ANNUALREPORT2008

2

Contents

Danish Ship Finance at a Glance 4

Key Figures 5

Activities During the Year 6

Profit and Loss Account and Balance Sheet 8

Outlook 9

Organisation and Management 10

Regulation 12

Risk Management and Capital Adequacy 14

Credit Risks 16

Financial Risks 22

Operational Risks 24

Bonds 25

Statement by the Management Board and the Board of Directors w w 26

Independent Auditors’ Report 27

Directorships 29

Accounting Policies 30

Profit and Loss Account 34

Balance Sheet 35

Statement of Changes in Capital and Reserves 36

Notes 38

• Danish Ship Finance is a ship finance institute,whichusesasimpleandeffectivebusinessmodelforfinancing ships against afirstmortgage.The com-pany is supervisedby theDanishFinancial Super-visoryAuthority.

• Danish Ship Finance provides financing for Dan-ish shipowners and for selected non-Danish ship-owners.

• Danish Ship Finance must comply with a balanceprinciple, which ensures that its loans are fundedthroughbond issuancethroughout thematurity.Tothat end, the companyhas secured sufficient fund-ingtofinancetheexistingportfolioofloansandloanoffersuntil2020withouthavingtoissuenewbonds.Future lending activitieswill require new bond is-sues.

• Since2007,DanishShipFinancehashadtheopport-unity to issuecoveredbonds.Thisopportunityhasnotyetbeenutilised.

• In2003,DanishShipFinanceacquiredtheexclusiveright toofferCIRRloansforvesselscontractedbe-foretheendof2012andbuiltinDenmarkuntiltheendof2015.

• BondsissuedbyDanishShipFinanceupholdanAa3ratingbyMoody’sInvestorsService.Thecompany’sIssuerRatingisalsoAa3.

• At31December2008,DanishShipFinancehadloansofDKK51.0billion,totalassetsofDKK81.6billionand capital and reserves ofDKK8.9 billion beforedividends.Thecompanyhas64employees.

• TheprofitaftertaxfortheyearwasDKK37.0mil-lion.Theprofitisconsideredacceptableinayearofunrestinthefinancialandmaritimemarkets.

• DanishShipFinancehasasolvencyratioof13.0%afterproposeddividends.Thecompany’scorecapi-tal(Tier1)ratioisalso13.0%.

DanishShipFinanceataGlance

4

2008 2008 2007 2006 2005 2004

Net interest income from lending operations 48 256 174 174 161 182

Net interest income from financing operations 89 470 443 411 369 411

Total net interest income 137 726 617 585 530 593

Net interest and fee income 151 796 659 630 568 615

Market value adjustment (72) (378) (160) (123) (148) (23)

Staff costs and administrative expenses (17) (92) (86) (80) (80) (74)

Losses and writedowns on debtors (38) (200) 104 176 56 772

Net profit before tax 24 128 519 606 399 1,293

Profit for the year 7 37 394 443 286 907

Loans 9,658 51,044 42,690 37,746 37,200 35,445

Due from credit institutions 284 1,503 10,550 6,150 1,591 2,734

Bonds 5,081 26,851 21,394 16,893 22,334 20,021

Capital and reserves 1,680 8,879 9,177 9,158 8,966 9,486

Total assets 15,446 81,632 76,660 62,542 62,534 59,907

Solvency ratio *) 13.0 13.0 15.3 17.9 18.6 22.2

Return on equity 0.4 0.4 4.3 5.0 3.3 10.4

Returnonequityiscalculatedastheprofitfortheyearasapercentageoftheaveragecapitalandreservesfortheyear.Theguaranteecapital,whichamountedtoDKK300millionuntil12July2005,wasnotpaidupandisthereforenotincludedinthecalcula-tionofaveragecapitalandreservesforuseincalculatingreturnonequity.

*)Thesolvencyratiofor2004wascalculatedinaccordancewiththeexecutiveorderonDanishShipFinance(DanmarksSkibskreditfond),whichwasinforceuntil1July2006.

AspartoftheconversionofDanmarksSkibskreditfondtoDanmarksSkibskreditA/Sin 2005, a total of DKK 1,610 million was repaid to the Danish government andDanmarksNationalbank.Therepaymentaffectedthecapitalandreservesrecognisedat31December2005.Thecomparativefiguresfor2004havenotbeenrestated.

KeyFiguresDanishShipFinance

(DanmarksSkibskreditfond)

DKKmillion

DanishShipFinanceA/S(DanmarksSkibskreditA/S)

DKKmillionUSDmillion

5

2008 was a year of many challenges. This applies to the financial sector as well as to large parts of the maritime sector. In light of this, Danish Ship Finance had an acceptable year in 2008.

