded as indicators that the customer receivable is impaired.

1.17 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. When any Company entity purchases its own shares, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted as appropriate from share capital and share premium reserve and the shares are cancelled.

1.18 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred and are subsequently stated at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Com-pany has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

1.19 Commercial Interest Reference Rate (CIRR) loan

The Company has applied for three Commercial Interest Reference Rate (CIRR) loans from the Norwegian Export Credit Agency. The duration of the loans is 12 years and the cash proceeds from the loans have been deposited in a fixed deposit account with a Norwegian bank at the same interest rate as the loans. The agreed periods of the deposits are identical with the periods of the loans. The cash gain due to the interest rate differential between the current market interest rate and the rate agreed for the deposit is deferred over the duration of the loans.

1.20 Taxation

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

Tax expense/benefit includes current taxes and the change in deferred taxes. Deferred income tax is provided for all temporary differences between the book value and the tax basis of assets and liabilities and for tax losses carried forward. Deferred tax assets made probable through prospective earnings that can be utilized


against the tax reducing temporary differences are recognized as intangible assets. Deferred tax assets and deferred tax liabilities are recognized independently of when the differences will be re-versed and, as a rule, at nominal value. Deferred tax assets and tax liabilities are measured on the basis of estimated future tax rate.

Part of the Company’s activities under the Norwegian subsidi-aries are structured to be in compliance with the regulations for the Norwegian Tonnage Tax Regime. The Company has estimated a tax rate of 0% for the companies subject to Norwegian Tonnage Tax Regime. Financial income within the regime is taxable at a rate of 25%. For companies not included in the tonnage tax regime, the Company applies a tax rate of 2%. The tax expense consists of taxes payable and changes in deferred tax assets/liabilities.

Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their car-rying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the Company is unable to control the reversal of the temporary difference for associates.

Deferred income tax assets are recognized on deductible temporary differences arising from investments in subsidiaries and associates only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilized.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

1.21 Pension costs and obligations

The Company has a defined benefit plan for its employees in Norway. The pension scheme is financed through contributions to insurance companies or pension funds. A defined benefit plan defines the amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognized in the statement of financial position relating to defined benefit plans is the present value of the defined

benefit obligation at the end of the reporting period less the fair value of the pension fund assets. The defined benefit obligation is calculated annually by an independent actuary on the basis of a linear model. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows based on the interest rate for covered bond rate. Since Norwegian government bonds are not issued for terms exceeding 10 years, a supplement to this bond rate is calculated by means of estimation techniques to establish a discount rate that is approximately the same as the term of the pension obligation.

Past service costs are recognized immediately in income.Actuarial gains and losses arising from experience adjustments

and changes in actuarial assumptions are charged or credited to eq-uity in other comprehensive income in the period in which they arise.

1.22 Derivative financial instruments and hedging activities

The Company enters into derivative instruments, primarily foreign currency contracts and interest rate swaps, to hedge foreign currency exposures, for example related to operating expenses and vessel purchase commitments, and interest rate exposures primarily related to long-term borrowings.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

Management designates loans in foreign currencies as hedges of a particular risk associated with a highly probable forecast trans-action (cash flow hedge), specifically the contractual future sales related to vessels chartered by the Brazilian subsidiary. As of 1 Janu-ary 2016 the functional currency of the Brazilian entity was changed from BRL to USD, and as a consequence the hedge accounting was discontinued. Further, some contracts in USD that was previously designated as hedge objects were terminated. This resulted in the reclassification of USD60.3m of hedge loss. See note 21.

The fair values of the foreign currency derivative instruments used for hedging purposes are disclosed in note 15. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other compre hensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement.

Amounts accumulated in equity are reclassified to profit or loss in the periods when the forecast sale that is hedged takes place. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized



when the forecast transaction is ultimately recognized in the profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immedi-ately transferred to the income statement within Operating Margin.

1.23 Revenue recognition

The Company’s activity is to employ different types of offshore sup-port vessels, including PSVs, OSCVs, AHTS vessels, WIVs, OSRVs, standby vessels and crew-boats and one scientific core-drilling vessel. In addition, the Company holds interest in one limited liability partnership with ownership in one well-stimulation vessel. In one of the subsidiaries of the Company, revenues are partly generated from income from construction contracts. Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company’s ac-tivities. Revenue is shown net of value-added tax, withholding tax, returns, rebates and discounts and after elimination of sales within the Company. Revenue is recognized as follows:

Charter rate contracts Charter contracts are classified as operating leases under IAS 17. Revenue derived from charter contracts is recognized in the period over the lease term on a straight-line basis. Related services are rec-ognized as revenue in accordance with the services being rendered.

Certain contracts include mobilization fees payable at the start of the contract. In cases where the fee covers specific upgrades or equipment specific to the contract, the mobilization fees are recognized as revenue over the estimated contract period. The related investment is depreciated over the estimated contract period. In cases where the fee covers specific operating expenses at the start of the contract, the fees are recognized in the same period as the expenses.

Vessels without signed contracts in place at discharge have no revenue until the signing of a new contract. Charter-related expenses for vessels during idle time are expensed as incurred.

Construction contracts The Company accounts for long-term construction, engineering and project management contracts on the percentage-of-completion basis as costs are incurred. Under this method, when the outcome of a construction contract can be estimated reliably and it is probably that the contract will be profitable, contract revenue is recognized over the period of the contract by reference to the stage of completion.

In the beginning phase of a project, the profit on a contract is not able to be estimated reliably until progress has reached at least 25% completion. Therefore, until an estimate of 25% complete is possible, only contract expenses are recognized, but no profit margin. Contract costs are recognized as expenses by reference to the stage of completion of the contract activity at the end of the reporting period.

When it is probable that a project will generate a loss (total contract costs are expected to exceed total contract revenue), the

total estimated loss is recognized as an expense immediately.

Interest income Interest income is recognized using the effective interest method. When a receivable is impaired, the Company reduces the carry-ing amount to its recoverable amount, which is determined as the estimated future cash flow discounted at original effective interest rate of the instrument and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognized using the original effective interest rate.

Dividend income Dividend income is recognized when the right to receive payment is established.

Rendering of services Service revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the service has been provided, the fee is fixed or determinable and collection of resulting receivables is reasonably assured. Other services are recognized on a percentage-of-completion basis.

1.24 Accounts payable

Accounts payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppli-ers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Accounts payable are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

1.25 Earnings per share

Earnings per share are calculated by dividing the net profit/loss for shareholders of the Company by the weighted average number of outstanding shares over the reporting period. Diluted earnings per share include the effect of the assumed conversion of potentially dilutive instruments such as employee stock options. The impact of share equivalents is computed using the treasury stock method for stock options.

1.26 Statement of Cash Flows

The Statements of cash flows are prepared in accordance with the indirect method.

1.27 Related party transactions All transactions, agreements and business activities with related parties are determined on an arm’s length basis in a manner similar to transactions with third parties.



1.28 Government grants

Grants related to net wages arrangement in Norway are recognized as a reduction of wage cost.

1.29 Operating leases

Leases in which a significant portion of the risks and rewards of ownership still remains with the lessor are classified as operat-ing leases. Payments made under operating lease agreements are classified in the income statement as operating expenses and recognized straight-line over the period of the lease.

1.30 Share-based payments

The Company operates an executive management equity-settled, share-based compensation plan, under which the entity receives services from ten top management employees as consideration for equity instruments (share-options) of the Company. The fair value of the employee services received in exchange for the grant of the options is recognized as an Operating Expense. For additional information see note 31 Share-based payments.

The total amount to be expensed is determined by reference to the fair value of the options granted at grant date, as determined using a Black-Scholes model. Exercise price is the stock price at date of the exercise. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. The only condition for vesting is employment with

the Company; options vest over a five-year period after grant date. At the end of each reporting period, the Company revises its

estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognizes the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. Each option gives the holder the right, but not the obligation, to acquire one share at the exercise price on the terms and subject to the conditions set out in the Stock Option Plan.

When the options are exercised, the Parent issues new shares or re-issues treasury shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Company is treated as a capital contribution. The fair value of employee ser-vices received, measured by reference to the grant date fair value, is recognized over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.


2.1 Financial risk factorsThe Company is exposed to a variety of financial risks through its ordinary operations and debt financing. Such risks include foreign exchange risk, interest rate risk, credit risk and liquidity risk. To manage these risks, management reviews and assesses its primary financial and market risks. Once risks are identified, appropriate action is taken to mitigate the identified risk. The Company’s risk manage-ment is exercised in line with guidelines approved by the Board. 2.2 Foreign exchange risksUSD is the reporting currency for the Company. Functional cur-rency for the parent company is USD, and for the vessel-operating subsidiaries USD, NOK, AUD and CAD are the functional currency. Remaining subsidiaries use NOK and EUR as functional currency. The Company operates internationally and is exposed to foreign exchange risks arising from various currency exposures primary with respect to NOK, GBP, EUR, CAD and AUD. Foreign exchange

risks can be divided into transaction risk from paying and receiving foreign currency and translation risk due to recognizing assets and liabilities in USD. The Company had in 2016 mainly USD, NOK, EUR, GBP, BRL, CAD and AUD revenue and expenses, compared to mainly USD, NOK, EUR, GBP and BRL for 2015.

At year-end, the Company had a shipbuilding contract with Polish yard for the construction of one PSV. The contract with the Polish yard is in EUR. After year-end the contract was cancelled due to delayed delivery from yard. The Company has been repaid all pre-delivery instalments related to the cancelled contract. Further information regarding the contract is set out in Note 2.5 and Note 17.

The Company is exposed to foreign exchange risk of its subsidi-aries, in particular the development of the Brazilian Real.

The following sensitivity table demonstrates the impact on the Company’s profit and equity before tax from potential changes to the exchange rates, all other variables held constant.

Note 2 – Financial Risk Management


Financial assets in 2016 and 2015 include derivatives related to hedging of foreign exchange risks. The derivatives in the sensitivity table include path-dependent options in which the value of the derivatives is influenced when the underlying reaches or fluctuates within, below or above specific barrier levels. The change in value of these derivatives will impact the profit of the Company. Financial liabilities in 2016 and 2015 consist of interest rate derivatives and are not influenced by movements in foreign exchange rates.

CONSOLIDATED Foreign exchange risk rate 10%

(Amounts in USD 1,000) +10% movements -10% movements

December 31, 2016 Carrying amount Profit/(loss) Equity Profit/(loss) Equity

Financial assets

Cash and cash equivalent 101,323 6,798 6,798 -6,798 -6,798

Derivaties - - - - -

Accounts receivable 48,230 3,519 3,519 -3,519 -3,519

Impact on financial assets before tax 149,553 10,317 10,317 -10,317 -10,317

Financial liabilitiesAccounts payable 20,783 -1,646 -1,646 1,646 1,646

Derivatives 8,358 -1,040 -1,040 1,040 1,040

Borrowings 1,470,893 -51,111 -51,111 51,111 51,111

Impact on financial liabilities before tax 1,500,033 -53,797 -53,797 53,797 53,797

Income statementOperating revenue 469,123 33,889 33,889 -33,889 -33,889

Operating expenses 340,829 -25,938 -25,938 25,938 25,938

Impact on operating result before tax 128,295 7,951 7,951 -7,951 -7,951

Total increase/decrease before tax -35,528 -35,528 35,528 35,528

Allocation per currencyNOK -37,620 -37,620 37,620 37,620

EUR 8,974 8,974 -8,974 -8,974

GBP 4,378 4,378 -4,378 -4,378

BRL -13,663 -13,663 13,663 13,663

CAD 1,979 1,979 -1,979 -1,979

AUD 423 423 -423 -423




CONSOLIDATED Foreign exchange risk rate 10%



Financial assetsCash and cash equivalent 148,753 7,839 7,839 -7,839 -7,839

Derivaties 1,451 - - - -

Accounts receivable 46,147 2,162 2,162 -2,162 -2,162


Financial liabilitiesAccounts payable 8,395 -823 -823 823 823

Derivatives 12,896 14,093 14,093 -14,093 -14,093

Borrowings 1,122,585 -51,906 -51,906 51,906 51,906

Impact on financial liabilities before tax 1,143,877 -38,635 -38,635 38,635 38,635

Income statementOperating revenue 422,449 23,242 23,242 -23,242 -23,242


Impact on operating result before tax 118,548 -982 -982 982 982



EUR 17,459 17,459 -17,459 -17,459

GBP 1,496 1,496 -1,496 -1,496

BRL -14,935 -14,935 14,935 14,935

Total increase/ decrease before tax -29,617 -29,617 29,617 29,617


PARENT COMPANY Foreign exchange risk rate 10%




Accounts receivable - - - - -


Financial liabilitiesAccounts payable 56 -4 -4 4 4

Derivatives - - - - -

Borrowings 210,807 -16,553 -16,553 16,553 16,553

Impact on financial liabilities before tax 210,863 -16,558 -16,558 16,558 16,558

Income statementOperating revenue 865 22 22 -22 -22


Impact on operating result before tax -12,321 -1,275 -1,275 1,275 1,275



GBP 2,611 2,611 -2,611 -2,611

BRL 667 667 -667 -667




PARENT COMPANY Foreign exchange risk rate 10%




Accounts receivable - - - - -


Financial liabilitiesAccounts payable 144 -14 -14 14 14

Derivatives - - - - -

Borrowings 207,582 -16,678 -16,678 16,678 16,678

Impact on financial liabilities before tax 207,996 -16,693 -16,693 16,693 16,693

Income statementOperating revenue 145 15 15 -15 -15

Operating expenses 9,240 -885 -885 885 885

Impact on operating result before tax -9,095 -871 -871 871 871



GBP 3,719 3,719 -3,719 -3,719

BRL -42 -42 42 42



2.3 Credit risks, Concentration risksThe Company’s credit risk is primarily attributable to its trade and other short-term receivables and asset derivative positions. The derivative counterparties are large established financial institu-tions, and the counterparty risk for the asset derivative positions are regarded as limited.

