Polarcus 2008 Annual Report

08A n n u a l R e p o r t

Content

Responsibility, Innovation, Excellence

First year of Polarcus

Letter from the Chairman: Turning heads

Letter from the CEO: No average achievement

9.

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10. 24. 67.

69.30.

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41.

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Polarcus’ distinctive offering

EXPLORE GREEN

New building projects

Polarcus innovative fleet

Executive management

The Polarcus Shares

Corporate governance commitments

Board of Directors

Board of Directors Report

Consolidated financial statements

Notes

Auditors report

Addresses

3

Polarcus is a pure play marine geophysical company with a pioneering environmental agenda, specializing in high-end towed streamer acquisition from pole to pole. The vision is to become a pioneer in an industry whereby the frontiers of seismic exploration are responsibly expanded without harm to the world.

The Company is building six ultra-modern 3D seismic research vessels which will operate worldwide providing best-in-class marine seismic services to the oil and gas industry.

With an initial fleet operation of four high-end 12 stream-er 3D vessels and two multipurpose wide-tow 6 streamer 3D / Source vessels, the Company is initially focusing it’s marketing efforts in the “contract market” and will later also develop a strategy to enter into the “non exclusive” or “multi client” market.

The Company will also place a special focus on the Arctic in keeping with the Company’s strategy to responsibly pursue frontier opportunities, seeking contracts for op-erations within this region.

Po-lar-cus (pō-lăr’kus) n. [from the Latin polus, pole and arcus, bow, a curved structure.]

ResponsibilityInnovationExcellence

4January February March April May June

2008

Signing of ship-building contract with Drydocks World - Dubai for vessel 1-4.

Steel cutting for Polarcus Nadia

Steel cutting for Polarcus Naila

Apr

il 28

th

May

18

th

June

8th

VisionThe Company’s vision is “to be a pioneer in an industry where the frontiers of seismic exploration are responsi-bly expanded without harm to our world”.

Core valuesIn support of the above vision, the Company has identi-fied a set of ‘core values’ which define the Company’s ethos and the way Polarcus’ management, employees and contractors are expected to perform within the busi-ness.

Responsibility – for their actions, for each other, and +for the environment and the world around.

Innovation – in business and in operations. +

Excellence – in delivery for shareholders and clients +alike.

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

StrategyTo achieve the Company’s corporate goal a seven point business strategy has been defined comprising the fol-lowing key elements:

Pioneering the environmental agenda. +

Operate at least 6 ultra-modern seismic vessels by +end 2010.

Recruit, develop and retain highest caliber industry +professionals.

Enhance service offerings through key alliances and +partnerships.

Maximize operational efficiency. +

Optimize financing and sales structures. +

Apply a risk management approach to all decision +making processes.

Signing of ship-building contract with Drydocks World - Dubai for vessel 5 & 6.

June

15

th

5

Dubai, UAEPolarcus HQ

London, UKEurope office1 April 2009

Houston, USANorth & South America Office

July August September October November December

Keel laying for Polarcus Naila

Steel cutting for Polarcus Asima

Keel laying for Polarcus Nadia

Steel cutting for Polarcus Selma

Steel cutting for Polarcus Alima

Steel cutting for Polarcus Samur

Oct

ober

20

th

Dec

embe

r 15

th

Nov

embe

r 2

nd

Dec

embe

r 18

th

Sep

tem

ber

1st

Sep

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ber

14

st

Polarcus LimitedCayman Islands

Polarcus 1Cayman Islands Hull 66

Polarcus Nadia

Hull 67Polarcus Naila

Hull 69Polarcus Samur

Hull 70Polarcus Selma

Hull 71Polarcus Asima

Hull 72Polarcus Alima

Polarcus DMCCDubai

Polarcus Seismic LimitedCayman Islands

Polarcus 2Cayman Islands





6

First year of Polarcus

Polarcus has signed shipbuilding contracts for six ves-sels with Drydocks World – Dubai and corresponding vessel design and equipment agreements with Ulstein Design AS. Construction of the first vessel commenced in Dubai on the 18 May 2008 with the steel cutting for “Polarcus Nadia”. By 18 December 2008 construction of all 6 vessels had commenced. The Polarcus vessels are all ultra-modern seismic research vessels built to the ULSTEIN SX124, SX133, and SX134 designs. These vessels combine the latest developments in maritime technology with the most advanced seismic systems commercially available. The vessels have been designed for the most challenging offshore projects and operating conditions.

Two rounds of financing have been undertaken during 2008, resulting in USD 212 million of equity financing and USD 330 million of debt like financing. Trades in the Company’s shares have since 8 July 2008 been registered on the Norwegian OTC list which is an infor-mation system for unlisted shares, administrated by the Norwegian Securities Dealers Association. The Polarcus shares are traded under the symbol PLCS.

The Company had as of 31 December 2008 recruited 56 full time employees of which 44 are based in Dubai, UAE, 1 in Houston, USA and 11 field engineers. The 2008 recruitment focus secured the Company executive management team together with other key office-based positions and the site team necessary to oversee and support the new build program.

On 10 November 2008 Polarcus announced a deferred payment arrangement with Drydocks World - Dubai LLC in relation to vessels 4, 5 & 6. Under the terms of this arrangement certain payment installments due under the original shipbuilding contracts are deferred from the scheduled milestone payment dates to the contractual delivery dates of the vessels. The total value of the de-ferred installments amounts to USD 99 million. An inter-est rate of LIBOR + 3 percent will apply on each deferred installment from the time and on the terms such install-ment would have been paid under the original shipbuild-ing contracts to the time of actual payment.

Signed shipbuilding contracts for 6 +ultra-modern seismic research ves-sels with Drydocks World – Dubai LLC

Two rounds of financing have been +undertaken resulting in USD 542 million of financing

Polarcus shares available in the +Norwegian OTC system since 8 July 2008.

Construction of all 6 vessels had +commenced by 18 December 2008.

56 people employed during the +year 2008.

Deferred payment arrangement in +relation to vessels 4, 5 & 6 at a total value of USD 99 million se-cured.

8

Turning heads

Dear Polarcus shareholders,Polarcus has turned a few heads in the first year!

We set out with the revolutionary idea of building a seis-mic company that could combine operational and geo-physical excellence with a strong ethos of corporate responsibility for the world around us, and at the same time challenging others in our industry to follow suit. We also aspired to build a company with a positive environ-ment where employees would feel respected and excited to come to work every day, motivated by a realization that they could make a real dif-ference. We believe that in our first year we have indeed come a long way in building the necessary founda-tions for that vision and we continue to live by our ‘core values’: responsible people drive innovative performance which generates excellence for all. This is in fact exactly what took place in 2008 as we launched the company and commenced construction of six ultra-modern 3D seismic research vessels with their unique and characteristic design features.

At the heart of our company is our conviction that the seismic business is fundamentally one of customer ser-vice. As such, our people work hard to exceed expecta-tions in everything they do. Our job is to ‘‘get it right’’ ev-ery step of the way, from the construction of the vessels overseen by our skilled project team at Drydocks World - Dubai, to an efficient sales process and the successful execution of the job by our operations teams. Not sur-prisingly, our company promotes an ethic of leadership in all that we do based on the following five leadership prin-ciples: Treat Your People Right, Communicate with Your Team, Inspire Greatness in Others, Encourage Initiative & Innovation and Do the Right Thing.

Our culture will be vital to our success in taking care of our employees and customers. As we continue to grow we will further sharpen our focus on strengthening the company culture, as we work to keep the feel of our company small yet highly responsive to our customers’ needs. We are determined to become better as we be-come bigger.

Following our focus on innovation and excellence, our financial results were also impressive in the context of a very challenging year in the financial markets. During 2008, we managed to raise USD 542 million to finance our ongoing construction. Further financing will be re-quired during 2009.

As we enter our second year, we remain committed to our vision to responsibly expand the frontiers of seismic

exploration without harm to our world. We also remain dedicated to deliver-ing excellence in ev-erything we do.

We know that we can-not take our accomplishments for granted. We

will continue to do all that has made us successful in the past while remaining focused on meeting our milestone targets for 2009 and delivering results that will ensure our future success. After all, ours is not just a story about 2008; it’s a story about delivering real value each and every day, for a long time to come. Our aim is to exceed the extraordinary standards we have set so that the future of Polarcus will be no less remarkable than our beginning. We believe we can keep turning heads in our industry for many years to come. On behalf of our dedicated Polarcus employees, we thank you for your continued interest in and support of Polarcus.

Sincerely

Peter M. RiggChairman

“the future of Polarcus will be no less

remarkable than our beginning“

Letter from the Chairman

9

No average achievement

Dear Polarcus shareholders,In 2008 we have met, if not exceeded the majority of our year end objectives that we set ourselves when we first launched Polarcus. Our year end targets for recruitment, marketing and sales, and overall company development have all been achieved. We have successfully undertaken two rounds of financing, resulting in USD 212 million of equity financing and USD 330 million of debt financ-ing. Our vessel build schedule is progressing efficiently, with con-struction on all six vessels now well underway. Only vessels 3 and 4 are behind our guided schedule, by two months, due to delays in the production of drawings attributable in part to the new design of these two unique vessels. Construc-tion on vessels 5 and 6 however was able to start ahead of time. This has been no average achievement as we set our ambitions high and came to the market with an aggressive plan to build, launch and operate six sophis-ticated marine seismic vessels in less than 30 months. It has been made possible to great extent by the caliber and commitment of the people we have recruited over the course of the year.

Our vision and core values have proved a strong magnet for those who share our ideals and believe that Polarcus can bring something new to the seismic industry; that we can be a pioneer of responsible exploration. This at a time when recruitment in the industry was especially challenging as a consequence of the exceptionally tight personnel market in the first half of the year. As a result we have now in place a very strong and highly respected management team that will enable us to move success-fully to the next phase of the company’s development and assure Polarcus’ strong competitiveness in the high-end 3D seismic market.

We recognize the importance of innovation and excel-lence at Polarcus. From the outset we have placed great emphasis on making the right maritime and seismic technology choices. Our vessels all incorporate the UL-STEIN X-BOW® inverted bow design alongside many oth-er advanced maritime features that will place our fleet firmly at the forefront of maritime innovation. Our seis-mic technology choices include many of the best-in-class systems currently available from leading companies such as ODIM, Sercel and ION, as well as the latest genera-

tion Sentinel® solid streamers and the Orca™ navigation system. We have as a result established important dif-ferentiation in our service offering that is already attract-ing considerable attention from prospective clients. As part of our original business plan we developed a clear road map and applied a risk management approach to

our decision making that has enabled us to remain firmly on course throughout this crucial

first year. We are already seeing the benefits of that foresight as we

navigate our way through the changing and potentially challenging market environ-

ment we are currently witnessing.

As we enter 2009, we are experiencing strong market interest in Polarcus’ value proposition and we give highest priority to reach our corporate goal. We are also encour-aged by the response we have received from potential in-vestors during the current challenging market conditions and we are through various avenues working relentlessly to raise the remaining funding required for 2009. We believe that the underlying industry fundamentals remain solid and we see encouraging indications today that our sector will experience a soft landing, evidenced in part by the fact that several major national and international oil companies are maintaining, and even in some cases increasing, their upstream E&P budgets.

These are exciting times for Polarcus and we are eager to commence operations. By the end of 2009 we will be on our way to becoming a world class geophysical company, with two high-end 12 streamer 3D vessels in operation, a professional and experienced support orga-nization, and some 200+ employees.

We thank our shareholders for the trust they have placed in us and we will continue to do our utmost to preserve that trust as we work rigorously to fully finance the Com-pany and count down to the launch of Polarcus Nadia, derived from the Arabic name meaning ‘the beginning, first’, in the third quarter of 2009.

Sincerely

Rolf RonningenCEO

Letter from the CEO

“we are on track to realize

our corporate goal”

Polarcus is a pure play marine geo-physical company with a pioneering environmental agenda, specializing in high-end towed streamer acquisition from pole to pole.

The Polarcus fleet will be at the forefront of maritime and seismic innovation from launch, well positioned to meet the current and future demands of the industry. Service capabilities will encompass conventional 3D surveys, so-phisticated wide and multi-azimuth projects, high density 4D production surveys, and marine seismic operations in areas of environmental sensitivity ranging from the tropics to the Arctic, the latter being an area currently receiving significant attention from the major interna-tional oil companies. Polarcus will be the sole operator in 2010 of 3D seismic vessels of less than 20 years hull age with the high ice class notation, ICE-1A, providing a unique competitive advantage for Arctic operations.

The expansion of the industry into frontier and environ-mentally sensitive regions of the world is also expected to drive a much higher level of environmental compliance worldwide as new legislation on emissions to air and wa-ter come into effect. Polarcus has placed a major em-phasis from start-up on “green” investments, both for its seismic systems and its maritime technologies in order to meet these challenges.

Polarcus’ pioneering environmental agenda will help to mitigate some of the environmental issues that have tra-ditionally affected vessel utilization and enable operations to expand responsibly into new frontier regions. Design features such as the DP2 dynamic positioning system, double hull, low sulfur fuels, selective catalytic reduction (SCR) catalysts, bilge water cleaning and ballast water treatment systems, and the CLEAN DESIGN class nota-tion will reduce the vessels environmental footprint and potentially enable access to environmentally sensitive ar-eas where some or all of the advanced design features above could be a requirement for entry.

Considerable attention has been placed on market-ing and sales efforts in order to secure backlog in the “contract market” for the first vessel by early Q2 2009. Projected areas for initial operations are the Atlantic margins, the Mediterranean, and the North Sea, all of which are areas with consistent high activity. The Com-

pany has placed a special focus on the Arctic in line with the strategy to responsibly pursue frontier opportunities, seeking opportunities for operations within this region from 2010 onwards. Other regional markets such as the Gulf of Mexico, Brazil, and the Eastern US seaboard are also being researched to identify opportunities for contracts of a duration that makes it economically viable to penetrate these markets early. The Company intends to develop a ‘back yard’ market around the Gulf coun-tries to establish it as the preferred supplier for projects that may arise close to the Dubai office. A strategy is also being developed to enable Polarcus to enter into the “multi-client” market once the operations deliver solid cash flow. Operating in both markets provides more flex-ibility for vessel scheduling as well as generating steady income in all phases of the seismic life cycle.