The company recorded a continuing positive trend inlending operations before writedowns. However, theglobaleconomiccrisishashadadirect impactonde-mandforseatransport.Slowingeconomicgrowthandin certain countries outright recession combinedwiththe delivery of many new vessels from the shipyardshavetriggeredaglobaldeclineinfreightratesandshipprices.Thedeclineinratesandpriceswasparticularlystrong in thedrybulkandcontainersegments,whereratesdeclinedatanunprecedentedpacetoverylowlev-els.Thisaffectedsomeofthecompany’scustomersandis the reason for the increase in thecompany’swrite-downs.Thecompanydidnotrecordlossesonloansin2008.

Danish Ship Finance has retained a consistent andprudentcreditpolicyduringtheeconomicboomofthepast fewyears.A very large number of loan requestshavebeenrejectedbecausetheyfailedtocomplywiththe company’s requirements for factors such as loan-to-value ratio, financial standing of the borrower oremploymentofthevessel.DanishShipFinancehasfo-

ActivitiesDuringtheYear

cusedoncustomerswhoareassessedtoberesilienttoaneconomicdownturn, forexamplebymaintainingaportfolioofvesselsacquiredoveranumberofyearsandatreasonableaverageprices.Eveninviewofrecenteco-nomicdevelopments, the companygenerally retainsasatisfactorycreditqualityinitsportfolioofoutstandingloanoffersanddisbursedloans.

Thecompanyhassufferedlossesonitssecuritiesport-folio due to the financial crisis.The spread betweenmortgagebondsandgovernmentbondswidenedinthecourseof2008.Asmostofthesecuritiesportfolioisin-vestedinDanishmortgagebonds,thecompanyhasnotbeenabletogeneratethesamereturnasthatachievedby similar investments in Danish government bonds.Thecompanyalsoincurredlossesonitsequityinvest-ments owing to thehistorical decline in global equityindicesin2008.

LoandisbursementsamountedtoDKK12.9billion,anincreaseofDKK1.1billionrelativeto2007.Newlend-ingisdistributedonDanishaswellasforeignshipown-ersandwasachievedthroughloanstonewcustomersandanincreaseinlendingtoanumberofexistingcus-tomers.

In2008,DanishShipFinance’scustomersacceptedloanoffersintheamountofDKK15.1billion.Theloanswill

6

bedisbursedduringtheperiod2008-2012.Shipownersfully or partly controlled byDanish interests accountforalittleover54%ofacceptedloanoffers.Theremain-ing46%areofferstoalargegroupofshipownersdomi-ciledoutsideDenmark,whichisconsistentwithDanishShipFinance'spolicyofactiveriskdiversification.Loanofferstoforeignshipownerswerealmostevenlydistrib-utedbygeographicareas,with thehighestnumberofacceptedoffersbeingacceptedbyUS,GreekandGer-manshipowners.

Theshippingmarkets

Thecontainermarketstruggledwithexcesscapacityin2008.As a result of this,many shipownershad to layuptonnage,andfreightratesandshippricesdeclinedthroughouttheyear.

Thetankermarketwasmarkedbytheprospectofaglo-baleconomicdownturn.Freightratesstayedathighlev-elsin2008,butshippriceshavestartedtocomedown.

Thedrybulkcarriersenjoyedagoodfirsthalfin2008characterisedbyhighratesandstrongdemand.Thesup-plyoftonnageroseinthesecondhalfoftheyear,anddemandwasdown, causinga sharpdecline in freightratesandshipprices.

Forthethirdyearrunning,demandforoffshoresupply

vessels remained strong. In spite of consistently highfreightrates,shippricesfellduringthelastfewmonthsoftheyear,partlybecauseofalargeorderbook,partlybecauseofmuchloweroilprices.

ThemostrecentShippingMarketReview,whichisavail-ablefromthewebsitewww.shipfinance.dk,providesanin-depthdescriptionoftheshippingmarkets.

Bondissuance

Theneedforissuingnewbondsin2008wasrelativelysmallfollowingtheissuanceinthesecondhalfof2007ofsufficientvolumestocoveralldisbursementsintheexistingportfolioof loanoffers. In2008, thecompanyissuedbondsworthDKK5.5billion,ofwhichDKK1.7billionwasissuedinDKKwithanaveragematurityofjustunder4.5years.TothisshouldbeaddedissuanceofbondsundertheCIRRloanschemeinforeigncurrencyforDKK3.8billionwithamaturityof12years.Giventheunstablemarketinwhichthebondswereissued,thetermsforraisingnewfundingweresatisfactory.