The exposure to credit risk for trade and other short-term re-ceivables is measured on an ongoing basis and credit evaluations are performed for customers identified to be risky. The Company’s

debtors are mainly major oil companies and offshore service com-panies, which are considered to be creditworthy third parties. His-torically, the loss percentage has been low but due to the market development caused by the low oil price, the counterparty risk has increased significantly during the year. Ongoing provisions are made and, on December 31, 2016, the provision for certain accounts receivables which may not be paid in full was USD 23.9 million for the Company (2015: USD 13.4 million) and USD 0 for the Parent (2015: USD 261K).

The table below presents the concentration risks for 2016 and 2015.


(Amounts in USD 1,000) USD % of total USD % of total

Receivables on December 31, 20161 to 5 largest - 0.0 % 38,008 78.8 %

6 to 10 largest - 0.0 % 16,692 34.6 %

Others - 0.0 % 17,403 36.1 %

Provision for bad debt - -23,872

Total accounts receivable - 0% 48,230 100%

(Amounts in USD 1,000) % of total USD % of total

Receivables on December 31, 20151 to 5 largest 261 100.0 % 38,217 82.8 %

6 to 10 largest - 0.0 % 10,869 23.6 %

Others - 0.0 % 10,433 -6.4 %

Provision for bad debt -261 -13,372

Total accounts receivables - 100% 46,147 100%



The carrying amounts of the Company’s and Parent’s accounts receivables are denominated in the following currencies:


(Amounts in USD 1,000) 2016 2015 2016 2015

CurrencyUSD - - 13,041 24,529

NOK - - 3,579 2,351

EUR - - 20,216 14,233

GBP - - 2,339 3,252

CAD - - 2,534 -

AUD - - 3,801 -

BRL - - 2,721 1,783

Total accounts receivable - - 48,230 46,147

The maximum exposure to credit risk at the reporting date is the carrying value of each class of accounts receivables mentioned above.

Trade and receivablesThe table below presents an aging analysis of the outstanding receivables at year end 2016 and 2015. Overdue receivables are followed up continually by Management. The Management considers the outstanding amounts to be recoverable.


(Amounts in USD 1,000) % of total % of total

Aging on December 31, 2016Not due - 0.0 % 26,744 55,5 %

Due up to 1 month - 0.0 % 13,815 28,6 %

Due 1-4 months - 0.0 % 4,207 8,7 %

Due more than 4 months - 0.0 % 3,464 7,2 %

Total accounts receivable - 0% 48 230 100%

(Amounts in USD 1,000) % of total % of total

Aging on December 31, 2015Not due - 0.0 % 31,007 67.2 %

Due up to 1 month - 0.0 % 3,947 8.6 %

Due 1-4 months - 0.0 % 5,450 11.8 %

Due more than 4 months - 0.0 % 5,742 12.4 %

Total accounts receivable - 0% 46,147 100%


2.4 Cash flow, interest risk and fair valueThe Company is financed by debt and equity. The Company is moreover exposed to changes in interest rates, which may affect the Company’s financial results.

These risks are mainly related to the Company’s long term bor-rowings with floating interest rates.

Further details of the Company’s borrowings are set out in Note 12. The Company has no significant interest-bearing assets other

than cash and cash equivalents and therefore the Company’s income and operating cash flows are substantially independent of changes in market interest rates. Cash and cash equivalents are invested for short maturity periods, generally from 1 day to 3 months, which mitigates some of the potential interest rate risk.

The following sensitivity tables demonstrate the impact on the

Company’s profit before tax and equity from a potential shift in interest rates, all other variables held constant.Borrowings in the tables above (both for 2016 and 2015) include only borrowings with floating interest.

Above movements also include the effect of interest rate swaps entered into in order to hedge the floating interest risk. Market-to-market effects in relation to the interest rate swaps impacts the profit and loss following a change of +/- 1% in the interest rate.

For more details, see Note 12. Above movements also include the effect of interest rate swaps

entered into in order to hedge the floating interest risk. Market-to-market effects in relation to the interest rate swaps impacts the profit and loss following a change of +/- 1% in the interest rate.

For more details, see Note 12.

CONSOLIDATED Interest rate risk (IR)

(Amounts in USD 1,000) -1% movements +1% movements


Financial assetsCash and cash equivalent 101,323 -1,013 -1,013 1,013 1,013

Impact on financial assets before tax 101,323 -1,013 -1,013 1,013 1,013

Financial liabilitiesBorrowings 1,023,997 12,687 12,687 -19,507 -19,507

Impact on financial liabilities before tax 1,023,997 12,687 12,687 -19,507 -19,507

Total increase/decrease before tax 11,674 11,674 -18,494 -18,494






Financial liabilitiesBorrowings 657,317 5,782 5,782 -5,770 -5,770

Impact on financial liabilities before tax 657,317 5,782 5,782 -5,770 -5,770

Total increase/decrease before tax 4,294 4,294 -4,282 -4,282



PARENT COMPANY Interest rate risk (IR)







Total increase/decrease before tax 154 154 -154 -154

PARENT COMPANY Interest rate risk (IR)







Total increase/decrease before tax -614 -614 614 614


The Company’s financial assets are classified into the categories: assets at fair value through the profit and loss, loans and receivables, and available for sale. Financial liabilities are classified as liabilities at fair value through the profit and loss, and other financial liabilities. For further information about comparison by category, see Note 29.

The value of forward exchange contracts is set by comparing forward exchange rate and the rate on the reporting date. The Company’s following financial instruments are not evaluated at fair value: accounts receivable, cash and cash equivalents, other short-term receivables, accounts payable and long-term liabilities with floating interest.

Because of the short term to maturity, the value of cash and cash equivalents entered into the Statements of Financial Position is almost the same as the fair value of these. Accordingly, the values of accounts receivable and accounts payable are almost the same as their fair values since they are entered on “normal” conditions.

The fair value of the Company’s non-current liabilities subjected to fixed interest rates is calculated by comparing the Company’s terms and market terms for liabilities with the same terms to ma-turity and credit risk.

The following tables display the booked value and the fair value of financial assets and obligations.

CONSOLIDATED

(Amounts in USD 1,000) 12/31/2016 12/31/2015

Financial assets Book value Fair value Book value Fair valueCIRR loan deposit 76,215 79,511 88,002 92,159

Long-term receivables 31,168 31,168 51,598 51,598

Accounts receivables 48,230 48,230 46,147 46,147

Other short-term receivables 120,977 120,977 60,657 60,657

Financial assets held for sale 1,099 1,099 3,459 3,459

Derivative financial instruments - - 1,451 1,451

Cash and cash equivalents 101,323 101,323 148,753 148,753

Total 379,012 382,307 400,066 404,224

Financial liabilitiesBorrowings 1,470,893 1,483,834 1,122,585 1,162,291

CIRR loan 76,215 92,580 88,002 92,159

Other non-current liabilities 47,382 47,382 34,142 34,142

Accounts payable 20,783 20,783 8,395 8,395

Derivative financial instruments 8,358 8,358 12,896 12,896

Other current liabilities 134,868 134,868 91,001 91,001

Total 1,758,498 1,774,734 1,357,022 1,400,884



PARENT COMPANY

(Amounts in USD 1,000) 12/31/2016 12/31/2015

Financial assets Book value Fair value Book value Fair valueCIRR loan deposit 14,300 15,343 19,208 20,215

Long-term loan 59,868 59,868 25,867 25,867

Accounts receivable - - - -

Other short-term receivables 6,298 6,298 4,169 4,169

Cash and cash equivalents 195,433 195,433 269,293 269,293

Total 275,900 276,943 318,538 319,544

Financial liabilitiesCIRR loan 14,300 20,636 19,208 20,215

Accounts payable 56 56 144 144

Other current liabilities 7,401 7,401 1,347 1,347

Total 21,757 22,800 20,698 21,706

2.5 Liquidity riskThe Company monitors its cash flow from operations closely and optimizes the working capital level of the individual companies and the Company as a whole. The Company funds are used for investment opportunities in the business, yard instalments, scheduled repayments and repayments of debt and to general working capital purposes.

The Company seeks to fix the majority of its fleet on long-term contracts. Vessels not fixed on long-term contracts are typically exposed to the volatility in the in the short to medium term market.

The Company will from time to time require additional capital to take advantage of business opportunities.

The tables below summarize the maturity profile of the Company’s financial liabilities including interest, and future commitments to the newbuilding program. Further, there can be no assurance that the Company will be able to raise new equity, or arrange new bor-

rowing facilities, on favourable terms and in amounts necessary to conduct its ongoing and future operations, should this be required. If the Company fails to repay or refinance its loan facilities, additional equity financing may be required. There can be no assurance that the Company will be able to repay its debts or extend re-payment schedules through re-financing of its loan agreements or avoid net cash flow shortfalls exceeding the Company’s available funding sources or comply with minimum cash requirements. In the event of insolvency, liquidation or similar event relating to a subsidiary of the Company, all creditors of such subsidiary would be entitled to payment in full out of the assets of such subsidiary before the Company, as a shareholder, would be entitled to any payments. Defaults by, or the insolvency of, a subsidiary of the Company could result in the obligation of the Company to make payments under parent company guarantees issued in favour of such subsidiary.


CONSOLIDATED

(Amounts in USD 1,000)Less than 3

months3 to 12

months1 to 2 years

2 to 5 years Thereafter Total

December 31, 2016

Interest-bearing loans and borrowings 26,649 232,026 234,836 873,923 463,874 1,831,308

Trade and other payables 20,783 - - - - 20,783

Total 47,432 232,026 234,836 873,923 463,874 1,852,091

December 31, 2015

Interest-bearing loans and borrowings 32,670 187,734 256,406 722,220 209,856 1,408,886

Trade and other payables 8,395 - - - - 8,395

Total 41,065 187,734 256,406 722,220 209,856 1,417,281

CONSOLIDATED


months3 to 12

months1 to 2 years


December 31, 2016

Yard instalments falling due - - - - - -

December 31, 2015

Yard instalments falling due 3,650 392,250 - - - 395,900

PARENT COMAPNY


months3 to 12

months1 to 2 years


December 31, 2016

Interest-bearing loans and borrowings 62,724 11,402 161,134 5,441 - 240,701

Trade and other payables 56 - - - - 56

Total 62,780 11,402 161,134 5,441 - 240,757

December 31, 2015

Interest-bearing loans and borrowings 2,776 12,956 141,472 95,182 - 252,386

Trade and other payables 144 - - - - 144

Total 2,920 12,956 141,472 95,182 - 252,530

No yard instalments falling due for the parent company as there were no vessels under construction year-end 2016 and 2015.



2.6 Capital risk managementThe Company seeks to obtain long-term financing supported by long-term contracts, in order to reduce the frequency and risk as-sociated with the refinancing of loans. Long-term charter parties at acceptable charter rates will also enable a higher degree of debt-financing.

The wholly-owned Norwegian company, Siem Offshore Rederi AS, had 1 PSV under construction in Poland at year end. The construc-tion contract was cancelled after year-end due to delayed delivery from the yard. The pre-delivery instalments paid to the yard have been repaid to the Company.

The Company cancelled one PSV prior to year-end due to delayed delivery from the yard, and took delivery of 6 vessels during the year. All vessels have commenced on long term contracts.

The low oil price and the excess capacity of offshore service vessels have increased the competition amongst owners which further put pressure on fixture rates. As a consequence owners have placed more vessels into lay-up. End of year the Company had 10 vessels in lay-up.

2.7 Risks related to loan agreements, restrictions on dividends and distributionThe Company’s loan agreements include terms, conditions and cov-enants which impose restrictions on the operations of the Company. These restrictions may negatively affect the Company’s operations including, but not limited to, the Company’s ability to meet the fierce competition in the market in which it operates. 2.8 Risks related to possible tax liabilitiesThe Company seeks to optimize its tax structure to minimize with-holding taxes when operating vessels abroad, avoiding double taxa-tion, and minimizing corporate tax paid by making optimal use of the shipping taxation rules that apply. It is, however, a challenging task to optimize taxation, and there is always a risk that the Company may end up paying more taxes than the theoretical minimum, which may in turn affect the financial results negatively.



December 31, 2016Estimated total

revenue Profit/(loss) Equity Profit/(loss) Equity

Total value of contracts 512,811

Progress reporting, effect from movement 5,128 5,128 -5,128 -5,128

Margin estimate, effect from movement - 5,128 5,128 -5,128 -5,128



December 31, 2015Estimated total

revenue Profit/(loss) Equity Profit/(loss) Equity

Total value of contracts 334,093

Progress reporting, effect from movement 3,341 3,341 -3,341 -3,341

Margin estimate, effect from movement - 3,341 3,341 -3,341 -3,341


IFRS requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, as well as in-come and expenses in the financial statements. The final reported outcomes may deviate from the original estimates.

Certain amounts included in, or that have an effect on, the ac-counts and the associated notes require estimation, which in turn entails that the Company must make assessments related to values and circumstances that are not known at the point in time when the accounts are prepared.

A significant accounting estimate is an estimate that is important to provide a complete picture of the Company’s financial position, which at the same time is the result of difficult, subjective and com-plex assessments performed by the management. Such estimates are often uncertain by nature.

Management evaluates such estimates continuously based on historical data and experience, consultation with experts, trend analysis and other factors that are relevant for the individual esti-mate, including expectations of future events that are believed to be reasonable under the circumstances.

Estimates and assumptions that have a significant risk of caus-ing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, as well as judgments made by management, in the process of applying the Company’s account-ing policies, that have the most significant effect on the amounts recognized in the financial statements, are discussed below.

Revenue recognition – percentage-of-completion for off-shore cable contracts

The Company uses the percentage-of-completion method in ac-counting for its fixed price construction contracts related to the segment Submarine Power Cable Installation.

One significant estimate is an estimate of the percent complete. Management estimates completion based on an assessment of certain technical criteria in the project execution plan that have to be met in order to achieve a certain level of percentage of completion, as opposed to using costs incurred as a measure of completion.

The primary risk in the execution of projects relates to the off-shore installation phase. Hence, profit margin is not recorded until the progress of the project has reached a stage of minimum 25 percent technical completion and that the offshore installation phase has commenced.