Rather than develop an in-house processing capability Polarcus will focus on establishing a relationship with a reputable and non-aligned processing company in order to offer a ‘full service’ operation to clients. This will en-sure the management team can commit its undivided attention to the development of the towed marine seis-mic business. Polarcus has in March 2009 entered into a 4 year agreement with the leading global non-aligned data processing company, GX Technology Corporation, under which GX Technology will provide seismic data quality control and data processing services onboard the Polarcus vessels, and advanced onshore seismic data processing capacity and services at one of their global Data Processing Centers as and when such services are part of the scope of surveys awarded to or required by the Company.

Polarcus has employed a well respected and highly ex-perienced management team from within the seismic industry and will directly employ office, marine and seis-mic personnel who will be operating under one unified EHS&Q (Environment, Health, Safety, and Quality) man-agement system strengthening its objective of becom-ing the responsible leader in safe, clean, and efficient marine seismic data acquisition.

The Company in July 2008 became a core member of the International Association of Geophysical Contractors (IAGC) and the CEO was elected to the IAGC Board of Directors in September 2008. The IAGC maintains sev-eral programs relating to environmental matters and the Company plans to become an active participant in the various committees and sub-committees relating to these.

Polarcus’ distinctive offering

10

Polarcus Nadia

EXPLORE GREEN

It is controversial and urgent. Debate and discussion carry forth from classrooms to boardrooms, from TV’s to radios and even to ships at sea. This emotional topic, of course, consists of the joint challenges of climate change and sustainable development with the primary question being; how are we going to address this? We believe the answer is “the world needs global solutions”. This means nations, NGO’s, individuals and the business world working together as a team. The seismic industry should not be exempt even though it is a part of the oil and gas business which is perceived so often as being on the dark side of the environmental debate. In reality, fos-sil fuels will have a place alongside clean energy sources for many decades so our industry has a key stewardship role to play in making every effort to operate in an envi-ronmentally responsible manner. There have been some in our industry who maintained a business strategy that allowed them to operate with little concern for environ-mental responsibility and sustainable development. After all, it was fossil fuels, the dark side; they didn’t sell to the public and didn’t see a profit in operating green. At Polarcus, a high-end marine seismic company launched in 2008, we approach this from the perspec-tive of individual citizens seeking global solutions and rec-ognize that we must be willing to accept economic costs now in order to avoid negative future consequences of inaction. We are well aware that we have a significant

opportunity within the maritime sphere of our industry to perform our work cleaner and greener. Our goal is to rise up and meet this challenge head on.

In launching Polarcus we are building an environmentally responsible company that we envision as being a model for others. Our beliefs are embedded in our corporate values of respect, innovation and excellence, and are apparent throughout the corporate lifecycle from the design of our seismic fleet, through their operation, to their eventual recycling. Our corporate values are the foundation for what we call “our pioneering environmen-tal agenda”. To be a pioneer we lead by example. Leading by example means, we know where we start from and how we’ll compare alongside our peers. We are pursuing an Emission Index for COx, NOx and SOx in our vessel build program. The principal uses an Emis-sion Indexing algorithm to measure our environmental footprint. The goal is to minimize that footprint whilst simultaneously maximizing vessel efficiencies. The Emis-sion Indexing is being conducted on the global marine seismic fleet by Ulstein International and Det Norske Veritas AS. This will establish benchmarks for existing vessels as well as new builds. It is our intention to share this data with the industry as it is only together that a timely, effective and pragmatic global solution can be found for the pollution and greenhouse gas challenges.

TM

A pioneering environmental agenda.

The resultant data will provide clients with the ability to objectively evaluate the sector and select an environmen-tally responsible contractor, furthermore challenging us all to innovate and move towards a cycle of continuous improvement.

Whilst building the company nearly every aspect of our vessel design and technology selection has come under the green focus. In designing the fleet we recognized the importance of reducing atmospheric emissions from our vessels. We investigated Selective Catalytic Reduc-tion Catalysts and through installation of these units we realized an investment in our future.

Similarly, by utilizing the latest systems for bilge and ballast water treatment we reduce, if not eliminate the number of contaminants and non-native species being released into our oceans, a lesser debated but equally important area of concern.

In parallel to the engineering initiatives, we are continu-ously seeking other ways to address the green agenda. For instance we measure the carbon footprint of our office, including business seminars held elsewhere. Em-ployees calculate the carbon footprint of primary cars and residences, with the carbon offsets paid for person-ally by the senior managers and by the company for all other employees. Another idea under consideration is a

carbon offset matching plan with our clients and suppli-ers, to offset the carbon footprint generated during our operations. The offsets would be used to support sus-tainable development in areas of extreme need, allowing us to give something back to the global community.

Small initial steps perhaps. But by increasing participa-tion, promoting awareness, investing in green technolo-gies and leading by example we hope to inspire others in our sector to become part of the global solution.

The above article by Peter Zickerman, EVP Polarcus, was published in the March 2009 issue of PennWell’s Offshore ® magazine

NB6651% Overall construction

98% Steel cut94% Steel constructed

Operation Q3 2009Keel laying 14 Sep 2008Steel cutting 18 May 2008



Operation Q4 2009Keel laying 20 Oct 2008Steel cutting 08 Jun 2008



Operation Q1 2010Keel laying 31 Jan 2009Steel cutting 1 Sep 2008



Operation Q2 2010Keel laying 22 Feb 2009Steel cutting 02 Nov 2008



Operation Q1 2010Steel cutting 15 Dec 2008



Operation Q2 2010Steel cutting 18 Dec 2008

As of March 2009

+

The Polarcus fleet has been designed to meet the in-dustry’s current and future needs, including the latest operational techniques such as wide and multi-azimuth seismic. The fleet is also well positioned for industry ex-pansion into new frontier regions that demand the latest in both maritime and seismic technology, and environ-mental safeguards.

The Polarcus fleet comprises 3 different vessel designs from Ulstein Design AS, each incorporating the innova-tive ULSTEIN X-BOW® hull that provides for a smoother and more fuel efficient passage through water. The Com-pany has applied rigorous EHS&Q criteria in the design of the vessels to account for extreme temperature expo-sures, tough sea conditions, maximized transit speeds and optimized seismic handling.

The vessels are designed in accordance with the Det Norske Veritas (DNV) Dynamic Positioning class 2 nota-tion (DYNPOS-AUTR) that will allow for continued safe steerage of the vessel in case of an engine failure, espe-cially important for operations in areas with infrastruc-ture hazards such as producing oilfields. The vessels are amongst the most environmentally sound seismic ves-sels in the market, designed with exhaust catalysts for all main engine exhaust lines in order to reduce the emis-sions of NOx, HC, soot and sound. These designs super-sede any international requirements currently in force and are in accordance to DNV’s latest rules for CLEAN DESIGN class. There are no fuel tanks adjacent to the vessels external hull, to mitigate potential exposure to the environment, and the adopted bilge water cleaning system will reduce contaminants to <5 ppm compared to typical shipping levels of 15 ppm or greater. The UL-STEIN SX133 and SX134 vessel designs also have a high ice class classification, ICE-1A, and an advanced ballast water treatment system to remove invasive spe-cies.

All six vessels are designed for crew comfort and safety, with gymnasium, sauna, individual offices, conference room, training room and high grade interiors of Scandi-navian standards for cabins and recreational areas. The COMF-V(3) class notation for reduced noise and vibration levels will provide a quieter, safer work environment for the crew and an improved life of machinery and equip-ment.

Polarcus Nadia & Polarcus Naila

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

Polarcus Samur & Polarcus Selma

Launching in 2010 “Polarcus Samur” and “Polarcus Selma” are multipurpose vessels built to the ULSTEIN SX133 design for both 6 streamer 3D seismic and for wide azimuth source operations. These vessels are capa-ble of towing up to 6 streamer cables of 8,000m length with a lateral separation of up to 160m. They have an LOA of 84.2m, a draft of 6.0m and a maximum speed of 18 knots, and carry the high ice class notation, ICE-1A, enabling them to operate safely in the Arctic Ocean.

Polarcus Asima & Polarcus Alima

Launching in 2010 “Polarcus Asima” and “Polarcus Al-ima” are 12 streamer 3D vessels built to the ULSTEIN SX134 design. These vessels will be capable of towing up to 12 streamer cables of 8,000m length with a lat-eral separation of 100m. They have an LOA of 92.0m, a draft of 7.5m and a maximum speed of 15 knots, and carry the high ice class notation, ICE-1A, enabling them to operate safely in the Arctic Ocean.

16

Polarcus innovative fleet

ULSTEIN SX124

ULSTEIN SX133

ULSTEIN SX134

17


Rolf RønningenChief Executive Officer

Rolf (born 1957) has over 28 years of seismic industry experience and has held senior positions at GECO, PGS and most recently was CEO of East-ern Echo Ltd. His experience covers both technical and operational man-agement of towed streamer seismic vessels. Rolf holds a B.Sc. in Com-puter Sciences from the Kongsberg Ingeniørhøgskole in Norway.

Shareholding in Polarcus: 1,000,000Warrants: 750,000Stock options: 580,000

Tom Henrik SundbyChief Financial Officer

Tom Henrik (born 1967) has over 15 years financial management and busi-ness development experience, with management positions in KPMG be-fore joining TINE Norway as Head of Controlling department and Head of M&A. Most recently he was Manag-ing Director of TINE UK Limited. Tom Henrik holds a Bachelor of Manage-ment and Economics from the Norwe-gian School of Management.

Shareholding in Polarcus: 350,000Warrants: 350,000Stock options: 380,000

Carl-Peter ZickermanExecutive Vice President & Head of Strategic Investments

Carl-Peter (born 1972) holds valuable experience in the seismic industry, gained from his prior start-up venture, Eastern Echo Ltd. Prior to this he founded GeoBird Ltd. His experience covers both maritime and seismic operations, including vessel conver-sions and newbuilds. Carl-Peter holds a B.Sc. in Marine Engineering from Kalmar Maritime College, Sweden. Carl-Peter is a Member of the Board of Polarcus Ltd.

Shareholding in Polarcus: 32,086,117Warrants: 15,000,000Stock options: 380,000

With combined relevant seismic, marine and geophysi-cal industry experience of over 215 years, the Executive Management team at Polarcus is not only a leader in this industry, but well-equipped to pursue the core focuses of

the company: innovation and excellence. The Executive Management team embodies the Polarcus culture and promotes an ethic of leadership and environmental re-sponsibility dedicated to achieving all company goals.

18

Eirin M. InderbergGeneral Counsel

Eirin (born 1968) has over 13 years experience as a lawyer, initially for the law firm Wikborg Rein & Co. in Oslo and London; as a lawyer at the Oslo Stock Exchange, and most recently as General Counsel of Eastern Echo Ltd. Her expertise includes Norwegian se-curities law, company law, and ship fi-nancing. Eirin holds a law degree from the University of Oslo, Norway and a BA in Business Administration and Economics from the California Luther-an University, USA.

Shareholding in Polarcus: 1,000,000Warrants: 1,000,000Stock options: 380,000

Paul Lionel HannaSenior Vice President Human Resources

Paul (born 1964) has over 22 years of industry experience and has held senior positions in various divisions of the Schlumberger group. His experi-ence includes the technical, person-nel and operational management of marine seismic vessels. Paul holds a MA in Engineering from the University of Cambridge, UK and a Ph.D. in Ge-odesy from the University of Notting-ham, UK.

Shareholding in Polarcus: 1,000,000Warrants: 750,000Stock options: 380,000

19

Christian FenwickSenior Vice President Business Development & Multi Client

Christian (born 1960) has over 26 years of industry experience and has held senior positions at Merlin Geo-physical, Schlumberger Geco-Prakla, Schlumberger Information Solutions, and Eastern Echo Ltd. His experience covers business development, mar-keting, sales, operations, and project management. Christian holds a B.Sc. in Geology from the University of Dur-ham and a professional certification in project management.


Svein Johnny NaleySenior Vice President Technology

Svein Johnny (born 1965) has over 15 years of industry experience and has held senior positions at PGS, Reservoir Exploration Technology (RXT), and most recently at Eastern Echo Ltd. where he was responsible for the company’s fleet new build project. Svein Johnny is a Maritime Engineer, specializing in mechanical/electro-automation. His expertise in-cludes project management of vessel new builds and conversions, seismic and maritime support, and operations management.



20

Trygve RekstenSenior Vice President Contract Sales

Trygve (born 1963) has over 17 years of industry experience and has held several management positions at PGS and Eastern Echo Ltd. His experience covers onboard technical roles, oper-ations, sales, business development, procurement and market analysis. Trygve holds a B.Sc. in Electrical Engi-neering and Electronics from the Uni-versity of Manchester, a degree in Po-litical Science from the University of Oslo, and a Masters of Management degree from BI Norwegian School of Management.


Jeff CorkhillSenior Vice President Operations

Jeff (born 1960) has over 26 years of industry experience, including time in the field, and has held several se-nior positions at Schlumberger West-ernGeco, Caspian Geophysical and AGO. Jeff was also VP Operations for WesternGeco Marine Electromagnet-ic Services. His experience covers op-erations management, marine sales, marketing, and region management, including eight years in the field. Jeff holds a HNC Electronics degree from C.C.A.T. in the UK.


21

Christopher GriffinVice President Environment, Health, Safety & Quality

Christopher (born 1961) has over 23 years of industry experience both onshore and offshore with Western Geophysical, Horizon Exploration, PGS and Eastern Echo Ltd. His experi-ence covers both onshore operations and project management, including 12 years in the field and 6 years in EHS&Q Management. Christopher holds a B.Sc. in Business Manage-ment from Louisiana, USA along with professional certification in Health and Safety, Lead Auditing and Accident In-vestigation.


Magnus ObergVice President IT

Magnus (born 1970) has over 20 years of IT experience working in mari-time companies. He joined Polarcus from Eastern Echo where he was VP Information Technology, and prior to that he held several senior manage-ment positions within Gulf Agency-Company before becoming the Group IT Research & Development Managerbased in Dubai. His expertise includes networking, security, and high-avail-ability infrastructure solutions utilizing the latest in virtualization and storage technologies.


The Polarcus Shares

The Company has one class of shares which carry equal rights in all respects and each Share carries one vote at the Company’s general meeting.

Polarcus’ issued share capital is USD 2,035,718.55 divided into 203,571,855 shares each with a nominal value of USD 0.01, all fully paid and issued. The shares are in registered form and are registered with the Nor-wegian Central Securities Depository (“VPS”) register with ISIN KYG7153K1085.

Trades in the Polarcus’ shares have been registered in the OTC system since 8 July 2008 under the symbol PLCS.