7

150

125

100

75

50

25

0

300

250

200

150

100

50

0

12-2

00

3

12-2

00

3

06

-20

03

06

-20

03

06

-20

04

06

-20

04

12-2

00

4

12-2

00

4

06

-20

05

06

-20

05

12-2

00

5

12-2

00

5

06

-20

06

06

-20

06

12-2

00

6

12-2

00

6

06

-20

07

06

-20

07

12-2

00

7

12-2

00

7

06

-20

08

06

-20

08

12-2

00

8

12-2

00

8

millionUSD

millionNOK

Shipvaluesbysegment

Dry bulk: Capesize, 170,000 DWT, 5 year old

Container: Post-Panamax, 6,600 teu, 5 year old

Tanker: VLCC, 300,000 DWT, 5 year old Offshore: AHTS, 12,240 BHP, 5 year old

Source: Clakson, Platou, Danish Ship Finance

Profitfortheyear

TheprofitfortheyearaftertaxamountedtoDKK37.0millioncomparedwithDKK394.4millionin2007.

NetinterestandfeeincomerosefromDKK658.6mil-lionin2007toDKK795.5millionin2008,ofwhichnetinterestandfeeincomefromlendingoperationsrecord-edanincreaseofDKK94.3milliontoDKK308.1mil-lion in2008,up fromDKK213.8million in2007.Dueto developments inmarket interest rates, net interestincome from financing operations rose by DKK 27.9millionfromDKK442.6millionin2007toDKK470.5millionin2008.

Marketvalueadjustmentsofsecuritiesandforeignex-changeamountedtoalossofDKK377.8millioncom-pared with a loss of DKK 160.0million in 2007. Thesecurities portfolio consists primarily of Danish gov-ernmentbondsandmortgagebondsorbondsofasimi-larsecurityandafewminorequityinterests.Thereturnonequityinvestments(unittrustcertificates)amountedtoalossofDKK232.8millionagainstaprofitofDKK28.3millionin2007.

Staff costs and administrative expenses amounted toDKK91.9millionin2008,againstDKK85.9millionin2007,anincreaseofjustunder7%.Lossesandwritedownsondebtorsamountedtoanetex-penseofDKK199.7millioncomparedwithanetincomeofDKK103.7millionin2007.WritedownsincreasedfromDKK730.8millionin2007toDKK932.4millionin2008,andattheendoftheyearmadeup1.9%oftotallending,whichisinlinewithlastyear’spercentage.Movementsinwritedownsin2008andwritedownsbrokendownbycountriesarespecifiedinnote12totheaccounts.

TaxfortheyearamountedtoDKK91.3millionagainstDKK124.1millionin2007.For2008,thisequalsanef-fectivetaxrateof71.2%,whichisduetothefact thatthenegativereturnonequityinvestmentsin2008isnotincludedinthetaxableincome.

Total assets increased to DKK 81,631.6 million fromDKK76,659.9millionat31December2007.

Lending, calculated at hedged values, rose by DKK8,515.5millionbeforewritedowns fromDKK43,420.5millionin2007toDKK51,936.0millionin2008,anin-creaseof19.6%.Overthecourseoftheyear,therewas

a net increase in new loans ofDKK 12,897.2million,againstanincreasein2007ofDKK11,760.3million.Forfurtherdetailsonmovementsinlending,seenote10totheaccounts.

ThebondportfoliorosefromDKK21,394.4million in2007toDKK26,851.2millionat31December2008.Theincreasecomparedwith2007wasprimarilyduetoanincreaseintheproportionoftheloansgranted,butstillnotdisbursed,whichisinvestedinshort-termbondsun-tiltheloansaredisbursed.Thebondportfolioisspeci-fiedinnotes13and14totheaccounts.

Issuedbondsamounted toDKK62,519.8millionat31December2008comparedwithDKK64,962.3millionatyear-end2007.Asaresultofstrong liquidityresourc-es, in 2008 newbonds issued amounted to onlyDKK5,524.2 million, as compared with issuance of DKK24,021.3 million in 2007. Movements in issued bondsandaspecificationofbondtypesaresetoutinnote19totheaccounts.Includingtheprofitfortheyear,thecompany’scapitalandreservesamountedtoDKK8,879.1millionascom-paredwithDKK9,177.2millionat31December2007.DividendsofDKK5.6millionhavebeenproposed forthefinancialyear.Theproposeddividendisincludedincapitalandreservesbutisexpectedtobedisbursedaftertheapprovalbytheshareholdersattheannualgeneralmeeting inApril 2009, and the amount has thereforebeendeducted incapitalandreserves in thesolvencycalculationbelow.

Thesolvencyratiostoodat13.0%at31December2008,ascomparedwiththeminimumrequirementof10%asstipulatedintheexecutiveorderonashipfinanceinsti-tute.Asfrom1January2009,therequirementisloweredto8%.Usingthesamecalculationmethod,thesolvencyratiostoodat15.3%at31December2007.Thedeclin-ingsolvencyratioduringtheyear isespeciallyduetothe increase in the loanportfolio (weightedassetsnotincludedinthetradingportfolio)andthefactthatitemsinvolvingoperationalrisksareincludedinthecalcula-tionofthesolvencyratioasfrom2008.Note23providesaspecificationofthecompany’ssolvency.