The project shall need to progress into the cable-laying phase before the minimum 25 percent age of technical completion is reached. Prior to reaching a progress of minimum 25 percent techni-cal completion, and subject to a foreseen positive project margin, project revenue is accrued to match the actual costs incurred at

the estimated stage. Periodic project margin is only recorded when the overall project

margin is forecasted to be positive, and when the execution of the project has reached such level of technical completion beyond 25 percent that the management is comfortable to assess the financial outcome of the project.

The sensitivity of the recorded revenue on long-term construc-tion contracts would be +/- USD 8.9 million in 2016 (2015: USD 8.9 million) if management had estimated a 10% better/worse progress on the contracts ongoing at year-end 2016.

Vessels

Impairment of vessels On the reporting date, the Company has assessed whether there are any indications that it may be necessary to write down a vessel. Indicators include external broker estimates, significant changes in charter hire contracts, day rates, operating costs or adverse market conditions.

When such indications exist, an impairment test is performed in accordance with Company policy.The recoverable value of the vessel is estimated, and if the recoverable amount is less than the current carrying value, an impairment loss is recognized in the amount of the difference between carrying value and net realizable value.

The recoverable amount for vessels is estimated by means of broker estimates and value in use calculations based on projected discounted cash flows for the remaining charter hire period or over the next four years if no charter contract exists, together with an assumption of a terminal value of the vessel.

The market for offshore service vessels is expected to remain weak for several years. For vessels fixed on firm contracts during the period from 2017 until 2019, the assumption is that the contract remains unchanged during the remaining contract period, and that the rate level are reduced thereafter until the end of 2019. Options included in charter hire agreements are not considered in the value in use calculations.

The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and further explained in Note 5.

Impairment of goodwill

The Company tests whether goodwill and intangible assets have suffered any impairment in accordance with the accounting policy stated in note 1.11. The recoverable amounts of cash-generating unit have been determined based on value-in-use calculation. This calculation requires the use of estimates (Note 5).

Note 3 – Critical Accounting Estimates and Judgements



Business combinations and bargain gain

In May 2016 the Company acquired the remaining 50% shares in Secunda Holding and made estimates on fair value of the vessel values and contract values. Following such valuations the Company identified a net bargain gain. See note 32.

Hedge accounting

The Company uses hedge accounting for the Brazilian subsidiary, which has a functional currency of BRL. The designated cash-flow hedge is a foreign currency exposure of future USD charter hire revenue as the hedged item and USD long-term debt the designated hedging instrument.

Designation of the hedged item requires significant judgment in defining the future charter contract revenue as highly probable.

Highly probable future charter revenue has been determined by management to include the renewal option period, based on the frequency of similar past transactions and for the contracts to be included in the designated hedge from the date of signing, even though the vessels are under construction.

Siem Offshore has defined an effective hedge to be when the cash flows of the highly probable future transactions are higher than the cash flows of the hedging instrument for the same period. Effectiveness testing is performed using the Dollar Offset Method.


The Company identifies its reportable segments and disclose segment information under IFRS 8 Operating Segments which requires Siem Offshore Inc. to identify its segments according to the organization and reporting structure used by management. Operating Segments are components of a business that are evaluated regularly by the chief operating decision maker for the purpose of assessing performance and allocating resources.

The Company’s chief operating decision maker is the management board, comprised of the CEO, CFO, CCO and CHRO. Generally, finan-cial information is required to be disclosed on the same basis that is used by the chief operating decision maker. The Company’s operating segments represent separately managed business areas with unique products serving different markets. The reportable business areas are OSV with the segments PSV, OSCV and WIV, AHTS Vessels, Canadian fleet and Other Vessels in Brazil, and Industrial with the segments Combat Management Systems, Submarine Power Cable Activities, Scientific Core-Drilling and Siem WIS.

The PSV segment includes 13 Platform Supply Vessels. The OSCV and WIV segment includes five Offshore Subsea Construc-tion Vessels and two Well Intervention Vessels. The AHTS segment includes ten Anchor Handling and Tug Supply Vessels. The Canadian fleet Segment consist of five offshore support vessels operating offshore Canada. The Segment of Other Vessels in Brazil consists

of two Oilspill Recovery Vessels and four smaller fast supply ves-sels and crew vessels.

Combat Management Systems is the activity of supplying soft-ware for a management system to the Brazilian Navy. Submarine Power Cable Installation comprises the activities of installation and maintenance of subsea power cables for offshore windfarms. Scien-tific Core-Drilling is comprised of the activity of a scientific drillship which performs core-drilling. The segment Siem WIS is comprised of the ownership of Siem WIS that develops applications for managed pressure drilling (“MPD”), and certain other activities. Siem Offshore Inc. uses three measures of segment results, Operating Revenue, Operating Margin and Net Profit.

Intersegment sales and transfers reflect arm’s length prices as if sold or transferred to third parties at the time of inception of the internal contract, which may cover several years. Transfers of business or fixed assets within or between the segments are re-ported without recognizing gains or losses. Results of activities not considered part of Siem Offshore Inc.’s main operations as well as unallocated revenues, expenses, liabilities and assets are reported together with Other under the Caption Other and eliminations. The following tables include information about the Company’s operat-ing segments.

CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Operating revenue by business areaPSV 62,058 76,455

OSCV and WIV 97,232 111,315

AHTS Vessels 48,326 54,692

Other Vessels in Brazil 20,143 21,326

Canadian fleet 24,474 -

Other/Intercompany elimination -9,256 -9,323

Operating revenue OSV segment 242,976 254,465

Combat Management Systems 2,410 4,741

Submarine Power Cable Installation 193,774 132,307

Scientific Core-Drilling 26,376 26,164

Siem WIS 3,587 4,773

Other/Intercompany elimination -

Operating revenue Industrial segment 226,147 167,984

Total 469,123 422,449

Note 4 – Segment Reporting



CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Depreciation and amortization by business areaPSV 23,134 28,169

OSCV and WIV 25,435 24,744




Other/Intercompany elimination 6,554 3,199

Depreciation and amortisation OSV segment 104,970 100,225

Combat Management Systems - -



Siem WIS 1,201 1,660

Other/Intercompany elimination 261 -

Depreciation and amortisation Industrial segment 6,801 6,800

Total 111,771 107,025

Impairment by business area 2016 2015

PSV 47,605 39,507

OSCV and WIV 10,750 24,849

AHTS Vessels - 95,109

Other Vessels in Brazil - -


Impairment OSV Segment 60,180 159,465

Siem WIS 1,015 6,705

Impairment Industrial Segment 1,015 6,705

Total 61,195 166,170


CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Operating profit/(loss) by business areaPSV -43,081 -28,980

OSCV and WIV 7,406 19,998

AHTS Vessels -29,496 -134,230



Other/Intercompany elimination -11,996 -3,413

Operating profit OSV segment -68,244 -143,147

Combat Management Systems 31 -208



Siem WIS -710 720

Other/Intercompany elimination - -

Operating profit Industrial segment 41,253 27,076

Administration expenses -33,059 -38,575

Gain (loss) from sale of fixed assets -423 16,317

Gain from bargain purchase 18,312 -

Gain sale of interest rate derivatives 368 368

Currency gain/ (loss) -7,762 -30,775

Total -49,555 -168,735

Other operating profit/(loss) includes, among others, gain of sale of interest rate derivatives (CIRR), gain/(loss) on currency exchange forward contracts and general and administration expenses.

Capital expenditures by business area 2016 2015

PSV (1) 33,391 60,872

OSCV and WIV 238,533 58,684



Canadian fleet -2,124 -


OSV Segment 476,287 150,299


Submarine Power Cable Installation 14,637 168

Scientific Core-Drilling 714 306

Siem WIS 194 142


Industrial Segment 15,545 616

Total 491,832 150,915

(1) Includes newbuilding program, in total 333,544 122,614



CONSOLIDATED

Capital expenditures by business area 2016 2015

PSV 346,342 405,391

OSCV and WIV 671,694 473,306

AHTS Vessels 655,744 557,679




OSV Segment 1,957,836 1,559,488




Siem WIS 2,724 4,408


Industrial Segment 36,272 22,652

Total 1,994,108 1,582,140


CONSOLIDATED

(Amounts in USD 1,000)Land and buildings

Vessels under construction

Vessels and equipment Drydocking

Capitalised project cost

Purchase cost on January 1, 2015 4,128 145,015 2,084,094 54,855 17,597

Correction opening balance January 1, 2015 3,656 2,669 1,821

Capital expenditure 63 122,614 8,282 19,495 461

Movements between groups 1,024 -1,024

Vessels delivered in 2015 - -62,970 62,970 - -

The year's disposal at cost -3,805 - -151,452 -4,032 -6,179

Effect of exchange rate differences -75 -12,095 -78,085 -1,001 -

Purchase cost on December 31, 2015 310 192,563 1,930,488 71,986 12,676

Accumulated depreciation on January 1, 2015 -433 - -351,882 -32,569 -6,632

Accumulated impairment on January 1, 2015 -14,500 -14,500

Correction opening balance January 1, 2015 -1,501 -687

The year's depreciation -2 - -84,954 -16,318 -4,813

Impairment - -159,465

Movements between groups, impairment 7,000 -7,000 - -

The year's disposal of accumulated depreciation 410 - 43,186 3,722 4,836

Effect of exchange rate differences 5 - 9,611 603 -

Accumulated depreciation on December 31, 2015 -20 -7,500 -566,506 -44,563 -7,296

Net book value on December 31, 2015 291 185,063 1,363,982 27,423 5,380

Purchase cost on January 1, 2016 310 192,563 1,930,488 71,986 12,676

Capital expenditure 3 333,544 69,690 9,444 2,083

Business combinations - - 183,631 - -

Vessels delivered in 2016 - -505,685 505,018 666 -

The year's disposal at cost - -10,424 -47,073 -11,683 -27

Effect of exchange rate differences -11 25 -2,675 -84 -

Purchase cost on December 31, 2016 302 10,024 2,639,079 70,328 14,732

Accumulated depreciation on January 1, 2016 -20 - -392,540 -44,563 -7,296

Accumulated impairment on January 1, 2016 - -7,500 -173,965 - -

Movements between groups - 7,500 -7,500 - -

The year's depreciation -13 - -96,747 -12,645 -1,873

Impairment of vessels - -1,766 -58,414 - -

The year's disposal of accumulated depreciation - - 21,435 11,005 59

The year's disposal of accumulated impairment - - 24,433 - -

Effect of exchange rate differences 1 - 71 -12 -

Accumulated depreciation on December 31, 2016 -32 -1,766 -683,233 -46,216 -9,111

Net book value on December 31, 2016 270 8,258 1,955,845 24,112 5,623

The balance of capitalized project costs relate to specific contracts. The costs are amortized over the term of the specific charter contracts.

Note 5 – Vessels, Equipment, Project Cost and Intangible Assets



Component Percentage of total Economic life-time

Hull 27.00% 30 years

Cargo equipment 17.00% 30 years

Marine equipment 10.00% 15 years

Crew equipment 9.00% 15 years

Engine 18.00% 30 years

Engine system 6.00% 30 years

Combined sewerage system 13.00% 30 years

Docking 2.5 years

Equipment 3 years

The vessels are divided into the following components and economical life-times:

INTANGIBLE ASSETS

(Amounts in USD 1,000) GoodwillResearch and development

Trademarks and licences Total

Balance on January 1, 2015 17,318 2,704 9,684 29,705

Moved from Vessel and equipment - 9,240 -9,240 -

Investments - 561 7 568

Effect of exchange rate differences -1,763 -480 -69 -2,312

Purchase cost on December 31, 2015 15,555 12,025 380 27,961

Accumulated depreciation on January 1, 2015 - -2,588 -1,180 -3,768

Moved from Vessel and equipment - -777 841 64

The year's ordinary depreciation - -932 -9 -941

Impairment on intangibles - -6,704 - -6,704

Effect of exchange rate differences - 238 - 238

Accumulated depreciation on December 31, 2015 - -10,764 -347 -11,112

Net book value on December 31, 2015 15,555 1,261 33 16,849


Trademarks and licences refer to Siem WIS AS patented technology for the drilling industry. The figures include assets under development and developed assets, and the depreciation refers to developed assets that are not yet commercialized.

INTANGIBLE ASSETS

(Amounts in USD 1,000) Goodwill Research and

developmentTrademarks and licences Total

Balance on January 1, 2016 15,555 12,025 381 27,961

Business combinations 1,123 - - 1,123

Investments - 38 - 38

Effect of exchange rate differences -581 61 7 -513

Purchase cost on December 31, 2016 16,097 12,125 387 28,608

Accumulated depreciation on January 1, 2016 - -10,764 -347 -11,111

The year's ordinary depreciation - -493 - -493

Effect of exchange rate differences - -21 -7 -28

Accumulated depreciation on December 31, 2016 - -11,277 -354 -11,632

Net book value on December 31, 2016 16,097 847 33 16,977



SensitivitiesImpairment of USD 60.2 million was recognized as of December 31, 2016. The VIU calculation is mainly affected by changes in WACC and freight rate assumptions.

A reduction of freight rate assumption of USD 1,000 per day for remaining life for each vessel would increase the total impair-ment by approximately USD 21.6 million. An increase in freight rate assumption of USD 1,000 per day would imply an impairment of

approximately USD 39.6 million, relevant for only 10 of the vessels. With an increase in freight rate assumptions of USD 1,000 day, VIU would become higher than FVLCOD for certain vessels.

An increase in WACC of 0.5% would increase the total impairment by approximately USD 12.6 million. A decrease in WACC of 0.5% would imply an impairment of approximately USD 48.3 related to only 11 of the vessels. With a decrease in WACC of 0.5%, VIU would become higher than FVLCOD for certain vessels.