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Dnb Nor Navigator 1,880,272 0.92%

Clearstream Banking S.A. 1,491,000 0.73%

Jpmorgan Chase Bank 1,490,000 0.73%

Rolf Rønningen 1,000,000 0.49%

Seami Invest Limited 1,000,000 0.49%

Christopher Joseph Griffin 750,000 0.37%

Paul Lionel Hanna 750,000 0.37%

Hans-Peter Burlid 750,000 0.37%

David John Pryer 750,000 0.37%

Dnb Nor Smb 661,359 0.32%

Hønefoss Invest AS 616,000 0.30%

Christian Fenwick 600,000 0.29%

Top 20 Shareholders 194,405,486 95.50%

Others 9,166,369 4.50%

Total 203,571,855 100%

As of 31 December 2008

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Polarcus Nadia

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Corporate governance commitmentsOn 4 February 2009 the Board of Directors of Polarcus adopted a set of corporate governance commitments. The commitments are founded on the recommenda-tions of the Norwegian Corporate Governance Code (the “Code”), as applicable at all times. A summary of the commitments is provided below.

Polarcus Articles of Association, Corporate Governance Document and Terms of Reference for the Board of Di-rectors, the Board committees, the chairman and dep-uty chairman of the Board are available on the Polarcus web site, www.polarcus.com.

Recommendation 1: Implementation and reporting on Corporate Gover-nance Polarcus believes that focus on corporate governance is critical to its success and long-term growth.

Polarcus is committed to maintaining high standards of corporate governance. The governance structure of Polarcus is designed to be appropriate to shareholders’ expectations, the size, business and the recent history of the Polarcus Group and adheres to the Norwegian Code of Practice for Corporate Governance (the “Code”), Cay-man Islands law and practice and the Memorandum and Articles of Association of Polarcus.

The Company will comply with good corporate gover-nance through the establishment of a comprehensive and efficient framework of commitments, procedures, checklists and audits thereof and the promotion of a responsible corporate culture throughout the Polarcus Group.

The Board of Directors will annually review, evaluate, explain and report on the Company’s compliance or non-compliance of the individual corporate governance commitments and the applicable corporate governance recommendations of the Code, such report to be includ-ed in each annual report of the Company.

The Company’s vision and core values are presented on page 4 of this annual report. The “core values” of the Company are implemented through its commitments and procedures. The essential commitments are posted on the Company’s web site.

Recommendation 2: BusinessThe goals and strategies of Polarcus are presented on page 4 of this annual report.

The Company’s business is clearly defined in the Articles (last amended 19 May 2008) clause 3:

“The objects for which the Company is established are to carry on, undertake, engage or invest, directly or in-directly, by itself or through subsidiaries or part-owned companies, partnerships or other forms of entities, on a worldwide basis, in any commercial activity within the in-

ternational oil and oil services business, including oil and gas exploration, production and participation, seismic data services and general offshore energy related busi-ness, and whatever else may be considered incidental or conductive thereto, including without limitation the ac-quisition, construction, equipment, leasing, chartering, operation, agency and manning of any kind of vessels and everything incidental thereto, and the Company shall have full power and authority to carry out any other ob-ject not prohibited by the Companies Law of the Cayman Islands (as amended) (the “Law”).”

Recommendation 3: Equity and Divi-dendsPolarcus is committed to have an equity capital at a level appropriate to its objectives, strategy and risk profile. Polarcus is committed to maximizing the shareholder value, hereunder declaring dividend to the shareholders from its profit. Polarcus is under certain of its financing arrangements subject to dividend restrictions. Due to these dividend restrictions and the current phase of the Company, Polarcus does not envisage any declaration of dividend to the shareholders for the fiscal year 2008. The Board of Directors has the authority to distribute any authorized but not yet issued or reserved shares, currently amounting to 283,610,062 shares of USD 0.01 par value. The purposes for which the issued share capital may be increased is left for the Board of Direc-tors to decide. Polarcus will when asking the general meeting for an increase of its authorised share capital ensure that the purposes for which the share capital may be increased is clearly defined.

In accordance with its Articles, Polarcus may only ac-quire its own shares if and in so far as approved by the general meeting through an ordinary resolution, such mandate to be for a specific number of shares and for a specific period of time. The Board of Directors will en-sure that any request to the general meeting for a man-date to acquire any of the Company’s own shares shall be limited in time to the following annual general meet-ing. The Company does not currently hold any mandate to acquire own shares.

Recommendation 4: Equal treatment of shareholders and transactions with close associatesPolarcus has one class of shares. Polarcus is committed to equal treatment of all share-holders. The Articles of Polarcus do not prescribe any pre-emption rights for shareholders of the Company. In the event that the Company consider it to be in the best interest of shareholders or necessary to perform a share offering, the Company is committed to limiting the level of dilution. The Company will in connection with a share issue carefully consider the purpose and need for new equity, the urgency of such equity, the strategic position-ing between the Company and the new shareholders the offering is directed towards, the offer price, the financial market conditions and the need for compensating exist-ing shareholders.

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Should the Company find it beneficial to shareholders that Polarcus performs a stock repurchase, the Com-pany will adapt and follow best practice procedures.

Polarcus has developed procedures to handle potential conflicts of interest. The executive management of the Company and each director has a duty to notify the CEO and the Board of Directors respectively if it becomes known to any of them that he or she or a related party has any direct or indirect interest in a not immaterial transaction to be entered into by the Company. Any di-rector with such interest shall refrain from voting in re-spect of such transaction. The executive management shall also inform the Company of any financial interest each of them might have in any other company. In the event of a non-material transaction between the Company and a shareholder or shareholders, directors, members of executive management or close associates of any such parties, the Board shall arrange for a valua-tion from an independent third party unless the Board of Directors decides to ask the general meeting to resolve on the matter.

Recommendation 5: Freely negotiable sharesThe Company’s Articles provide that upon listing of the shares at a regulated investment market, the shares shall be freely transferable. Prior to such listing, a trans-fer of shares is subject to a consent from the Board of Directors.

The Board of Directors has not since the shares were listed on the Norwegian OTC in July 2008, enforced the Articles’ consent provision.

The majority of the Company’s shares are subject to a shareholder agreement. The agreement restricts the transfer of shares covered by the agreement until six vessels have been completed at Drydocks World Dubai LLC, expected to be Q2 2010. After this time the shares will be freely transferable. The Company believes it is important to maintain this agreement until all vessels have been delivered in order for the Company to reach a phase in its development where the real values are more correctly reflected in the share price.

The shares not subject to the shareholder agreement do not carry any transfer restrictions.

Recommendation 6: General Meet-ingsNotice of GMIn accordance with its Articles, the Company will pro-cure distribution of the notice of an annual general meet-ing to the shareholders at least 14 days in advance of the meeting and the notice of an extraordinary general meeting at least 7 days in advance of the meeting. The Company will distribute the notice to all individual share-holders with known address. The notice of a general meeting shall always include:

Date, time and place of the general meeting; +

The agenda, a description of or supplemental +

information on the matters to be discussed with suf-ficient details and content to enable the sharehold-ers to form a view on all matters to be considered at the meeting, any recommendation of a nomina-tion committee and, where applicable, proposal for resolutions;

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

A form of instrument of proxy that may be used at +the shareholders’ discretion, guidelines for complet-ing the proxy and information on who the sharehold-er can appoint as proxy;

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

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

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

Participation in a general meetingThe Company will ensure that as many shareholders as possible may exercise their rights as shareholders by participating in a general meeting and that the general meeting works as an effective forum for the views of the shareholders, hereunder by implementation of the follow-ing measures:

If at all required, the deadline for shareholders to +give notice of their intention to attend the meeting shall be fixed to earliest the day before the date of the meeting. Normally there will be no requirement for a shareholder to notify its attendance at the general meeting in advance of the meeting;

Any shareholder who cannot attend the meeting in +person shall be able to vote by proxy either by grant-ing proxy to the chairman of the Board of Directors or to an individual appointed by the shareholder on each matter to be considered at the meeting. The notice of the general meeting will specify at which address the instrument of proxy shall be deposited and that the proxy must be deposited no later than the time for holding the meeting. The chairman of the general meeting may in any event at his discre-tion direct that an instrument of proxy shall be deemed to have been duly deposited.

The chairman of the meeting shall invite the share- +holders to participate in discussions of the different issues at the general meeting.

The general meeting shall vote separately on each candi-date nominated for election to the Board of Directors. The members of the Board of Directors, the CEO, the CFO and the company secretary shall be present at any general meeting. Furthermore, the members of the nom-ination committee will be present at the annual general meeting. The auditor shall be present at each general meeting where such presence is practical or necessary due to the nature of the business to be transacted at the meeting.

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Proceedings at general meetingsIn order for a general meeting to proceed, shareholders representing not less than 10% of voting rights of the Company must be represented either in person or by proxy.

For practical reasons as well as cost considerations, the chairman of the Board of Directors will chair the general meeting, provided the chairman of the Board of Directors at any time elected is independent of any ma-jor shareholder of the Company. If the chairman of the Board of Directors is prevented from meeting or unable or unwilling to act as chairman of the general meeting, the other members of the Board of Directors present shall elect one of their number to be chairman of the meeting and if possible one member that is independent of any major shareholder of the Company. If no member of the Board of Directors is willing or able to act as chair-man, the shareholders present at the meeting shall by ordinary resolution choose one of their number to be the chairman of the meeting.

Announcement of documents related to GM The Company shall post the following documents related to a general meeting on its web site:

The notice of a general meeting and supplemental +information on the matters to be considered, includ-ing any recommendation of a nomination committee, and proposals for resolutions to be considered, if possible at least 21 days in advance of the meeting;

Form of instrument of proxy; +

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

Minutes from the general meeting latest three days +after the date of the general meeting.

Recommendation 7: Nomination Com-mitteeThe Board will establish a nomination committee prior to the election of board members on the annual gen-eral meeting in 2010. The nomination committee will be responsible for evaluating and recommending candi-dates for members of the Board of Directors as well as proposing remuneration for the Board of Directors. The committee’s proposal will be presented in the notice for the general meeting.

The Board of Directors will appoint one of its indepen-dent members to appoint the committee. This elected member will in turn appoint two individuals among the 20 at that time largest shareholders. No shareholder that is part of the executive management team may be part of the nomination committee and at least one mem-ber must be independent of the Board of Directors. The members of the nomination committee are elected for a period of two years.

The names of the members of the nomination commit-tee will be posted on the Polarcus web site, www.polar-cus.com.

Recommendation 8: Board of Direc-tors: Composition and independencePursuant to the Articles, the Board of Directors may consist of 2 to 10 directors. The current Board of Di-rectors are presented on pages 32 and 33 of the annual report. They were all elected in 2007 or 2008.

The members of the Board of Directors and the chair-man of the Board of Directors shall be elected by the annual general meeting by ordinary resolution.

Each director shall serve for a term of two years which expires at the conclusion of the annual general meeting in the year in which the period of office expires. A direc-tor is eligible for re-election after the two-year period.

The Board of Directors shall together have qualities, ex-perience and expertise that the Company needs in order for it to develop into a recognised provider of geophysical seismic services world-wide including, but not limited to, geophysical seismic expertise, corporate, financial and investor relation experience and experience within invest-ment banking. The directors shall furthermore have the ability to work efficiently as a team and have sufficient capacity to carry out his/her duties.

The Board of Directors shall attend to the common in-terest of all shareholders and operate independently of any special interests and have a balanced combination of directors representing major shareholders and directors that are independent of any shareholder or shareholder groups. Under no circumstance shall the independent di-rectors count less than two directors. The Company will furthermore ensure that the majority of the directors are independent of the Company’s executive management and material business contacts. The composition of the current Board of Directors complies with the Company’s corporate governance commitments. The Company feels the Board of Directors reserves sufficient time to carry out their duties as directors in Polarcus. None of the di-rectors holds such a number of board positions in other companies that such other positions would compromise the time needed to act as directors in Polarcus. Mr. Carl-Peter Zickerman is part of the Company’s exec-utive management, serving as EVP & Head of Strategic Investment. Mr. Zickerman is furthermore one of the major shareholders and a founding shareholder of the Company. The Board of Directors finds it advantageous that he holds office as director as well as attending to critical strategic processes on a daily basis.

The directors are encouraged to and all current Direc-tors own shares in the Company. No director shall be entitled to options in their capacity as director.

Recommendation 9: The work of the Board of DirectorsThe Board of Directors has issued separate terms of ref-erence documents that in detail set outs the authorities, responsibilities and duties of the Board of Directors, the chairman, the deputy chairman, a director, the company secretary, board committees as well as the CEO. The terms of reference are available on the Polarcus web site, www.polarcus.com. The Board of Directors and

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each director shall comply and carry out its responsi-bilities in accordance with at any time applicable instruc-tions and guidelines.

The Board of Directors shall regularly consider the ap-pointment of board committees in order to enhance and ensure independent and efficient preparation and con-sideration of matters. Only directors independent of the executive management team can be members of such committees. A description of the current corporate gov-ernance committee and remuneration committee and their mandate are included on page 34 of this annual report.

The Board of Directors has established a plan for its work for 2009 and has carried out an evaluation of its performance and expertise for 2008.

The Board of Directors has held 2 physical meetings, 3 phone meetings and executed 20 written resolutions in 2008.

Recommendation 10: Risk manage-ment and internal controlGood risk management and quality processes are at the core of the Company’s business.

The Company will ensure sound internal control of its business and compliance with all relevant laws, regula-tions, and market requirements i.a. through its company management system. The management system contains Polarcus commitments (policy statements), Company manuals, corporate identity and ethical commitments, risk control, 3rd party management and contingency planning. The commitments, manuals and planning doc-uments are supported by procedures. The procedures shall provide the necessary reference, standards and instruction for responsibly carrying out the daily tasks of the Group, in many situations aided by checklist that shall ensure that the task is carried out as prescribed in the procedure. Polarcus will annually carry out an internal audit in ac-cordance with detailed audit procedures and the annual audit plan in order to ensure sufficient regular monitor-ing and review of the Group’s management system, in-cluding suppliers and sub-contractors. The result of such audits shall be presented and considered by the Board of Directors. External and internal audits will take place throughout the year.

As part of the company management system and cul-ture, the employees are required to report near-misses, incidents and non-conformances. Compliance with all aspects of the Polarcus management system shall be one element measured for each employee under the performance based bonus scheme implemented by the Group.