No events have occurred after thebalance sheet datethathaveamaterialeffectonthecompany’sannualac-counts.

ProfitandLossAccountandBalanceSheet

8

Duetotheeconomicdownturnandthecontinuingtur-moilinthefinancialmarkets,thecompanyexpectsanincreaseinthenumberofloansinvolvingahigherriskof default in 2009, and itmay prove necessary to in-creasethecompany’swritedowns.Asinpreviousyears,pricedevelopmentsinthesecuri-ties portfoliowill also affect the company’sfinancialperformance.

Likeothercredit institutions,DanishShipFinance iscovered by the Danish parliament’s credit package,whichisoftenreferredtoasSecondBankPackage.Itremains to be decidedwhether the companywill ex-ploit thepossibilities foracapital injection fromSec-ondBankPackage.Regardlessof thepossibilitiesof-feredbySecondBankPackage,DanishShipFinancewillpursuenormalandselectiveloanofferactivities.From1January2009,DanishShipFinanceiscoveredbytheexecutiveorderonfinancialreportinginfinan-cialinstitutions.Onthesamedate,thecompany'snewexecutiveorderentersintoforce,andtherulesonau-ditcommitteesandobligationstoreportoncorporatesocialresponsibilitywilltakeeffect.DetailsaboutthenewrulesareprovidedinRegulation.

Danish Ship Finance has resolved to continue recentyears’policyofnot issuingquarterlyreports in2009.The company currently publishes full-year and half-yearreports. It isbelievedthatmorefrequentreportswouldnotaffectthepricingofthebondsissued.

Outlook

Shippinghasalwaysbeenacyclicalindustryinwhichfluctuations in supply and demand for vessels are anaturalcomponent.Atthemoment,theoutlookischar-acterisedbyaverylargeorderbookandmanydeliver-iesofnewvesselsfromtheshipyards,whilstdemandisslowingdownduetotheglobaleconomiccrisis.

Tosomeextent,theindustrywillcontributetoreducingsupplybyincreasingtheproportionofvesselsthatarescrapped.Duringthepastfewmonths,therehasbeena sharp increase in scrapping activity. At the sametime,theslowingdemandhastriggeredrenegotiationsofmanyshipbuildingcontractsalreadysignedwithaviewtocancellingsuchcontractsorpostponingthede-liverydate. In the short term,however, these supply-reducingmeasures are unlikely to suffice to balanceouttheslowingdemand.

Itisstilltooearlytodeterminewhatconsequencestheglobaleconomiccrisiswillhavefortheshippingmar-kets.Sofar,especiallythedrybulkandcontainermar-ketshaveexperiencedunusualfluctuations.Theothersegments are expected to be affected to some extentas well. Many countries have taken steps to restoregrowth,butitremainstobeseenwhensuchmeasureswillhaveafavourableimpactondemandforseatrans-port.

Although theoutlook for thevarious segments isnotunequivocal, the shipping markets are generally ex-pectedtofaceaverychallengingyear.

Sofar,thechallengesfacedbythefinancialsectorhaveresultedindemandforfundingexceedingsupply.Theresultisasharpincreaseincreditmargins.Inspiteofthe heavy demand, Danish Ship Finance will retainits cautious lending policy and continue to focus onshipownerswhoare considered tohave thebest pre-conditionsformakingitthroughthecurrenteconomicdownturn.

Basedonthevolumeofloanoffersalreadymadeandaccepted, lending in 2009 is expected to remain un-changedortobeslightlyhigher, inUSD-terms.At31December 2008, 87% of lendingwas denominated inUSD.Earnings from lendingoperationsbeforewrite-downs, also measured in USD, are expected to rise.MovementsintheexchangerateoftheUSDwillaffectthesizeoflendingandearningsinDKK-terms.

9

ObjectiveandVisionTheobjectiveofDanishShipFinanceistoprovideshipfinancing inDenmark. Inaddition, thecompanypro-vides ship financing in the international market, solongas suchactivities donot unnecessarily limit thecompany’sDanishoperations.

DanishShipFinanceprovidesshort-termandlong-termloancapitalforshipownersinallstagesoftheshippingcycle and it endeavours to be a competent and trust-worthybusinesspartnertoitscustomersandfinancialcounterpartiesaswellasotherstakeholders.

DanishShipFinanceaimstoobtainsatisfactoryfinan-cial results for its owners and is therefore dedicatedtocreatingvalue,whichissecuredthroughcontrolledgrowthinlendingwhilefocusingonhighcreditqualityandappropriatediversificationintheloanportfolio.

