DDI Holding AS Bond Issue Prospectus · DDI Holding AS Prospectus of February 22, 2007 4 operating...

DDI Holding AS

Bond Issue Prospectus

Registration document

Manager

Oslo, February 22, 2007

DDI Holding AS Prospectus of February 22, 2007

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Table of contents 1. Risk factors ............................................................................................................................................................. 3

1.1 Financial risk factors.................................................................................................................................... 3 1.2 Operational risks.......................................................................................................................................... 4 1.3 Commercial risks ......................................................................................................................................... 4

2. Persons responsible ................................................................................................................................................ 6 2.1 Persons responsible for the information ...................................................................................................... 6 2.2 Declaration by persons responsible ............................................................................................................. 6 2.3 Important Notice .......................................................................................................................................... 7

3. Definitions .............................................................................................................................................................. 9 4. Statutory Auditors ................................................................................................................................................ 11

4.1 Names and addresses.................................................................................................................................. 11 5. Information about the Issuer ................................................................................................................................ 12

5.1 History and development of the Issuer ...................................................................................................... 12 5.2 Investments................................................................................................................................................. 13

6. Business overview................................................................................................................................................ 14 6.1 Principal activities...................................................................................................................................... 16 6.2 Market conditions ...................................................................................................................................... 19

7. Selected financial information ............................................................................................................................. 26 7.1 Selected financial information for DDI Holding AS................................................................................. 26 7.2 Selected consolidated financial information for the Group....................................................................... 26

8. Organizational structure ....................................................................................................................................... 28 8.1 Description of the group which the Issuer is part of ................................................................................. 28 8.2 Issuer dependent upon other entities ......................................................................................................... 29

9. Trend information................................................................................................................................................. 30 10. Forecasts or estimates......................................................................................................................................... 31 11. Administrative, management and supervisory bodies....................................................................................... 32

11.1 Information about persons........................................................................................................................ 32 11.2 Administrative, management and supervisory bodies conflicts of interest............................................. 34

12. Major shareholders ............................................................................................................................................. 35 12.1 Ownership................................................................................................................................................. 35 12.2 Share capital.............................................................................................................................................. 35 12.3 Change of control ..................................................................................................................................... 35

13. Financial information concerning the issuer's assets and liabilities, financial position and profits and losses 36 13.1 Historical Financial Information.............................................................................................................. 36 13.2 Financial statements ................................................................................................................................. 37 13.3 Auditing of historical annual financial information ................................................................................ 37 13.4 Age of latest financial information .......................................................................................................... 37 13.5 Legal and arbitration proceedings............................................................................................................ 37 13.6 Significant change in the issuer's financial or trading position ............................................................... 37

14. Third party information and statement by experts and declarations of any interest......................................... 38 14.1 Information about person(s) as expert(s) ................................................................................................. 38 14.2 Third party information ............................................................................................................................ 38

15. Documents on display ........................................................................................................................................ 39 16. Cross Reference List .......................................................................................................................................... 40 17. DDI Holding’s Articles of Association.............................................................................................................. 41 APPENDIX I Annual report DDI Group 2005 APPENDIX II Auditor’s report to Annual report DDI Holding Group AS 2005 APPENDIX III 2Q Report DDI Group 2006 APPENDIX IV Annual report DDI Holding AS 2005


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1. Risk factors Readers of this prospectus should carefully consider all of the information contained herein and in particular the following factors, which may affect some or all of the DDI Holding Group’s activities or the bonds. This list is not exhaustive. The actual results of the Group could differ materially from those anticipated in the forward looking statements as a result of many factors, including the risks described below and elsewhere in this prospectus. Investing in DDI Holding AS (DDI Holding) must be considered as a risk investment. Investors should make adequate independent investigations before investing in the company. Prospective investors should carefully consider the following risk factors, in addition to the other information presented in this Prospectus before making an investment decision. The risks discussed below are not the only risks that may affect the company’s business or the value of the company’s Bonds. Additional risks not presently known to the company or risks that the company currently considers being immaterial may also impair the company’s business operations and prospects. If any of the following risks occur, this could have a material adverse effect on the financial position of the company and potential investors could lose the entire value of their investment in the company’s securities.

1.1 Financial risk factors The DDI Holding and Sinvest Group will be exposed to risks due to interest rate and currency fluctuations, investments and trading risks in general in addition to risks arising from borrowing and leverage and the fluctuating value of its assets. In the event that any of these factors should occur, this could have a negative impact on the financial results of the DDI Holding and Sinvest Groups. 1.1.1 Liquidity risk

The Sinvest Group has good liquidity and it has not been resolved to take measures to change the liquidity risk. Future liquidity risk for DDI Holding is associated with the finance requirements of construction of the Deep Driller rigs in progress and financing of future operation. Bond loans fully finance the first three rig deliveries in 2006. In addition two more bonds have been raised which, in addition to equity funds, will fully finance the last two rigs in the programme to be delivered in 2008 and 2009 respectively. The company has available financing through the shipyards for the two rigs to be delivered in 2007. No market-maker agreement has been made in connection with this bond loan, and this may represent a liquidity risk for the investor.

1.1.2 Credit risk The company is currently exposed to little risk of loss on both financial investments and pure receivables. In the view of the Board of Directors, the risk of loss is currently very low. This will change in the future when the activity of DDI Holding changes from a building phase to an operation phase with hire and operation of the rigs. By the end of 2006, the Sinvest Group has immaterial investments in receivables, and hence has little credit exposures.

1.1.3 Interest rate risk As the Sinvest Group does not have any significant interest-bearing assets besides funds in escrow accounts, the group’s profit and cash flow from current and future operations is mainly independent of changes in the market interest rate. The group’s interest rate risk is mainly associated with long-term loans. Interest on the Sinvest Group's bank borrowings and bonds accrues at both fixed and floating interest rates. DDI Holding has issued four bond loans in 2006, three of them based on fixed interest and one based on floating interest. Loans with a floating interest rate result in an interest rate risk for the DDI Holding Group cash flow. Fixed interest loans expose the group to actual value interest rate risk.

1.1.4 Foreign exchange risk The DDI Holding Group uses the US$ as the functional currency. The group operates internationally and is exposed to exchange risks arising from various currencies, primarily with respect to NOK and SG$ and other currencies in which the rigs operate and accrue local rig


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operating costs. Furthermore foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign (Non-US Dollar) operations. The group has raised NOK denominated bond loans, where the currency risk is partially offset by NOK denominated cash other NOK assets held by the group. Changes in currency exchange rates relative to the US$ will affect the US$ value of DDI Holding’s assets and thereby impact upon the DDI Holding and Sinvest Group’s total return on such assets. The Sinvest Group has to some extent entered into forward exchange contracts to buy US dollars for a fixed amount of NOK in order to economically hedge installment payments to the shipyards.

1.1.5 Financing risks DDI Holding has ordered eight Deep Driller rigs. Bond loans fully finance the first three rig deliveries in 2006, as well as the last two rigs to be delivered in 2008 and 2009. The company has available financing through the shipyards for the two rigs to be delivered in 2007. Still, there is always the risk that DDI Holding will not be able to finance the rig remaining under construction.

1.1.6 Risks connected to fluctuating value of the fleet The value of the Deep Driller rigs and the rigs and vessels of the Sinvest Group may fluctuate with market conditions. Another downturn in the market could adversely affect the market value of the Sinvest Group’s assets and may result in breaches of its financial obligations. In such a case, sales of the rigs and/or the vessels could be forced at prices that represent a potential loss of value.

1.2 Operational risks There are several operational risks that could impair the DDI Holding Group’s business operations. As five of the rigs are under construction, many operational risks such as insurances, accidents etc. are not currently deemed relevant. The three delivered rigs are in operation. Additional risks will be significant when the rigs commence to operate. 1.2.1 Contract performance risks

Five of DDI Holding’s newbuildings are under construction at yards in Singapore. Even with the reputable builders PPL and Keppel FELS, experience shows that an inherent risk in such construction projects is the possibility of cost overruns and/or delays. While the DDI Holding Group has attempted to cater for such calamities via penalty clauses in the construction contracts, no assurance can be given that the newbuildings will be delivered on time and/or on budget.

1.2.2 Operation risks The Deep Driller rigs will be exposed to operational risks associated with offshore operations such as the risk of breakdown, bad weather, technical problems, force majeure situations (nationwide strikes etc), collisions, grounding etc.

1.3 Commercial risks There are several commercial risks that could impair the DDI Holding Group’s business operations. As five of the rigs are under construction, many commercial risks are not currently deemed relevant. Consequently, they are left out of this prospectus. The three delivered rigs are in operation. Additional risks such as environmental risks, service and technical risks etc. will be regarded as significant when the rigs commence to operate. 1.3.1 Market risks

The demand for drilling rigs, in connection with exploration drilling and production of oil and gas, is sensitive to energy price changes, changes in production level and the outcome of exploratory drilling. In some foreign exploration areas there are political risks associated with changes in and attitudes to different regimes. Fluctuations in the oil price have historically been


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shown to have a significant impact on the demand for services such as those the DDI Holding Group will be providing. On the supply side, there is uncertainty, among other things, regarding capacity access on new rigs and upgrading and maintenance of existing rigs. Other factors such as dismantling, conversion and adjustment of new rigs have an effect on the value trend. As a holding company with three rigs delivered and five still under construction, DDI Holding is exposed to the market risk associated with utilization of the rigs. New entrants in the market could also have a negative effect on the contractual prices as well as the market value of the rigs and vessels.

1.3.2 Oil price Historically, demand for offshore exploration, development and production services have been volatile and closely linked to the price of hydrocarbons. Low oil prices typically lead to a reduction in exploration drilling as the oil companies' scale down their investment budgets. The sharp reduction in production costs on new oil fields may, however, reduce the strong historical correlation between day rates and oil prices. A decrease in the oil prices may, nevertheless, have a material adverse impact on the financial position of the DDI Holding Group.

1.3.3 Price risk The group is exposed to price risk with regard to share prices on investments classified in the balance sheet either as being available for sale or at the actual value over the result. Furthermore, there is risk associated with the value development of rigs and also pricing of drilling services.


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2. Persons responsible

2.1 Persons responsible for the information Persons responsible for the information given in the registration document are as follows: DDI Holding AS Gyldenløvesgate 2B, 4611 Kristiansand S, Norway P.O. Box 728, 4666 Kristiansand S, Norway

2.2 Declaration by persons responsible

Responsibility statement This Prospectus has been prepared by DDI Holding AS with a view to providing a description of relevant aspects of DDI Holding AS in connection with the Bond Issue and an investment therein. We confirm that, taken all reasonable care to ensure that such is the case, the information contained in the registration document is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.

Kristiansand (Norway), February 22, 2007

DDI Holding AS

Manager Pareto Securities ASA has assisted the Company in preparing the Prospectus. (Pareto Securities ASA has separately verified the information contained herein.) Accordingly, no representation, warranty or undertaking, expressed or implied, is made and the Manager expressively disclaims any legal or financial liability as to the accuracy or completeness of the information contained in this Prospectus or any other information supplied in connection with bonds issued by DDI Holding or their distribution. The statements made in this paragraph are without prejudice to the responsibility of the Issuer. Each person receiving this Prospectus acknowledges that such person has not relied on the Manager nor on any person affiliated with it in connection with its investigation of the accuracy of such information or its investment decision.