As a measure to assist in the internal control of the Group, the executive management is required to report to the Board of Directors regularly on (i) safety, (ii) fi-nancial reporting, including conformation of categories of budget and financial accounts, the status and compli-ance with covenants in loan agreements/sale-leaseback transactions, vessels CAPEX and currency exposure, (iii) vessels construction progress, (iv) status of recruitment

and (v) sales/marketing measures. The executive management and each department of the Group shall regularly identify the risk and possible mitiga-tion measures of the Group and the respective depart-ment. The result of the reviews shall at least annually be presented to the Board of Directors for discussion and consideration.

Polarcus management follow up its financial status on a daily basis leading into a formal monthly management re-port including critical factors relating to covenants, cash flow and other key figures. The quarterly financial state-ments are presented and approved by the Board with a detailed comparison to budget. The complete internal control system is in the process of being developed, but critical control procedures have been put in place.

Recommendation 11: Remuneration of the board of directorsThe remuneration of the Board of Directors shall reflect the Board of Directors’s responsibility, expertise, time commitment and the complexity of the Company’s activi-ties from year to year. The remuneration shall not be linked to the Company’s performance. The Company is currently in a work-intensive phase and requires consid-erable input and assistance from its directors. The detail of the proposal for annual remuneration of the Board of Directors is presented in Note 27.4 to the Consolidated Financial Statement on page 65 of this annual report. No additional remuneration has been paid to any direc-tor. Committee work is not eligible for additional pay.

The Company will not establish options scheme for its di-rectors. However, Mr. Carl-Peter Zickerman own options in the Company in his capacity as a member of the ex-ecutive management. All directors, directly or indirectly own shares in the Company.

As a general principle, the directors or the director’s companies shall not take on specific assignments for the Company. If a director’s particular expertise is needed by the Company for a period of time, the framework of such assignment as well as the remuneration shall in advance be approved by the Board of Directors.

Recommendation 12: Remuneration of the executive managementThe remuneration committee shall annually review, and propose to the Board of Directors the updated guide-lines for the remuneration and benefits package of the members of the executive management, including the CEO. The remuneration committee shall when prepar-ing the guidelines take into account the location of the management, the level of remuneration normal within the business of the Group, the phase of the Group’s busi-ness and special characteristics of the different persons within the executive management. The guidelines shall include a summary of the characteristics of employee option schemes and bonus schemes applicable to the Group. The guidelines shall be communicated to the annual general meeting for information. Information on the remuneration of the executive management and the general principles behind the various elements are pre-sented on page 65 of this annual report. No bonuses have been granted to the employees for 2008.

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

Recommendation 13: Information and communicationsThe reporting of financial and other information from the Company shall be based on openness and equal treat-ment of all participants in the securities market. The Company will comply with detailed reporting require-ments applicable for companies whose shares are trad-ed at the Norwegian OTC list.

The Company will during the first period of 2009 estab-lish complete investor relations and external communica-tion procedures. Legal disclosure obligations and regula-tions for financial reporting will be strictly followed. All information sent to the shareholders or the market shall simultaneously be published on the Company’s web site. The Company provides certain progress information to Drydocks World LLC under its shareholder agreement which could compromise the requirement for equal treat-ment of the shareholders. The Company will strive to give the information to the total market as soon as practically possible. The Company does not see that its disclosure duties to Drydocks World LLC creates substantial disad-vantages for the other shareholders as Drydocks World LLC and the other parties to the shareholder agreement under any circumstances are restricted from trading in the shares and as such cannot take benefit of the infor-mation received.

The Company shall in the beginning of each year publish a calendar setting out the announcement of financial re-ports, the date of the annual general meeting and other major events. The financial calendar for 2009 is pre-sented on the Polarcus web site, www.polarcus.com.

Recommendation 14: Take-oversThe Company will establish detailed guidelines for how the Board of Directors and executive management shall act in the event of a take-over bid. Such guidelines will re-flect the applicable laws and the Code, describe the vari-ous phases of a take-over process, include procedures to ensure that sufficient information and time are made available to the shareholders of the Company to evaluate the offer of such takeover, as well as guidelines for the Board of Directors’ evaluation of the offer and collection of independent price valuation. The principles will give guidance to when a general meeting should be called and

include which actions the Board of Directors has to take or refrain from taking. Under the guidelines, the Board of Directors shall not exercise mandates or pass any resolutions with the intention of obstructing the take-over bid unless this is approved by a general meeting following announcement of such bid.

Any transaction that is in effect a disposal of Company’s activities shall be decided by a general meeting.

Recommendation 15: AuditorThe Company has appointed Ernst & Young AS, Oslo, Norway as its auditors.

The Company shall annually request an audit plan from the auditor concerning the audit of the Company’s con-solidated financial statements.

The Board of Directors shall request and accommodate that the auditor can participates in board meetings that deal with annual accounts. The auditor shall in such meet-ings review any material changes in the Company’s ac-counting principles, comment on any material estimated accounting figures and report on all material matters on which there has been disagreement between the audi-tor and the executive management of the Company. The Board of Directors shall in combination with such review meet with the auditor without the presence of the CEO or any other member of the executive management.

The auditor shall at least once a year discuss the Com-pany’s internal control procedures with the Board of Di-rectors, including identified weaknesses and proposals for improvement.

The Company will establish guidelines as to when it is ac-ceptable to use the Company’s auditor for services other than the audit. This in order to ensure the auditor’s con-tinued independence. The executive management shall furthermore carefully evaluate, when instructing consul-tants, whether any of such consultants can be linked to the auditor and therefore put the independence of the auditor at risk. The Company has during 2008 received tax advice from the auditors. The Company is confident that these services have not compromised the indepen-dency of the auditor and has received a written confirma-tion from auditor on its status of independence.

The Board of Directors shall request to receive annual written confirmation from the auditor that the auditor continues to satisfy the requirements for independence. The auditor shall provide the Board of Directors with a summary of all services in addition to the audit work that have been undertaken by the Company.

The Board of Directors shall report the remuneration paid to the auditor at the AGM, including details of the fee paid for audit work and any fees paid for other spe-cific assignments. Proposal for remuneration to the au-ditor for services rendered during 2008 is presented in Note 27.5 to the Consolidated Financial Statement on page 65 of this annual report.

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Peter M. RiggChairman of the Board

Peter (born 1948) has an extensive background in invest-ment banking with 21 years experience working in Asia and Europe, principally for Credit Suisse First Boston as a Worldwide Managing Director responsible for Asian Equity Capital Markets. Peter is a qualified Solicitor. He is also an independent non-executive Director of Shroder’s Oriental Income Fund Limited, and of two Asian private equity funds.

Shareholding in Polarcus: 250,000 sharesIndependent of the Company and management and inde-pendent of major shareholders

Geoff TaylorNon-Executive Director

Geoff (born 1953) has held the position of Chief Execu-tive Officer of Drydocks World LLC since 2004. He is also a member of the Board of Drydocks World LLC, Dubai World LLC and EZ World LLC.

Shareholding in Polarcus: 600,000 sharesIndependent of the Company and management but rep-resenting Drydocks World LLC

Carl-Gustav ZickermanNon-Executive Director

Carl-Gustav (born 1948) has substantial experience in the seismic industry gained from his involvement in the startup of Eastern Echo Ltd. and prior to that, as Direc-tor and Partner with SeaBird Exploration Ltd.

Shareholding in Polarcus: 52,961,232 sharesRepresenting Zickerman Holding Ltd

Alan LockerNon-Executive Director

Alan (born 1952) has extensive technical experience, with his most recent position being Chief Technical Of-ficer at Drydocks World LLC, and prior senior positions at Dubai Ports Authority and Eurotunnel Services Ltd. He holds an Engineering degree from the UK.

Shareholding in Polarcus: 250,000 sharesIndependent of the Company and management

Carl-Peter ZickermanExecutive Director

Carl-Peter (born 1972) holds valuable experience in the seismic industry, gained from his prior start-up ventures, Eastern Echo Ltd, and GeoBird Ltd.At present he is work-ing in the capacity of Executive Vice President & Head of Strategic Investments at Polarcus.

Shareholding in Polarcus: 32,086,117 sharesPart of the Executive Management team of the Company and representing Zickerman Group Ltd

Kitty HallNon-Executive Director

Kitty (born 1956) has over 30 years experience within the geophysics industry and is currently Chief Executive of ARKeX Ltd, UK, where she is also the founding share-holder. Kitty was a Board Member of Eastern Echo Ltd.


The Board of Directors of Polarcus Limited is composed of 2 directors from Drydocks World, 1 director each from Zickerman Group Ltd. and Zickerman Holding Ltd, representing the founding shareholders, and 5 indepen-dent directors. All members of the BoD are experts in their specific areas of industry and have the qualities, experience and expertise required to develop Polarcus into a stock-listed company and a recognized provider of geophysical seismic services worldwide. Independence and integrity are emphasized in all matters concerning Polarcus, so ensuring the successful development and implementation of Polarcus Limited’s business plan.

Board of Directors

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Tore KarlssonNon-Executive Director

Tore (born 1953) is an independent consultant and part-ner/founder in Memetree Ltd, UK, MoVa AS, Norway and GeoPublishing Ltd. He has an MSc. in Geophysics and is an Associate Professor at the Centre for Entre-preneurship at the University of Oslo. He was Chairman of the Board of Eastern Echo Ltd prior to its acquisition by Schlumberger Ltd in 2007.


Hege SjoNon-Executive Director

Hege (born 1968) is currently consulting for Hermes In-vestment Management Ltd., London; prior to which she was employed there in the capacity of Manager for Euro-pean Governance and Engagement. Hege is the author of “Investor Relations in Practice” and holds a business degree from Stirling University, Scotland and a post-graduate degree in Corporate Finance from the Norwe-gian School of Economics. Hege serves as an alternate member of StatoilHydro’s corporate assembly.


Dr. Rosli KhanNon-Executive Director

Dr. Rosli (born 1958) joined Drydocks World LLC in 2007 as Business Development Director, based in Dubai. Prior to this he worked as a high-level maritime and infrastruc-ture consultant for over 16 years. He holds an MSc. in Transport Planning and a PhD in Transport Economics from Cranfield Univeristy, UK. Dr. Rosli is also a Member of the Chartered Institute of Logisitics and Transporta-tion, UK.

Shareholding in Polarcus: 200,000 sharesIndependent of the Company and management but rep-resenting Drydocks World LLC.

Board of Directors report

Polarcus is a pure play marine geophysical company with a pioneering environmental agenda, specializing in high-end towed streamer acquisition from pole to pole. The Company is currently building six ultra-modern 3D seismic research vessels which will operate worldwide providing best-in-class marine seismic services to the oil and gas industry. The Company is initially focusing the marketing efforts in the contract market and will later enter into the multi-client market.

1. Key developments 2008Launched the company. +

Signed shipbuilding contracts with Drydocks World +- Dubai LLC for the construction of six seismic ves-sels. All six Polarcus vessels incorporate the innova-tive ULSTEIN X-BOW® hull design and will enable the company to operate worldwide providing high-end 3D and 4D towed marine seismic services to the oil and gas industry. The vessels will be delivered between Q3 2009 and Q2 2010.

Secured financing of USD 542 million comprising eq- +uity of USD 212 million and debt of USD 330 million.

Arranged deferred payment with Drydocks World +Dubai LLC of USD 99 million.

Appointed nine directors to the Board. All directors +together bring diverse skills and extensive experience to the Board in financial, legal and industry matters. Four of the directors are independent of the majority shareholders of the company.

Keel laying for the first two Polarcus vessels +

Established a sales and marketing office in North +America by appointment of a VP Marketing, North & South America

Registered its shares on the Norwegian OTC list +(“NOTC List”) with ticker PLCS.

2. Financial results for 2008The Group will not have operating income until the first vessel becomes operational in Q3 2009. The annual financial statement reflects the progress of construc-tion projects through the period. The vessels under construction are capitalized at cost amounting to USD 180,080,689 as at 31 December 2008. The capital expenditure is according to budget. Total financing se-

cured in 2008 totaled USD 542 million. Total loss for 2008 was USD 2,388,211. The Group will need fur-ther financing during October 2009. The board confirms that the 2008 financial statements have been prepared based on the assumption of going concern.

3. OutlookAlthough oil demand has fallen sharply in the past two quarters due to the global recession, Polarcus believes that the underlying industry fundamentals remain solid due to the continuing need for the oil companies to re-place reserves and address declining production rates in maturing fields. This is further supported through vari-ous announcements that both national and international oil companies are maintaining, or in some cases increas-ing, their E&P budgets for 2009.

As global economies begin to recover, oil demand can be reasonably expected to follow suit and to continue to grow over time fuelled by the global growth in population and improving standards of living, especially across India and China. In the seismic industry and after witnessing weakening day rates through the first quarter of 2009, Polarcus is seeing encouraging indications that the sec-tor will experience a soft landing in H2 2009 and begin to recover in H1 2010, led by the high-end 3D seismic acquisition sector.

4. Risk4.1. Financial Risks

Access to financial fundingThe Company is dependent on obtaining additional financ-ing in order to fully fund the completion of the vessels. Further, the Company may require additional capital in the future due to unforeseen liabilities and for general working capital purposes.

Future contract awards and credit risksThe income of the Company will be dependent on con-tract awards and there are no guarantees that the fi-nancial position of the contract parties will be sufficient to adhere to the obligations under the contracts with the Company

4.2. Market Risks

Variability of operating resultsThe Company’s revenue may vary from month to month

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and year on year due to changes in oil companies explo-ration and production spending. There is no guarantee that Polarcus will be able to secure contracts at prof-itable rates. In addition, the Company may experience significant off-hires between charters.

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

4.3. Risk factors particular to the vessels construction project

Dependence on timely access and deliveryThe construction of the Company’s vessels is dependent on timely access to yard slots and delivery of long lead items and design drawings. Delays in any one or more of these areas may significantly impact the overall vessel build schedule resulting in, but not limited to, cost over-runs and delivery delays.

Dependence on sub-contractorsThe Company is dependent on the ability of sub-contrac-tors to provide key seismic equipment which meets the specifications, quality standards and delivery schedules of the Company. Failure to meet these requirements may have a material adverse impact on the Company’s oper-ating results and financial position.

5. Health, safety and securityPolarcus ensures that the highest priority is placed on all identified health, safety and security issues by utilizing a strong risk based approach to our decision making processes. From commencement of the Company, Po-larcus logged exposure hours for all Polarcus employees in addition to contractor personnel working at the Dubai Shipyard on Polarcus projects. Polarcus experienced zero lost time incidents (LTI’s) giving a lost time incident frequency (LTIF) of 0. Through the same period Polarcus had zero recordable incidents giving a total recordable case frequency (TRCF) of 0.