(Amounts in USD 1,000) 2016 12/31/2016

Vessel Valuation Method Impairment recognized Recoverable amount

PSV 1 VIU 1,209 1,300

PSV 2 VIU 4,071 27,848

PSV 3 VIU 4,036 29,672

PSV 4 VIU 8,974 28,930

PSV 5 VIU 2,130 28,930

PSV 6 VIU 8,977 21,646

PSV 7 VIU 16,442 1,099

PSV 8 VIU 1,825 75

PSV 9 VIU 1,766 8,258

OSCV 1 VIU 2,668 34,319

OSCV 2 VIU 3,543 37,315

OSCV 3 VIU 2,188 82,621

OSCV 4 VIU 2,351 82,621

Total 60,180 384,634

Impairment vesselsTangible and intangible assets with finite lives are tested for im-pairment if indicators are identified that would suggest that the carrying amount of the assets exceed the recoverable amount. The Group performs an assessment to determine any indicators of impairment. An impairment loss is recognized if the carrying amount exceeds recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost of disposal (FVLCOD) and value in use (VIU) and each vessel is considered a separate cash generating unit (CGU).

As of December 31, 2016, impairment indicators were identified for all OSV vessels, mainly due to lower freight rates, and impair-ment testing has been performed.

Value in use (VIU)VIU is based on the present value of discounted cash flows for each separate CGU for its remaining life based on market views for future periods.

Discount rateThe discount rate used in the value-in-use calculation is a real aver-age cost of capital after tax ranging from 7.59%–9.62%.

Operating expensesOperational expenses that are directly attributable to the CGU are based on budget with an annual escalation as applicable. Dry-docking costs are included as scheduled.

Fair value less cost of disposalFVLCOD (level 3) is determined as the amount that would be obtained from sale of the asset in a regular market, less cost of sales, based on an average of third party valuation reports from two independ-ent ship brokers. The company understand that shipbrokers apply newbuilding price parity as basis for their appraisals. Newbuilding prices are adjusted for building supervision costs and other additional costs, which results in an estimated delivered cost of a newbuilding with prompt delivery adjusted for age of each vessel.

Impairment testingBased on the assessment an impairment charge of USD 60.2 million has been recognized which represents a write down of OSV vessels to their recoverable amount. The recoverable amount was based on the higher of FVLCOD and VIU calculation with each vessel as a separate cash generating unit. Impairment of USD 60.2 million is related to 13 vessels in the Group’s fleet.


The book value in Siem Offshore do Brasil SA was increased with USD 12.2 million, Siem Offshore Rederi AS reduced by USD 272.9 million, Siem Offshore Construction Vessels increased by USD 11.4 million, Siem Offshore Management AS increased by USD 1.6 million, Siem AHTS Pool AS increased by USD 275.8 million and Siem Offshore Invest AS increased by USD 0.1 in 2016.

The above companies are owned by the Parent. In addition, the subsidiaries own the following companies:


COMPANY Registered office Share and voting rightsConsub Delaware LLC Delaware, USA 100%

Aracaju Serviços Auxiliares Ltda Rio de Janeiro, Brazil 100%

Siem Offshore Crewing AS Kristiansand, Norway 100%

Siem Meling Offshore DA Stavanger, Norway 51%

Siem WIS AS Bergen, Norway 60%

Siem Offshore Maritime Personnel AS Kristiansand, Norway 100%

Siem Offshore Contractors GmbH Leer, Germany 100%

SOC Equipment and Personnel Services BV Groningen, The Netherlands 100%

Overseas Drilling Ltd Groningen, The Netherlands 100%

Siem Offshore Canada Inc Halifax, Canada 100%

Siem Offshore Poland Sp.z.O.O Gdynia, Poland 100%

Siem Offshore Australia Pty Ltd Perth, Australia 100%

Siem Offshore Real Estate GmbH Leer, Germany 100%

Siem Offshore Contractors UK Ltd London, UK 100%

Siem Offshore Ghana International AS Kristiansand, Norway 51%

Siem Offshore LLC Delaware, USA 100%

Consub Defesa e Tecnologia SA Rio de Janeiro, Brazil 100%

Secunda Holdings SLH Halifax, Canada 100%

COMPANY (Amounts in USD 1,000) Registered office Ownership and voting share Revenue Net profit Share capital Book equity Cost price Book value

Siem Offshore AS Kristiansand, Norway 100% 6,547 1,465 24 8,972 7,597 8,943

Siem Offshore Invest AS Kristiansand, Norway 100% 19,141 1,374 629 66,168 97,206 77,365

Siem Offshore Rederi AS Kristiansand, Norway 100% 109,305 -59,072 6,175 272,997 310,500 310,500

Siem Offshore Construction Vessels AS Kristiansand, Norway 100% 9,852 -6,224 4 -4,895 11,356 11,356

Siem Offshore do Brasil SA Rio de Janeiro, Brazil 100% 27,649 -6,619 155,429 -43,130 132,253 105,156

Siem Offshore US Inc. Delaware, USA 100% - -6 - 5,295 - -

Siem AHTS Pool AS Kristiansand, Norway 78% 33,424 -28,213 139 329,703 275,825 275,825

DSND Subsea Ltd London, England 100% - -4 - -187 18,352 -

Siem Offshore Services AS Kristiansand, Norway 100% 12,359 -1,416 18 -704 292 3,908

Siem Offshore Management AS Kristiansand, Norway 100% 9,150 348 12 2,353 5,566 7,033

Siem Offshore Management (US) Inc Texas, USA 100% 232 -7 1 246 1 1

Siem Offshore US Holding AS Kristiansand, Norway 100% - -142 5 90 5 961

Siem Offshore Crewing (CI) Inc Cayman Islands 100% 313 263 50 1,566 50 50

Total value recorded in the statements of financial position of the Parent 638,475 859,003 801,099

Note 6 – Investment in Subsidiaries


COMPANY (Amounts in USD 1,000) Registered office Ownership and voting share Revenue Net profit Share capital Book equity Cost price Book value

Siem Offshore AS Kristiansand, Norway 100% 6,547 1,465 24 8,972 7,597 8,943

Siem Offshore Invest AS Kristiansand, Norway 100% 19,141 1,374 629 66,168 97,206 77,365

Siem Offshore Rederi AS Kristiansand, Norway 100% 109,305 -59,072 6,175 272,997 310,500 310,500

Siem Offshore Construction Vessels AS Kristiansand, Norway 100% 9,852 -6,224 4 -4,895 11,356 11,356

Siem Offshore do Brasil SA Rio de Janeiro, Brazil 100% 27,649 -6,619 155,429 -43,130 132,253 105,156

Siem Offshore US Inc. Delaware, USA 100% - -6 - 5,295 - -

Siem AHTS Pool AS Kristiansand, Norway 78% 33,424 -28,213 139 329,703 275,825 275,825

DSND Subsea Ltd London, England 100% - -4 - -187 18,352 -

Siem Offshore Services AS Kristiansand, Norway 100% 12,359 -1,416 18 -704 292 3,908

Siem Offshore Management AS Kristiansand, Norway 100% 9,150 348 12 2,353 5,566 7,033

Siem Offshore Management (US) Inc Texas, USA 100% 232 -7 1 246 1 1

Siem Offshore US Holding AS Kristiansand, Norway 100% - -142 5 90 5 961

Siem Offshore Crewing (CI) Inc Cayman Islands 100% 313 263 50 1,566 50 50

Total value recorded in the statements of financial position of the Parent 638,475 859,003 801,099

PHO

TOG

RA

PHER

: JAN

PETER LEH

NE


Figures for associated companies included in the consolidated accounts based on the equity accounting.

Note 7 – Investment in Associated Companies


December 31, 2016

COMPANY NAME (Amounts in USD 1,000)

PR Tracer Offshore ANS

KS Big Orange XVIII

Rovde Ind.park AS

SentosaOffshore DIS

Secunda Holdings LP

Siem Offshore

Ghana Ltd Total

Profit and loss account

Operating revenues 5,651 436 242 - - 6,328

Operating expenses -4,770 -21 -79 - - -4,870

EBITDA 881 415 163 - - 1,458

Depreciation and Amortisation -486 - -87 - - -573

Operating profit (EBIT) 394 415 76 - -360 885

Net financial items 9 7 -22 - - -6

Taxes - - - - - -

The year’s net profit after tax 403 422 54 - -360 - 879

Siem Offshore’s share of net profit

167 174 27 - -180 188

Adjustments consolidated accounts - - -8 -160 -168

This year’s share of net profit after tax 167 174 19 -160 -180 - 19

Statement of financial position

Non-current assets 0 - 1,296 - 1,296

Current assets 513 -17 6 - - 502

Cash 2,642 1,125 48 - - 3,815

Total assets 3,154 1,109 1,350 - - 5,613

Equity 3,601 1,108 616 - - - 5,324 Non-current liabilities 0 0 642 - - 642

Current liabilities -446 1 93 - - -353

Total liabilities -446 1 734 - - - 289

Total equity and liabilities 3,154 1,109 1,350 - - - 5,613


Siem Offshore's share of booked equity 1,488 458 308 - - - 2,254

Added/reduced in the period - - - - - - -Change of ownership% or sale - - - - - - -

Adjustments IFRS and fair value in excess of book value - - - - - - -

for vessel and goodwill as of De-cember 31 15 324 124 - - - 463

Net book value in Siem Offshore as of December 31 1,503 782 432 - - - 2,717

Ownership interest 41.3% 41.3% 50.0% 0.0% 100.0% 49%

Specification of changes net book value in Siem Offshore's accounts

Net book value as of January 1 1,295 596 513 153 14,103 - 16,660

Investment in associated companies - - - - - - -

This year's share of net profit 167 174 27 - -180 - 188

Adjustments consolidated accounts 26 4 -107 -161 - - -238

Capital increase, correction previous year - - - - - - -

Change of ownership% or sale - - - - -13,923 - -13,923

Dividends - - - - - - -

Effect of exchange rate differences 15 6 1 8 - - 30

Net book value as of December 31 1,503 780 434 - - - 2,717

Of which:Adjustments IFRS and fair value in excess of book value for vessel and goodwill as of January 1

- 314 123 120 2,874 - 3,431

Capital increase, correction previ-ous year - - - - - - -

Adjustment for depreciation IFRS - 4 - - - - 4

Amortisation of fair value in excess of book value for vessels and goodwill

- - - -120 -2,834 - -2,954

Effect of exchange rate differences 15 6 1 - -40 - -18

Fair value in excess of book value for vessels and goodwill as of December 31 15 324 124 0 0 0 463

COMPANY NAMEPR Tracer

Offshore ANSKS Big

Orange XVIIIRovde

Ind.park ASSentosa

Offshore DISSecunda

Holdings LP

Siem Offshore

Ghana Ltd Total



COMPANY name Registered office CONSOLIDATED as Owner interest Voting rightsPaid in capital

Issued, notpaid in capital

PR Tracer Offshore ANS Lysaker, Norway Equity accounting 41.33% 41.33% 1,633 -

KS Big Orange XVIII Lysaker, Norway Equity accounting 41.33% 41.33% 8 5

Rovde Industripark AS Vanylven, Norway Equity accounting 50.00% 50.00% 222 -

Sentosa Offshore DIS (1) Oslo, Norway Equity accounting 0.00% 0.00% - -

Secunda Holdings LP (2) Halifax, Canada Equity accounting 100.00% 100.00% 15,519 -

Total 17,381 5

(1) Sentosa filed for bankrupcy in 2016. (2) The Group aquired 100% of Secunda Holdings LP with effect from 1 June 2016. The Accounts of Secunda have since then fully con-

solidated into the Group accounts.

December 31, 2015

COMPANY name (Amounts in USD 1,000)


KS Big Orange XVIII

Rovde Ind.park AS

SentosaOffshore DIS

Secunda Holdings LP

Siem Offshore

Ghana Ltd Total

Profit and loss account

Operating revenues 6,533 452 263 4,494 33,067 44,810

Operating expenses -4,820 -21 -39 -186 -23,920 -28,985

EBITDA 1,713 431 225 4,309 9,148 15,825

Depreciation and Amortisation -862 - -105 -1,200 -6,171 -8,338

Gain on sale - - - - - -

Impairment - - - - - -

Operating profit (EBIT) 851 431 120 3,109 2,976 7,486

Net financial items 113 18 -27 -2,928 -3,500 -6,324

Taxes - - - - -455 -455

The year's net profit after tax 964 449 92 180 -978 707

Siem Offshore’s share of net profit

398 186 46 9 -489 150

Share of net result not included - -

Adjustments consolidated accounts - - -9 - -1,701 -1,710

This year’s share of net profit after tax 398 186 37 9 -2,190 -1,560

Statement of financial position

Non-current assets 466 - 1,563 12,244 48,852 63,125

Current assets 568 -17 71 30 4,214 4,867

Cash 2,213 698 10 1,054 4,406 8,381

Total assets 3,248 682 1,643 13,328 57,472 76,373


COMPANY name (Amounts in USD 1,000)


KS Big Orange XVIII

Rovde Ind.park AS

SentosaOffshore DIS

Secunda Holdings LP

Siem Offshore

Ghana Ltd Total

Equity 3,132 682 781 662 22,459 27,715 Non-current liabilities - - 736 7,556 31,580 39,872

Current liabilities 116 - 126 5,110 3,433 8,786

Total liabilities 116 - 862 12,667 35,013 48,658

Total equity and liabilities 3,248 682 1,643 13,328 57,472 76,373

Siem Offshore's share of booked equity

1,294 282 390 33 11,229 13,229

Added/reduced in the periodChange of ownership% or sale

Adjustments IFRS and fair value in excess of book value

for vessel and goodwill as of De-cember 31 - 314 123 120 2,874 3,431

Net book value in Siem Offshore as of December 31 1,294 596 513 153 14,103 16,660

Ownership interest 41.3 % 41.3 % 50.0 % 5.0 % 50.0 %

Specification of changes net book value in Siem Offshore’s accounts

Net book value as of January 1 1,651 1,339 550 257 16,426 20,222

Investment in associated compa-nies - - - - -

This year's share of net profit 398 186 46 9 -489 150

Adjustments consolidated accounts - - -9 - -1,701 -1,710

Capital increase, correction previ-ous year 2,427 2,427

Change of ownership% or sale - - - - - -

Dividends -513 -797 - -77 - -1,387

Effect of exchange rate differences -241 -131 -74 -35 -2,560 -3,041

Net book value as of December 31 1,295 596 513 153 14,103 16,660

Of which:Adjustments IFRS and fair value in excess of book value for vessel and goodwill as of January 1