Oslo (Norway), February 22, 2007

Pareto Securities ASA


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2.3 Important Notice This Prospectus has been prepared in connection with an application for listing of the Company’s four Bond Loans on Oslo Børs. The Prospectus has been approved by Oslo Børs pursuant to Section 5-7 of the Securities Trading Act. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities offered hereby, by or on behalf of the Company, the Manager, any of their respective affiliates or any other person in any jurisdiction in which it is unlawful for any person to make such an offer or solicitation. The delivery of this Prospectus is restricted by law in certain jurisdictions. Persons into whose possession this Prospectus may come are required by the Company and the Manager to inform themselves about, and to observe, such restrictions. This Prospectus may not be used for, or in connection with, any offer to, or solicitation by, anyone in any jurisdiction under any circumstances in which such offer or solicitation is not authorized or is unlawful. No person is authorized in connection with any offering made hereby to give any information or to make any representation not contained in this Prospectus and, if given or made, such other information or representation must not be relied upon as having been authorized by the Company or the Manager. The information contained herein is as of the date hereof and subject to change, completion or amendment without notice. Neither the delivery of this Prospectus at any time nor any subsequent commitment to the sale of securities of the Company shall, under any circumstances, create any implication that there has been no change in the information set forth herein or in the affairs of the Company since the date hereof. All inquiries relating to this Prospectus and the Bond Loans should be directed to the Manager. In certain jurisdictions, the distribution of this Prospectus is subject to legal restrictions. No actions have been taken, other than inspection of this Prospectus by Oslo Børs, to seek permission for the distribution of the Prospectus in any jurisdiction where such specific action I s required. Any person receiving this Prospectus is required by the Company and the Manager to inform themselves about and to observe such restrictions. No securities are being offered in the United States pursuant to this Prospectus. The Bonds will not be registered under the U.S. Securities Act. The Bonds have not been approved or recommended by any United States federal or state securities Commission or regulatory authority. Any representation to the contrary is a criminal offence. In relation to the United Kingdom, this Prospectus and its contents are confidential and its distribution (which term shall include any form of communication) is restricted pursuant to Section 21 (Restrictions on Financial Promotion) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. In relation to the United Kingdom, this Prospectus is only directed at, and may only be distributed to, persons who fall within the meaning of Article 19 (Investment Professionals) and 49 (High Net Worth Companies, Unincorporated Associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or who are persons to whom the Prospectus may otherwise lawfully be distributed. Without limiting the manner in which the Company may choose to make any public announcements and subject to the Company’s obligations under applicable law, announcements relating to matters in this Prospectus will be considered to have been made once they have been received by Oslo Børs and distributed through its information system.

Risk factors Reference is made to Section 1 “Risk factors” for a description and discussion of certain risk factors relevant to an investment in the Company.


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Forward looking statements All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assume no obligation to update any such forward-looking statements. Forward-looking statements will however be updated if required by applicable law or regulation. Investors are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially from those included within the forward-looking statements as a result of various factors including, but are not limited to, those described below and elsewhere in this Prospectus.

Third party statement The information in Prospectus that has been sourced from third parties has been accurately reproduced and, as far as the Company is aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading.


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3. Definitions DDI Holding or the Company or the Issuer or the Borrower - DDI Holding AS (DDI Holding), company reg. no. 988 689 068 DDI - Deep Drilling Invest Pte. Ltd., a Singapore company being a

100% subsidiary of DDI Holding the Group - DDI Holding, its subsidiary DDI and DDI’s subsidiaries DD1-8 DD1-8 - Deep Drilling 1-8 Pte. Ltd., eight rig owning daughter companies

of DDI, registered in Singapore Sinvest - Sinvest ASA, the ultimate holding company of DDI Holding Sinvest Group - Sinvest ASA and its wholly owned subsidiaries DDI Holding AS

(comprising DDI and its daughter rig-owning companies), Beta Drilling Pte Ltd and its partially owned companies Venture Drilling AS (50 %), Premium Drilling AS (50%) and Petrojack ASA (18 %)

Aban Group - Aban Singapore and Aban International Norway AS Aban Singapore - Aban Singapore Pte. Ltd., wholly owned subsidiary of the Indian

company Aban Offshore Ltd (Aban Group). (Main shareholder in Sinvest)

Skeie Group - Skeie Group AS, the wholly owned investment group of Bjarne

Skeie (Sinvest’s ex-Chairman of the Board) and his family PPL Rig - rig constructed at the PPL Shipyard, see figure 4 for details KFELS Rig - rig constructed at the Keppel FELS Shipyard, see figure 4 for

details PPL (Shipyard) - PPL Shipyard Pte. Ltd in Singapore Keppel FELS (Shipyard) - Keppel FELS Shipyard Pte. Ltd. in Singapore Awilco - Awilco Offshore ASA, owning 50% in Premium Drilling AS Group Annual Report 2005 - the Group’s annual report of 2005 DDI Holding Annual Report 2005 - the annual report of 2005 for DDI Holding AS 2Q06 Report - the Group’s 2nd Quarterly Report of 2006 Prospectus - this document dated February 22, 2007 Section - a section in this Prospectus Board or Board of Directors - the board of directors of the Company


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Companies Registry - the Norwegian Registry of Business Enterprises (Foretaksregisteret)

Oslo Børs - Oslo Børs ASA (the Oslo Stock Exchange) EBITDA - earnings before interest, taxes, depreciation and amortisation IFRS - International Financial Reporting Standards NGAAP - generally accepted account principles in Norway ISIN - International Securities Identification Number Book Runner / Manager - Pareto Securities Manager / Pareto Securities - Pareto Securities ASA, P.O. Box 1411 Vika, 0115 Oslo, Norway NOK - Norwegian kroner, the legal tender of Norway USD - United States dollars, the legal tender of the United States of America


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4. Statutory Auditors

4.1 Names and addresses The Issuer’s auditor for 2005 was PricewaterhouseCoopers AS, independent public accountants, located at Gravane 26, 4664 Kristiansand S, Norway. PricewaterhouseCoopers is a member of The Norwegian Institute of Public Accounts. State Authorized Public Accountant Torstein S. Robstad has been liable for the Auditor's report for 2005.


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5. Information about the Issuer

5.1 History and development of the Issuer

5.1.1 Legal and commercial name The legal and commercial name of the issuer is DDI Holding AS. See also Section 2. Definitions.

5.1.2 Place of registration and registration number The Issuer is registered in the Norwegian Companies Registry with registration number 988 689 068.

5.1.3 Date of incorporation DDI Holding was incorporated 22 September 2005, in Kristiansand. Sinvest ASA was established in Kristiansand 10 January 2001, and listed on the Oslo Stock Exchange in 2001.

5.1.4 Domicile and legal form The Issuer is a public limited liability company organized under the laws of Norway with its registered office at Gyldenløvesgate 2B, 4611 Kristiansand S, Norway The Issuer's mailing address is P.O. Box 728, 4666 Kristiansand S, Norway and telephone Tel: + 47 38 04 19 40

5.1.5 Recent events relevant to evaluation of solvency Recent events related to the DDI Group Declaration of rig options The DDI Group declared the two latest rig options and entered an agreement regarding construction of two new rigs, Keppel FELS (no.8) and PPL (no.7). Previously, the company has entered a construction agreement regarding rigs no. 1, 2, 3, 4 and 5, (DD1, DD2, DD3, DD4 and DD5). Establishment of bond loans In 2006, DDI Holding established four bond loans; a first loan of USD 280 mill. to finance the first two jack-up rigs (DD1&DD2), a second and third loan of USD 160 mill. and NOK 400 mill. respectively to finance the construction of rigs no. 7 and 8 (DD7&DD8), and a fourth loan of USD 140 mill. to finance the construction of drill no. 3 (DD3). Security for the loans will be the respective rigs. Christening and deliveries of rigs Deep Driller 1 (DD1) was christened 8 March at PPL Shipyard in Singapore, and was delivered from the shipyard 24 May 2006. Deep Driller 2 (DD2) was christened 8 April at Keppel FELS Shipyard in Singapore, and was delivered 27 April 2006. Deep Driller 3 (DD3) was christened 14 October at Keppel FELS Shipyard in Singapore, and was delivered 6 November 2006 Rigs on contracts A contract has been signed with Hardy Exploration & Production (India) for the first drilling rig DD1 regarding drilling of two wells outside India. Furthermore, a contract has been signed with Reliance Industries in India, which will also use the rig for drilling offshore India. This contract has a term of


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18 months with 2 x 6-month options. DD2 has entered into a 16-month drilling contract with Brunei Shell Petroleum Co. Sdn. Bhd. and the rig will operate offshore Brunei. DD3 is currently being prepared for drilling operations, and have a contract with Shell starting in April 2007. The contract is for 12 months with 2 x 12 months options. Prior to the Shell contract DD3 will commence a short term contract with an oil major for approximately two months in South-East Asia.

5.2 Investments

Description of the latest principal investments The Group has not made any principal investments since the publishing of the last published financial statements. (The Sinvest Group 3Q06 Report, which consist information about Sinvest and all its subsidiaries, was published 30 November 2006). For principal investments made in 2006, see Section 5.1.5 above. For previous investments, see Section 6 “History” below. There is currently no knowledge of any future investments, on which the management bodies have already made firm commitments.


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6. Business overview

Introduction DDI Holding AS is a Norwegian holding company, investing in jack-up drilling rig units/companies. DDI Holding’s wholly owned subsidiary Deep Drilling Invest Pte Ltd, DDI, comprises eight rig owning daughter companies, DD1-8, in Singapore. Three rigs are delivered, while the remaining five are under construction at the PPL and KFELS shipyards in Singapore. The units are marketed and operated by the drilling contractor Premium Drilling, which is partly owned by DDI. DDI Holding is wholly owned by the Norwegian company Sinvest ASA which holds shares in several offshore related companies. Sinvest is a public listed company, and has been listed on the Oslo Stock Exchange since its incorporation early in 2001. The company is located in Kristiansand. Sinvest’s objective is to be a long-term financial and strategic investor in oil- and offshore companies.

History Sinvest was established and listed on the Oslo Stock Exchange in 2001. Late 2003, Sinvest extended its objective to become an active partner globally in projects that had sound growth potential within the oil, gas and offshore industry. As a consequence of the company’s investment strategy, Sinvest decided in December, 2003 to take a position in the market for top quality jack-up drilling units. This decision materialized in January of 2004 by placing an order for one (with an option for a second unit) KFELS Super B Class jack-up at Keppel FELS Shipyard and one additional order for one (also with an option for a second unit) Baker Marine Pacific 375 (enhanced) jack-up at PPL Shipyard, both in Singapore. Sinvest’s engagement in this project was placed in a separate corporate entity, Deep Drilling Invest (DDI), which has had the overall responsibility for this particular investment. DDI is a Singapore company owned 100 % by Sinvest ASA. In late 2005, Sinvest restructured the group by a drop down sale of DDI, to the then incorporated DDI Holding AS on 22 September 2005. DDI was set up with eight rig owning daughter companies registered in Singapore, DD1-8, which will each own or will own one of the eight rigs delivered and under construction. DDI’s units are now marketed and operated by the drilling contractor Premium Drilling AS, which is a joint venture (50/50) between Sinvest and Awilco and manages the new drilling rigs of both companies. Sinvest has another joint venture, with Petrolia Drilling AS, where Sinvest owns 50 %. The joint venture, called Venture Drilling AS, was established to manage operation of the drilling vessel “Valentin Shashin”, renamed “Deep Venture”, which has a contract for 18 months, starting Q1 2007.

Strategy Sinvest’s objective is to be a long-term financial and strategic investor in oil- and offshore companies. Sinvest's mission is to deliver superior returns to its shareholders as a globally recognized entrepreneurial and active owner of companies and/or investor in projects with high growth and profit potential within the oil, natural gas and offshore industries. Furthermore, Sinvest is - due to its experienced, well-connected and tight management team - able to analyze complex investment and exit situations and make decisions in an expedient manner. Investment Strategy Sinvest investment strategy is a combination of four factors: International perspective; Being selective and focused; Partnering with dedicated management; Adding value to portfolio companies and projects through supportive, committed ownership; and to achieve an appropriate financial structure prior to the investment.

• International Perspective The activities of companies within the oil, natural gas and offshore industries are global, and


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thus the companies active in this field as well as projects (e.g. the construction of offshore rigs) need to have an international perspective.

• Being Selective and Focused

Sinvest shall always have the approach of keeping its funds at a manageable size so as not to create the potentially harmful pressure to invest for the sake of investing. This allows Sinvest to make fewer investments and, consequently, to be able to spend more time on the projects and with the management of its portfolio companies and projects.