During 2008, Polarcus has made significant progress to-wards producing an innovative, risk based Management System that is the basis for future certification under ISM, ISPS, ISO 9001, 14001 and OHSAS 18001. The modular based system provides a fast, efficient and user friendly approach towards accessing information, re-porting, investigation, experience transfer, action track-ing, document management and review. The system is planned for roll out and certification during 2009.

6. EnvironmentThe Company is pursuing an Emission Index for COx, NOx and SOx in the vessel build program. The principal uses an Emission Indexing algorithm to measure the environ-mental footprint. The goal is to minimize that footprint whilst simultaneously maximizing vessel efficiencies. The Emission Indexing is being conducted on the global ma-rine seismic fleet by Ulstein International and Det Norske Veritas AS. This will establish benchmarks for existing vessels as well as new builds. It is the Company’s inten-tion to share this data with the industry as it is only together that a timely, effective and pragmatic global solution can be found for the pollution and greenhouse gas challenges. The resultant data will provide custom-ers with the ability to objectively evaluate the sector and select an environmentally responsible contractor,

Whilst building the Company nearly every aspect of ves-sel design and technology selection has come under the green focus. In designing the fleet the Company recog-nized the importance of reducing atmospheric emissions from the vessels. The Company investigated Selective Catalytic Reduction Catalysts and through installation of these units Polarcus will realize an investment in our fu-ture.

Similarly, by utilizing the latest systems for bilge and bal-last water treatment the Company will reduce, if not eliminate, the number of contaminants and non-native species being released into our oceans, a lesser debated but equally important area of concern. In parallel to the engineering initiatives, Polarcus is continuously seeking other ways to address the green agenda. For instance the Company measures the carbon footprint of the of-fice, including business seminars held elsewhere. Em-ployees calculate the carbon footprint of primary cars and residences, with the carbon offsets paid for person-ally by the senior managers and by the company for all other employees. Another idea under consideration by Polarcus is a carbon offset matching plan with clients

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Peter Rigg

Geoffrey Taylor

Carl-Gustav Zickerman

Alan Locker

Carl-Peter Zickerman

Kitty Hall

Tore Karlsson

Hege Sjo

Dr. Rosli Khan

Dubai 31 March 2008, Board of directors

and suppliers, to offset the carbon footprint generated during operations. The offsets would be used to support sustainable development in areas of extreme need, al-lowing the Company to give something back to the global community.

Polarcus experienced zero pollutants to ground during 2008 and waste is managed in accordance with national and international standards and disposed of according to these standards. Polarcus’ environmental management system is based on ISO 14001 in preparation for certifi-cation during 2009.

7. EmployeesAs of year end 2008, Polarcus had 56 full time employ-ees of which 44 are based in Dubai, UAE, 1 in Houston, USA and 11 field based employees. The 2008 recruit-ment focus secured the Company executive manage-ment team together with other key office based positions and the site team necessary to oversee and support the newbuild program.

The Company is committed to being the employer of choice in the marine seismic business and has developed a comprehensive compensation and benefits package to attract and retain the best experts worldwide. The Com-pany is committed to maintain a human resource system that is open and fair. All employees are treated equally regardless of ethnic background, gender, religion, age or disability.

8. Board committees Currently the board of directors has established two board committees, a corporate governance committee and a remuneration committee. Directors are not paid any extra remuneration for committee work.

The corporate governance committee consists of Mr. Alan Locker, Mrs. Hege Sjo and Mrs. Kitty Hall and was appointed on 30 July 2008 with a mandate of developing a framework for the Company’s corporate governance commitments and to regularly review and update the Company’s governance commitments and structure.

The remuneration committee consists of Mr. Alan Lock-er, Mrs. Hege Sjo, Mrs. Kitty Hall and Mr. Tore Karlsson and was appointed on 30 July 2008 with a mandate to review proposals from the executive management on bonus schemes and other benefits as well as general principles for salary and allowance increases.

34

+

36

Consolidated financial statementsfor the year ending 31 December 2008

Consolidated Income Statement

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Consolidated Financial Statements

37.

38.

39.

40.

41.

Consolidated Income Statement

Notes Year ended

(In USD) 31-Dec-08 Revenues - Salaries and G&A Salaries and other employee benefits 22 (8,045,202) Office rent and other general expenses (1,407,907) Legal and consulting (714,197) Business promotion (417,908) Travel expenses (558,329) Depreciation 6 (88,067) Operating Loss (11,231,610) Financial Expenses Finance costs 23 (5,074,641) Finance income 24 13,918,040 Net Financial Expenses 8,843,399 Profit/(loss) for the period before Tax (2,388,211) Income tax expense 25 - Profit/(loss) for the period (2,388,211) Loss per share for loss attributable to the equity holders during the period - Basic 26 (0.018) - Diluted 26 (0.060)

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Consolidated Balance sheet

(In USD) Notes 31-Dec-08 ASSETS Non-Current Assets Property, plant and equipment 6 1,064,629 Vessels under construction 7 180,080,689 Intangible assets 8 584,172 Restricted cash - long-term 11 735,696 Total Non-Current Assets 182,465,186 Current Assets Prepaid expenses 9 420,340 Advance to employees 10 386,297 Deposits 36,675 Restricted cash - short-term 11 83,582,779 Cash and bank 12 105,253,909 Total Current Assets 189,680,000 TOTAL ASSETS 372,145,186 EQUITY and LIABILITIES Equity Issued share capital 13 2,035,719 Share premium 13 188,641,420 Other reserves 15 1,314,832 Retained loss (2,388,211) Total Equity 189,603,760 Non Current Liabilities 13% Senior secured bonds 14, 17 53,191,115 8.5% Convertible bonds 14, 18 29,131,763 Liability for warrants 13 10,934,452 Employee pension accrual 16 27,666 Total Non Current Liabilities 93,284,996 Current Liabilities Interest payable 20 4,708,551 Employee accruals and payables 295,850 Other accrued expenses 125,892 Accounts payable 21 83,997,403 Other payables 128,734 Total Current Liabilities 89,256,430 TOTAL EQUITY and LIABILITIES 372,145,186

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Consolidated Cash Flow Statement

(In USD) 31-Dec-08 Cash flows from operating activities Loss for the period before tax (2,388,211) Adjustment for: Depreciation 88,067 Changes in fair value of financial instruments (7,781,936) Stock options compensation provision 879,888 Interest income (2,070,318) Working capital adjustments: Increase in current assets (843,312) Increase in trade and other payables and accruals 1,403,677 Net cash flows from operating activities (10,712,145) Cash flows from investing activities Increase in restricted cash (84,318,475) Purchases of property, plant and equipment (93,123,792) Payments to acquire intangible assets (584,172) Interest income 268 081 Net cash flows used in investing activities (177,758,358) Cash flows from financing activities Proceeds from the issue of ordinary shares 211,971,855 Transaction costs of issue of shares (2,578,328) 13% Senior secured bond net proceeds 53,075,000 8.5% Convertible bond net proceeds 33,775,000 Interest income 2,070,318 Net cash flows from financing activities 298,313,845 Hedged loss on revaluation of restricted cash (other reserves) (4,589,433) Net increase in cash and cash equivalents 105,253,909 Cash and cash equivalents at the beginning of the period - Cash and cash equivalents at the end of the period 105,253,909

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Consolidated Statement of Changes in Equity

(in USD) Number of

Shares

Issued Share capital

Share Premium

Other Reserves

Retained Loss

Total Equity

17 December 2007 at USD 1.00 per share 1 0.01 0.99 - - 1 Balance at 1 January 2008 1 0.01 0.99 - - 1 Net loss on cash flow hedge - - (4,589,433) - (4,589,433) Net income and expense for the year directly recognised in equity - - (4,589,433) - (4,589,433)

Loss for the period - - - (2,388,211) (2,388,211)

Total income and expense for the year - - (4,589,433) (2,388,211) (6,977,644)

Issue of share capital 9 February 2008 at USD 1.00 per share 49,999,999 500,000 49,499,999 - - 49,999,999 18 March 2008 at USD 1.00 per share 3,786,855 37,869 3,748,986 - - 3,786,855 19 May 2008 at USD 1.00 per share 85,000,000 85,000,000 84,150,000 - - 85,000,000 21 May 2008 at USD 1.00 per share 20,000,000 20,000,000 19,800,000 - - 20,000,000 29 June 2008 at USD 1.00 per share 2,785,000 27,850 2,757,150 - - 2,785,000 2 July 2008 at USD 1.20 per share 42,000,000 420,000 49,980,000 - - 50,400,000 Transaction costs on issue of shares - (2,578,328) - - (2,578,328) Issue of warrants to shareholders - (18,716,388) - - (18,716,388) Issue of convertible bonds - - 5,024,377 - 5,024,377 Employee stock options provision - - 879,888 - 879,888

Balance as at 31 December 2008 203,571,855 2,035,719 188,641,420 1,314,832 (2,388,211) 189,603,760

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

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Notes to the consolidated financial statements

1 General InformationThe consolidated financial statements of Polarcus Limited (the “Company”) and its subsidiaries (together the “Group”) for the year ended 31 December 2008 were authorized for issue in accordance with a resolution of the directors on 31 March 2009.

Polarcus Limited is a pure play marine geophysical company with a pioneering environmental agenda, specializing in high-end towed streamer data acquisition from Pole-to-Pole.

Polarcus Limited was incorporated on 17 December 2007 in the Cayman Islands with its registered office at Walker House, 87 Mary Street, George Town, Grand Cayman, Cayman Islands. The Group has its main administration office in Dubai, United Arab Emirates which is the domicile of the Group. The Group had no activities in 2007 apart from the issue of one share for USD 0.01, hence no financial statements were prepared for 2007.

The Group is building six ultra-modern seismic vessels at Drydocks World Dubai LLC (“DWD”) of the X-BOW type from Ulstein Design AS.

Vessels 1 and 2 are scheduled to be in operation by Q3 and Q4 2009, respectively. The construction of these vessels is progressing well and the vessels are expected to be delivered within guided dates.

A potential delay of two months beyond the guided delivery dates is expected for vessels 3 and 4 due to delays in production of drawings. The situation is continuously monitored and the Company, together with Ulstein Design AS and DWD, is working hard in order to avoid further delays and potentially recoup some of the time already lost.

The building progress of vessels 5 and 6 is ahead of schedule. The current expected operational dates for these vessels are therefore well within previously guided dates.

1.1 FinancingThe Group is, pursuant to the contracts with DWD and other vendors, committed to building six new vessels at a total cost of approximately USD 849 million, taking into consideration hedging of payment obligations in NOK. In addition, the Group estimates to spend approximately USD 50 million on general and administrative expenses related to the construction projects. The total expenditure is estimated at USD 899 million excluding the cost of financing.

As of 31 December 2008, the Group has arranged total financing of USD 542 million, as per below:

Equity USD 212 million Senior secured bond USD 55 million Convertible bond USD 35 million Sale & lease back (on first two vessels) USD 180 million Vendor financing on seismic equipment USD 60 million

A deferred payment arrangement has been entered into with DWD in relation to vessels 4 to 6, “Polarcus Selma”, “Polarcus Asima” and “Polarcus Alima”. Under this arrangement certain payment installments due under the original ship building contracts for these vessels will be deferred from the scheduled milestone payment dates to the contractual delivery dates of the vessel. The total value of the deferred installments amounts to USD 99 million. The interest rate is LIBOR+3 per cent.

Accordingly, additional financial resources of approximately USD 407 million are required. The Group expects to generate further financing from various sources, including equity and debt financing, and through operation of the vessels.

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1.2 The going concern assumptionThese consolidated financial statements are presented based on the going concern assumption under International Financial Reporting Standards. Accordingly, the financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, the amounts and classification of liabilities, or any other adjustments that might result should the Company be unable to continue as a going concern.

As reflected in 1.1 above, the Group has secured about sixty percent of the total financing requirement for the construction project. Furthermore the Group has been able to reduce the estimated project cost in USD by USD 27 million vs. budget due to favorable exchange rates. As a result further financing will be required during October 2009 to meet the Group’s payment obligations.

The deferred payment arrangement with DWD referred to in note 1.1 and the realised foreign exchange gains vs. budget referred to above provides flexibility in timing to secure the remaining project funding. The Company is pursuing a number of alternatives in respect of this additional funding. Consequently, the management believes that the going concern assumption is valid.

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

2.1 Basis of preparationThese consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments that have been measured at fair value and financial liabilities measured at amortised cost. The consolidated financial statements are presented in USD and all values are stated in whole dollars unless otherwise specified.

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

2.3 Future changes in accounting policiesThe Company has early adopted all standards and interpretations listed below where early adoption before December 31, 2008 is allowed. However, this early adoption has not had any impact on the preparation of the financial statements.

Reference Description

IFRS 2 Amendment to IFRS 2, Share-Based Payment

IFRS 3R Business Combinations (Revised)

IFRS 8 Operating Segments

IAS 23 Borrowing Costs

IAS 27A Consolidated and Separate Financial Statements (Amended)

IAS 32 Amendments to IAS 32 Financial instruments: Presentation

IAS 39 Amendments to IAS 32 Financial Instruments: Recognition and Measurement

– Eligible Hedged items

IFRIC 13 Customer Loyalty Programs

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

IFRIC 17 Distributions of Non-Cash Assets to Owners

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The Group has not applied the following applicable IFRS and IFRIC provisions which have been issued but are not yet effective:

• IAS 1 Presentation of Financial Statements (Amended)The revised standard (to be applied from the year beginning January 1, 2009) separates non-owner and owner changes in equity. The statement of changes in equity will only include details of transactions with owners. All non-owner transactions are presented on a single line. In addition the standard introduces a statement of comprehensive income presenting income and expenses of non-owner transactions either as addition to the income statement or as a separate statement of comprehensive income. This will change the presentation of the Group’s financial statements.

2.4 Consolidation2.4.1 SubsidiariesSubsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered as an impairment indicator of the asset transferred.

2.5 Foreign Currency Translation2.5.1 Functional and presentation currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in USD, (the presentational currency). The parent and all subsidiaries have the USD as their functional currency.

2.5.2 Transactions and balancesForeign 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 recognised in the income statement, except when deferred in equity as qualifying cash flow hedges.

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

2.6 Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and sales taxes or duty. The Company defers the unearned component of payments received from customers for which the revenue recognition requirements have not been met.