- 373 157 144 482 1,156

Capital increase, correction previ-ous year - - - - 2,427 2,427

Adjustment for depreciation IFRS - - -9 - -274 -283

Amortisation of fair value in excess of book value for vessels and goodwill

- - - - -1,443 -1,443

Effect of exchange rate differences - -59 -25 -24 1,682 1,574

Fair value in excess of book value for vessels and goodwill as of December 31 - 314 123 120 2,874 - 3,431


COMPANY name Registered office CONSOLIDATED as Owner interestVoting rights Paid in capital

Issued, notpaid in capital

PR Tracer Offshore ANS Lysaker, Norway Equity accounting 41.33% 41.33% 1,633 -

KS Big Orange XVIII Lysaker, Norway Equity accounting 41.33% 41.33% 8 5

Rovde Industripark AS Vanylven, Norway Equity accounting 50.00% 50.00% 222 -

Sentosa Offshore DIS Oslo, Norway Equity accounting 5.00% 5.00% 7,514 -

Secunda Holdings LP Halifax, Canada Equity accounting 50.00% 50.00% 15,519 -

Total 24,895 5


Caption goes here PHOTOGRAPHER: XXX

SIEM OFFSHORE INC. ANNUAL REPORT 2016 66 SIEM OFFSHORE INC. ANNUAL REPORT 2016

CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

The amount recognized in the income statement is as follows:

Service cost 1,690 2,491

Interest expense 275 285

Expected return on plan assests -221 -196

Administration cost 25 21

Social contribution 187 269

Impact of curtailment/settlement -445 -693

Net periodic pension cost (see Note 19) 1,511 2,177

The development in the defined benefit obligation is as follows:

Beginning of year 10,817 12,546

Current service cost 1,690 2,491

Interest expense 275 285

Aquisition (disposal) -505 -

Benefits paid -302 -319

Remeasurements loss/(gain) -718 -1,889

Exchange differences 241 -2,002

End of year 11,498 11,113

The development in the fair value of plan assets is as follows:

Beginning of year 8,622 8,735

Expected return on plan assets 221 196

Acquisition (disposal) -240 -

Employer's contribution 1,986 2,393

Benefits paid -301 -317

Remeasurements loss/(gain) -493 -493

Exchange differences 209 -1,596

End of year 10,005 8,918

Note 8 – Pension Costs and Obligations


CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Present value of funded obligations 11,498 11,113

Fair value of plan assets -10,005 -8,918

Social contribution - -

Present value of funded obligations 1,493 2,195

Present value of overfunded asset 199 -

Liability in the statement of financial position 1,692 2,195

Financial assumptions:

Discount rate 2.60% 2.70%

Expected return on funds 2.60% 2.70%

Expected wage adjustment 2.50% 2.50%

Adjustm. of the basic National Insur. amount 2.25% 2.25%

Expected pension increase 0.00% 0.00%

Number of employees in defined benefit scheme 326 334



USD 5.8 million of the Company’s cash balance at year end was restricted funds of which USD 1.2 million was for tax withholdings and USD 4.6 million represented security for bank guarantees and loans.


12/31/2016 12/31/2015 (Amounts in USD 1,000) 12/31/2016 12/31/2015

Long-term receivables

4,136 3,997 Employee loans, see Note 19 4,136 3,997

55,732 21,870 Intercompany receivables - -

- - Loan to Group of Parent Company - 17,069

- - Other long term receivables 12,924 1,462

- - Convertible loan to Customer (1) 14,107 29,070

59,868 25,867 Total long-term receivables 31,168 51,598

12/31/2016 12/31/2015 Other short-term receivables 12/31/2016 12/31/2015

278 4 Prepaid expenses 51,060 18,387

- - Unbilled revenue 55,439 11,549

- - Outstanding insurance claims (2) 3,489 7,438

- - Prepaid income taxes and other taxes 2,397 2,571

- - VAT 91 565

-50 -1,620 Intercompany receivables - -

6,348 5,786 Other short-term receivables 8,500 20,148

6,298 4,169 Total other short-term receivables 120,977 60,657

(1) The sale of “Siem Daya 1” was partly financed by a Seller’s credit from Siem Offshore Inc. in the form of a Convertible Bond with four years duration. Following an impairment test of the Convertible Bond, an impairment at USD 14.0 million was recorded.

(2) Outstanding insurance claims refer to breakdown expenses qualifying for insurance cover. The amount is less own deduction.

Note 9 – Receivables

Note 10 – Restricted Cash


There are no tax assets in the parent company. Deferred tax assets are recognized as intangible assets as it is probable through prospective earnings that it can be utilized. The Company is subject to taxes in several jurisdictions, where significant judgment is required in calculating the tax provision for the

Company. There are several transactions for which the ultimate tax cost is uncertain and for which the Company makes provisions based on an assessment of internal estimates, tax treaties and tax regulations in countries of operation, and appropriate external advice. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such difference will impact the tax charge in the period in which the outcome is determined.

The Company decided to exit the Norwegian Tonnage Tax regime effective 1 January 2015. Formally the decision was made as part of filing of the 2015 corporate tax return. The decision was made to ensure that the Company is fully capable of complying with current legislation. Additionally, exiting the Norwegian Tonnage Tax regime will provide more flexibility to the Company. The Norwegian Tonnage tax Regime is a ring-fence regime which is not flexible with regards to which assets and activities that can be operated under the regime.

Tonnage tax in subsidiaries, as of December 31(Amounts in USD 1,000) 2016 2015Tonnage tax regime in subsidiaries, as of January 1 5 22

Tax charge -4

Paid -16

Effect of exchange rate differences 4

Total tonnage tax in subsidiaries, as of December 31 5 5

CONSOLIDATED(Amounts in USD 1,000) 2016 2015

Temporary differencesDeferred taxParticipation in limited liability companies -2,701 -2,701

Operating assets -30,927 -34,497

Pension funds/obligations -1,493 -2,601

Other long-term differences 6,517 4,605

Net temporary differences as of December 31 -28,604 -35,194

Tax loss carried forward -31,091 -31,091

Basis for deferred tax (tax asset) -59,695 -66,286

Deferred tax (tax asset) Norway -1,169 -8,137

Deferred tax (tax asset) Holland -3,075 -3,415

Deferred tax (tax asset) Germany -7,223 -115

Deferred tax (tax asset) -11,467 -11,668 Deferred tax asset recognized in statement of financial position as of December 31 -11,467 -11,668

Note 11 – Taxes



12/31/2016

Total tax liabilities CONSOLIDATED

(Amounts in USD 1,000) Tonnage tax regime Other tax regime Total tax liabilities

Long term tax liabilities falling due after 1 year - 1,297 1,297

Payable taxes falling due within 1 year 5 2,863 2,868

Tax liabilities 5 4,160 4,165

Tax expense 2016

(Amounts in USD 1,000) Tonnage tax regime Other tax regime Total tax expense

Taxes payable -4 842 838

Change in deferred tax/deferred tax asset - -212 -212

Total -4 629 626

12/21/2015

Total tax liabilities CONSOLIDATED


Long term tax liabilities falling due after 1 year - 5,483 5,483

Payable taxes falling due within 1 year 5 3,491 3,496

Tax liabilities 5 8,974 8,979

Tax expense


Taxes payable -4 -4,506 -4,510

Change in deferred tax/deferred tax asset - -227 -227

Total -4 -4,734 -4,737

Total tax liabilities PARENT COMPANY

(Amounts in USD 1,000) 12/31/2016 12/31/2015

Long term tax liabilities falling due after 1 year - 4,258

Payable taxes falling due within 1 year -292 -150

Tax liabilities -292 4,108

Total tax liabilities PARENT COMPANY

Tax expense 2016 2015

Taxes payable - -

Total - -


Note 12 – Borrowings


CONSOLIDATED Drawn amount

(Amounts in USD 1,000) 2016 2015

Secured Current Non-current Total Current Non-current Total

Bank Loans 177,834 1,091,784 1,269,618 114,660 817,474 932,134

Loans from related parties - 60,000 60,000 - 60,000 60,000

Total secured borrowings 177,834 1,151,784 1,329,618 114,660 877,474 992,134

Unsecured Current Non-current Total Current Non-current Total

Floating rate notes / Bonds - 150,812 150,812 - 147,576 147,576

Total unsecured borrowings - 150,812 150,812 - 147,576 147,576

Total borrowings 177,834 1,302,596 1,480,430 114,660 1,025,050 1,139,710

Fees and expenses - -9,537 -9,537 - -17,125 -17,125

Total borrowings incl. fees 177,834 1,293,059 1,470,893 114,660 1,007,925 1,122,585

CONSOLIDATED Fair value

(Amounts in USD 1,000) 2016 2015


Bank Loans 177,834 1,108,433 1,286,267 114,660 838,442 953,102


Total secured borrowings 177,834 1,168,433 1,346,267 114,660 898,442 1,013,102




Total borrowings 177,834 1,319,245 1,497,079 114,660 1,046,018 1,160,678

Fees and expenses - -9,537 -9,537 - -17,125 -17,125

Total 177,834 1,309,708 1,487,542 114,660 1,028,893 1,143,553


PARENT COMPANY Drawn amount

(Amounts in USD 1,000) 2016 2015



Total secured borrowings - 60,000 60,000 - 60,000 60,000


Floating rate notes / Bonds - 150 807 150 807 - 147,576 147,576


Total borrowings - 210,807 210,807 - 207,576 207,576

Fees and expenses - - - - 420 420

Total borrowings incl. fees - 210,807 210,807 - 207,996 207,996

PARENT COMPANY Fair value

(Amounts in USD 1,000) 2016 2015



Total secured borrowings - 60,000 60,000 - 60,000 60,000




Total borrowings - 210,812 210,812 - 207,576 207,576

Fees and expenses - - - - 420 420

Total - 210,812 210,812 - 207,996 207,996

The Company has a portfolio of bank loans secured with mortgage in vessels. The creditor and guarantors are in general first class com-mercial banks and state owned financial institutions with ratings on or above BBB- and AAA.

As of year-end, the Company had issued two high yield unsecured bonds of NOK 600 million and NOK 700 million respectively. It is agreed with the bondholders that its two high yield bonds shall be extended with additional 2.75 years from original maturity date The high yield unsecured bonds are listed on Oslo Stock Exchange, have no amortization and matures in 2020 and 2021.


Prior to ordering vessels from Norwegian yards, the Company applied for fixed 12-year interest rate options related to the long-term financing of such vessels. The Company was granted such options for each of the relevant vessel by the Norwegian Export Credit Agency. The Company made certain sale of the right to exercise such options to a first class international bank (the “Bank”). Long-term loans drawn from the Norwegian Export Credit Agency are placed as corresponding deposits in the Bank as financial security for the loans drawn. Recognition of the gain, related to each option, is recorded over the term of any drawn loans. In relation to sale of a vessel in 2015 which had a fixed 12-year USD interest rate associated with its mortgage debt financing, the proceeds from the sale equivalent to the respective remaining amount of the outstanding long-term loan from the Norwegian Export Credit Agency were placed on deposit in the Bank as financial security for the drawn loan at the date when the sale was concluded.

The book value of mortgaged assets consist of non-current tangible assets and portion of the accounts receivables and amounts to USD 1,395 million at year end.

There are various financial covenants related to the Company’s debt agreements. The main prevailing covenants are:• Value Adjusted Equity Ratio• A ratio of Financial Indebtedness to EBITDA• Free cash covenant • The Company and Parent are in compliance with the financial covenants as per 31 December 2016.

CIRR loan (Both CONSOLIDATED and PARENT COMPANY) 2016 2015

Total CIRR loan commitment 76,215 88,002

CIRR loan drawn on 31.12 -76,215 -88,002

Commitment as of December 31 - -

Unearned CIRR 2016 2015

Beginning of the year 1,418 1,786

Recognized in the profit and loss account -368 -368

Paid-back CIRR - -

Commitment as of December 31 1,050 1,418


(USD 1,000)Instalments per December 31, 2016

falling due over the next 5 years Mortgage debt Other interest bearing debt Total

2017 96,719 - 96,719

2018 100,031 - 100,031

2019 157,393 - 157,393

69,601 2020 489,185 69,601 558,786

141,206 2021 230,453 81,206 311,659

- Thereafter 255,842 - 255,842

210,807 Total 1,329,623 150,807 1,480,430



The Company’s largest shareholder, Siem Europe S.a r.l, with a holding of 83 %, and its parent company, Siem Industries Inc., are defined as related parties. The Company has an obligation to Siem Industries Inc., for a fee of USD 250K for 2016 (2015: USD 300K). This fee is the remuneration for the services of the two of the Board members. This fee also covers office in the Cayman Islands and administrative costs.Details related to transactions, loans and remuneration to the Executive Management and the Board of Directors are set out in Note 19. For the Parent, all subsidiaries listed in Note 6 are also defined as related parties.For other related parties, the following transactions were carried out:

Above service is provided to companies in which a Board member has an interest. Kristian Siem is the Chairman of Siem Industries Inc., which is controlled by a trust whose potential beneficiaries include members of Kristian Siem’s immediate family. Siem Industries holds an interest in Subsea 7. Siem Offshore LLC, 100% owned by the Company and Siem AHTS Pool AS, 78% owned by the Company, have charted vessels to Subsea 7 during 2016. The amount for 2016 also include management services delivered to Siem Industries and to subsidiaries of Siem Europe S.A R.L.