DanishShipFinanceismanagedonthebasisofthefol-lowingvision:

Danish Ship Finance is the leading provider of ship fi-nancing in Denmark and is to be regarded by the inter-national market players as one of the five most recog-nised and leading lenders by 2010.

ShareholdersinDanishShipFinance

Thecompany'sambitionistogenerateareturnthatissatisfactorytoitsshareholders.TheBoardofDirectorscontinuallyassesseswhetherthecompany’sshareandcapitalstructureconsistentlycomplywiththeinterestsoftheshareholdersandthecompany.TheBoardofDi-rectorsbelieves that thecompanyhasanappropriateshareandcapitalstructuregivenitslevelofactivity.

The share capital of the company amounts to DKK333.3 million, nominal value, and is divided into A

shareswithanominalvalueofDKK300.0millionandBshareswithanominalvalueofDKK33.3million.Thesharesarenotlistedfortradinginaregulatedmarket.

Theshareholdershavesignedashareholders’agreementthatincludesaprovisiontotheeffectthatthesharesshallnotbefreelynegotiableuntil12July2010.However,theprovisionallowsfortradingintheshareswithinthecor-porategroupofeachindividualshareholder.

The shares in Danish Ship Finance are distributedamongthefollowingshareholdergroups:

Banks 40.5%Danmarks Nationalbank 18.9%Shipyards 14.8%Shipowners 11.7%Den Danske Maritime Fond 10.0%Insurance companies 4.1%

The following of the company’s shareholders hold atleast5%ofthetotalvotingrightsorownatleast5%ofthesharecapital.Theshareholdersarelistedalphabeti-cally:

A.P. Møller-Mærsk A/SDanmarks NationalbankDanske Bank A/SDen Danske Maritime FondNordea Bank AB (publ.)Odense Staalskibsværft A/S

At the annual generalmeeting in 2008, theBoard ofDirectors’ proposal on dividends was adopted. Ac-cordingly,DKK0.92persharewaspaidtoholdersofAshares,andDKK1.7748persharewaspaidtoholdersofBshares.Sinceitsconversion,thecompanyhaspaidtotal dividends of DKK 168.4million to the B share-

OrganisationandManagement

10

PursuanttoDanishlegislation,threeemployeerepre-sentativesareelectedfortermsoffouryears.Aftertheannualgeneralmeetingheldon24April2008,ErlingGarrelts,ChiefAccountantandHeadofStaffAdmin-istration,LisbethNavntoftPedersen,AssistantRelation-ship Manager, and Henrik Rohde Søgaard, SeniorRelationshipManager,wereelectedtotheBoardofDi-rectors.

The Board of Directors subsequently elected PerSkovhusasitsnewchairmanandJensThomsenasitsnewdeputychairman.

Management Board: Bo Jagd, Managing Director,steppeddownfromhispositionasmanagingdirectorinApril2008inordertoretirebytheendoftheyear.

ThecompanyappointedtwonewmemberstotheMan-agementBoard;ErikI.Lassenwasappointedaschiefexecutiveofficer,andPerSchnackwasappointedexec-utivevicepresidentandchieffinancialofficerinchargeoftreasury,finance,IT,humanresourcesandotherad-ministrativefunctions.

Management remuneration: The company does nothaveawrittenremunerationpolicy.Theunwrittenre-muneration policy reflects shareholder and companyinterests. The remuneration policy is adapted to thecompany’s specific circumstances, is reasonable rela-tive to thedutiesandresponsibilitiesundertakenandpromoteslong-termbehaviour.

Boardmemberselectedbytheemployeesmaybecom-prisedbyabonusscheme.Thebonusschemesarenotunusualrelativetotherestofthefinancialsector.

Nounusual severanceschemesexist for themanage-ment.

holder,DenDanskeMaritimeFond.ThefundsareusedtodevelopandpromoteDanishshippingandtheDan-ishshipbuildingindustry.

Management

The management structure in Danish Ship FinancereflectstheoveralllegalrequirementsandthespecialstatutoryrequirementsthatfollowfromDanishfinan-ciallegislation.

Additional information about corporate governance inDanishShipFinanceisprovidedonwww.shipfinance.dk.

Managementstructure:ThegeneralmeetingelectssixmemberstotheBoardofDirectors,andtheemployeeselectthree.TheBoardofDirectorsdefinestheoverallprinciplesforthecompany’soperations.TheBoardofDirectorsappointstheManagementBoard,whichisinchargeofthesenior,day-to-daymanagement,andre-portstotheBoardofDirectors.