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2.7 Property, Plant and EquipmentProperty, Plant and Equipment primarily consist of furniture, fixtures and IT equipment. All assets are stated at cost less accumulated depreciation and impairment charges. Cost includes expenditure that is directly attributable to the acquisition, construction or installation of the items, including financing costs.

2.7.1 Useful life and depreciationDepreciation is calculated on a straight-line basis over the useful life of the asset once the asset is ready for use. The estimated useful life of major assets is as follows:

Furniture and fixtures 5 Years Vehicles 4 Years IT equipment 5 Years Seismic equipment 3-30 Years Maritime equipment 5-30 Years Vessels 30 Years

Each component of the vessels, with a cost significant to the total cost, is separately identified and depreciated on a straight-line basis over that component’s economic life. Day-to-day maintenance costs are charged to the income statement during the financial period in which they are incurred. The cost of major renovations and periodic maintenance of vessels is capitalised and depreciated over the useful lifetime of the parts replaced. The useful lifetime of regular vessel docking expenses will normally be the period until next docking. Maintenance and classification costs for vessels are capitalized and charged to expenses over the period up to the next occasion when maintenance is carried out, normally 30 months. Accrued maintenance and repairs, including periodic maintenance and class surveys for seismic vessels, are expensed as incurred. When vessels are acquired or constructed a proportion of the acquisition cost is capitalized as periodic maintenance.

The assets’ residual values and useful lives are reviewed and adjusted if appropriate at least every balance sheet date. Adjustments, where applicable, are made on a prospective basis. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are presented net in the income statement.

2.7.2 Vessels under constructionInstallments on new building contracts are capitalised as vessels under construction as certain milestones are reached. The acquisition cost reported is the sum of such installments plus direct and financing costs incurred during the construction period.

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

2.8.1 Group as a lesseeFinance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased asset, are capitalised at the commencement of the lease at the fair value of the leased asset or, if lower, at the present value of minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement.

Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and lease term.

Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

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2.9 BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement or capitalised in accordance with the accounting policy for borrowing costs as mentioned below, over the period of the borrowings using the effective interest method.

Interest payable on borrowings is classified as a current liability unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

2.9.1 Convertible BondsConvertible bond loans are separated into a debt liability and an equity component based on the terms of the contract.

On issuance of the convertible bonds, the fair value of the debt liability excluding conversion option is measured at the fair value of expected cash flows at inception and is recorded under non-current liabilities in the balance sheet. The debt liability component is amortised to the redemption value over the bond life, accruing interest at the effective rate. The rest of the convertible bond issue proceeds are recorded as equity.

Transaction costs are apportioned between the debt liability and equity components of the convertible bonds based on the allocation of the proceeds of the debt liability and equity components when the instruments are initially recognised.

2.10 Borrowing CostsBorrowing costs are recognised as an expense in the period in which they are incurred, except for borrowing costs which are directly attributable to the acquisition, construction or production of a qualifying asset. Such borrowing costs are capitalised as part of the cost of that asset.

To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization on that asset is determined as the actual borrowing costs incurred from the borrowing during the period less any investment income on the temporary investment of those borrowings.

To the extent that funds are borrowed generally and used for the purpose of obtaining qualifying assets, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the expenditures on those assets. The capitalisation rate is the weighted average of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalised during a period does not exceed the amount of borrowing costs incurred during that period.

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

Computer software development costs recognised as assets are amortised over their estimated useful lives once the individual asset is available for use (not exceeding three years).

Computer software not yet available for use is tested annually for impairment.

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2.12 Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

Cash and cash equivalents that are restricted for the Group’s use are disclosed separately in the consolidated balance sheets and are classified as current or non-current depending on the nature of the restrictions. For the purpose of the cash flow statements changes in restricted cash are disclosed as part of the “Investing activities”.

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

2.14 Trade payablesTrade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

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

2.16 Employee Benefits2.16.1Pension PlanThe Group recognises a provision for pensions payable to the employees based on one month’s basic salary for each year completed pro rata based on date of joining of each employee.

2.16.2Bonus PlansThe Group recognises a provision for bonuses where bonuses are a contractual obligation or where there is a past practice that has created a constructive obligation.

The Group recognises a liability and an expense for bonuses prescribed in employment contracts.

2.16.3Share-based compensationThe Group has an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted measured at grant date.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

2.17 Derivative financial instruments and hedgingThe Group uses derivative financial instruments to reduce risk exposure related to fluctuations in foreign currency rates and interest rates. Such derivative financial instruments are initially recognised in the consolidated balance sheet at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting and any ineffective hedges are taken directly to the income statement.

The Group applies either fair value or cash flow hedge accounting when a transaction meets the specified criteria. To qualify for hedge accounting, the instrument should be designated as a hedge at inception of a hedge relationship. At the time a financial instrument is designated as a hedge, the Group documents the relationship between the hedging instrument and the hedged item. Documentation includes risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. Accordingly, the Group formally assesses, both at the

46

inception of the hedge and on an ongoing basis, whether the hedging derivatives have been “highly effective” in offsetting changes in the fair value or cash flows of the hedged item. Hedge accounting will be discontinued when (a) the Company determines that a derivative is not, or has ceased to be, highly effective as a hedge, (b) the derivative expires, or is sold, terminated or exercised, (c) the hedged item matures or is sold or repaid, or (d) a forecast transaction is no longer deemed highly probable.

2.17.1Fair value hedgesThe Group applies fair value hedges whilst hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment (except for foreign currency risk).

The change in fair value of the hedging instrument is recognized in the consolidated income statement. The change in fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the consolidated income statement. When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the consolidated income statement.

2.17.2Cash flow hedgesCash flow hedging is applied to hedge the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.

The effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while any ineffective portion is recognized immediately in the consolidated income statement. Amounts recorded to equity are transferred to the consolidated income statement when the hedged transaction affects profit or loss. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts taken into equity are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction or firm commitment occurs.

2.18 Impairment of non-financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. When the carrying amount of an asset does not yet include all the cash outflows to be incurred before it is ready for use or sale, the estimate of future cash outflows includes an estimate of any further cash outflow that is expected to be incurred before the asset is ready for use or sale. This is the case for the vessels under construction.

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

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3 Financial risk management3.1 Financial Risk Factors

The Group is through its activities exposed to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s activities under the vessels construction program expose it to currency risk and liquidity risk. The Group’s overall risk management program focus on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

The management is in the process of developing a comprehensive finance policy. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, use of non-derivative financial instruments, and investment of excess liquidity.

3.1.1 Market RiskForeign Exchange RiskThe Group’s costs are primarily in USD and the revenues are expected to be in USD. Long term financing is in USD. The company’s shares are traded in NOK. The NOK trading price is affected by the underlying activities of the Group which are primarily denominated in USD.

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Norwegian Kroner (“NOK”) and Euro (“EUR”). Foreign exchange risk arises from future committed commercial transactions related to the vessels construction program and recognised assets and liabilities.

To manage the Group’s foreign exchange risk arising from future commercial transactions, primarily the NOK commitments under the vessel construction program, the Group maintains NOK cash accounts to cover a major part of these future commitments. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency, which is USD.

The fair value of warrants to shareholders and options to employees is determined using models which incorporate the NOK share price and therefore changes in the NOK/USD market exchange rate will impact the fair value.

At 31 December 2008 the Group had hedged 15% of its foreign currency capital commitments for which firm commitments existed at the reporting date.

The following table demonstrates the sensitivity to a reasonably possible change in the EUR and NOK exchange rates, with all other variables held constant, of the Group’s loss before tax (due to changes in the fair value of monetary assets and liabilities) and the Group’s equity (due to changes in the fair value of cash flow hedges):

31-Dec-08 Change in exchange rate

Effect on profit before tax

Effect on equity

EUR +10% (458,188) - NOK +10% (1,197,230) (2,571,336) (1,655,418) (2,571,336) EUR -10% 560,007 - NOK -10% 1,463,281 3,142,744 2,023,288 3,142,744

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Price riskThe Group is exposed to its own equity price risk because the fair value of warrants to shareholders and options to employees is determined using models which incorporate the entity’s share price.

The susceptibility of the value of warrants to a possible change in the Company’s share price (the management best range of estimates) is disclosed in Note 4.

The Group is exposed to price risk regarding the seismic services it will deliver. The Company’s pricing strategy may vary from period to period based on the competitive market situation. The Company may have to adjust the price of its services based on the competition.

Cash flow and fair value interest rate riskThe Group has significant interest-bearing assets which results in the Group’s income and operating cash flows being dependent on changes in market interest rates. The interest bearing assets with variable interest rates expose the Group to cash flow interest rate risk. Interest earned and received on these balances fluctuates with changes in market interest rates. During the period, the Group’s financial assets at variable rates were denominated in USD and NOK.

The interest rate and maturity analysis of the Group’s borrowings as per the reporting date are shown in the table below:

Effective interest rate

(%) Maturity 2008

(USD)

Current Accounts payable – deferred payments for vessel 4 to DWD* LIBOR +3.00 01 December 2009 10,935,199 Accounts payable – deferred payments for vessel 5 to DWD* LIBOR +3.00 01 February 2010 11,817,915 Accounts payable – deferred payments for vessel 6 to DWD* LIBOR +3.00 01 April 2010 11,817,915 34,571,029

Non-current 13% Senior Secured Bonds (refer to Note:16) 14.49 30 July 2013 53,191,115 8.5% Convertible Bond (refer to Note:17) 13.39 30 July 2013 29,131,763

82,322,878

* Regular trade payables are presented in the balance sheet under current assets in accordance with IAS 1 but the amounts listed in the table above are not payable until the delivery of the vessels to which they relate.

Shifts in the market interest rates will impact the fair value of the warrants to shareholders and options to employees and hence impact the Group’s income statement. The susceptibility of the value of warrants to a possible shift in interest rates (the management’s best range of estimates) is disclosed in Note 4.

3.1.2 Credit RiskCredit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with a minimum rating of investment grade or higher are accepted by the Group. The Group’s maximum exposure to credit risk for the components of the balance sheet at 31 December 2008 is shown in the table below:

(in USD) 31-Dec-08 Financial assets Non-current restricted cash 735,696 Cash and short-term deposits 188,873,363 189,609,059

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3.1.3 Liquidity RiskPrudent liquidity risk management implies maintaining sufficient cash and having availability of funding through an adequate amount of committed credit facilities. Management constantly manages the forecast of the group’s liquidity reserve on the basis of expected cash flows. Due to a significant new building program the group will have to obtain additional funding.

The table below analyses the Group’s financial liabilities broken into different maturity groups based on the remaining period from the balance sheet date to the date of contractual maturity. The amounts disclosed in the table are the contractual undiscounted cash flows.

At 31 December 2008 (cash out flows)

Less than 1 Year

Between 1 - 2 Years

Between 2 - 5 Years

Over 5 Years Total

Bond Borrowings - - 90,000,000 - 90,000,000 Interest payment on borrowings 10,125,000 10,125,000 30,375,000 - 50,625,000 Trade and Other payables 49,426,374 34,571,029 - - 83,997,403 59,551,374 44,696,029 120,375,000 - 224,622,403

The bond borrowings – senior secured loan of USD 55 million and convertible loan of USD 35 million - mature on 30 July 2013. Delivery of the first two vessels is scheduled for September and October 2009, respectively. The next four vessels will be delivered in the first half of 2010. The vessels are expected to generate sufficient revenues to support the Group’s operations and service of debts.

3.2 Capital Risk ManagementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to maximize the shareholder value and maintain an optimal capital structure, to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may (i) adjust the amount of dividends paid to shareholders, (ii) return capital to shareholders, (iii) issue new shares or (iv) sell assets to reduce debt.

The Company is subject to dividend restrictions under certain of its financing arrangements. Due to these dividend restrictions and the current phase of the Company, Polarcus does not envisage any declaration of dividend to the shareholders for the fiscal year 2008. The Group aims to issue new equity and obtain adequate long term financing to finance its ongoing new build program and operating activities.

Polarcus aims to have an equity capital at a level appropriate to its objectives, strategy and risk profile. As of 31 December 2008 the Group has a book equity ratio of 51%.

4 Critical accounting estimates and judgmentsThe preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Certain amounts included in or affecting the financial statements and related disclosure must be estimated, requiring the Group to make assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. A ‘‘critical accounting estimate’’ is one which is both important to the portrayal of the Group’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The management evaluates such estimates on an ongoing basis,

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based upon historical results and experience, consultation with experts, trends and other methods considered reasonable in the particular circumstances, as well as forecasts as to how these might change in the future.

The following is a summary of which estimates and judgments could have a material effect on the accounts.

4.1 Critical accounting estimates and assumptions4.1.1 ImpairmentThe Group assesses long-lived assets for possible impairment upon the occurrence of indicators. Events that can trigger assessments for possible impairments include, but are not limited to (a) significant decreases in the market value of an asset, (b) significant changes in the extent or manner of use of an asset, and (c) a physical change in the asset. Estimating undiscounted future cash flows requires the management to make judgments about long-term forecasts of future revenues and costs related to the assets subject to review. These forecasts are uncertain as they require assumptions about demand for our products and services, future market conditions and future technological developments. Significant and unanticipated changes in these assumptions could require a provision for impairment in a future period. Given the nature of these evaluations and their application to specific assets and specific times, the management cannot reasonably quantify the impact of changes in these assumptions.

4.1.2 Fair value of financial instrumentsThe fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Management uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. The primary assumptions used in the valuations are interest rates, share price, expected life of instruments, volatility and likelihood of certain events happening.

The employee stock option was priced using a Black Scholes formula for equity options. For the simulation of “Change of Control”, the event was drawn from a uniform distribution in the simulations.

Financial instruments carried at fair value include warrants issued to founding share holders. Assumptions used in the calculations of fair value of the financial instrument that are more sensitive are the following:

- Market price of the Company’s shares (warrants) - Volatility of the share price (warrants) - Probability of change of control event (warrants)

4.1.3 WarrantsThe Group has issued 42,500,000 warrants where the strike price might vary dependent upon circumstances outside of the control of the Group. The warrants are classified as a liability and measured at fair value through profit or loss. No cash outflows will arise in relation to the warrants.

As at 31 December 2008, the value of the warrants was calculated to be USD 10.9 million using 57 % volatility and a share price of USD 0.57 (NOK 4 at USD exchange rate of 7.02).

The table below presents a calculation of the sensitivities related to the valuation of warrants. The table shows increase / decrease in fair value of warrants based on 10% change (plus or minus) in volatility, share price and market interest rate. The fair value of the warrants, and consequently the liability relating to the change of control clause, is strongly dependent on the value and the volatility in the shares.