12/31/2016 12/31/2015 (Amounts in USD 1,000) 12/31/2016 12/31/2015

- - Social security tax, etc. 3,042 3,552

- - Unearned income 24,188 35,793

1,065 723 Accrued interest expenses 12,793 15,016

80 80 Other accrued cost, mainly regarding operating expenses vessels 9,387 3,655

- - Accrued expenses on long-term contracts 51,577 -

6,257 544 Other current liabilities 33,881 32,984

7,401 1,347 Total other current liabilities 134,868 91,001

Sales of services CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Service to entity where director has ownership 26,150 21,493

Total 26,150 21,493

Note 13 - Other Current Liabilities

Note 14 – Related Party Transactions



Purchase of service CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Service from related parties 4,425 5,925

Service from entity where director has ownership 234,709 60,559

Total 239,134 66,484

Service delivered from related parties is mainly cost for technical management, corporate management and delivered crew. The service is supported to Siem Meling Offshore DA, 51% owned by the Company, and is delivered by its partner in Siem Offshore DA.

Service from entity where director has ownership consist of instalment according to shipbuilding contracts with Flensburger Schiffbau-Gesellschaft and management fee from Siem Capital UK Ltd, both owned 100% by Siem Europe; S.a.r.l.

Balance items following purchase and sale of service CONSOLIDATED(Amounts in USD 1,000) 2016 2015Accounts receivables 3,642 2,081

Accounts payable 222 250

Loans to related parties CONSOLIDATED(Amounts in USD 1,000) 2016 2015Loan to associatesAt January 1 17,069 233

Drawings - 18,278

Instalments -18,600 -51

Interest charged 498 511

Interest received -1,047 -4

Exchange rate variations 2,233 -1,897

At December 31 153 17,069

The Company holds a long-term loan to Rovde Industripark AS and a long-term loan to Siem Industries Inc.The loan to Siem Industries Inc was repaid end of 2016. Siem Offshore Invest AS owns 50% of Rovde Industripark AS.

Loans to related parties CONSOLIDATED(Amounts in USD 1,000) 2016 2015Short-term loan to related partiesAt January 1 5,786 -

Drawings - 5,684

Instalments - -

Interest expenses 284 102

At December 31 6,070 5,786

In 2015 the Company provided a short-term loan to Research Developement & Financial Consultant Ltd. The borrower is the 49% owner of Siem Offshore Ghana International AS. The loan is on markets term of interest.


Liability to related parties CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Loan to associatesAt January 1 60,830 -

Reclassification - 60,158

Drawings 30,566 590

Instalments -30,000 -

Interest expenses 2,330 2,086

Interest paid -2,583 -1,956

Exchange rate variations -1 -49

At December 31 61,142 60,830

Liability to related parties CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Short-term loan to related partiesAt January 1 - 60,158

Reclassification - -60,158

At December 31 - -

Long-term liabilityThe long-term liability consist of two fasilities. The Company has a long-term credit facility provided by Siem Industries Inc. and Siem Meling Offshore DA has drawn a long-term liability from its partner in Siem Meling Offshore DA.

Short-term liabilityEnd of 2014, a short-term liability of USD 60 million was drawn by Siem Offshore Inc. under a credit facility provided by Siem Industries Inc. In 2015, the parties have agreed to change the terms of the liability from a short-term liability to a long-term liability. This is reflected in the tables above as reclassification.

The liability is on market term of interest.

Following transactions with related parties were carried out for the parent company

Sales of service CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Service to subsidiaries 601 -

Service to associates 264 145

Total 865 7,415



Purchase of service CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Service to subsidiaries 6,754 7,415

Service to associates - -

Total 6,754 7,415

Sales to subsidiaries and associates consists of guarantee provisions to Siem Offshore Rederi AS, Siem Offshore Contractors GmbH and Secunda Canada LP.

Service from subsidiaries consists of administrative and corporate services provided by Siem Offshore Management AS. All terms used for above transactions are at arms’ length.

Year-end balances arising from sales and purchases PARENT COMPANY

(Amounts in USD 1,000) 2016 2015

Receivables from related partiesSubsidiaries 1,027 1,129

Associates 327 522

Total 1,354 1,651

Payables from related partiesSubsidiaries 3,353 4,576

Associates - -

Total 3,353 4,576

Loans to related parties PARENT COMPANY

(Amounts in USD 1,000) 2016 2015

Loan to associatesAt January 1 21,870 21,748

Reclassification 34,723 -

Drawings - -

Instalments -1,950 -

Interest expenses 1,045 502

Interest paid - -

Exchange rate variations 44 -380

At December 31 55,732 21,870

Loans to related partiesAt January 1 - 4,498

Reclassification - 143

Drawings - -

Instalments - -4,761

Interest expenses - 61

Interest paid - -61

Exchange rate variations - 121

At December 31 - -


Total long-term loans to related parties 2016 2015

At January 1 21,870 26,246

Reclassification 34,723 143

Instalments -1,950 -4,761

Interest expenses 1,045 563

Interest paid - -61

Exchange rate variations 44 -259

At December 31 55,732 21,870

The long-term loan to subsidiaries on 31 December 2016, is held against Siem Offshore do Brasil SA and Siem AHTS Pool AS.Loan provided to associates, Siem Offshore Contractors GmbH, a company owned 100% by the subsidiary Siem Offshore Invest AS, was repaid during 2015.

All loans are on market terms of interest.

Short-term loan to related parties PARENT COMPANY

(Amounts in USD 1,000) 2016 2015

Short-term loan to related partiesAt January 1 7,090 6,984

Reclassification - -

Drawings - -

Instalments - -

Interest expenses 327 106

Interest paid - -

Exchange rate variations - -

At December 31 7,417 7,090

The short-term loan to related parties on 31 December 2016, is held against Siem Offshore do Brasil SA and Research Developement & Financial Consultant Ltd. The borrower is 49% owner of Siem Offshore Ghana International AS.

All loans are on market terms of interest.




12/31/2016 12/31/2015 (Amounts in USD 1,000) 12/31/2016 12/31/2015

Assets Liabilities Assets Liabilities

- - Forward currency contracts - cash flow hedges - 326 1,286 4,170

- - Interest rate swaps - 214 106 2,021

- - Cross currency swaps - 7,817 59 6,705

- - Total derivative financial instruments - 8,358 1,451 12,896

Forward currency contractsThe nominal principal amount of the outstanding forward currency contracts on 31 December 2016 were USD 10.4 million (2015: 162.9 million) of which USD 8.6 million refers to USD/NOK contracts, USD 1.0 million refers to EUR/NOK contracts and USD 0.7 million refers to GBP/NOK contracts. The forward currency contracts have been entered into in order to hedge primarily operating expenses in foreign currencies.

For further information regarding profit and loss effect on forward currency contracts and currency options, please see Note 28.

Interest rate swapsThe nominal amounts of the outstanding interest rate swaps contracts on 31 December 2016 were USD 70.0 million (2015: USD 270.0 million ).

At 31 December 2016, the fixed rates vary from 1.13% to 2.10%. The floating rate leg of the interest rate swaps are LIBOR. Gains and losses are recognised in the profit and loss under financial expenses.

Cross currency swapsCross currency swaps have been entered into in order to hedge both interest and principal payments on long term debt financings de-nominated in other currencies than USD.

Note 15 – Derivative Financial Instruments – Assets (Liabilities)

Caption goes here PHOTOGRAPHER: XXX



Capital expenditures contracted for at the reporting date but not yet paid are as follows:


12/31/2016 12/31/2015 (Amounts in USD 1,000) 12/31/2016 12/31/2015

- - Shipbuilding contracts with variation orders - 596,594

- - Instalments paid - 200,694

- - Unpaid instalments - 395,900

PARENT COMPANY Instalments falling due over the next 2 years CONSOLIDATED

12/31/2016 12/31/2015 (Amounts in USD 1,000) 12/31/2016 12/31/2015

- - 2016 - 395,900

- - 2017 - -

- - Total - 395,900

(1) As at 31 December 2016, the Company had one vessel under construction at a Polish yard. After year-end, the contract was cancelled due to delayed delivery. All prepayments have been refunded from refund guarantees.


12/31/2016 12/31/2015 (Amounts in USD 1,000) 12/31/2016 12/31/2015

- - Contractual guarantees to Brazilian Navy 3,912 1,681

- - Guarantees related to tax-disputes, Brazil 2,889 2,748

52,494 305,658 Contractual guarantees Power cable segment 54,518 305,658

52,494 305,658 Total guarantees 61,318 310,087

Contractual guarantees to Brazilian Navy are issued by Siem Offshore do Brasil SA. Guarantees related to disputes and ongoing tax-cases have been raised per request from Brazilian tax authorities. Contractual guarantees provided by Parent are security for clients of Siem Offshore Contractors GmbH.

Note 16 – Guarantees

Note 17 – Commitments




2016 2015 (Amounts in USD 1,000) 2016 2015

- -267 Vessel crew expenses 103,466 105,457

- -10 Other vessel operating expenses 65,192 63,678

- - Power Cable project expenses 139,111 96,191

13,187 9,516 General and administration 33,059 38,575

13,187 9,240 Total operating expenses 340,829 303,901

Personnel expenses (1) CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Salaries and wages 73,381 69,982

Government grants - net wages arrangement in Norway -3,852 -4,801

Payroll tax 9,416 9,740

Pension costs, see Note 8 1,511 2,177

Other benefits 8,491 5,178

Total personnel expenses 88,947 82,276

(1) Personnel expenses includes vessel crew expenses and part of general and administrative expenses, see Note 18.

Government grants are a special Norwegian seaman payroll and tax refund given to Norwegian shipping companies. The average number of employees in the Company was 1,058 for 2016 (2015: 949), including onshore and offshore employees. There are no employees in the Parent Company.

Payroll registered to the executive management:

(Amounts in USD 1,000) 2016 2015

Salary and other short term compensation 1,558 1,860

Total 1,558 1,860

Employees included in the above payroll in 2016 were 4 (2015: 6).

Note 18 – Operating Expenses

Note 19 – Salaries and Wages, Number of Employees


Corporate management salaries and other benefits are presented in the table below:

Name Salary paid Pension premium Other benefits Share options held

2016 (Amounts in USD 1,000)

CEO Idar Hillersøy 511.5 28.4 5.5 -

CFO Dagfinn B. Lie 253.1 21.6 9.2 2,400,000

CCO Bernt Omdal 327.5 26.5 4.4 2,400,000

CHRO Tore B. Johannessen 331.5 31.1 8.1 2,400,000

Shares in the Company held by members of corporate management in 2016 were 1,538,161 (2015: 1,538,161).

2015 (Amounts in USD 1,000)

CEO Idar Hillersøy 1) 237.2 28.0 1.9 -

CEO Terje Sørensen 1) 379.6 33.1 39.7 -

CFO Dagfinn B. Lie 211.2 21.3 10.2 2,400,000

COO Svein Erik Mykland 2) 263.7 35.6 6.9 -

CCO Bernt Omdal 260.2 26.1 2.5 2,400,000

CHRO Tore B. Johannessen 268.0 31.4 3.0 2,400,000

1) Idar Hillersøy replaced Terje Sørensen as CEO with the effect from July 2015.2) COO Svein Erik Mykland left the Company with the effect from December 2015.

The Board of Directors of Siem Offshore Inc. has authorized the award of two programs of Stock Options to seven employees of the Com-pany. See Note 31 for more information.

Loan to executive management

(Amounts in USD 1,000) 2016 2015

Balance January 1 716 3,331

Changes in executive management - -2,760

New loan raised - 227

Instalments - -

Effect of currency differences 12 -83

Balance December 31 727 716

Loan on December 31, 2016 (Amounts in USD 1,000) Amount Interest Terms

Loan to executive management 727 11 Share loan (1)

Total 727 11

Loan on December 31, 2015 (Amounts in USD 1,000) Amount Interest Terms

Loan to executive management 716 9 Share loan (1)

Total 716 9



(1) Share loan: The loans are repayable by the employee when the employee’s shares in the Company are realized or if the employee leaves the Company. Loans equivalent to USD 4 million are secured by pledges in relevant shares.

The Remuneration paid to the Board of Directors in 2016 was USD 407K (2015: USD 430K).

Auditor’s remuneration


2016 2015 (Amounts in USD 1,000) 2016 2015

87 96 Audit Fee 452 484

15 101 Audit Fee Other 212 226

10 11 Tax/Legal Assistance 10 41

13 6 Other consultants, Fees 41 259

126 214 Total auditor’s remuneration 715 1,010

The Company has entered into different operating leases for office premises, office machines and communication satellite equipment for the vessels. The lease period for the lease agreements varies and most of the leases contain an option for extention. The lease costs were as follows:


2016 2015 (Amounts in USD 1,000) 2016 2015

- - Annual lease payment on operational leases 3,042 2,985

As of 31 December 2016, the Company had some commitments relating to lease agreements which fall due as follows:

PARENT COMPANY Fall due CONSOLIDATED

- 2017 1,937

- 2018 1,072

- 2019 1,182

- Total 4,191

Net present value of future commitments relating to lease agreements are calculated to be USD 3,838 thousand for the Company. There are no lease agreements for the Parent. The interest rate in the calculation of net present value is 5%.

Note 20 – Operating Leases as Lessee


Net currency gain/(loss) includes an unrealized gain of USD 27,675 calculated on monetary items, and a realized loss of USD 11,935 related to intercompany transactions.

The net currency gain/(loss) for the Parent of USD 1,265 includes an intercompany currency loss of USD 1,379.


2016 2015 (Amounts in USD 1,000) 2016 2015

Financial income

4,499 3,491 Interest income 8,487 4,223

3,308 - Other financial income 3,984 6,961

7,807 3,491 Total financial income 12,471 11,184

Financial expenses

-12,752 -12,210 Interest expenses -50,146 -51,149

-73 -16 Other financial expenses -5,166 -3,529

-12,825 -12,225 Total financial expenses -55,312 -54,677

Other financial items

64 1,265 Net currency gain/(loss) -64,154 22,110

64 1,265 Total currency gain/(loss) -64,154 22,110

Net currency gain/(loss) includes an unrealized loss of USD 3.8 million related to intercompany transactions and USD 60.3 million related to a terminated hedge accounting program for the Brazilian subsidiary..