• Partnering with Dedicated Management

It is a key factor to Sinvest's investment decisions that the companies or projects that Sinvest invests in have dedicated management teams. Sinvest will provide suitable management to projects or companies if such are not in place prior to making its Sinvest's investment. Sinvest's Management Team shall strive to work closely with the project management and the management of its portfolio companies in order to develop strong, honest relationships that can help the project team completing its project in accordance with specifications, in time and without cost overrides or to help the portfolio company grow. Thus, the Management Team of Sinvest shall spend a significant portion of its time assisting and advising the project management teams and the portfolio company management teams, respectively.

• Adding Value to Portfolio Companies and Projects

Through this active partnership, the project management teams and portfolio company management teams will have access and leverage to Sinvest extensive and international experience to facilitate growth and successful completion of projects. In addition to the Sinvest Management Team's expertise the company has a network of industry contacts and board members that can help project management teams and portfolio company teams in recruiting, partnering and refining a project plan/business strategy, just to name a few.

• Achieving an Appropriate Financial Structure

Sinvest has significant experience in negotiating and structuring attractive debt financing. Minimizing Sinvest's loss exposure is key factor to its investment decisions.

• Exit Strategy

It is Sinvest's ambition to be an active owner of companies or investor in projects for three to five years. However, as Sinvest investments are targeted at projects and companies within the oil, natural gas and offshore industries that are cyclic, Sinvest shall at all times be ready to secure capital gains of its investors, through public offering or by selling the company or project to an industrial buyer.

DDI Holding’s strategy While Sinvest focuses on investments in the offshore industry in general, DDI Holding’s focus lies on investment in the jack-up rig market. DDI Holding’s mission is to own and operate jack-up drilling rig units through its subsidiaries.


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6.1 Principal activities

The Deep Driller rigs DDI Holding has ordered eight rigs, which will be named the Deep Driller 1, the Deep Driller 2, the Deep Driller 3 and so forth. The three first rigs, the DD1, the DD2 and the DD3, have been delivered. The DD1 was delivered from the PPL Shipyard on 24 May 2006, the DD2 was delivered from the KFELS Shipyard on 27 April 2006 and the DD3 was delivered from the KFELS Shipyard on 6 November 2006. Currently, two rigs are being constructed at the PPL Shipyard, and three rigs are under construction at the KFELS Shipyard. The figure below displays the time schedule for construction and delivery, together with currently known contracts.

Source: Pareto Securities ASA

Jan-04 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09

Murmanskaya

Deep Venture (50%)

Keppel 5

Keppel 4

Keppel 3

Keppel 2

Keppel 1

PPL 3

PPL 2

PPL 1 Delivered in May

Q207

Q207

Q408

Hardy India. 130D, 2 wells, 150’$/day 1. well+mobilization, 166’$/day 2. well, Reliance 18 months at USD 197’/day + 2x6 months options

Brunei Shell 480 days @180’$/day, Charterer has option for additional12 months

Q109

Q308

Delivered in April

Q109

18 months contract with Exxon Mobile @ 389’$/day. Contract value approximately USDm 200-220

LoI with oil major for two months @ 170’$/day – gross value USDm10. Thereafter contract Shell 1Y+2x1Y options, 225’$/day. Value offirm period approximiately USDm 82

Delivered in November

Q107

Figure 1: Construction program

Constuction Program and Contract Status


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Jack-up rigs All the Deep Driller rigs are jack-up rigs. Jack-up rigs are mobile bottom-supported self-elevating drilling platforms that stand on three legs on the seabed. When the rig is to move from one location to another, it will jack itself down on the water until it floats, and will be towed by a supply vessel or similar, or carried by a heavy lift and transportation vessel, to its next location. A modern jack-up will normally have the ability to move its drill floor aft of its own hull (cantilever), so that multiple wells can be drilled at open water locations or over wellhead platforms without re-positioning the rig. Ultra premium jack-up rigs are rigs with enhanced operational capabilities which can work in water depths >300ft. All the Deep Driller jack-up rigs are of the same design as either DD1 or DD2; the PPL or KFELS rig designs. These two rig designs are developed to enable DDI’s rigs to drill deeper and longer wells. The rigs will be particularly well suited for ultra-deep gas wells as well as long demanding horizontal development wells. Deep Driller 1 The Deep Driller 1, DD1, is a Baker Marine Pacific Class 375 jack-up rig delivered from the PPL Shipyard. The PPL yard in Singapore has completed to date over 30 rigs of various types and sizes. The rig was delivered 24 May. It now has a firm contract with Hardy Exploration & Production for the drilling of two wells outside India with an estimated duration of around 130 days. The value of the contract is about USD 24 mill. Furthermore, a contract has been signed with Reliance Industries in India, which will also use the rig for drilling offshore India. This contract has a term of 18 months with 2 x 6-month options. The value of this contract, excluding the options, is about USD 108 mill. Deep Driller 2 The Deep Driller 2, DD2, is KFELS Super B Class jack-up from the Keppel FELS Shipyard. Keppel Fels is the world’s leading designer and builder of jack-ups, having built the most number of jack-ups on order over the last decade. The rig was delivered 27 April 2006. DD2 has entered into a 16-month drilling contract. The contract has been entered into with Brunei Shell Petroleum Co. Sdn. Bhd. and the rig will operate offshore Brunei. The value of the contract is about USD 88 mill. Deep Driller 3 The Deep Driller 3, DD3, is KFELS Super B Class jack-up from the Keppel FELS Shipyard. Keppel Fels is the world’s leading designer and builder of jack-ups, having built the most number of jack-ups on order over the last decade. The rig was delivered 6 November 2006. DD3 is currently being prepared for drilling operations, and has a contract with Shell in Malaysia starting in April 2007. The value of the contract is about USD 82 mill. On 15 January 2007, Sinvest announced a 2 month Letter of Intent (LOI) with oil major, operating offshore Malaysia, starting beginning of February. The value of the LOI is about USD 10 mill.

Figure 2: DD1

Figure 3: DD2/ DD3

Source: Keppel FELS web-site: www.keppelfels.com.sg

Source: Keppel FELS web-site: www.keppelfels.com.sg


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The figure below displays the details of the PPL and KFELS rigs:

Figure 4: Technical specifications

Source: Pareto Securities

Rig Details


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6.2 Market conditions General market conditions for the oil and offshore industry The market for offshore drilling services is primarily driven by the investments and level of activity in the exploration, development and production of crude oil and natural gas. The investment level depends on oil companies’ cash flow and revenues, acreage available for exploration and development as well as existing and forecasted oil & gas prices. These factors are, in turn, affected by various political and economic factors, such as global production levels, prices of alternative energy sources, government policies, the political stability in the oil producing countries, etc. The market for offshore drilling services is cyclical and volatile ranging from the highly volatile exploration drilling market to the more stable production services market. Increase in oil price In the last couple of years, there has been a significant increase in the demand for oil, and also a corresponding increase in the investments made by oil companies in offshore drilling services. The crude oil price is currently around USD $55 per boe.

Figure 5: Oil Price 1 yr, 2005/2006

Figure 6: Oil Price last 30 years, 1976 - 2006

Oil Price 2 year back

Oil Price 30 years back

Crude Oil - North Sea (Brent), Dated, Close Light Crude Spot (WTI), NymexSource: Reuters EcoWin

jan05

mar mai jul sep nov jan06

mar mai jul sep nov jan07

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Crude Oil - North Sea (Brent), Dated, Close Light Crude Spot (WTI), NymexSource: Reuters EcoWin

76 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

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20

Increase in oil demand Except for the period 1979-1982, demand has grown every year since 1971. World oil demand growth is expected to increase from 1.2 million bbl/d in 2005 to 1.6 million bbl/d in 2006, and further to 1.9 million bbl/d in 2007 (source: EIA). The increased demand for oil, combined with only moderate growth in production capacity, has reduced the world’s production buffer. On top of this, production in many fields in the OECD area are likely to peak in the next couple of years and start declining, although the impact of last year’s price surge has made this more uncertain. However, despite this strong projected growth in demand, world spare oil production capacity is projected to increase during 2006 and 2007 as non-OPEC and OPEC supplies increase. This increase is expected to ease the current tightness in world oil markets and moderate the world oil price increases seen during the past year.

Figure 7: Oil Demand and Capacity

Source: Pareto Securities/BP

Oil Demand and Capacity

40

50

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1971

1973

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30 %Excess oil production capacity (mbpd)World Oil Demand (mbpd)Spare capacity

mboe/day


21

Strong day rates In general, there has been a very positive trend in the rig market in 2005. This trend has continued in 2006, which has been reflected in rising share prices for all rig players. A high oil price has resulted in increased demand for drilling rigs, which in turn has lead to generally higher rig rates and higher balance sheet values. In the market related to DDI’s jack-up rigs, the rates and the rig prices have shown a good trend. Market reports and analyses indicate that the demand for modern jack-up drilling rigs will continue to grow in the short to medium term, at the same time as shipyard capacity, equipment supplies and delivery time for new rigs are limited. This is prosperous for DDI and should mean that the rates and the rig prices will continue to rise.

Figure 9: Dayrate Overview

Figure 8: Dayrate Development



Dayrate Development

Dayrate Overview


22

Overview of the world-wide rig market The worldwide fleet of mobile drilling rigs totals 593 units. Of these, 395 are Jack-up rigs (most of which are capable of drilling in water depths between 150 and 300 feet), 160 are Semi-submersible rigs and 38 are Drillships. With 485 of these employed as of 31 December 2006, the fleet utilization is 82 % (source: ODSPetrodata) However, the effective utilization for the mobile drilling rigs being marketed is close to 100% as 39 units remain cold-stacked/ under up-grading, while the remaining number of unemployed units are either at shipyard for repairment/upgrade/classing or are en-route between contracts.

Jack-up66 %

DrillShips6 %

Semi-submersible28 %

Jack-up

Semi-submersible

DrillShips

Figure 10: Worldwide Fleet Distribution

Figure 11: Rig Properties

Inc. DP

Inc. DP

Inc. DP

Inc. DP

Inc. DP

Inc. DP

Shallow water Medium water Deep water Ultra-deep water

Ft.(not linear scale)

Water depth:

Rig type:

Geographicarea:

Jack-up rigs

200 400 3,000 5,000 8,000

Semi rigs (2nd generation)

Semi rigs (3rd generation)

Semi rigs (4th generation)

Semi rigs (5fh generation)


Drill ships

US GoM, South America, North Atlantic, Middle East,

Southern AsiaWorldwide West Africa, Brazil, USA West Africa, Brazil, USA

Inc. DP

Inc. DP

Inc. DP

Inc. DP

Inc. DP

Inc. DP

Shallow water Medium water Deep water Ultra-deep water

Ft.(not linear scale)

Water depth:

Rig type:

Geographicarea:

Jack-up rigs

200 400 3,000 5,000 8,000

Semi rigs (2nd generation)

Semi rigs (3rd generation)


Semi rigs (5fh generation)


Drill ships

US GoM, South America, North Atlantic, Middle East,

Southern AsiaWorldwide West Africa, Brazil, USA West Africa, Brazil, USA



Worldwide Fleet Distribution

Rig properties


23

Overview of the Jack-up rig market The Jack-up rig market has traditionally had its strongest focus in the Gulf of Mexico (GoM). However, during the last couple of years several units have migrated from this region to other regions such as the Pacific and the Middle East.

During the latest downturn the Jack-up rig market experienced fairly high utilization as compared to the semi-submersible rig market. However, there were considerable variations between the different geographic markets. Over the last 2 years there has been an extensive global improvement. Jack-up rigs with drilling capacity in excess of 300 feet have been awarded contracts above US$ 200,000/day, while the level for the most sophisticated units exceeds US$ 240,000/day. Global utilization for Jack-up rigs with drilling capacity in excess of 300 feet has increased from 85% at the end of 2004 to 90-95% today. The utilization ratio is still curbed by many units undergoing repairs following the damages caused by the hurricanes in the GoM fall 2005. Demand is, according to ODS-Petrodata, set to increase by another 60 units (19%) the next 12 months, which implies that there will be a significant shortage next year. Excluding one unit built for the Caspian Sea, 24 Jack-up rigs have been delivered since 1998. Eight of these rigs were built to meet the challenges of harsh environments, usually resulting in significantly increased construction costs. Harsh environment units are also generally able to compete in the Middle East, India and South East Asia. However, the primary markets for these units are currently strong, and no migration is expected.