Annualgeneralmeeting:Thegeneralmeeting shallbethe supreme authority in all company matters. Theshare capital is divided intoAandB shares.EachAshareofDKK1carriestenvotes,andeachBshareofDKK1carriesonevote.Otherthanthis,therearenoprovisionsthatrestrictthenumberofvotesorlimitthenumberofsharesheldbyeachindividualshareholder.

The next annual general meeting will be held on 16April2009.

BoardofDirectors:Attheannualgeneralmeetingheldon 24 April 2008, Peter Schütze, the chairman, andPeterFalkenhamresignedfromtheBoardofDirectors.Michael Rasmussen and Torben Schelde Jørgensenwereelectedasnewboardmembers.

11

Danish Ship Finance is governed by a specific act and executive order (the “Executive Order”). Pur-suant to the Executive Order, the company is gov-erned by parts of the Danish Financial Business Act. In addition, the company is governed by parts of common rules for financial enterprises. The full wording of the act and the Executive Order is pro-vided on www.shipfinance.dk.

In addition to the rules that govern Danish Ship Finance, the company is governed by a set of rules that comply with the provisions of the Danish Pub-lic Companies Act. The company’s in-house activi-ties are also governed by a set of policies that may be more restrictive than the external regulation. These policies have been adopted by the Board of Directors.

Newrulesin2009

Thecompany’snewexecutiveorder:Thenewexecutiveorderonashipfinanceinstitutetookeffecton1Janu-ary2009.Pursuanttotheexecutiveorder,thesolvencyrequirementisloweredfrom10%to8%,whichisinlinewiththegeneralsolvencyrequirementforotherfinan-cialenterprises.

Theexecutiveorderalsocontainsrulesontheissuanceof coveredbonds.Coveredbondsmust be issued in acapitalcentre,andtheexecutiveordercontainsspecificrulestothateffect.

IFRS:Asfrom1January2009,DanishShipFinancewillbepresenting itsaccountsaccordingtotheDanishFi-nancialSupervisoryAuthority’sexecutiveorderonac-counting.ThisorderbuildsoncomponentsoftheInter-national Financial Reporting Standards (IFRS). Likeother financial enterprises, the company will thus becomprisedbytheIFRSrules.

Auditcommittee:Thenewrulesonauditcommitteeswillhaveaneffectaftertheannualgeneralmeetingin2009.TheprimaryroleoftheauditcommitteeistoassisttheBoardofDirectorsinmeetingitsobligationstoensurean independent and objectivemonitoring of the com-pany.Themembersoftheauditcommitteehavenotyetbeenappointed,butthecompanyisconsideringtoletallthemembersoftheBoardofDirectorshandlethecom-mittee’sfunction.

CorporateSocialResponsibility:As from theannual re-port for 2009, Danish Ship Finance will be under anobligationtoreportonthecompany’sCorporateSocialResponsibility(CSR)policy.Thecompanyhasstartedtoprovide CSR information onwww.shipfinance.dk andwillregularlydevelopandimprovethepolicy.

Regulation

12

1313

Risk management is given high priority at Dan-ish Ship Finance, because uncontrolled develop-ment of the various risks may have an adverse im-pact on financial performance and solvency and, by extension, materially weaken future business opportunities.

The company is exposed to several types of risk. The company's risk management efforts are ad-justed according to the special characteristics of each type of risk. The company distinguishes be-tween credit risks, financial risks and operational risks, which are considered the most important types of risk.

Riskmanagement

The Board of Directors has the overall responsibilityforensuringappropriateriskmanagementprocedures.Riskmanagementeffortsaredeterminedbytheguide-linesestablishedbytheBoardofDirectorsandthelegis-lativeframework.

Thecompanyisgovernedbyitsownregulation.Pursu-anttotheExecutiveOrder,thecompanyisgovernedbyparts of theDanish Financial BusinessAct.The com-panyisalsogovernedbytheExecutiveOrderonbondissuance, the balance principle and riskmanagement,and,likeotherfinancialenterprises,itissupervisedbytheDanishFinancialSupervisoryAuthority.

Thelimitsforcreditriskmanagementarestipulatedinthecreditpolicy.Thepolicybuildsontheprovisionsinthecompany’sactandexecutiveorder.Theseprovisionsstipulatethattheboardofdirectorsshalllaydownriskdiversificationrules. In itsriskmanagementactivities,thecompanydistinguishesbetweencreditrisksderived

from lendingoperationsandcredit risksderived fromtransactionswithfinancial counterparties.Theday-to-dayresponsibility for thecreditpolicyandfor thepe-riodical risk calculation and reporting rests with thecreditdepartment.

Theguidelines forfinancial riskmanagementare laiddowninthefinancepolicy.Thepolicyisbased,amongotherthings,ontheprovisionsoftheExecutiveOrderonbondissuance,thebalanceprincipleandriskmanage-ment.However, the guidelines for financial risksmaybestricterthansuchexternalrules.Thetreasurydepart-menthas theday-to-day responsibility for thefinancepolicy,while theresponsibilityfor thecurrentcalcula-tionandreportingoffinancialriskslieswithafunctionoutsidethetreasurydepartment.