Volatility Effect of Share

Price Effect of Interest

Rate Effect of

used at 31.12.2008

-10% +10% used at 31.12.2008

-10% +10% used at 31.12.2008

-10% +10%

57% $0.57 2.30% Warrant liability (USD million) 10.9 8.9 13 10.9 9.8 12.2 10.9 10.8 11.04 % increase/decrease in warrant liability - -18% 19% - -10% 12% - -1% 1%

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4.2 Critical accounting judgments in applying the entity’s accounting policiesIn the process of applying the Company’s accounting policies, management has made the following judgment, apart from those involving estimations, which has the most significant effect on the amounts recognized in the financial statements:

4.2.1 LeasesFor leasing arrangements, significant management judgment is required in order to determine whether the lease arrangement should be considered an operating or finance lease.

5 Segment InformationThe Group is currently in a pre-commercial phase focusing on building seismic vessels and an organisation. These activities are conducted and monitored within the Group as one business segment, thus in accordance with IFRS 8, no further segment information has been disclosed in these consolidated financial statements.

6 Property, plant and equipment

(in USD) Furniture

and fixtures Office IT

Equipment

Office Equipment

under construction Total

Costs Balance at 1 January 2008 - - - - Additions 528,697 482,372 141,627 1,152,696 Disposals - - - - At 31 December 2008 528,697 482,372 141,627 1,152,696 Depreciation and impairment losses Balance at 1 January 2008 - - - - Depreciation for the period 40,798 47,269 - 88,067 Disposals - - - - At 31 December 2008 40,798 47,269 - 88,067 Carrying amounts

At 1 January 2008 - - - - At 31 December 2008 487,899 435,103 141,627 1,064,629

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7 Vessels under constructionThe vessels under construction are capitalised at cost amounting to USD 180 million as of 31 December 2008. The cost element includes payments related to the construction of six vessels in Dubai and down payments for securing delivery slots for certain equipment for two optional vessels. The total value of vessels under construction is made as follows;

Vessel Number 1 2 3 4 5 6 7 8

Total Vessel Name

Polarcus Nadia

Polarcus Naila

Polarcus Samur

Polarcus Selma

Polarcus Asima

Polarcus Alima (Option-1) (Option-2)

Vessel Type SX 124 SX 124 SX 133 SX 133 SX 134 SX 134 SX 134 SX 134

Values in USD Vessel and Equipment 40,740,234 33,383,201 22,499,488 22,567,065 23,848,635 23,844,531 3,449,719 3,449,719 173,782,592

Project Overheads 261,610 261,610 156,966 156,966 261,610 261,610 - - 1,360,372

Borrowing costs - - 2,827,199 614,755 749,797 745,974 - - 4,937,725 WIP value per Vessel 41,001,844 33,644,811 25,483,653 23,338,786 24,860,042 24,852,115 3,449,719 3,449,719 180,080,689

See Note 23 Finance costs and Note 24 Finance income for details of the capitalized borrowing costs.

Vessel 3, Polarcus Samur is pledged as a security for the senior secured bond loan and interest accrued thereon. (Also refer to Note 16 ‘Senior secured bonds’).

Vessel 1 and 2 are subject to a sale lease-back financing arrangement as described in Note 18 ‘Sale Lease back arrangement’.

Commitments outstanding under vessel construction contracts as of 31 December 2008 are as per below;

Vessel Number 1 2 3 4 5 6 7 8

Total Vessel Name

Polarcus Nadia

Polarcus Naila

Polarcus Samur

Polarcus Selma

Polarcus Asima

Polarcus Alima (Option-1) (Option-2)

Vessel Type SX 124 SX 124 SX 133 SX 133 SX 134 SX 134 SX 134 SX 134

In USD 67,084,493 72,734,552 74,119,046 73,511,663 76,679,751 76,340,733 11,421,867 10,701,339 462,593,443

The above values of commitments are calculated using the foreign currency exchange rates prevailing on 31 December 2008. All of these commitments are due within two years from the reporting date.

8 Intangible assets

(in USD) 31-Dec-08 Additions at cost during the year 584,172 Net book value at 31 December 2008 584,172

Intangible assets comprise the ERP system and an industry specific application, which the Group is developing through external software developers. The useful lives of these assets are considered to be finite and will be amortised over three years once the assets are available for use.

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9 Prepaid Expenses

(in USD) 31-Dec-08 Prepaid rent 182,186 Prepaid other expenses 137,744 Prepaid insurance 100,410 420,340

10 Advance to Employees

(in USD) 31-Dec-08 Employee House Rent Advance 501,702 Employee expense reimbursements payable (115,405) 386,297

11 Restricted cash 11.1 Short Term

Short term restricted cash represents the interest earning cash deposits in;

- Letter of credit escrow account to secure payment to a supplier in NOK. The balance of such deposit as of 31 December 2008 is NOK 199 million (USD 28.3 million).

- Escrow account for temporary deposit of senior secured bond loan proceeds. Balance of such deposit including the interest earned as of 31 December 2008 is USD 55.3 million.

11.2 Long TermLong term restricted cash represents the cash margin deposits for bank guarantees in place, for securing residence visa for Polarcus employees in Dubai. The amount of such deposit made as of 31 December 2008 is United Arab Emirates Dirham (“AED”) 2.7 million (USD 0.74 million).

12 Cash and BankCash and cash equivalents include cash-in hand, deposits held at call with banks, other short-term highly liquid investments.

The Group’s cash and cash equivalents are denominated in the following currencies at 31 December 2008;

Currency USD AED 287,331 78,249 USD 86,950,982 86,950,982 EUR 3,575,274 5,040,064 NOK 92,612,696 13,169,525 GBP 10,421 15,089 105,253,909

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13 Share capital and share premiumThe total issued share capital as of 31 December 2008 is USD 2,035,718.55 divided into 203,571,855 shares at a par value of USD 0.01. All issued shares have been paid in as of 31 December 2008.

Number of shares

Issued share capital (USD)

Share premium

(USD) Total (USD)

Proceeds from shares issued 203,571,855 2,035,719 209,936,136 211,971,855 Transaction cost of share issue - - (2,578,328) (2,578,328) Warrants to founding shareholders - - (18,716,388) (18,716,388) Total as at 31 December 2008 203,571,855 2,035,719 188,641,420 190,677,139

The Company’s authorised share capital is USD 5,637,868.55 divided into 563,786,855 shares of par value USD 0.01. Apart from potential shares that could be issued under the terms of the share warrants, stock option plan or convertible bonds, the board of directors have no restrictions on issuing remaining authorised share capital. The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.

During the period from date of incorporation to 31 December 2008, Polarcus Limited had the following issues of shares that are fully paid:

Date Details

Change in number of

shares

Change in issued share

capital (USD)

Number of shares

following change

Subscription price per

share (USD)

Nominal value (USD)

Share capital

following increase (USD)

17-Dec-07 Incorporation 1 0.01 1 1.00 0.01 0.01

9-Feb-08 Private placement to initial shareholders 49,999,999 500,000 50,000,000 1.00 0.01 500,000

18-Mar-08 Private placement to initial shareholders 3,786,855 37,869 53,786,855 1.00 0.01 537,869

19-May-08 Private placement to initial shareholders 85,000,000 850,000 138,786,855 1.00 0.01 1,387,869

21-May-08 Private placement to initial shareholders 20,000,000 200,000 158,786,855 1.00 0.01 1,587,869

29-Jun-08 Private placement Polarcus and DWD employees and Polarcus BOD 2,785,000 27,850 161,571,855 1.00 0.01 1,615,719

2-Jul-08 Private placement initial shareholders 42,000,000 420,000 203,571,855 1.20 0.01 2,035,719

13.1 WarrantsOn 14 March 2008 the Group issued 42,500,000 warrants to the founding share holders, each giving the right to subscribe for one new ordinary share. The warrants are exercisable at a price of USD 0.01 on or before 31 December 2012 and can only be exercised if all of the following conditions are met;

- Delivery of all six seismic vessels on or before 1 April 2011; - Effective employment of all six vessels; and - The shares of the Company being traded on an internationally recognized marketplace or stock

exchange at a volume weighted average price per share of at least NOK 11.00 (or equivalent) for more than 30 trading days.

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

- NOK 5.50 if the shares trade at an average price of less than NOK 11.00 for the 10 consecutive business days following such change of control or if the validity period of the offer is less than 10 trading days.

- USD 0.01 if the shares trade at an average share price of above NOK 11.00 for the 10 consecutive business days following such change in control.

As of 31 December 2008 no warrants have been exercised.

The warrants have been determined to be a liability because they fail to meet the requirements of fixed amount of cash or fixed amount of its own shares as required by IAS 32. Consequently, the fair value of the warrants at the issue date of USD 18.7 million has been recorded as a distribution to shareholders directly in equity. Subsequent to issuance, the liability is recorded at fairvalue at each balance sheet date and the resulting change in fair value is recognized in the income statement within changes in fair value of financial instruments – net. In the period from issue date to 31 December 2008, a gain of USD 7.8 million has been recorded.

The fair value of warrants granted on 14 March 2008 and at each subsequent balance sheet dates were determined using a model consistent with the Black-Scholes valuation model and assuming that all warrants will be exercised.

13.2 Share OptionsThe Group has granted share options to executive management and other selected employees. As of 31 December 2008 the Group has issued 7,710,000 options. The exercise price of options is based on the weighted average price of the shares for the 30 days prior to acceptance of employment offer. The options cliff vest three years after grant date and can be exercised up to five years after the grant date. The exercise of options is conditional to the employee completing three years of service (the vesting period) and being an employee of the group at the exercise date. The options are only available for settlement in equity. As of 31 December 2008 none of the options were exercisable.

The fair value of options granted is determined using the Black-Scholes valuation model. The total fair value of options granted up to 31 December 2008 is USD 3.94 million, assuming all options will be exercised. For the period ended 31 December 2008, the Group has expensed USD 0.88 million towards stock options granted as employee compensation.

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year;

WAEP Stock option plan Number (USD) Granted during the year 2008 7,710,000 1.00 Outstanding at 31 December 2008 7,710,000 1.00 Exercisable as at 31 December 2008 - -

The weighted average remaining contractual life for the share options outstanding at 31 December 2008 is 4.45 years.

The range of exercise prices for options outstanding at the end of the year was USD 0.68 – USD 1.30.

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The following table lists the inputs to the models used for the share option plan for the year ended 31 December 2008:

31-Dec-08 Dividend yield (%) - Expected volatility (%) 40.00 Risk-free interest rate (%) 2.50 Expected life of option (years) 5.00 Weighted average share price 1.05

The value of the option is estimated by a tree implementation of the Black Scholes formula for the pricing of equity call options.

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

14 Other financial assets and liabilitiesFinancial liabilities at fair value through profit or loss:

(in USD) 31-Dec-08 Liability for warrants (refer to Note:13) 10,934,452 Total liabilities at fair value through profit and loss 10,934,452 Financial liabilities at fair value through profit or loss 7,781,936 Net gain or loss on financial liabilities at fair value through profit or loss 7,781,936

Financial liabilities measured at amortised cost:

(in USD) 31-Dec-08 13% Senior Secured Bonds (refer to Note:17) 53,191,115 8.5% Convertible Bonds (refer to Note:18) 29,131,763 Total financial liabilities measured at amortised cost 82,322,878

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14.1 Fair valuesThe carrying amounts and fair value of the Group’s financial instruments as carried in the financial statements are as per below;

Carrying Amount

Fair value

(in USD) 31-Dec-08 31-Dec-08 Financial assets

Cash and deposits 189,572,384

189,572,384 Other financial assets 843,312

843,312

190,415,696 190,415,696

Financial liabilities Accounts payable 83,997,403

83,997,403

Liability for warrants 10,934,452

10,934,452 13% Senior secured bonds 53,191,115

36,025,000

8.5% Convertible bonds 29,131,763

21,437,500 Other financial liabilities 5,286,693

5,286,693

182,541,426 157,681,048

Cash and deposits, accounts payable, other financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

The fair values of senior secured and convertible bonds are measured at a rate prescribed by The Norwegian Securities Dealers Association based upon the secondary market prices of the respective securities.

14.2 Cash flow hedgesThe Group holds cash in foreign currency to hedge against capital commitment costs for future purchases of equipment related to the construction of the vessels. The cash flow hedges of the expected future purchases in the course of 2009 and 2010 were assessed to be highly effective.

(in USD) 31-Dec-08 Assets Fair value of Cash flow hedge 28,284,698 Net unrealized loss recognised in equity in respect of cash flow hedge 4,589,433

15 Other Reserves

(in USD) 31-Dec-08 Issue of convertible bonds - fair value of equity component (refer to Note:18) 5,024,377 Employee stock options provision (refer to Note:13) 879,888 Gain/(Loss) on Cash flow hedge (4,589,433) 1,314,832

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16 PensionA provision has been made towards the pension payable to employees based on management’s policy under consideration. The pension is calculated based on one month basic salary for each year completed and pro rata based on date of joining of each employee. During the year some employees made use of the option granted by management of taking out their accrued pension payment early.

17 Senior secured BondsOn 30 July 2008, the Group issued 550 senior secured callable bonds at par value of USD 100,000 each totaling USD 55 million, bearing 13% interest per annum. The net proceeds of the issue are to be employed to part-finance the construction of the vessel NB 69 “Polarcus Samur” through the vessel owning company Polarcus 3. The interest is payable semi-annually in arrears on 30 January and 30 July each year. The bonds will mature five years from the date of issue at their nominal value.

The bonds including accrued interest and expenses are secured by the vessel to be owned by Polarcus 3, a 100% owned subsidiary of Polarcus Limited. During the vessel construction phase, the loan is secured with a pledge of the shares in Polarcus 3, on-demand upstream guarantee from Polarcus 3, floating charges concerning all equipment related to the vessel ‘Polarcus Samur’ and any intra-group loans, assignment of the shipbuilding contract and the major equipment contracts, the refund guarantees granted and to be granted under the shipbuilding contract and a pledge over the bank account in which all funds at any time not disbursed under the loan are credited. .From the delivery date of the vessel, the loan will be secured by a first priority mortgage on the vessel, an assignment of insurances related to the vessel, the pledge of shares in Polarcus 3 as well as the up-stream guarantee form Polarcus 3. Drawing of funds from the loan is subject to evidence that capital subordinated to the loan in an amount equal to or larger than the amount released from the loan, from time to time, has been or is employed in accordance with the purpose of the loan.