World Jack-up Rig Fleet April 2006

Figure 12: Worldwide Jack-up Rig Concentration

Strong increase in Jack-up rig demand

Source: ODS-PetrodataSource: ODS-Petrodata


24

Figure 13: International Jack-ups

Figure 14: Jack-ups under construction

Source: ODS Petrodata, Companies, Pareto Securities research

International Jack-ups

Jackup fleet: 63 units under construction – (15 - 16 % of current fleet)

0102030405060708090

1963196

6196

9197

2197

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1198

4198

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9200

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8

Total jackup fleet 395 units Average fleet age 25 years Only 37 units built since 1993 Only 52 units built last 20 years 63 units under construction

# of units


25

The Groups market position DDI Holding is a relatively new company. DDI has received three rigs, but are still waiting for the remaining five. All the delivered rigs are in operation. These circumstances make it difficult as to comment DDI’s current market position. Sinvest and DDI were the first to order new rigs at PPL and Keppel FELS Shipyards. Consequently they got a favorable price and a better time to market compared to later orders made. The current jack-up order book consists of 63 units. DDI has 5 among the first 18 jack-ups to be delivered. The company is therefore in a very attractive position to be awarded strong fixtures. As the jack-up market has improved significantly since the first rigs were ordered, the value of the rigs has increased substantially. Market reports and analyses indicate that the demand for modern jack-up drilling rigs will continue to grow in the short to medium term, at the same time as shipyard capacity, equipment supplies and delivery time for new rigs are limited. This is prosperous for DDI and should mean that the rates and the rig prices will continue to rise. The contract value of the five rigs the company has under construction totals USD 685.5 mill.

Figure 15: Rig Delivery Overview

The list above is not complete.

Rig owner name Rig NameRated water

depth [ft]Drilling

depth [ft] DesignDelivery

date Shipyard

Apexindo Soehanah 375 25,000 Pacific Class 375 Jan-07 PPL Shipyard Pte LtdPetroVietnam PV Drilling I 300 20,000 KFELS MOD V B Mar-07 Keppel FELSA.P. Møller Maersk JU BM1 375 30,000 Pacific Class 375 Mar-07 Jurong Shipyard Pte LtdENSCO ENSCO 108 350 30,000 KFELS MOD V B Bigfoot Mar-07 Keppel FELSScorpion Offshore Offshore Courageous 350 30,000 Super 116 Apr-07 Keppel AmFELSAwilco WilSuperior 375 30,000 Pacific Class 375 May-07 PPL Shipyard Pte LtdPerforadora Central Panuco 350 30,000 Super 116E May-07 LeTourneauDDI Holding AS Deep Driller 5 350 35,000 KFELS MOD V Super B Jun-07 Keppel FELSShip Finance West Prospero 350 30,000 KFELS MOD V B Jun-07 Keppel FELSGazprom Arcticheskaya 328 21,326 Corrall 6500/10-30 Jul-07 Zvezdochka ShipyardNoble Noble Roger Lewis 400 30,000 JU-2000E Aug-07 DalianDDI Holding AS Deep Driller 4 375 30,000 Pacific Class 375 Sep-07 PPL Shipyard Pte LtdStella West Atlas 375 30,000 KFELS MOD V B Sep-07 Keppel FELSRowan J.P. Bussell 350 35,000 TARZAN CLASS Oct-07 Signal InternationalScorpion Offshore Offshore Defender 350 30,000 Super 116 Oct-07 Keppel AmFELSCaleb West Triton 375 30,000 Pacific Class 375 Oct-07 PPL Shipyard Pte LtdA.P. Møller Maersk JU Tbn1 350 30,000 CJ50-X100MC Nov-07 Keppel FELSThule Drilling Thule Energy 300 Super M2 Nov-07 QGMAwilco WilForce 375 30,000 Pacific Class 375 Dec-07 PPL Shipyard Pte LtdGulf Drilling Int. Al Zubarah 300 30,000 KFELS MOD V B Dec-07 Keppel FELSPetrojack Petrojack II 375 30,000 Pacific Class 375 Jan-08 Jurong Shipyard Pte LtdDiamond Offshore Ocean Scepter 350 35,000 KFELS MOD V Super B Feb-08 Keppel AmFELSDiamond Offshore Ocean Shield 350 35,000 KFELS MOD V Super B Feb-08 Keppel FELSNoble Noble Hans Deul 400 30,000 JU-2000E Feb-08 DalianJapan Drilling Hakuryu X 375 Pacific Class 375 Feb-08 PPL Shipyard Pte LtdThule Drilling Thule Force 300 30,000 Super M2 Mar-08 QGMScorpion Offshore Offshore Resolute 350 30,000 Super 116 Mar-08 Keppel AmFELSAwilco WilBoss 400 30,000 KFELS MOD V B Apr-08 Keppel FELSAban Offshore Aban VIII 375 30,000 Pacific Class 375 Jun-08 PPL Shipyard Pte LtdRowan Rowan JU Tbn1 400 Class 240-C Jun-08 LeTourneauSeaDrill Ltd West Ariel 400 30,000 KFELS MOD V B Jun-08 Keppel FELSAwilco WilSeeker 375 30,000 Pacific Class 375 Jun-08 PPL Shipyard Pte LtdScorpion Offshore Offshore Vigilant 350 30,000 Super 116 Jun-08 Keppel AmFELS

Rig Delivery Overview


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7. Selected financial information For further comments regarding the accounts and explanatory notes of DDI Holding AS and the Group, see the annual reports for 2005 and interim report 2Q 2006 as referred to in section 13 “Financial information concerning the issuer's assets and liabilities, financial position and profits and losses”.

7.1 Selected financial information for DDI Holding AS The selected income statements and balance sheets the fiscal year ending 31 December 2005 has been derived from the Company's audited financial statements. Table 1: INCOME STATEMENT 31.12.2005 DDI HOLDING AS 31.12.2005Total Operating expenses NOK (21,695) Net Operating profit NOK (21,695)Ordinary profit before tax NOK (21,688) Profit/ (loss) for the period NOK (11,365) Attributable to equity holders of the Company : (11,365) Table 2: BALANCE SHEET 21.12.2005 DDI HOLDING AS ASSETS 31.12.2005 Total fixed assets NOK 3,359,830,323Total current assets NOK 100,007Total Assets NOK 3,359,930,330 EQUITY & LIABILITIES 31.12.2005 Total equity NOK 3,359,793,455Total liabilities NOK 136,875 Total equity and liabilities NOK 3,359,930,330

7.2 Selected consolidated financial information for the Group The selected consolidated income statements and the consolidated balance sheets the fiscal year ending 31 December 2005 and unaudited consolidated income statement and unaudited consolidated balance sheet have been derived from the Company's audited financial statements. Table 3: INCOME STATEMENT DDI HOLDING GROUP 30.06.2006 31.12.2005Total income USD 5,168 -Total operating expenses USD 13,737 6Income from operations USD (8,569) (6)Net financial income (loss) USD (6,996) (5)Income (loss) before tax USD (18,884) (11)Net income (loss) for the period USD (18,884) (11)


27

Table 4: BALANCE SHEET DDI HOLDING GROUP 30.06.2006 31.12.2005ASSETS Total non-current assets USD 452.929 151,324Total current assets USD 397,378 267Total assets USD 850,306 151,591 EQUITY & LIABILITIES 30.06.2006 31.12.2005Total shareholders equity USD 104,954 132,838Total non-current liabilities USD 715,059 18,985Total current liabilities USD 30,293 8,768Total equity and liabilities USD 850,306 151,591


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8. Organizational structure

8.1 Description of the group which the Issuer is part of DDI Holding is 100% owned by the Norwegian investment company Sinvest ASA, and is Sinvest’s “main” subsidiary. The Sinvest Group comprises the 100% subsidiaries DDI Holding and Beta Drilling, 50 % of the joint venture Venture Drilling, 18 % of the shares of Petrojack and 2 % of the shares in Awilco Heavy Transport. DDI Holding owns the 100 % subsidiary DDI and also 50 % of Premium Drilling.

Figure 16: Organizational Structure

Organizational Structure


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Sinvest ASA Sinvest is a long-term financial and strategic investor in oil- and offshore companies. Sinvest owns several drilling companies through its subsidiaries which are described above and below. Deep Drilling Invest Pte. Ltd DDI is owned by Sinvest through DDI Holding. DDI is an investment company registered in Singapore, which owns and operates drilling rigs. The rigs are owned by DDI through 8 rig owning companies, Deep Drilling 1-8 Pte. Ltd., registered in Singapore. The rigs are/will be operated by Premium Drilling. Beta Drilling Pte Ltd Beta Drilling has been rewarded a bareboat agreement regarding the jack-up Murmanskaya with unit owner Arktikmorneftegazrazvedka (“Arktik”). The contract will have a duration of 3 years. Venture Drilling AS Venture Drilling is a joint venture between Sinvest and Petrolia Drilling AS, where Sinvest owns 50 %. Venture Drilling has entered into a bareboat agreement regarding the drillship Deep Venture (ex Valentin Shashin) with vessel owner Arktikmorneftegazrazvedka (“Arktik”). The contract will have duration of 18 months, starting in 1Q 2007. Venture Drilling is now marketing the ship on a world-wide basis. Premium Drilling AS Premium Drilling was formed as a drilling contractor in 2005 by Sinvest ASA and Awilco Offshore ASA. Premium Drilling has offices in the U.S., Singapore, Australia, India, Malaysia and Brunei and will operate 17 Mobile Offshore Drilling units worldwide (belonging to Sinvest (DDI and Beta Drilling) and Awilco). DDI’s position in the Sinvest Group DDI Holding and DDI have a unique position in the Sinvest Group, because DDI owns all of Sinvest’s fully owned jack-up rigs, and is therefore a great contribution to the Sinvest Group. In addition to these DDI rigs, Sinvest has hired in a rig through Beta Drilling, and owns 18 % of Petrojack’s rigs.

8.2 Issuer dependent upon other entities DDI Holding is dependent on several entities, both in the DDI and Sinvest Group. DDI Holding is a pure holding company and the parent company in the Group. DDI Holding operates as an internal bank for the respective rig-owning subsidiaries. The debt that DDI Holding raises in the bank and bond markets is either relent, or contributed by way of equity, to the various rig-owning companies in the DDI Group. Through the cash flow generated from the operation of the rigs, the subsidiaries service the debt, or pay dividends, to DDI Holding, and DDI Holding uses these funds to service its external debt to banks and bond investors. DDI Holding is also dependent on entities in the Sinvest Group. As stated above, Premium Drilling is in charge of the operation of DDI Holding’s Deep Driller rigs.


30

9. Trend information There has been no material adverse change in the prospects of the Issuer since the date of its last published audited financial statements.