The net currency gain/(loss) for the Parent of USD 64 thousand includes an intercompany gain of USD 563 thousand.The weighted average cost of debt for the Company was approximately 3.9% p.a. at 31 December 2016, including the effect of fixed

interest rate swap agreements.

2016 2015

Weighted average number of shares outstanding (1,000) 842,021 518,318

Weighted average number of shares diluted (1,000) 842,021 757,123

Result attributable to shareholders (USD 1,000) -142,436 -186,687

Loss per share attributable to equity shareholders -0.17 -0.36

Loss per share diluted attributable to equity shareholders -0.17 -0.36

Option program to executive management, see Notes 19 and 31.

Note 21 – Financial Items

Note 22 – Earnings per Share



CONSOLIDATED

(Amounts in USD 1,000)Recognized

2016Accumulated per

December 31 2016

Revenue 177 572 241 696

Cost 129 439 145 064

Total 48 133 96 632

Assets/liabilities

Prepaid project cost Unearned revenue Accrued project costDecember 31 2016

Unbilled revenue

Revenue 19 296 - 47 192

Cost 16 624 51 577 -

Total 16 624 19 296 51 577 47 192

(Amounts in USD 1,000)Recognized

2015Accumulated per

December 31 2015

Revenue 120 890 233 680

Cost 93 670 173 461

Total 27 220 60 219

Assets / liabilities

Prepaid project cost Unearned revenue Accrued project costDecember 31 2015

Unbilled revenue

Revenue - 28 378 - 3 510

Cost 14 918 - 9 867 -

Total 14 918 28 378 9 867 3 510

Contracts in progress refer to activity within the Power Cable Installation Segment and Combat Management Systems (CMS), see Note 4.The activity within Power Cable Installation segment included six projects in progress at year-end 2016. These projects are in an various

phases, and margin for 2016 is recognized only on projects with progress exceeding 25 %.At year-end 2016, the activity within CMS had two projects in progress. The degree of completion varies from 29% to 94%. Margin for

2016 is recognized only on projects with progress exceeding 25%. All projects in progress at year-end 2016 are estimated to generate a positive contribution over the total project period.There are no contracts in progress in the Parent Company.See note 2.9 for analysis of sensitivity.

Note 23 – Contracts in Progress


CONSOLIDATED

(Amounts in USD 1,000) 2016 2015

Purchase cost per January 1 3,459 -

Moved from Fixed asset 1,099 3,459

The year’s disposal at cost -3,459 -

Purchase cost on December 31 1,099 3,459

Booked value for the vessel “Siem Supplier” was transferred from fixed assets to asset held for sale in December 2016.Booked value for the vessel “Siem Carrier” was transferred from fixed assets to asset held for sale in December 2015.


2016 2015 (Amounts in USD 1,000) 2016 2015

- - Gain/(loss) on sale of assets, net -423 16,317

- - Total -423 16,317

2016 The net loss for the Company on sale of assets of USD 0.4 million consists of loss from the sale of the “Panuke” and other equipment. 2015 The net gain for the Company on sale of asses of USD 16.3 million consist of gain from the sale of the OSCV “Siem Daya 1” by USD 16.6 million, and a loss on sale of other equipment of USD 0.3 million.

Note 24 – Asset Held for Sale

Note 25 – Other Gain/(Loss) on Sale of Assets



SHAREHOLDER NUMBER OF SHARES OWNER INTEREST

SIEM EUROPE S.A R.L 699,110,008 83.03%

ACE CROWN INTERNATIONAL LIMITED 79,201,509 9.41%

WATERMAN HOLDING LTD 13,500,000 1.60%

EGD CAPITAL AS 6,000,000 0.71%

SØRENSEN, TERJE 4,404,442 0.52%

MERRILL LYNCH, PIERCE, FENNER & SM 3,727,644 0.44%

ROVDEFRAKT AS 2,550,000 0.30%

DG-INVEST AS 1,538,161 0.18%

TONGA INVEST AS 1,500,000 0.18%

MYKLAND, SVEIN ERIK 1,350,000 0.16%

OPSAHL, STIAN 963,687 0.11%

FORSVARETS PERSONELLSERVICE 953,976 0.11%

CORTEX AS 952,000 0.11%

OSLOKANALEN AS 850,000 0.10%

BRUUN, LARS 699,656 0.08%

TIMUCUAN FUND LTD. 646,268 0.08%

BARRUS CAPITAL AS 515,697 0.06%

LEROLI AS 500,000 0.06%

KEBI AS 500,000 0.06%

MACAMA AS 473,500 0.06%

Total 20 largest shareholders 819,936,548 97.38%

Other shareholders 22,084,832 2.62%

Total number of outstanding shares 842,021,380 100.00%

Siem Europe S.a r.l. is the main shareholder of Siem Offshore Inc. and is controlled by a trust whose potential beneficiaries include mem-bers of Kristian Siem’s immediate family. Kristian Siem, who is Director of the Company, is also the Chairman of Siem Industries Inc., who is the parent company of Siem Europe S.a r.l.

Note 26 – Listing of the 20 Largest Shareholders as of 31 December 2016


• Concluded the sale of the 1999-built PSV “Siem Supplier”.• Cancelled a shipbuilding contract for the 4th dual fuel PSV due to excessive delay in delivery. The Company has been repaid all pre-

delivery installments made under the contract covered by refund guarantees.• Received approval from the bondholders of its two bond issues, the Senior Unsecured Bond Issue 2013/2018 and the Senior Unsecured

Bond Issue 2014/2019, for the extension of the original maturity dates by 2.75 years and for certain amendments to terms, conditions and financial covenants. A condition to the bondholders’ approval is that the the Company must undertake a rights issue of NOK 190 million. The Company’s largest shareholder, Siem Europe S.a r.l., has agreed to underwrite the entire issue.

• Secunda Canada LP, a wholly-owned subsidiary of Siem Offshore Inc., has received a 4-year firm contract plus 5 yearly options from a major Canadian customer. The Company will mobilize one of its vessels from the North Sea region for the contract. After necessary upgrades, the vessel will operate offshore Newfoundland and be engaged in supply, standby-and-rescue and ice management operations.


2016 2015 (Amounts in USD 1,000) 2016 2015

- - Unrealized gain/(loss) 871 2,074

- - Realized gain/(loss) -8,634 -32,849

- - Total -7,762 -30,775

Further details related to the currency derivative contracts are set out in Note 15.

Note 27 – Subsequent Events

Note 28 – Gain/(Loss) on Currency Derivative Contracts



Below is a comparison by category for carrying amounts and fair values of all of the Company’s financial instruments.

CONSOLIDATED

(Amounts in USD 1,000) December 31, 2016

Loans and receivables

Assets at fair value through the profit or loss

Available for sale Total

Assets as per statement of financial position

Derivative financial instruments 48,230 - - 48,230

Other short term receivables (1) 69,917 - - 69,917

CIRR Loan deposit 76,215 - - 76,215

Long term receivables 31,168 - - 31,168

Cash and cash equivalents 101,323 - - 101,323

Total 326,853 - - 326,853

(1) Prepayments do not qualify as a financial instrument and are not included in above amount. Excluded prepayments amount to USD 51,060, see Note 9.

CONSOLIDATED

(Amounts in USD 1,000) December 31, 2016

Liabilities at fair value through the profit or loss

Other financial liabilities Total

Liabilities as per statement of financial position

Accounts payable - 20,783 20,783

Borrowings - 1,470,893 1,470,893

CIRR Loans - 76,215 76,215

Other non-current liabilities - 47,382 47,382

Other current liabilities - 134,868 134,868

Adjustments for liabilities that do not qualify as a financial instrument (1) - -31,790 -31,790

Derivative financial instruments 8,358 - 8,358

Total 8,358 1,718,351 1,726,708

(1) Non-financial liabilities do not qualify as a financial instrument and are not included in above amount. Excluded liabilities amount to USD 31,790 consisting of USD 2,868 in Taxes Payable, USD 1,692 in Pension Liability, USD 3,042 in Social Security Payable and USD 24,188 in Unearned Income. See Note 13 for information about Social Security Payable and Unearned Income.

Note 29 – Financial Instruments by Category



CONSOLIDATED

(Amounts in USD 1,000)December 31, 2015


Assets at fair value through the profit or loss



Derivative financial instruments - 1,451 - 1,451

Accounts receivable (1) 46,147 - - 46,147

CIRR Loan deposits 88,002 - - 88,002

Long term receivables 51,598 - - 51,598


Total 334,500 1,451 - 335,951

(1) Prepayments do not qualify as a financial instrument and are not included in above amount. Excluded prepayments amount to USD 18,387, see Note 9.

CONSOLIDATED


Liabilities at fair value through the profit or loss



Accounts payable 8,395 8,395

Borrowings 1,122,585 1,122,585

CIRR Loans 88,002 88,002

Other non-current liabilities 34,142 34,142

Other current liabilities 91,001 91,001

Adjustments for liabilities that do not qualify as a financial instrument (1) - -41,604 -41,604

Derivative financial instruments 12,896 - 12,896

Total 12,896 1,302,521 1,315,417

(1) Non-financial liabilities do not qualify as a financial instrument and are not included in above amount. Excluded liabilities amount to USD 12,802 consisting of USD 3,496 in Taxes Payable, USD 2,258 in Pension Liability, USD 3,552 in Social Security Payable and USD 3,496 in Unearned Income. See Note 13 for information about Social Security Payable and Unearned Income.

PARENT COMPANY



Assets at fair value through the profit and loss



Trade and other instruments (1) 86,113 - - 86,113


Total 281,546 - - 281,546

(1) Prepayments do not qualify as a financial instrument and are not included in above amount. Excluded prepayments amount to USD 278. See Note 9.


PARENT COMPANY


Liabilities at fair value through the profit and loss



Borrowings falling due after 1 year - 210,807 210,807

Accounts payable - 56 56

CIRR Loan - 14,300 14,300

Total - 225,163 225,163

PARENT COMPANY



Assets at fair value through the profit and loss



Trade and other instruments (1) 55,766 - - 55,766


Total 325,059 - - 325,059

(1) Prepayments do not qualify as a financial instrument and are not included in above amount. Excluded prepayments amount to USD 4, see Note 9.

PARENT COMPANY

(Amounts in USD 1,000)Liabilities at fair value through

the profit and lossOther financial

liabilities Total


Borrowings falling due after 1 year 207,852 207,852

Accounts payable - 144 144

CIRR Loan - 19,208 19,208

Total - 227,203 227,203


2016 2015 (Amounts in USD 1,000) 2016 2015

- - Fuel 1,819 2,514

- - Spareparts 7,290 5,225

- - Total inventories 9,109 7,739

Note 30 – Inventories


The Company has entered into two Employee share schemes with selected employees. On the 13 January 2013, the Company entered into a Share option agreement as follows: The Board of Directors of Siem Offshore Inc. has authorized the award of 14,000,000 share options to eight key employees of the Company. The exercise price is NOK 8.45 per share. The exercise price of the granted options is equal to the market price of the shares on the date of the grant.

The Options can be exercised as follows: 2014 20% of the total number beginning on January 18th 2014.

2015 40% of the total number beginning on January 18th 2015, less any options previously issued.



2018 100% of the total number beginning on June 18th 2018, less any options previously issued.

The exercise period shall in no event be later than the date falling 10 years after the award date.The group has no legal or constructive obligation to repurchase or settle the options in cash. No options were exercised during 2015 or 2016.

The weighted average fair value of options granted during the period determined using the Black-Scholes valuation model was NOK 3.72 per option.

The significant inputs into the model were weighted average share price of NOK 8.45 at the grant date, exercise price of NOK 8.45, volatility of 23%, dividend yield of 0%, an expected option life of 10 years and an annual risk-free interest rate of 2.32% (4.13%).

The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices over the last three years.

See Note 19 for the total expense recognised in the income statement for share options granted to certain employees.

Value of employee services as per December 31, 2016 are recognized under Retained earnings at USD 3,125.

On the 2 April 2014, the Company entered into a Share option agree-ment with selected employees. The Board of Directors of Siem Off-shore Inc. has authorized the award of 3,000,000 share options to ten key employees of the Company. The exercise price is NOK 9.07 per share.The exercise price of the granted options is equal to the market price of the shares on the date of the grant.

The Options can be exercised as follows: 201760% of the total number beginning on April 2nd 2017, less any op-tions previously issued.

201880% of the total number beginning on April 2nd 2018, less any op-tions previously issued.

2019100% of the total number beginning on April 2nd 2019, less any options previously issued.

The exercise period shall in no event be later than the date falling 10 years after the award date. The group has no legal or constructive obligation to repurchase or settle the options in cash. The weighted average fair value of options granted during the period determined using the Black-Scholes valuation model was NOK 3.65 per option.

The significant inputs into the model were weighted average share price of NOK 9.07 at the grant date, exercise price of NOK 9.07, volatility of 25.92%, dividend yield of 0%, an expected option life of 10 years and an annual risk-free interest rate of 2.90%. The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices over the last five years.

During 2015 three members of the option program left the Company. They have been taken out of the progam and previously expensesd option costs are reversed. See Note 19 for the total ex-pense recognised in the income statement for share options granted to certain employees.Value of employee services as per December 31, 2016 are recognized under Retained earnings at USD 0.391.

Note 31 – Share-based Payments



Excercise price per share option, NOK (*weighted average) Options outstanding

At 1 January 2014 8,45* 14,000,000

Granted 9.07 3,000,000

Forfeited -

Excersised -

Expired -

At 31 December 2014 8,56* 17,000,000

At 1 January 2015 8,56* 17,000,000

Granted -

Forfeited -7,200,000

Excersised -

Expired -

At 31 December 2015 8,56* 9,800,000

At 1 January 2016 8,56* 9,800,000

Granted -

Forfeited -

Excersised -

Expired -

At 31 December 2016 8,56* 9,800,000


At the end of May 2016, Siem Offshore Inc. acquired the remaining 50% of the shares in Secunda. Following this transaction, Siem Offshore Inc. owned and controlled 100% of the shares in Secunda.

