Shipping activities yielded NOK 7.8 mill in Q2 2012 compared to NOK 11 mill during the same period in 2011. First half of 2012 yielded NOK 18.9 mill, which is in line with same period in 2011. The result from the ship-owning companies (equity method) for first half of 2012 was NOK 17.7 mill compared to NOK 12.8 mill in same period 2011. The result before tax for first half of 2012 was NOK 16.1 mill compared to NOK 10 mill for same period in 2011. The securities portfolio had a loss of NOK -2.8 mill, compared to a loss of NOK -7.7 mill for same period in 2011.

Introduction
The first part of the second quarter of 2012 was characterized by continued low LPG exports from the Middle East, with resulting low rates for the VLGC segment. The ethylene segment was negatively impacted by reduced export volumes from the Middle East to Asia and Europe. However, the second quarter has shown an overall positive trend from first quarter's low activity level for VLGC and uncertainty in the Ethylene market, to very high LPG export volumes and significant improvement in VLGC rates from May until the current level. Ethylene market showed signs of improvement in the beginning of the second quarter, but any real improvement in volumes and rates are first seen in the third quarter.

The first half of 2012 finished on a positive note, where the outlook for fully-refrigerated LPG ships remain positive, and third quarter continued the upward trend started in second quarter.

On time charter basis Solvang's share of freight earnings for second quarter 2012 were NOK 43.8 mill compared to NOK 39.2 mill for same period in 2011, an increase of 11,7%. For the first half of 2012 freight earnings were NOK 90 mill, compared to NOK 82.9 mill same period in 2011. The Baltic Index, which climbed considerably during the second quarter, has increased from an average of around USD 46.5/ton in second quarter 2011 to an average of around USD 63/ton in second quarter 2012. The average rate / ton for the first half of 2012 was USD 56.3/ton, compared to USD 45.1/ton for same period in 2011.

A continued low USD/NOK exchange rate together with high bunker prices had negative impact on the results.

VLGC 82k-84k cbm
The Solvang Group has one 82k cbm VLGC ship, which is on time charter until August 2016 on a market based hire. The group has two additional VLGCs ordered at HHI Korea with delivery in the third and fourth quarter of 2013.

The LPG export volume out of the Arabian Gulf is a central driver for this market, and export volumes remained low in the first quarter until the end of April 2012. Main reasons are production delays and maintenance shutdown at some of the larger export facilities. Towards the end of April most of this is resolved and freight rates strengthens considerably on increased export volumes out of the Arabian Gulf, predominantly from Saudi Arabia, but with the addition of strong export growth from Qatar, UAE, Kuwait and Bahrain.

Panamax VLGC 75k cbm
The Solvang Group has one Panamax VLGC on long term time charter and one in the spot market. As a result of the weaker VLGC market in first and beginning of second quarter, the rates for Panamax VLGCs have similarly been under pressure. However, the one VLGC operating in the spot market has successfully utilized the Panamax size feature, and have been able to differentiate from other VLGCs and traded with a solid premium compared to the market.  

LGC 60k cbm
As previously reported the market for ships in the LGC segment has had a positive trend over the recent years. Earnings are 55% higher on time charter basis during second quarter 2012 compared to same period in 2011. Particularly the market in the West has been the centre of attention with arbitrage opportunities from USA to Europe. As such, several time charters have been available in the market at strong terms, and the segment is now very tight in terms of supply and demand. The segment has as such a positive outlook for 2012 and into 2013. 

Ethylene 12-17k cbm
The weak ethylene freight market from the first quarter, mainly from production issues and maintenance shutdown at facilities of our COA customers, continued into the second quarter, which was characterized by a very quiet spot market. The third quarter, however, has picked up considerably with high export volumes from our COA customers, as well as in the spot market, where other ethylene exporters have increased production to compensate for lost volume from Iran. The outlook for 2012 is still significantly lower than in 2011 but still more positive than the indications given in the beginning of 2012. In the longer term, there is some concern over the high newbuilding order book within the ethylene segment.

Financial Risk
The Solvang group's investments in ships, which are owned through participation in ship owning companies with joint responsibility, are all USD based, and the group's revenue is all USD based. The group's risk in currency exposure is as such limited.

The Solvang group's security portfolio has a book value of NOK 71.8 mill as per 30.06.2012. Solvang is responsible for the management of the portfolio, with a conservative investment strategy. The stock market dropped considerably towards the end of second quarter, and led to a negative value adjustment for the first half of 2012. 

  
Subsequent events
In July 2012 Solvang and partners have done a sale/leaseback transaction on "Clipper  Harald" where the ship has been sold and chartered back on a 10 year bareboat charter. The sale gives an accounting profit of NOK 2.2 mill, and has a liquidity effect of NOK 26.5 mill for Solvang Group. The profit will be booked in the 3rd quarter
2012.  Solvang had a 20 % ownership share in the ship, and has also a 20 % ownership share in the company which has the ship on bareboat.

General
There have been no incidents with a particular impact on the financial accounts during the period.

Transactions with related parties are as per the guidelines set within the code. The Group's principal broker for sale & purchase is Inge Steensland AS. There are also parallel investments done with other companies within Steensland group. All transactions are done at market terms.

The Solvang Group will have three scheduled classification dockings in 2012.