31

10. Forecasts or estimates The issuer does not choose to include a profit forecast or a profit estimate.


32

11. Administrative, management and supervisory bodies

11.1 Information about persons Board of Directors The Board of Directors has the general responsibility for the company’s management and also control of the company’s operational management. The board of directors develops the company’s strategic plans and also establishes the main budgets. The Board of Directors elects its own Chairman. On the 4 October 2006, the following persons were elected to the board: Name Position Business Adress Jan Tomas Norrby ........................... Chairman Lilleakerveien 31, N-0283 Oslo Svein Anton Bjørnholmen............... Member Lilleakerveien 31, N-0283 Oslo Olav Haugland.............................. Member Lilleakerveien 31, N-0283 Oslo Jan Tomas Norrby, Chairman Mr. Norrby holds a MSc in Naval Architecture and Marine Engineering from Chalmers University of Technolgy (Sweden) and a Master of Business Administration (MBA) from the Norwegian School of Management. Tomas Norrby was responsible for business development, marketing and contracting in Ocean Rig and was recruited to Ocean Rig from a position as Executive Vice President for Tor Drilling Inc. in Houston, Texas. Norrby resides in Bærum, Norway. In DDI Norrby is responsible for business development, marketing and operational issues. Svein Anton Bjørnholmen, Svein Anton Bjørnholmen graduated in economics from Agder College in 1975. Accountant at Coopers & Lybrand 1976-82. Finance Director at Maritime Hydraulics AS 1982-87. Finance Director of various companies owned by Bjarne Skeie and family 1987-98. Responsible for Skeie Management 1990-98. Finance Director at Hydralift ASA from May 1 1998 to February 1, 2002. Bjørnholmen resides in Kristiansand, Norway. Olav Haugland, Chief Financial Officer, Oslo Mr. Haugland holds a Master of Science in Business administration and is a state authorised public accountant from the Norwegian School of Economics and Business Administration. Haugland has 15 years of international experience from auditing, consumer goods and the shipping industry. The past seven years he held the position as Group Controller in shipping company Wilh.Wilhelmsen ASA in Bærum, Norway. In DDI Haugland is primarily covering the CFO role. Corporate Governance Sinvest ASA is convinced that good corporate governance principles are essential for the company’s development and value creation. Sinvest places great emphasis on autonomy and neutrality in all matters in order to maintain trust in the market. The company strives therefore to follow, as a minimum, “Norwegian recommendations for corporate governance of 7/12 04, revised 8/12 05”. The Board of Directors and the management of Sinvest have a close co-operation. Despite this, the board believes that independence between the Board of Directors and the company’s management has been taken care of, and this is also reflected in the composition of the Board of Directors. The company has used external consultants when required. The Board of Directors has prepared a separate report regarding corporate governance, which is a separate part of the Sinvest Annual Report 2005, refer to page 6. DDI Holding is dedicated to maintaining high standards of corporate governance. Corporate governance addresses the interaction between the shareholders, board of directors, management,


33

employees and other stakeholders. Maintaining high standards of corporate governance improves the quality of discussions and decisions by corporate bodies and strengthens confidence among shareholders, bondholders and the investor market in general, contributing to value creation. The corporate governance policies are available in the Sinvest Annual Report 2005. Management group The table below sets out the names of the members of the DDI Holding’s senior management: Name Position Business Adress Jan Tomas Norrby .............................. Chairman Lilleakerveien 31, N-0283 Oslo Olav Haugland.................................... Managing director Lilleakerveien 31, N-0283 Oslo Tom Mikkelsen.............................. VP Projects Lilleakerveien 31, N-0283 Oslo Jan Tomas Norrby, Chairman Mr. Norrby holds a MSc in Naval Architecture and Marine Engineering from Chalmers University of Technolgy (Sweden) and a Master of Business Administration (MBA) from the Norwegian School of Management. Tomas Norrby was responsible for business development, marketing and contracting in Ocean Rig and was recruited to Ocean Rig from a position as Executive Vice President for Tor Drilling Inc. in Houston, Texas. Norrby resides in Bærum, Norway. In DDI Norrby is responsible for business development, marketing and operational issues. Olav Haugland, Chief Financial Officer, Oslo Mr. Haugland holds a Master of Science in Business administration and is a state authorised public accountant from the Norwegian School of Economics and Business Administration. Haugland has 15 years of international experience from auditing, consumer goods and the shipping industry. The past seven years he held the position as Group Controller in shipping company Wilh.Wilhelmsen ASA in Bærum, Norway. In DDI Haugland is primarily covering the CFO role. Tom Mikkelsen, VP Projects Tom Mikkelsen holds an MSc in Naval Architecture and Marine Engineering from NTNU (Norway). Tom Mikkelsen has more than 20 years experience in the offshore industry, 4 years as technical director in Northern Offshore and 14 years in senior technical and operational positions at Wilrig and Wilh. Wilhelmesen, mainly as project manager for various newbuilding-, conversions and upgrade projects. Mikkelsen resides in Oppegård, Norway


34

Figure 17: DDI Management Team

11.2 Administrative, management and supervisory bodies conflicts of interest

There are no conflicts between any duties to the issuing entity of the persons referred to in Section 11.1 and their private interests and or other duties.

CEO/CFOOlav Haugland

VP Projects

ChairmanTomas Norrby

Tom Mikkelsen

Accounting manager(Norway)

Finance Manager(Singapore)

Group Controller(Norway)

Engineering team(Norway)

Site manager KFELS(Singapore)

Site manager PPL(Singapore)

DDI Management Team


35

12. Major shareholders

12.1 Ownership As of 20 February 2007, Sinvest ASA has 1,974 shareholders. Aban Singapore is the largest shareholder with 24,282,165 shares, representing 40 % of the outstanding shares. The company’s 20 largest shareholders held 88.11 % of the shares. The composition of the board of directors in the company is reflecting the shareholder structure. There are two directors representing Aban Singapore and two independent directors. One of the independent directors is chairman. The chairman has a casting vote. SHAREHOLDER NO.SHARES % DETAILS NATIONALITY

ABAN SINGAPORE PTE L ATT: C P GOPALKRISHN 24 282 165 40,00 SGP

ABAN INTERNATIONAL N 6 077 581 10,01 NOR

DEUTSCHE BANK AG LON PRIME BROKERAGE FULL 4 875 355 8,03 NOM GBR

CREDIT SUISSE SECURI SPECIAL CUSTODY A/C 3 035 270 5,00 NOM USA

DnB NOR MARKETS, AKS MARKET-MAKING INNLAN 2 637 900 4,35 NOR

MERRILL LYNCH INTERN C/O SEB SECURITIES S 2 320 291 3,82 NOM GBR

MERRILL LYNCH INTERN C/O SEB SECURITIES S 2 052 500 3,38 NOM GBR

GOLDMAN SACHS INTERN EQUITY NONTREATY CUS 1 228 900 2,02 NOM GBR

MORGAN STANLEY & CO. CLIENT EQUITY ACCOUN 1 107 208 1,82 NOM GBR

MORGAN STANLEY AND C CLIENT EQUITY ACCOUN 802 200 1,32 NOM GBR

GOLDMAN SACHS INTERN EQUITY HOUSE CLEARAN 761 968 1,26 GBR

NATEXIS BLEICHROEDER SPEC. CUST. ACC CUST 716 884 1,18 USA

BARCLAYS CAPITAL SEC S/A ABC ARBITRAGE 594 100 0,98 GBR

STATE STREET BANK AN A/C CLIENT OMNIBUS D 584 213 0,96 USA

DEUTSCHE BANK AG LON 521 623 0,86 GBR

MORGAN STANLEY & CO. 478 871 0,79 NOM GBR

UBS AG, LONDON BRANC IPB CLIENT ACCOUNT 470 000 0,77 NOM GBR

CREDIT SUISSE SECURI (EUROPE) PRIME BROKE 389 139 0,64 NOM GBR

INSTITUSJONEN FRITT ATT.: ERIK RUDENG 279 600 0,46 NOR

CREDIT AGRICOLE INVE BANK, NON TREATY ACC 278 069 0,46 NOM FRA

TOTAL 20 LARGEST 53.493.837 88,11

TOTAL OUTSTADNING SHARES 60.705.415 100

Figure 18: 20 largest shareholders

12.2 Share capital As of 20 February 2007, the issued capital in DDI Holding is in the amount of NOK 2,925,100,000, which corresponds to 29,251,000 shares. The issued capital in Sinvest is in the amount of NOK 364,232,490, which corresponds to 60,705,415 shares. Both DDI Holding AS and Sinvest ASA have only one share class with equal rights and the articles of association set no restrictions regarding the shares’ transferability.

12.3 Change of control There are no arrangements, known to DDI Holding, the operation of which may at a subsequent date result in a change in control of the company. However, through the mandatory offering from ABAN International Norway AS, ABAN Group controls 97 % of DDI Holdings parent company Sinvest. See press release of 19 February 2007, Mandatory notification of trade.

20 largest shareholders as of 20 February, 2007


36

13. Financial information concerning the issuer's assets and liabilities, financial position and profits and losses

13.1 Historical Financial Information

Statement of compliance The consolidated financial statements of DDI Holding and all its subsidiaries are prepared in accordance with IFRS as adopted by the EU and the Norwegian Accounting Act. The financial statements have been prepared under the going concern assumption in accordance with the Norwegian Public Company Act § 3-3a The Group first time adopted IFRS in its consolidated financial statement ended 31 December, 2005. (For more information, see Auditor’s Report in connection with the Annual Report 2005). Information required by IFRS 1 and recommended by Oslo Stock Exchange has been given as a separate note in the Annual Report.

Basis for preparation The group accounts have been prepared on the basis of the historical cost principle with the following modifications: financial assets available for sale, financial derivatives and financial assets and obligations valued at the actual value over the result. Preparation of accounts in accordance with IFRS requires the use of estimates. Furthermore, application of the company’s accounting principles requires that the management must make a discretionary assessment. Areas that contain a large number of such discretionary assessments or a high degree of complexity, or areas where the prerequisites and estimates are important to the group accounts, have been described in Note 4 in the Annual Report of 2005. For further information regarding the basis for preparation, see Note 1 in the Annual Report of 2005. The subsidiaries in the DDI Holding are all entities (Special Purpose Entities) where the group has controlling interest in the entity’s financial and operational strategy, usually through ownership of more than half the voting capital. The effect of potential voting rights that may be exercised or converted on the balancing date are included when establishing whether there is controlling interest. Subsidiaries will be consolidated from the date control has been transferred to the group and will be omitted from consolidation when control ends. Inter-company transactions, inter-company balances and unrealized profit between group companies have been eliminated. Unrealized loss is eliminated, but is regarded as an indicator of depreciation in value with regard to write-down of the transferred asset. Accounting principles in subsidiaries are changed when this is necessary to achieve harmonization with the group’s accounting principles. DDI Holding and its subsidiaries are USD based companies, with all revenues, debt and a significant part of the operating costs in the US dollar. All the consolidated financial statements are presented in USD. According to the Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council, information in a prospectus may be incorporated by reference. Because of the complexity in the historical financial information and financial statements this information is incorporated by reference to the 2Q06 Report, DDI Holding Annual Report 2005 and the Group Annual Report 2005 as follows:


37

Financial Statements

Quarterly report, the Group

Annual report, DDI Holding

Annual report, the Group

2Q 2006 2005 2005 DDI Holding AS Consolidated income statement Page 1, APPENDIX III Page 2, APPENDIX IV Page 3, APPENDIX I Consolidated balance sheet Page 2, APPENDIX III Page 3 – 4,

APPENDIX IV Page 4, APPENDIX I

Consolidated cash flow statement Page 2, APPENDIX III N/A Page 6, APPENDIX I Consolidated statement of changes in equity Page 2, APPENDIX III N/A Page 5, APPENDIX I Notes to the consolidated accounts Pages 3 – 7,

APPENDIX III Pages 5 – 7, APPENDIX IV

Pages 7 – 20, APPENDIX I

Accounting principals Note 3, APPENDIX III Note 1, APPENDIX IV Note 2, APPENDIX I Auditor’s report to Annual Report 2005 is enclosed this Prospectus as Appendix II.

13.2 Financial statements See section 13.1 Historical Financial Information.

13.3 Auditing of historical annual financial information

13.3.1 Statement of audited historical financial information The historical financial information of the Group, comprising financial statements from Annual Report 2005 (see above for references), has been audited. The auditor responsible for these historical financial statements is Torstein S. Robstad of PricewaterhouseCoopers (see Section 4.1). A statement of audited historical financial information is given in Auditor’s Report in connection with the Annual Report 2005.

13.4 Age of latest financial information

13.4.1 Last year of audited financial information The last year of audited financial information is 2005. The second-quarter report of 2006, 2Q06, is published, but not audited.

13.5 Legal and arbitration proceedings The Issuer is not and has not been in any governmental, legal or arbitration proceedings since the Issuer was established in September 2005.

13.6 Significant change in the issuer's financial or trading position Since the publishing of the DDI 2Q06 report, there have been no significant changes in the financial or trading position of the Group.