Details of the purchase consideration, the net assets acquired and bargain gain recognized are as follows:

Purchase consideration for the remaining 50% shares was USD 1.

The assets and liabilities recognized as a result of the acquisition are as follows;

(Amounts in USD 1,000)

Cash 4,599

Accounts receivable 4,750

Other current receivables 977

Vessels and equipment including favorable time charter contracts 110,849

Other non-current assets 1,194

Accounts payable -1,649

Other current liabilities -3,122

Borrowings -84,480

Other non-current liabilities -51

Net identifiable assets acquired 33,067

Gross bargain gain recognized 33,067

Business combination was achieved in stages and the following information explains the loss recognized on equity interest held im-mediately before the acquisition and the net bargain gainrecognized:

Loss on equity interest held immediately before the acquisition -14,755

Gross bargain gain recognized 33,067

Net bargain gain recognized 18,312

From the date of acquisition, revenues of USD 27,5 million and a loss of USD -1,2 million is included in these consolidated financial statements related to the acquisition of Secunda.

Under the assumption that the acquisition had taken place on January 1, 2016, revenue and loss of the combined group would have been USD 480,1 million and USD -155,9 million respectively (unaudited amounts).

A bargain purchase gain was recorded at USD 18.3 million fol-lowing the acquisition of the remaining 50% shares in Secunda.

The Bargain Gain has been tested against fair market value for the previous held 50% shares in Secunda, the fair market value of the individual vessels and the fair market value of the contracts.

Based on such analysis management has concluded to recognize a bargain gain of USD 18.3 million in the income statement.

The acquisition of the remaining 50% shares was a consequence of the previous owner’s decision not to contribute to further funding of Secunda following certain circumstances when Secunda took delivery a new PSV in May 2016.

Secunda had a contract with a Polish yard for the delivery of a highly specialized newbuilt PSV that was to commence operations for a major oil-company offshore Canada.

As the vessel was delayed from the yard in Poland, the client noti-fied Secunda that it intented to cancel the charter party due to the delayed delivery. Following this information, the financing bank informed Secunda that the financing commitment for the vessel was terminated with immediate effect.

Siem, as the most active owner of Secunda, managed to get a tender for a alternative financing package in place, however at less favorable terms than the original financing. Further, the import duty that would be payable to Canandian customs was no longer considered as being a part of the vessel purchase price, and had to be financed by funds provided by the owners of Secunda.

At this stage, the previous owner declared that he did not accept the increased risk following the delayed delivery of the vessel and that he would not contribute with shareholder’s funding that was a term under the debt agreement.

Further, the previous owner declared that his investment in Se-cunda was not regarded as part of his core business.

Note 32 – Business Combinations



CORPORATE SOCIAL RESPONSIBILITY

C ayman Islands corporate law is to a great extent based on English Law. In addition, due to the Company being a

Norwegian Tax Resident, the Norwegian Accounting law applies to the Company. According to the Norwegian Accounting Act $3-3c the Company should provide a statement on social responsibility. The statement should include which actions are taken by The Company to integrate human rights, employee’s rights and so-cial conditions, external environment and the fight against corruption in its business strategies, daily operations and in relation to its interested parties.

The Board of Directors has reviewed this statement. It is the opinion of the Board of Directors that the Company complies with regulations in the Nor-wegian Accounting law with respect to Social Responsibility reporting.

Code of Business ConductThe Company has established a Code of Business Conduct policy expressing its non-tolerance on corruption as well as dealing with ethical principles of the Company. The Company is fully committed to perform its business with integrity and transparency throughout its global operations. As stated in the Code of Business Conduct policy, it is the policy of the Company to conduct its busi-ness in accordance with all applicable laws and regulations and in an ethically responsible manner.

Protection of health, safety and the prevention of pollution to the environment are primary goals of the Company. All of our employees and representatives must conduct their duties and responsibilities in compliance with the Company’s policy on Health, Safety and Environ-ment, applicable law and industry standards relating to health and safety in the workplace and prevention of pollution to the environment.

The Company has implemented policies and control procedures

to ensure that only proper transactions are entered into by the Com-pany, that such transactions have proper management approval, that such transactions are properly accounted for in the books and records of the Company, and the reports and financial statements of the Company are prepared in a timely manner, understandable and fully, fairly and accurately reflect such transactions.

The Company observes fair employment practices in every as-pect of its business.

The Company conducts its business with honesty and integ-rity and competes fairly and ethically within the framework of the law. The Company has entered into agreements with well-known subcontractors for the delivery of technical management and crew management services to some of the Company’s vessels.

As a company incorporated in the Cayman Islands, Siem Offshore Inc. (“The Company”) is an exempted company duly incorporated under the laws of the Cayman Islands and subject to Cayman Island laws and regulations with respect to corporate governance.

PHOTOGRAPHER: JAN PETER LEHNE


The Company has also entered into shipbuilding contracts with high standard shipbuilding yards in Norway, Poland and Germany. These subcontractors are subject to review on an ongoing basis. The Company expects that all of its business partners have the same approach to business dealing.

Improper paymentsThe Code of Business Conduct does also include policies on improper payments. The Company does not tolerate any actions / payments which could be viewed as improper payments.

No gift, hospitality or travel benefit may be offered to or requested or accepted from any third party if that benefit could be seen to be disproportionately generous or otherwise be seen as something which may induce or make the recipient feel obliged to reciprocate by way of improperly performing his or her function.

The Company and its directors, officers and employees will not accept any gift, hospitality or travel benefit either directly or indirectly from business partners, against making commitment, recommending or promoting a certain conduct or position by the Company or otherwise seek to gain personal benefit in relation to twhe Company’s business dealings.

Likewise, the Company does not itself offer inducements to anyone associated with business partners to promote a certain conduct or position by such business partner.

The Company and any of its people shall not pay money or provide gifts, entertainment, hospitality or any other thing or service of value to any Government Official. This prohibition extends to payments to consultants, agents or other intermediaries when the payer knows or has reason to believe that some part of the payment will be used to bribe or otherwise influence a public official.

Political contributions are not authorized.

Corporate Social Responsibility The Company respects and promotes harmonious working rela-tionship with the local communities where it operates, but refrains from participating in local politics. The Company seeks to foster a sustainable business for its many stakeholders.

The Company is fully committed to comply with local laws and regulations throughout its global operations.

The Company is committed to employ local staff where applicable and possible in all countries where it is operating and conducting business. The Company is committed to providing equal opportunity and fair treatment to all individuals on the basis of merit, without discrimination on the grounds of race, colour, religion, national origin, sex, pregnancy, age, disability, marital status or other characteristics protected by applicable law.

The Company is dedicated in creating a high-quality working environment under which its people respect and trust each other such that everyone acts in an honest, friendly and proactive way with a responsible attitude and high moral standards. The Company prohibits bullying and harassment in any form including sexual, racial, ethnic, and other forms of harassment.

At Christmas 2012 The Company donated funds to Jaynii Street-wise in Ghana. No funds have been donated in 2016. Jaynii Streetwise is a charity and non-governmental organization founded in Ghana by Jay Borquaye and Emmanuel (Nii) Quartey in the deprived area of Jamestown (Accra) with the aim of improving the lives of children and youth. Jaynii Streetwise was born out of their Jaynii Cultural Troupe, a traditional music and dance group which has performed at countless functions locally and internationally.

Over time, Jaynii has identified the need to support ongoing efforts by government and civil society to keep children off the streets and in school. As a poor, marginalized and deprived area, many children are found walking on the beach and in the streets during school hours. Most of these children come from very deprived homes. So far Jaynii has identified fifty children aged between 4 to 16 years who have been enrolled into the Streetwise Project, based at Jaynii Beach, a small stretch of beach just below the Jamestown lighthouse which is now their centre.

These 24 girls and 26 boys, who were spending their childhood walking aimlessly on the Jamestown Beach, are now enrolled at schools in the communities- Accra Sempe Primary School in Classes 1 to 6 and St. Thomas Day Care Centre. Jaynii, without assistance from parents, buys them school uniforms, shoes, bags and exercise books and registers them in school. After school hours, the children go to Jaynii Beach where they get fed as well as get extra classes, homework help and afternoon activities and entertainment.

During 2013 the Company has also donated funds for the funeral and family support of passed away gardener of the Company’s office in Ghana.

The Company has furthermore previously donated funds to Pro Criança Cardíaca in Rio de Janeiro, Brasil, a non-profit organiza-tion helping children with heart diseases. Pro Criança Cardíaca is a hospital founded in 1996 by Cardiologist Doctor Celia Rose. The mission of the organization is to provide medical care to cardiac children focusing in cardiac surgery and any other procedure that requires high technology treatment to children. No funds have been donated in 2016

The Company has also in previous years made donations to the Norwegian Salvation Army, Redningsselskapet and the street magazine “Klar”. No donations have been made in 2016.

CORPORATE SOCIAL RESPONSIBILITY


We confirm, to the best of our knowledge that the financial statements for the period 1 January to 31 December 2016 have been prepared in accordance with current applicable accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the entity and the group taken as a whole. We also confirm that the Board of Directors’ Report includes a true and fair review of the development and performance of the business and the position of the entity and the group, together with a description of the principal risks and uncertainties facing the entity and the group.

19 April 2017

RESPONSIBILITY STATEMENT

Eystein Eriksrud Kristian Siem John C. Wallace

Chairman Director Director

(Sign.) (Sign.) (Sign.)

Michael Delouche Alexander Monnas Idar Hillersøy

Director Director Chief Executive Officer

(Sign.) (Sign.) (Sign.)


Eystein Eriksrud (born 1970), Chairman

Mr Eriksrud joined the Board of Directors of Siem Offshore in May 2010 and became Chairman in May 2012. Mr Eriksrud is the Deputy CEO of the Siem Industries Group. Prior to joining Siem Industries in October 2011, Mr Eriksrud was a partner in the Norwegian law firm Wiersholm Mellbye & Bech, from 2005, working as a business lawyer, particularly in the shipping, offshore and oil service sectors. Mr Eriksrud was Group Company Secretary of the Kvaerner Group from 2000–2002 and served as Group General Counsel of the Siem Industries Group from 2002–2005. He is a candidate of jurisprudence from the University of Oslo. Mr Eriksrud has served on the boards of Privatbanken ASA and Tinfos AS as well as a number of other boards. He is the Chairman of Flensburger Schiffbau-Gesellschaft mbH & Co. KG and Electromagnetic Geoservices ASA and a Director of Subsea 7 SA and a director of several subsidiaries in the Siem Industries Group. Mr Eriksrud is a Norwegian citizen.

Kristian Siem (born 1949), Board member

Mr. Siem is the Chairman of Siem Industries Inc., Subsea 7 SA and Siem Shipping Inc. (former Star Reefers Inc.) and is a Director of Siem Offshore Inc., Flensburger Schiffbau Gesellschaft mbH, North Atlantic Smaller Companies Investment Trust plc. and London and Frupor S.A., Portugal. Mr Siem is a Norwegian citizen.

Michael Delouche (born 1957), Board Member

Mr. Delouche is the president and the secretary of Siem Industries Inc. and is in charge of the Company’s operations at the head office in George Town, Cayman Islands. He is a director of Siem Shipping Inc. Mr. Delouche received degrees in civil engineering (structural) and business and was previously an audit manager with KPMG Peat Marwick LLP. Mr. Delouche is a US citizen.

John C. Wallace (born 1938), Board member

John C. Wallace is a Chartered Accountant having qualified with PricewaterhouseCoopers in Canada in 1963, after which he joined Baring Brothers & Co., Limited in London, England. Prior to his re-tirement in 2010, he served for over twenty-five years as Chairman of Fred. Olsen Ltd., a London-based corporation that he joined in 1968 and which specializes in the business of shipping, renewable energy and property development. He received his B. Comm degree majoring in Accounting and Economics from McGill University in 1959. In November 2004, he successfully completed the International Uniform Certified Public Accountant Qualification Examination and has received a CPA Certificate from the State of Illinois. Mr. Wallace also retired from the board of directors of Ganger Rolf ASA and Bonheur ASA, Oslo, both publicly-traded shipping companies with interests in offshore energy services and renewable energy. He is a Director of Callon Petroleum Co , USA where he is Chairman of the Audit Committee. He is a former director of Secunda Holdings LP. He was inducted as a 2011 Industry Pioneer by the Offshore Energy Centre in Houston. Mr. Wallace is a Canadian citizen.

Alexander Monnas (born 1951), Board Member

Mr. Monnas is a non-executive advisor to Daiwa Capital Markets Europe Ltd., and attends the Board Risk Committee and the Audit Committee. Mr. Monnas is also an advisor on investment and finan-cial matters in Geneva, and on the board of a private trust company. He is a board member of Siem Offshore Inc. Mr. Monnas has spent over 40 years in the commercial and investment banking industries, specialising in financial markets. He was CEO of Daiwa Securities’ European operations from 1994 to 2001, and was a board member of Veripos Inc. from 2012 to 2014. He has a degree in Chemistry. Mr. Monnas is a British citizen.

BOARD OF DIRECTORS

The Company has a Board of five Directors. Members of the Company’s management are not members for the Board, but the Company’s management does attend Board meetings.


Siem Offshore Inc. will release financial figures on the following dates in 2017:

Q1 2017 Monday 8 May

Q2 2017 Thursday 24 August

Q3 2017 Thursday 26 October

The Annual General Meeting of the Company will be held on Friday 5 May 2017.

FINANCIAL CALENDAR 2017


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Siem Offshore Inc. Annual Report 2016

Siem Offshore Inc

c/o Siem Offshore ASNodeviga 144610 KristiansandNorway

POSTAL ADDRESS

P.O. Box 425N-4664 Kristiansand S, Norway

TELEPHONE

+47 38 60 04 00

TELEFAX

+47 37 40 62 86

E-MAIL

[email protected]

www.siemoffshore.com

2016 - Siem Offshore Highlights for the First Quarter • The Oil spill recovery vessel (“OSRV”) “Siem Marataizes” was delivered from a yard in Brazil and commenced an 8-year

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