On the date of issue, net proceeds of USD 53,075,000 have been booked under non-current liabilities. Issue costs amortised up to 31 December 2008 are USD 116,115. Total interest payable accrued for the same period amounts to USD 2,979,167.

As of 31 December 2008 the Group complies with the covenants set out in the loan agreement.

18 Convertible BondsOn 30 July 2008 the Group issued 350 subordinated unsecured callable convertible bonds at a par value of USD 100,000 each totaling USD 35 million, bearing 8.5% interest per annum. The interest is payable semi-annually in arrears on 30 January and 30 July each year. The bonds mature five years from issue date at their nominal value of USD 35 million or can be converted into a total of 21,604,940 shares at the holders’ option at a conversion price of USD 1.62 per share. The conversion price is subject to adjustment upon certain changes of the Company’s share capital and in case of mergers and de-mergers..

In the event the Company has not listed its shares at the Oslo Axess or another regulated marketplace by 30 September 2009, each bondholder shall have the right to require the Company to redeem the loan on 31 October 2009 at 108% plus accrued interest.

The convertible bond has been accounted for in separate components – the value of the liability component has been recognised at its fair value and the remaining part as equity. In measuring fair value of the liability component a supposed market rate (estimated to be 13%) for a similar debt without a conversion right has been used in discounting the cash flow under the loan agreement. The supposed market rate was chosen based on valuations of the interest rate for a non-convertible bond at the date of drawing the loan. There will be no re-measuring of the fair value of the liability component.

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At issue date the following amounts were recognised for the convertible bond in the financial statements:

Fair Value of liability component USD 28,750,623 Fair Value of equity component

USD 5,024,377

The difference between the funds received and the total amount shown above as recognised on issue is due to the issue costs associated with the issue of the bonds. At 31 December 2008, amortisation of issue cost added to the liability component amounted to USD 381,140. Total interest payable accrued for the same period is USD 1,239,584.

USD 33,775,000

19 Sale and Lease-back arrangementThe Group has on 30 June 2008 entered into a sale and lease-back financing arrangement for its first two vessels, Polarcus Nadia and Polarcus Naila. The total cash inflow from this arrangement will be USD 180 million (i.e. USD 90 million per vessel).

Under the terms of this arrangement, GSH 2 Seismic Carrier I AS (the ‘lessor’) has agreed to purchase the vessels (excluding the seismic streamer package) at a price of USD 90 million each upon the delivery of vessels from the shipyard. Immediately upon such transfer of ownership, the Group (as a ‘charterer’) will lease back the vessels from the lessor at a fixed daily charter rate, payable monthly in arrears throughout the duration of the charter period. The Group as a charterer has the option to purchase the vessels from the lessor each year after three years from the date of delivery.

The charter period shall commence on the delivery date and shall (subject to the Group’s purchase option as per above) continue until the date falling a minimum of 10 years from the delivery date.

The purchase price of USD 90 million per vessel will be paid by the lessor to the Group in installments throughout the vessel construction period, subject to the agreed payment schedule and conditions attached thereto.

The above arrangement falls under the category of finance lease as described under IAS 17. (Also refer to note 2.6 on ‘Leases’). As of 31 December 2008, no amount has been recognised in the consolidated financial statements in relation to the sale and lease-back arrangement. The Group has not received any installments of purchase price from the lessor as of 31 December 2008.

20 Interest PayableInterest payable under current liabilities includes;

(in USD) 31-Dec-08 Interest accrued on senior secured bonds (refer to Note:17) 2,979,167 Interest accrued on convertible bonds (refer to Note:18) 1,239,584 Interest accrued on deferred payments to the shipyard 489,800 Total 4,708,551

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

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21 Accounts payable

(in USD) 31-Dec-08 Payable to vendors related to the vessels under construction 83,171,868 Payable to other vendors 825,535 83,997,403

Included within amounts payable to vendors related to the vessels under construction are installments totaling USD 34,571,029 that are not due for payment until more than one year from 31 December 2008.

22 Salaries and other employee benefitsThe Company offers a fixed base salary to all employees. Employees are also provided with a housing allowance and car allowance based on their location of employment and grades. In addition to the fixed salary package the Company offers a performance-related bonus scheme based on overall performance of the Company against certain pre-defined metrics together with performance against individual and team-specific goals. Employee can benefit from a variable compensation in the range of 8% to 50% of base salary depending upon the employee’s grade. In addition all employees are offered a comprehensive employee health protection plan.

In 2008, no performance-related bonuses were paid to Company employees.

The Company has implemented a share option program for key employees whose performance will have a significant positive impact on the overall success of the Company. Please find more details about the program in note 13.2 Share options.

The Company will launch a pension plan in 2009 which will be contributory for both employee and employer. The Company contribution is set to one month’s base salary and will be expensed as incurred. The Company pension contributions accrued for 2008 were paid out to eligible employees in December 2008.

Salaries and other benefits for the year ended 31 December 2008 are comprised of the following;

(in USD) 31-Dec-08 Salaries 3,936,689 Board Remuneration 275,000 Loyalty Bonus (accrual) 180,930 Other Employee benefits 3,367,401 Pension 318,705 Stock Options expense (refer to Note:13) 879,888 Less; Project related personnel cost capitalised (913,411) Total 8,045,202

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23 Finance costs

(in USD) 31-Dec-08 Interest accrued on senior secured bond 3,095,280 Interest accrued on convertible bond 1,620,725 Interest accrued on deferred payments to the shipyard 489,801 Interest expenses capitalised to vessels under construction (5,205,806) Net interest expenses - Realised currency exchange loss 1,280,881 Unrealised currency exchange loss 3,793,760 Total finance costs 5,074,641

The realised currency gain or loss represents the effect of foreign currency payments made and the unrealised currency gain or loss represents the effect of revaluation of foreign currency financial assets other than those treated as cash flow hedging instruments.

For more information regarding capitalized interest costs refer to Note 2.8 ‘Borrowing costs’ and Note 7 ‘Vessels under construction’.

24 Finance incomeNet interest income represents the following;

(in USD) 31-Dec-08 Interest income from deposits with banks 2,338,399 Interest income offset against capitalised interest expenses (268,081) Total interest income 2,070,318 Realised exchange gain 2,789,042 Unrealised exchange gain 1,276,744 Financial liabilities measured at fair value through profit and loss 7,781,936 13,918,040

The changes in fair value of financial instruments comprise the gain on revaluation of fair value of liabilities on warrants issued. Please also refer to notes on warrants in Note 13 Share Capital and share premium.

25 Income TaxesSince the Group’s main operations are in the Cayman Islands and United Arab Emirates, it is not liable to pay any taxes on its income. No deferred or current tax assets or liabilities have been recognised in these consolidated financial statements.

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26 Earnings per Share26.1 Basic

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares issued during the period.

Profit attributable to equity holders of the Company (2,388,211) Weighted average number of ordinary shares issued 135,200,577 Basic earnings per share (0.018)

26.2 DilutedDiluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

Loss attributable to equity holders of the Company (2,388,211) Gain related to warrants issued (7,781,936) Net loss attributable to potential equity holders of the Company (10,170,147) Weighted average number of ordinary shares issued 135,200,577 Share with dilutive effect for warrants issued 33,583,601 Weighted average number of diluted ordinary shares 168,784,178 Diluted earnings per share (0.060)

The share options that have been granted to selected employees as at the end of reporting period (see Note 13) and the convertible bonds giving the bond holders a right to convert the bonds to equity shares (see Note 18) have not been included in the calculation of diluted EPS as they have an anti-dilutive effect for the reporting period.

There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

27 Related-party transactions27.1 Subsidiaries

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

Name of the Subsidiary Country of

Incorporation Equity interest as

at 31-Dec-2008 Polarcus DMCC UAE 100% Polarcus 1 Cayman Islands 100% Polarcus 2 Cayman Islands 100% Polarcus 3 Cayman Islands 100% Polarcus 4 Cayman Islands 100% Polarcus 5 Cayman Islands 100% Polarcus 6 Cayman Islands 100% Polarcus Seismic Limited Cayman Islands 100%

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27.2 Transactions with related partiesDWD holds 36.85% of the paid-in share capital of the Company as of 31 December 2008. Below is a summary of major transactions between DWD and the Group during the period ended 31 December 2008;

(in USD) 31-Dec-08 Payments made in the year under ship building contracts 8,839,806 Amount due at the end of reporting period under accounts payables: - within 12 months period from 31 December 2008 40,703,581 - after 12 months period from 31 December 2008 34,571,029 75,274,610 Accrued finance cost at the end of reporting period on deferred payments 489,801

Zickerman Holding Limited holds 26.07% of paid in share capital of the Company as of 31 December 2008. Zickerman Holding Limited is fully owned by Carl-Gustav Zickerman, Board member of the Company. Following is a summary of transactions between Zickerman Holding Limited and the Group during the period ended 31 December 2008;

(in USD) 31-Dec-08 Cash advances from Zickerman Holding for project related vendor payments 30,721,363 Shares allotted to Zickerman Holding settled against above advances (30,900,738) Foreign Exchange loss on allotment of shares 179,375 Payments made by the Group on behalf of Zickerman Holding 5,254 Balance due from Zickerman Holding as of 31 December 2008 5,254

The above balance due to the Group is free of any interest charges.

Zickerman Group Limited holds 15.76% of paid share capital of the Company as of 31 December 2008. Zickerman Group Limited is fully owned by Carl Peter Zickerman, Board member and Executive Vice President of the Company. Following is a summary of transactions between Zickerman Holding Limited and the Group during the period ended 31 December 2008;

(in USD) 31-Dec-08 Cash advances from Zickerman Group for project related vendor payments 18,785,409 Shares allotted to Zickerman Holding settled against above advances (19,086,102) Foreign Exchange loss on allotment of shares 434,680 Balance due to Zickerman Holding as of 31 December 2008 133,987

The above balance due by the Group is free of any interest charges.

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27.3 Key management compensationThe actual salaries and other benefits paid to key management personnel for the period ended 31 December 2008 are shown in the table below;

(in USD)

Date of Joining Salary

Housing allowance

Car allowance

Sign on

Bonus Pension

Stock Options

(Accrual) Rolf Rønningen Chief Executive Officer 1-Apr-08 299,997 67,500 13,500 47,459 25,114 75,025 Tom Henrik Sundby Chief Financial Officer 15-Sep-08 87,500 26,250 5,250 54,059 7,397 33,067 Carl Peter Zickerman Executive Vice President 1-Apr-08 297,000 63,000 13,500 161,710 24,863 49,154 Eirin M. Inderberg General Counsel 1-Apr-08 187,497 60,000 13,500 21,221 15,696 49,154 Paul Lionel Hanna SVP Human Resources 1-Jun-08 120,000 39,000 9,000 105,881 11,726 48,082 Svein Johnny Naley SVP Technology 16-Apr-08 177,081 55,250 12,750 - 14,840 46,473 Christian D.G. Fenwick SVP Business Development 1-Apr-08 187,497 58,500 13,500 49,246 15,696 49,154 Trygve Reksten SVP Sales 1-Apr-08 157,500 58,500 13,500 6,204 13,185 49,154 Jeff Corkhill SVP Operations 1-Apr-08 187,500 58,500 13,500 31,653 15,696 49,154 Christopher Griffin VP EHS&Q 1-Apr-08 135,000 52,500 13,500 5,427 11,301 42,687 Magnus Oberg VP IT 1-Apr-08 93,750 55,500 13,500 11,630 7,848 42,687

1,930,322 594,500 135,000 494,490 163,362 533,791

27.4 Board remunerationThe annual remuneration to the Board members as well as payments made for the period ended 31 December 2008 is shown below;

(in USD)

Director since

Annual remuneration

Paid up to 31-Dec-2008

Peter M. Rigg, Chairman 20-Jun-08 100,000 50,000 Carl-Gustav Zickerman 17-Dec-07 45,000 45,000 Carl Peter Zickerman 9-Feb-08 45,000 37,500 Geoffrey Taylor 19-May-08 45,000 26,250 Dr. Rosli Khan 19-May-08 45,000 26,250 Alan Locker 20-Jun-08 45,000 22,500 Hege Sjo 20-Jun-08 45,000 22,500 Katherine J. Hall 20-Jun-08 45,000 22,500 Tore Karlsson 20-Jun-08 45,000 22,500 460,000 275,000

27.5 Remuneration to the auditorsThe total remuneration paid by the Company to its auditors during the period ended 31 December 2008 is shown below;

(in USD) 31-Dec-08 Audit fees 23,657 Tax advisory services 6,846 Other consultancy services 75,467

105,970

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28 Commitments and contingenciesThe Group has entered into a rental agreement for its office premise in Dubai, UAE. The annual rental cost for the office premise is USD 509,888. In accordance with IFRS these rental agreements are determined as operational leases and consequently all rental cost is expensed when incurred.

(in USD) 31-Dec-08 Lease payments under operational lease of premises Not later than one year 509,888 509,888

Other than the lease commitments shown above and the capital commitments described under Note 7 Vessels under construction the Group has no other commitments or contingencies to note.

29 Authorisation of financial statementsThe consolidated financial statements for the year ended 31 December 2008 were authorized for issue in accordance with a resolution of the directors on 31 March 2009.

Peter Rigg, Chairman Carl-Peter Zickerman

Geoff Taylor Hege Sjo

Rosli Khan Kitty Hall

Alan Locker Tore Karlsson

Carl-Gustav Zickerman

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Polarcus LimitedWalker House, 67 Mary StreetGeorge Town, Grand Cayman KYI – 9001Cayman Islands

Polarcus 1Walker House, 67 Mary StreetGeorge Town, Grand Cayman KYI – 9001Cayman Islands

Polarcus Seismic LTDWalker House, 67 Mary StreetGeorge Town, Grand Cayman KYI – 9001Cayman Islands

Polarcus America1510 Eldridge ParkwaySuite #110-169Houston, TX 77077USA

Polarcus DMCCSaba 1, Level 34Jumeirah Lakes TowersP.O.Box 283373, Dubai, U.A.E.






Vessel owning companies Sales company Administrative offices

Notes

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Contact addressPolarcus LimitedC/O Polarcus DMCCSaba 1, Level 34Jumeirah Lakes TowersP.O.Box 283373, Dubai, U.A.E.

www.polarcus.com

Polarcus 2008 Annual Report

Documents

d vessels

d seismic research vessels

companys strategy

d market

ultramodern seismic

d source vessels

polarcus nailaapril

polarcus nadiasteel