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14. Third party information and statement by experts and declarations of any interest

14.1 Information about person(s) as expert(s) Information about person(s) as expert(s) is listed in the following table: Name Qualifications Business address Material interest

in the Company Torstein S. Robstad State Authorized Public

Accountant (Norway) PricewaterhouseCoopers, Gravane 26, 4664 Kristiansand S, Norway

None

14.2 Third party information Part of the information given in this Prospectus has been sourced from a third party. It is hereby confirmed that the information has been accurately reproduced and that as far as DDI Holding is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. The following table lists such third parties: Third party Source Section Reference: Keppel FELS www.keppelfels.com.sg 6.1 Text BP, British Petroleum www.bp.com 6.2 Figure from Pareto report EIA, Energy Information Administration

www.eia.doe.gov 6.2 Figure from Pareto report

ODS Petrodata www.ods-petrodata.com 6.2 Figure from Pareo report EcoWin www.ecowin.com 6.2 Figure from EcoWin database


39

15. Documents on display The following documents (or copies thereof) may be inspected for the life of the Prospectus at the headquarters of DDI Holding, address Gyldenløvesgt. 2B, 4611 Kristiansand, Norway: (a) the memorandum and articles of association of DDI Holding and Sinvest ASA; (b) all reports, letters, and other documents, historical financial information, valuations and statements prepared by any expert at the Group’s request any part of which is included or referred to in the registration document; (c) the historical financial information of DDI Holding and its subsidiary undertakings for the financial year preceding the publication of the registration document. This Prospectus will be available on the issuers web-site, www.sinvest.no .


40

16. Cross Reference List Reference in Prospectus Refers to 11.1 Corporate Governance Sinvest Annual Report 2005.

13.2. Change of control Press release at Oslo Børs 19 February 2007.


41

17. DDI Holding’s Articles of Association

ARTICLES OF ASSOCIATION FOR DDI HOLDING AS (per 8 May 2006)

§ 1

The name of the company is DDI Holding AS. The company is a limited liability company.

§ 2 The company shall have its business address in the municipality of Kristiansand.

§ 3 The business activities of the company are directly or through ownership in other companies to invest in assets, shares and similar, particularly within the oil- and offshore-sector.

§ 4 The share capital is NOK 2 925 100 000 divided in 29 251 000 shares, at a par value of NOK 100.00.

§ 5 The company is managed by a board of directors consisting of 3 board members elected by the general meeting. The chairman of the board is authorised to sign on behalf of the company.

§ 6 At the ordinary general meeting, the following matters shall be addressed and decided: 1. Approval of the annual accounts, including distribution of dividend 2. Election of the board of directors and the company Auditor. 3. Other business that by law or pursuant to the Articles of Association are to be transacted at the

general meeting.

* * *


42

APPENDIX I Annual report DDI Group 2005

DDI Holding Group Annual Report 2005

Annual Report 2005

DDI Holding Group – 31 December 2005 (All amounts in USD 1 000)

Page 2

Contents

Note Page Note Page

Consolidated income statement 3 3 Financial risk management 14 Consolidated balance sheet 4 4 Critical accounting estimates and

judgments 15

Consolidated statement of changes in equity 5 5 Segment information 15 Consolidated cash flow statement 6 6 Fixed assets 15 Notes to the consolidated financial

statements: 7 7 Investments in joint venture 16

8 Accounts receivables and other short-term receivables 16

1 General information 7 9 Cash and cash equivalents 16

2 Summary of the most important accounting policies: 7

10 Share capital 16

2.1 Basic principles 7 11 Trade and other payables 17

2.2 Consolidation principles 8 12 Long-term liabilities 17

2.3 Segment information 8 13 Deffered income tax 17

2.4 Foreign currency translation 8 14 Employee benefit expense 17

2.5 Tangible fixed assets 9 15 Finance income and costs 17

2.6 Intangible fixed assets 10 16 Income taxes 18

2.7 Impairment of non-financial assets 10 17 Earnings per share 18

2.8 Financial assets 10 18 Cash generated from operations 18

2.9 Derivates and hedging 11 19 Contingencies 18

2.10 Inventories and spare parts 12 20 Commitments 19

2.11 Trade debtors 12 21 Restructuring of the Group 19

2.12 Cash and cash equivalents 12 22 Related-party transactions 19

2.13 Share capital and premium 12 23 Events after the balance sheet date 20

2.14 Loans 12 24 Share capital and shareholder information 20

2.15 Deferred tax 13 25 Pro forma information 20

2.16 Pension obligations, bonus schemes and other employee compensation schemes 13 26 Business combinations 20

2.17 Provisions 13

2.18 Revenue recognition 13

2.19 Lease agreements 14

2.20 Dividend 14

2.21 Borrowing costs 14

2.22 Fair value estimation 14

Annual Report 2005


Page 3

Consolidated income statement

22 September –

31 December

Note 2005

Revenue -

Total revenue -

Other operating expenses 14 (6)

Operating profit (6)

Finance costs 15 (5)

Profit before income tax (11)

Income tax expense 16 -

Profit for the year (11)

Attributable to:

Equity holders of the Company (11)

(11)

Earnings per share for profit attributable to the equity holders of the Company during the year (USD per share)

- basic 17 (0.002)

- diluted 17 (0.002)

DDI Holding AS was incorporated in September 2005. For this reason no comparable figures are presented for the group.

Pro forma information is presented in note 25.

The notes on pages 7 to 20 are an integral part of these consolidated financial statements.

Annual Report 2005


Page 4

Consolidated balance sheet As at 31

December

Note 2005 ASSETS Non-current assets Property, plant and equipment 6 148 339 Investment in joint venture 7 2 985 151 324 Current assets Trade and other receivables 8 54 Cash and cash equivalents 9 213 267 Total assets 151 591 EQUITY Capital and reserves attributable to equity holders of the

Company

Ordinary shares and share premium 10, 24 497 565 Retained earnings (373 727) Total equity 123 838

LIABILITIES Non-current liabilities Borrowings 12, 22 18 985 18 985 Current liabilities Trade and other payables 11, 22 8 768 8 768 Total liabilities 27 754

Total equity and liabilities 151 591



Annual Report 2005


Page 5

Consolidated statement of changes in equity

Attributable to equity holders of the Company Sum

Share capital and premium Retained earnings

Paid-up capital at incorporation 22 September 2005

16 - 16

Issue of share capital 497 549 - 497 549

Charged due to reverse acquisition* - (373 716) (373 716)

Profit for the year - (11) (11)

Balance at 31 December 2005 497 565 (373 727) 123 838

*) DDI Holding’s acquisition of its subsidiaries is reported as a reverse acquisition. Book values of all assets and liabilities in Deep Drilling Invest Pte Ltd are carried over in the balance sheet. See further information in note 21.


Annual Report 2005


Page 6

Consolidated cash flow statement

22 September –

31 December

Note 2005

Cash flows from operating activities 18 -

Cash flows from investing activities -

Cash flows from financing activities

Proceeds from issuance of ordinary shares 17 Cash in acquired subsidiaries 21 196 Net cash used in financing activities 213

Net increase in cash, cash equivalents and bank overdrafts 213

Cash, cash equivalents and bank overdrafts at 22 September -

Cash, cash equivalents and bank overdrafts at end of year 9 213



Annual Report 2005


Page 7

Notes to the consolidated financial statements

1 General information DDI Holding AS (”the Company”) and its subsidiaries (together ”the Group”) is a long-term financial and strategic

investor in the oil and offshore industry. The incorporation of DDI Holding AS was part of the restructuring of the Sinvest Group. In the restructuring process DDI Holding AS acquired its subsidiaries from its parent company Sinvest ASA in December 2005 with consideration in shares. This transaction is treated as a reverse acquisition under common control, and therefore assets and liabilities in the acquired subsidiaries are recognised and measured at their carrying amounts. The investment in Premium Drilling was also acquired from Sinvest ASA in December 2005 and is recognised at fair value. See note 22. At year end the Group’s activity was still mainly related to construction of Jack-up drilling rigs. The first rig will be ready for drilling in 2006. DDI Holding is domiciled in Norway with registered address in Kristiansand. The parent company, Sinvest ASA, is listed on the Oslo Stock Exchange.

2 Summary of the significant accounting policies A description of the significant accounting policies used to prepare the consolidated financial statements is given

below. These policies have been consistently applied to all years presented, unless otherwise stated.

2.1 Basic principles The consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRS) as endorsed by the EU. The consolidated financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

Standards, amendments and interpretations effective in 2005:

The following standards, amendments and interpretations are mandatory for the Group’s accounts of 2005. • IFRIC 2, Members’ Shares in Co-operative Entities and Similar Instruments (effective from 1 January 2005); • SIC-12 (Amendment), Consolidation – Special Purposes Entities (effective from 1 January 2005); and • IAS 39 (Amendment), Transition and Initial Recognition of Financial Assets and Financial Liabilities (effective

from 1 January 2005)

The management has assessed whether these changes are relevant to the Group’s operations and have concluded that they are not.

Standards, amendments and interpretations that are not yet effective The following standards, amendments and interpretations are mandatory for accounting periods beginning after 1

January 2005:

• IAS 19 (Amendment) Employee Benefits (effective from 1 January 2006). • IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast Intragroup Transactions (effective from 1

January 2006). • IAS 39 (Amendment), The Fair Value Option (effective from 1 January 2006). • IAS 39 og IFRS 4 (Amendment), Financial Guarantee Contracts (effective from 1 January 2006). • IFRS 6, Exploration for and Evaluation of Mineral Resources (effective from 1 January 2006). • IFRS 7, Financial Instruments: Disclosures, and a supplementary change in IAS 1, Presentation of Financial

Statements – Capital Disclosures (effective from 1 January 2007). • IFRIC 4, Determining whether an Arrangement contains a Lease (effective from 1 January 2006). • IFRIC 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation

Funds (effective from 1 January 2006). • IFRIC 6, Liabilities arising from Participation in a Specific Market – Waste Electrical and Electronic

Equipment (effective from 1 December 2005). IFRIC 4 may be relevant to the Group’s accounts and IFRS 7 require different disclosures. The other changes listed

above are not anticipated to have an effect on the Group’s accounts.

Annual Report 2005


Page 8

2.2 Consolidation principles (a) Subsidiaries The subsidiaries are all entities (including special purpose entities) where the group has controlling interest in the

entity’s financial and operational strategy, usually through ownership of more than half the voting capital. 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 will be consolidated from the date control has been transferred to the group and will be omitted from consolidation when control ends. The purchase method is used for accounting when acquiring subsidiaries. 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 (see Note 2.6). Inter-company transactions, inter-company balances and unrealized profit between group companies have been eliminated. Unrealized loss is eliminated, but considered an impairment indicator of the asset transferred. Accounting principles in subsidiaries are changed where necessary to ensure consistency with the policies adopted by the group.

(b) Transactions with minority interests The group applies a policy of treating transactions with minority interests as transactions with parties external to

the group. In the event of sale of shares in subsidiaries to minority interests, the group’s loss or gain is entered in the accounts. Goodwill arises in the event of purchase of shares in subsidiaries from minority interests. The goodwill will be the difference between the compensation and the share of the book equity of the subsidiary being purchased.

(c) Associates Associates are entities where the group has significant influence, but not control. Significant influence generally

exists for investments where the group has between 20 and 50% of the voting capital. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The group’s share of profit and loss in associates is recognised in the income statement. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment, together with the share of equity changes that are not recognised in the income statement. The group does not recognise the share of any losses if this results in the book value of the investment being negative (including unsecured receivables on the entity), unless the group has undertaken obligations or given guarantees for the associated company’s obligations or made payments on behalf of the associate. Unrealised gains on transactions between the group and its associates are eliminated to the extent of the group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group.

(d) Joint ventures The group’s interests in jointly controlled entities are accounted for using the equity method. The group’s share of

profit and loss is recognised in the profit and loss account. For further description of the equity method, see the above description related to associates.

2.3 Segment information A business segment is a part of the enterprise that supplies services that are subject to risk and return that differs

from other business segments. A geographical segment is a part of the enterprise that supplies services that are subject to risks and returns that are different from segments operating in other economic environments.