Writtenin-housebusinessproceduresandcontrolpro-ceduresareinplaceforallsignificantareasandactivi-ties.Theinternalcontrolfunctionregularlyverifiesthatthese procedures are adhered to and reports its find-ingsviatheexternalauditorstotheBoardofDirectors.Danish Ship Finance is not subject to a requirementaboutinternalaudit.

Thebalanceprinciple:DanishShipFinanceisgovernedbythebalanceprincipleandhasresolvedtopursuethespecificbalanceprinciple.Thebalanceprincipleentailsfixed absolute limits for the size of allowable interestrate,foreignexchangeandliquidityriskswhenthereisa differencebetweenpayments on loans and funding.Under these rules, thecompany isprevented fromas-suming any noteworthy interest rate risk, foreign ex-changeriskorliquidityriskinitslendingoperations.

Thecompanymayissuebondsinablockissueonthebasis of loan offers submitted and estimated lendingactivity.

RiskManagementandCapitalAdequacy

14

cyrequirement,aresetoutintheExecutiveOrderonCapitalAdequacy.

Therearenorequirementsontheuseofaspecificme-thodtocalculatetheadequatecapitalbaseandthein-dividualsolvencyrequirement.Themethodselected isacombinationofstresstestsandindividuallyassessedfactorsbelievedtobeofimportanceforthesizeofthecapital basewhich the company, as aminimum,mustmaintain.Acapitalrequirementiscalculatedforeachofthefactors;apositive,negativeorneutralrequirement.Theoverallsolvencyrequirementisthencalculatedasthesumofallcontributionsandexpressedasapercent-ageoftherisk-weightedassets,whicharenotrestated.TheBoardofDirectorsconsidersthechoiceofmethodatleastonceayearandreceivesreportsontheindivid-ualsolvencyrequirementsinconnectionwiththequart-erlyfinancialreporting.

Stress test:The stress test is performed at least onceevery quarter to test sensitivity to shifts in the finan-cialmarketandthecreditqualityoftheloanportfolio.Thestartingpointisthefinancialimpactwithintwelvemonthsandwithinaselecteddegreeofsecurity.

CapitaladequacyCalculationmethod:DanishShipFinanceissubjecttotheprovisionsoftheExecutiveOrderonCapitalAdequacy.The companymay choose between differentmethodsfor calculating its risk-weighted items for each of thethree overall types of risk.The company has not ap-pliedforapermissionfromtheDanishFinancialSuper-visoryAuthoritytoapplyoneof the internalmethods.Accordingly,thecompanyappliesthestandardmethodto calculate the risk-weighted items concerning creditrisks andmarket risks, and uses the standard indica-tormethodtocalculaterisk-weighteditemsconcerningoperationalrisks.

Adequate capital base and the capital requirement:TheDanishFinancialBusinessActusestheconceptsofcap-italrequirementsandadequatecapitalbase.

The capital requirement is the absoluteminimum forthe statutorycapitalbase.Thecapitalbase is the sumofcorecapitalandadditionalcapital.Theratiobetweenthecapitalbaseandrisk-weightedassetsisreferredtoasthesolvencyratio.Until1January2009,theminimumsolvency ratiowas 10%.As from 1 January 2009, therequirement is lowered to 8%.Danish Ship Finance’scapitalbaseconsistsexclusivelyofcorecapital,asthecompanyhasnotissuedanysupplementarycapital.

Anadequatecapitalbasecoverstheminimumamountofcapitalwhich,intheopinionoftheBoardofDirec-tors,isrequiredtoensurethatthebondholdersareonlyexposedtoaminuteriskofsufferingalossincasethecompany becomes insolvent.The individual solvencyrequirementiscalculatedonthebasisoftheadequatecapital base.When calculating the solvency require-mentcurrentandfutureriskfactorsandtheopportu-nities for sourcing fresh capital shouldbe taken intoconsideration.Therulesoncalculationoftheadequatecapitalbaseand,byextension, the individualsolven-

15

CreditRisks

Credit risk reflects the risk of a loss due to default on the part of a counterparty. This applies to coun-terparties in the form of shipowners and financial counterparties.

Creditpolicy

The credit policy defines specific guidelines for theprovisionoffinancingforshipowners.

Thefollowingoverallpoliciesapply:• Anyloanofferbuildsonanindividualcreditassess-mentwhichtakes intoconsiderationtheborrower'sfinancialpositionandtheage,conditionandemploy-mentofthefinancedvessels.