2.4 Foreign currency translation (a) Functional and presentation currency The group will change its functional currency from Norwegian kroner (NOK) to US Dollars (USD) from January 1,

2006. Beginning in 2006 the economic circumstances for the group significantly changed with substantially all revenues and a significantly increased proportion of expenses denominated in USD. In addition, material assets are valued and mainly financed in USD. These changes in economic circumstances indicated that the functional currency had changed. DDI group will also change its reporting currency from NOK to USD with effect from January 1, 2006. Accordingly, the financial statements will be reported in USD. Figures in this report are translated from NOK to USD to be comparable to financial reports of 2006. The parent company, Sinvest ASA, also changed functional and reporting currency from January 1, 2006.

Annual Report 2005


Page 9

(b) Transactions and balance sheet items Transactions in foreign currency are translated to the functional currency when using the transaction exchange

rate. Foreign exchange gains and losses that arises during payment of such transactions and when translating cash items (assets and liabilities) in foreign currency at year-end to the exchange rate on the balancing date are entered in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Change in fair value of monetary securities in foreign currency classified as available-for-sale are split into

translation differences due to change in amortized cost of securities and other changes in the book value of securities. Translation differences are recognised in profit or loss, and other changes in carrying amount are recognised in equity.

When assessing the fair value, translation differences for non-monetary items (both assets and liabilities) are

included as part of the profit and loss Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in the fair value reserve in equity.

(c) Group companies The results and financial position for group entities (none with hyper-inflation) with a functional currency different

from the presentation currency are translated as follows:

I. assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet

II. income and expenses for each income statement are translated at average exchange rates

(The transaction rate is used, if the average does not give a fair estimate of the accumulated effects of using the transaction rate)

III. all resulting exchange differences are recognised as a separate component of equity.

During consolidation, the differences when translating net investment in foreign entities, and financial instruments designated as hedging of such investments, are carried directly to equity. When a foreign operation is sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

2.5 Tangible fixed assets Tangible fixed assets are carried at the acquisition cost, less accumulated depreciation. The acquisition cost

includes costs directly associated with acquiring the fixed asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. Other repair and maintenance costs are charged to the income statement in the period in which the cost is incurred. Fixed assets are depreciated on a straight-line basis over the estimated useful life, adjusted for residual values and asset recycling costs. The estimated useful lives are as follows: Machinery and drilling equipment 3-15 years Fixture and office equipment 3-10 years Jack – up rigs 25-30 years The cost of rigs has been categorized separately by its main components, and useful lives have been determined for each component. The primary portion of the rigs is depreciated over 25-30 years, while other components are depreciated over their useful lives, ranging from 5 to 25 years. That part of the rig’s cost which relates to special periodic surveys, which take place every 5 years, is depreciated over the 5 year period. Upgrades on leased assets are capitalised and expensed on a straight line basis over the lease period. The assets’ residual values and useful lives are re-assessed at each balance sheet date and are adjusted if appropriate. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.7). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold, the amounts included in other reserves are transferred to retained earnings.

Annual Report 2005


Page 10

Building contracts Building contracts for rig investments are entered in the balance sheet as work in progress as the installments

are paid to the shipyard. Directly attributable costs, including directly attributable borrowing costs, are also entered in the balance sheet as part of the purchase cost.

2.6 Intangible fixed assets (a) Goodwill Goodwill is the difference between the purchase cost when purchasing the enterprise and the actual value of

the group’s share of the net identifiable assets in the entity on the acquisition date. Goodwill when purchasing subsidiaries is classified as an intangible fixed asset. Goodwill when purchasing a share of associated companies is included in investments in associated companies. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The group allocates goodwill to each business segment in each country in which they operate.

(b) Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to

use the specific software. These costs are amortised over their estimated useful lives (three to five years).

2.7 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation are tested annually for impairment.

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

2.8 Financial assets The group classifies its financial assets in the following categories: at fair value through profit or loss, loans

and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.

(a) Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held for trading, and those designated at fair value

through profit or loss at inception. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date.

(b) Loans and receivables Loans and receivables are non-derivate financial assets with fixed payments that are not sold in an active

market. These are classified as current assets, unless they fall due for payment more than 12 months after the balancing date. If so, they are classified as fixed assets. Loans and receivables are classified as ”trade debtors and other receivables” in the balance sheet (Note 2.11).

(c) Financial assets available for sale Financial assets available for sale are non-derivatives that are either designated in this category or not

classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular purchases and sales of investments are recognised on trade-date – the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss is initially recognised at fair value and transaction costs are expensed in the income statement. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.

Annual Report 2005


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Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category, including interest and dividend income, are presented in the income statement within ‘other (losses)/gains – net’ in the period in which they arise. Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of monetary securities classified as available-for-sale and non-monetary securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as ‘gains and losses from investment securities’. Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement. Dividends on available-for-sale equity instruments are recognised in the income statement when the group’s right to receive payments is established. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little s possible on entity-specific inputs. The group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment testing of trade receivables are described in Note 2.11

2.9 Derivates and hedging Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are

subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The group designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); (2) hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge); or (3) hedges of a net investment in a foreign operation (net investment hedge).

The group documents at the inception of the transaction the relationship between hedging instruments and

hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions. The group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining hedge item is more than 12 months, and as a current asset or liability, if the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.

(a) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the

income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating to the effective portion of interest rate swaps hedging fixed rate borrowings is recognised in the income statement within ‘finance costs’. The gain or loss relating to the ineffective portion is recognised in the income statement within ‘other gains/(losses) – net’. Changes in the fair value of the hedge fixed rate borrowings attributable to interest rate risk are recognised in the income statement within ‘finance costs’.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a

hedge item for which the effective interest method is used is amortised to profit or loss over the period to maturity.

(b) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow

hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within ‘other gains/(losses) – net’.

Annual Report 2005


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Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within ‘finance costs’. The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in the income statement within ‘sales’. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge

accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

(c) Net investments hedge Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or

loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating to the ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in equity are included in the income statement when the foreign operation is disposed of.

(d) Derivates that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative

instruments that do not qualify for hedge accounting are recognised immediately in the income statement within ‘other gains/(losses) – net’.

2.10 Inventories and spare parts Inventories and spare parts are valued at the lower of cost and net realisable value. Cost is determined using

the first-in, first-out (FIFO) method. 2.11 Trade debtors Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using

the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement within ‘selling and marketing costs’.

2.12 Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid

investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

2.13 Share capital and premium Ordinary shares are classified as equity.

Costs associated directly with issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. In the event of purchase of own shares, the payment, including any transaction costs less tax, is carried as a reduction in equity (assigned to the company’s shareholders) until the shares are cancelled, reissued or sold. If own shares are subsequently sold or reissued, the payment, less direct transaction costs and associated tax effect, is entered as an increase in equity assigned to the company’s shareholders.

2.14 Loans Loans are recognised initially at fair value, net of transaction costs incurred. Loans 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 over the period of the borrowings using the effective interest method. In case of establishment of a convertible loan, the fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects.

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On repayment of the convertible loan, the repayment amount (including premium) is divided between equity and liabilities in the same ratio as the initial division of the convertible loan between equity and liabilities. The difference between book debt ratio and allocated debt ratio on repayment is entered as financial costs in the profit and loss account. Loans are classified as short-term debt, unless there is an unconditional right to defer payment of the debt for more than 12 months from the balance sheet date.

2.15 Deferred tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the

tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax, if it is not accounted for, arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss,. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

2.16 Pension obligations, bonus schemes and other employee compensation

schemes The group has a defined contribution plan for employees in the parent company. A defined contribution plan

is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. There are no agreements regarding share-based or performance-based compensation agreements.

2.17 Provisions Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the group

has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is

determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the

obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

2.18 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services

in the ordinary course of the group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the group. Revenue is recognised as follows:

(a) Charter contracts Charter contracts are classified as operating leases under IAS 17. Revenue derived from charter contracts is

recognised in the period over the lease term. Related services are recognised as revenue in accordance with the services being rendered. Certain contracts include mobilisation fees receivable at the start of the contract. In cases where the fee covers specific upgrades or equipment specific to the contract, the mobilisation fee is recognised as revenue, and the related investment is depreciated over the contract period. In cases where the fee covers a general upgrade of a rig or equipment which increases the value the value of the rig or equipment beyond the contract period, the fee is recognised as revenue over the contract period whereas the investment is depreciated over the remaining useful life of the asset. Demurrage is included if a claim is considered probable. Estimated losses arising from charter contracts are provided for in full when they are probable.

(b) Reimbursables Customer “out-of-pocket” expenses are recorded as revenues under a separate accounting line,

‘Reimbursables’. The related direct cost is classifies as an operating expense. Changes in the amount of reimbursables do not have a material effect on the results of operation or cash flows.

Annual Report 2005


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(c) Interest income Interest income is recognised on a time-proportion basis using the effective interest rate method. Interest income

is classified as other gains and losses within operating profit. 2.19 Lease agreements The determination of whether an arrangement is, or contains a lease, is based on the substance of the

arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Financial leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the 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 charged directly financial expenses. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term.

2.20 Dividend Dividends are recognised as a liability in the period in which the dividends are approved by a Shareholder’s

meeting. 2.21 Borrowing costs Borrowing costs incurred during construction of fixed assets and which are directly attributable to the

construction, are capitalised. Other borrowing costs are charged to the income statement. 2.22 Fair value estimation The fair value of financial instruments traded in active markets (such as trading and available-for-sale

securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the group is the current bid price. The nominal value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.

3 Financial risk management 3.1 Element of financial risk The Group’s activities expose it 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 demand for drilling rigs is among others sensitive for changes in energy prices, production level and level of test exploration.

(a) Market risk (i) Foreign exchange risk The value of the Groups investment in drilling rigs is affected by changes in exchange rates, especially USD

which is the currency of the building contracts and also the currency of future income. The Group has also investment in foreign subsidiaries whose net assets are exposed to foreign Currency

translation risk. (ii) Price risk The Group is exposed to price risk in relation to changes in value of rigs and prices on drilling services.. (b) Credit risk The Group has no concentration of credit risk. (c) Liquidity risk The Group is mainly linked to financial requirement of rig-building contracts.

Annual Report 2005


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(d) Floating and fixed-rate risk The Group does not have any material interest-bearing assets. Profit and cash flow from operating activities are

therefore independent from changes in market rate. The Group’s interest rate risk is mainly associated to long-term liabilities. Liabilities with floating interest rate results in a interest rate risk for the Group’s cash flow. Fixed-interest rate exposes the Group to fair value interest rate risk.

3.2 Fair value estimation The nominal value less impairment provision of trade receivables and payables are assumed to approximate their

fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.

4 Critical accounting estimates and judgments Estimates and judgments are evaluated continuously and are based on historical experience and other factors,

including expectations regarding future events that are believed to be reasonable under the circumstances. The group prepares estimates and makes assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates associated with value measurement estimates related to rig operations’ revenue and costs, including depreciation charges, may have a significant effect on the accounts. At year end of 2005, the critical estimates is whether the assets under construction will be finished in time to fulfil future contracts. The company believes that under the current market the fair value of the building contracts are above contracted amounts.

5 Segment information The Group has not any rigs in operation at end of the financial year. As a consequence the Group has not

different segments to report.

6 Fixed assets

Rigs under construction Total

Financial year 2005 Acquisition of subsidiaries 148 339 148 339 Depreciation for the year - - Book value at 31 December 2005 148 339 148 339 As at 31 December 2005 Cost or valuation 148 339 148 339 Accumulated depreciations - - Book value at 31 December 2005 148 339 148 339 Rigs under construction are 6 jack-up rigs under construction by the PPL and Keppel FELS shipyards in

Singapore. One of the rigs belongs to the legal entity Kristiansand Drilling Pte Ltd which is owned 18.18% by DD1 Ltd Pte. Based on an interpretation of a put-call agreement related to the remaining 81.82% of the shares in Kristiansand Drilling, the equity paid in by DD1 Pte Ltd is recognised as a direct rig-investment in the Group. Capitalised costs of purchase are instalments paid to the shipyards with addition of capitalised cost of projects and capitalised financial expenses. Remaining schedule of payments to the shipyards is USD 543 million. There is no depreciation until the rigs are ready for use.

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7 Investment in joint venture

Joint venture The Company owns 50% of Premium Drilling AS. Premium Drilling is a joint venture with Awilco Offshore ASA, and is recognised using the equity method in the Group accounts. The Group has not any commitment to pay further cash into the joint venture. Shares in Premium Drilling AS are owned by the subsidiary PD Holding AS, which is owned by DDI Holding AS. Profit in Premium Drilling AS in the table below shows the entire year, not only the period when DDI Holding AS held the shares. As the entity was acquired ultimo December, no portion of the loss has been recognised in the income statement for 2005.

The Group’s share of profit, assets and liabilities in the joint venture are:

Name Contry of incorporation

Assets Liabilities Goodwill Book value

Revenues Profit/ (loss)

% interest held

2005

Premium Drilling AS Norway 2 223 360 1 122 2 985 – (1 073) 50% 8 Account receivables and other short-term receivables

2005

Account receivables - Less: provision for impairment of receivables - Account receivables - net - Prepayments and accruals 54 Total 54

Fair value of receivables and other short-term receivables are approximately equal to book value.

Credit risk related to account receivables is considered immaterial.

9 Cash and cash equivalents 2005 Cash at bank and on hand 213

10 Share capital

Number of shares Share

capital Share

premium Total A-shares B-shares

Paid-up capital at incorporation 22 September 2005

1 000 - 15 1 16

Issue of share capital 20 475 000 8 775 000 433 173 64 376 497 549

Balance at 31 December 2005 20 476 000 8 775 000 433 188 64 377 497 565

Share classes: All shares have equal rights and restrictions expect of following:

- B-shares have no voting rights - B-shares are entitled to an annual cumulative dividend of 8.5% from what originally was paid-in capital. - A-shares have no dividend rights until dividends in class B are paid. - The company has a redemption right for all or a portion of the B-shares, unless contract obligations that block

the company from paying the total redemption amount, or company law prohibit the redemption. Shareholders shall receive an amount equal to face value at this particular date with an addition to accumulated dividend not received.

- 15 years after the issue of the B-shares, the company is, after written notice from shareholders in class B, obliged to redeem the shares in class B. Shareholders shall receive an amount equal to face value at this particular date with an addition to accumulated dividend not received.

Share options Share options do not exist in the Group.

Annual Report 2005


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11 Trade and other payables 2005

Trade payables 742

Amounts due to Sinvest ASA and subsidiaries (related parties) 1 892

Accrued expenses 6 134

8 768

12 Long-term liabilities

2005 Long-term liabilities Liabilities to financial institutions 16 000 Liabilities to companies in the same group 2 985

18 985

Book value of long-term liabilities is approximately equal to fair value. Interest of the liabilities to financial institutions are 3 m LIBOR + 3% Interest of the liabilities to companies in the same group are 6 m LIBOR + 1,5%

Maturity for Long-term liabilities are as follows: Between 1 and 2 years 16 000 Between 2 and 5 years 2 985

13 Deferred income tax

The rig-owning companies have a total of USD 137.7 in deferred tax assets not recognised in the balance sheet. The reason is the uncertainty of the use of tax losses carried forward. For further information, see note 16 about income taxes.

14 Employee benefits expense and fees 2005

The Group has hired CFO and management for the Deep Drilling investment. There are no employees in the company.

Auditors’ remuneration Statutory Audit * - Other assurance services - Tax advisory fee - Other advisory services 3 Total ** 3 * Includes technical assistance of preparation the financial statements for the

company.

** Fees are included VAT and cover the period from incorporation of DDI Holding AS to year end, which also equals the period the Group has existed.

15 Finance income and costs 2005 Finance costs - interest from liabilities to related-parties (5) (5)

Annual Report 2005


Page 18

16 Income taxes 2005 Tax payable – Deferred tax (note 13) – –

There is no operating situation in the subsidiaries in Singapore. Most of the expenses related to project follow-up and rig investment have been capitalized at rig. For this reason there are no significant tax positions in the subsidiaries. The effective tax rate is therefore 0%.

17 Earnings per share Basic 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.

2005

Profit attributable to equity holders of the Company (11)

Weighted average number of ordinary shares in issue (thousands) 4 664

Basic earnings per share (USD per share) (0.002)

Diluted earnings per share (USD per share) (0.002)

Diluted earning per share 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. Convertible debt is assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense less the tax effect. For share options, a calculation is made in order to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. If income statement shows a loss diluted earnings per share equals basic earnings per share. As at year end 2005, no dilutive instruments exist.

18 Cash generated from operations 2005 Profit for the year (11) Adjustments for:

– Income tax (note 16) - – Depreciation (note 6) -

Changes in working capital (excluding the effects of acquisition and exchange differences on consolidating):

– Trade and other receivables (17) – Trade and other payables 28 Cash generated from operations -

The Group was established at the end of December 2005. Operating activities in associated companies have for that reason no effect on the Group’s cash flow.

19 Contingencies Contingent liabilities

The Group has no contingent liabilities related to bank overdrafts and the like. The Group is not aware of possible liabilities which are not reflected in the financial statements. The Group is not aware of other contingencies.

Annual Report 2005


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20 Commitments Capital commitments Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:: 2005 Jack-up rigs* 543 360 Due within 1 year 298 990 Due between 1 and 5 years 244 370 Due after 5 years – Total 543 360 * The commitments includes the price to exercise the call option of shares in Kristiansand Drilling Pte Ltd,

where the remaining rig financing amounts to USD 21,3 million.

21 Reorganisation leading to the formation of the Group:

The parent company of the group, Sinvest ASA, carried out a reorganisation of its activities in December 2005. The reorganisation included a drop-down of Deep Drilling Investment Pte Ltd (Singapore) to the newly formed wholly owned subsidiary DDI Holding AS (Norway). DDI Holding AS was established with the primary objective to own the shares in DDI Pte Ltd. The transaction is under common control but the principles in IFRS 3 have been elected as policy of the Group. The transaction is therefore accounted for as a reverse acquisition, cf. IFRS 3.21-22. Thus, the carrying amounts in Sinvest ASA were carried over in DDI Holding AS. The fair value of the shares in DDI Holding AS was assessed at USD 498 million. The excess value related to rigs under construction and options to build additionally two rigs. The consideration was all in shares. Due to the carry over basis in the consolidated accounts, the excess value of USD 374 million is charged to retained earnings as the paid in capital is determined at fair value in accordance with Company Law, cf. Consolidated statement of changes in equity on page 5. The transaction is measured at fair value in the statutory separate statements of DDI Holding AS.

In addition DDI Holding AS acquired the subsidiary PD Holding AS from Sinvest, through which the Group holds its 50% investment in Premium Drilling AS. This acquisition was financed by seller’s credit. Fair value equalled predecessor values in Sinvest ASA.

For further information, see the note 2 Investment in subsidiaries, in the separate financial statements of the parent company DDI Holding AS.

22 Related-party transactions

The Group is 100% owned by Sinvest ASA, and all companies in the Sinvest group is regarded as related parties. The majority owner of Sinvest ASA is Skeie Group AS which as at 5 January 2006 owned 35.51 %. The chairman of the board (Bjarne Skeie) controls Skeie Group AS.

The following transactions were carried out with related parties:

Purchases from Sinvest ASA 2005

– Shares in Deep Drilling Invest Pte. Ltd. with consideration in shares 497 549

– Shares in Premium Drilling AS 2 985

For principles used in setting the price, see note 26.

The Group has at 31 December 2005 the following liabilities to related-parties:

– Long-term liability to Sinvest ASA 2 985

– Short-term liability to Sinvest ASA 1 892

Annual Report 2005


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23 Events after the balance sheet date

The Group has exercised its options to have two more jack-up rigs built. The Group therefore now has 8 jack-up rigs in order at year-end.

24 Share capital and shareholder information The share capital of USD 433 187 708 consists of 29 251 000 shares with a face value of NOK 100.00 each. The

share capital consists of A and B shares. These have different rights, see note 10 for further information.

25 Pro forma information

January 1 – December 31

2005 2004

Revenues 5 1

Operating profit/(loss) (1 871) (137)

26 Business combinations

In the process of restructuring Sinvest Group, DDI Holding AS acquired 100% of the shares in both Deep

Drilling Invest Pte Ltd and PD Holding AS from its parent company Sinvest ASA. The transactions took place on 21 December 2005. DDI Holding AS issued 29 250 000 as settlement to Sinvest ASA for the shares. The purchase price of the shares was USD 498 million, where 495 million was related to the purchase of DDI Pte. Ltd. and 3 million to the purchase of PD Holding AS. The transaction costs were covered by the seller. The value of DDI Pte Ltd was based on the board of directors own assessment of the value of the shares. The assessment was based on two independent principles. One was based on the stock value of Sinvest ASA. The other was based on assessments from the independent broker Fernley Offshore AS, and also an Offer from one larger operator in the rig market. Total price was based on an overall estimation of the share value of DDI Pte Ltd.

DDI Pte. Ltd. and its subsidiaries’ activity are related to construction of Jack-up drilling rigs. None of the rigs are available for drilling until 2006. PD Holding AS owns 50% of Premium Drilling AS which is a joint venture with Awilco Offshore ASA. Premium Drilling is a drilling contractor with offices in USA, Singapore, Malaysia, and Brunei. Additional information about the structure of the Group is given in note 2 in the annual report of DDI Holding AS.

Details of net assets acquired are as follows: DDI Group PD Holding AS Fair

value Book value of acquired

company

Fair value

Book value of acquired

company Cash and cash equivalents 181 181 18 18 Fixed assets 522 055 148 339 - - Investment in joint venture - - 2 985 2 985 Receivables 54 54 - - Short-term liabilities (8 740) (8 740) (7) (7) Long-term liabilities (16 000) (16 000) (2 985) (2 985) Net assets 497 550 123 834 11 11


43

APPENDIX II Auditor’s report to Annual report DDI Holding Group

AS 2005

PricewaterhouseCoopers AS Postboks 447 NO-4664 Kristiansand Telefon 02316 Telefaks 23 16 10 00

Kontorer: Arendal Bergen Drammen Fredrikstad Førde Hamar Kristiansand Mo i Rana Molde Måløy Narvik Oslo Stavanger Stryn Tromsø Trondheim Tønsberg Ålesund

PricewaterhouseCoopers navnet refererer til individuelle medlemsfirmaer tilknyttet den verdensomspennende PricewaterhouseCoopers organisasjonen

Medlemmer av Den norske Revisorforening | Foretaksregisteret: NO 987 009 713

www.pwc.no

AUDITOR'S REPORT TO THE SHAREHOLDERS OF DDI HOLDING GROUP We have audited the annual financial statements of DDI Holding Group as of 31 December 2005, showing a loss of USD 11.000 for the group. The annual financial statements comprise the financial statements of the group. The financial statements of the group comprise the balance sheet, the statement of income and cash flow, the statement of changes in equity and the accompanying notes. IFRSs as adopted by the EU have been applied in the preparation of the financial statements of the group. The financial statements are the responsibility of the Company’s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on other information according to the requirements of the Norwegian Act of Auditing and Auditors. We conducted our audit in accordance with laws, regulations and auditing standards and practices generally accepted in Norway, including standards on auditing adopted by the Norwegian Institute of Public Accountants. These auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the schedule. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements of the group have been prepared in accordance with the law and regulations and give a true and fair view of the financial position of the group as of December 31, 2005, and the results of its operations and cash flows and the changes in equity for the year then ended, in accordance with IFRSs as adopted by EU. Kristiansand, 31 January 2007 PricewaterhouseCoopers AS Torstein S Robstad Statsautorisert revisor


44

APPENDIX III 2Q Report DDI Group 2006


45

APPENDIX IV Annual report DDI Holding AS 2005


46

DDI Holding AS Gyldenløvesgt. 2B

P.O. Box 728, 4666 Kristiansand N-4611 Kristiansand

Norway Tel: + 47 38 04 19 40 Fax: + 47 38 04 19 41

www.sinvest.no

Pareto Securities ASA Dronning Maudsgt. 3, 0114 Oslo P.O. Box 1411 Vika, 0115 Oslo

N-0114 Oslo Norway

Tel: + 47 22 87 87 00 Fax: + 47 22 87 87 10

www.pareto.no

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