• Loansaresecuredbyafirstmortgageinoneormorevessels.Incaseoffinancingduringconstruction,theshipmortgagemaybereplacedbyassignmentoftheship building contract and a refundment guaranteeprovidedbytheshipyard’sbank.

• Loans are usually established with covenants onmaximum loan-to-value ratios and/orfinancial cov-enants.

• Focuswillbeonthefinancialstandingoftheborrow-er,thetermsoftheloanandontheloan'scontribu-tiontocompliancewiththediversificationrules.

• Theloanportfolioismonitoredinanongoingproc-ess, including an annual classification of each bor-rower’screditquality.

Diversificationrules

Thecompositionoftheloanportfolioisgovernedbyasetofdiversificationrules,whichformpartofthecreditpolicy.Thepurposeofthediversificationrulesistoen-surediversificationbyvesseltype,borrowerandcoun-tryrisk.

Riskdiversificationonvesseltypes:Adequateloanport-folio diversificationmust be in place regarding vesseltypes. No vessel type (tanker, container, etc.) may beprovidedassecurityformorethan50%ofthecompa-

ny’sgrosslending.Withineachvesseltype,nosegment(crudeoil,product,etc.)maybeprovidedassecurityformorethan33%ofthecompany’sgrosslending.

At theendof2008,DanishShipFinance's loansweredistributed on three core segments; container, tankeranddrybulk.Inaddition,thecompanyprovidesloansforvesselsintheoffshoresector,ferries/Ro-Rovessels,LPGvessels and cruise vessels. In 2009, the companywillmostlikelyreceiveamortageinoneormoreLNGvessels and semi-submersible vessels. The latter arefloatingunitsforuseintheoffshoresector.

Risk diversification on borrowers: The composition ofborrowers must be adequately diversified in the loanportfolio.For large loans, thecompanyshouldseek todiversifytheriskonvesseltypeswithintheindividualaccount.Thediversificationruleisrelatedtotheobjectsclauseinthearticlesofassociation:

“TheobjectofthecompanyistoprovideshipfinancinginDenmark.Inaddition,thecompanymayprovideshipfinancing in the internationalmarket, so longas suchactivitiesdonotunnecessarilylimitthecompany’sDan-ishoperations.”

Forfinancingasdefinedinthesecondsentenceoftheobjects clause, the overall account per borrowermaynot,ataconsolidatedlevel,exceed25%ofthecompa-ny'smostrecentlypublishedcapitalandreserves.Therearenoformallimitsonloansizesinrespectoffundingpursuant to thecompany'smainobjective (shipfinan-cinginDenmark).

Riskdiversificationoncountries:Theloanportfoliomustbeadequatelydiversifiedoncountries.Thecountryriskiscalculatedonthebasisoftheborrower’shomecoun-try.LoanstoborrowersinNorway,theUSAandincer-tainEU countries are not subject to restrictions as tocountryrisk.Forloanstoborrowersinothercountries,thecompanyhasdefinedanoveralllimitpercountryofupto20%ofitsgrosslending.

16

Ongoingmonitoring

Aspartof theriskmanagementprocess,all loansareassessed at least twice a year.All loans are assessed,and thecurrentcredit risk isassessedon thebasisofcurrentmarketvaluationsof thefinancedvessels andthemostrecentaccountingdataandbudgetsfromtheborrower.

Inaddition,theloanportfolioismonitoredinanongo-ing process in relation to the borrowers' fulfilment oftheindividualloanagreement,comprising:

• Verifyingtheexistenceofadequate insurancecoveronfinancedvessels.

• Half-yearly updating of themarket values of all fi-nancedvessels.

• Verifyingthatanyothercollateralmeetsthespecifiedminimumrequirements.

• Verifyingcompliancewithallotherloancovenants.

Ifa loan isdeemed toentail increasedrisk, themoni-toring will be intensified to safeguard Danish ShipFinance'sintereststothebestpossibleextent.

Insurance of ship’s mortgages: Borrowers’ insurancesconcerning financed vessels are assigned to Danish

ShipFinance.Asaminimum,theinsuranceincludes:

• Hullandmachineryinsurance,whichcoversdamagetothevesselortotalloss.

• P&I (Protection & Indemnity) insurance, which isa third party liability insurance to cover damageagainstpersonsorequipment.

• WarRiskstocoverdamage,retention,etc.causedbywarorwar-likeconditions.

VesselsownedbymostoftheborrowersarecoveredbyMortgageInterestInsuranceandMortgageeAdditionalPerilsPollutionInsurance.Thisinsurancecoverstheriskinmostsituationswhichtheborrower’sprimaryinsur-ancepoliciesdonotcover.

Inspectionofships:Asasupplement to thehalf-yearlymarketvaluations,physicalinspectionsofthefinancedvesselsaremadeonaspot-checkbasis.Theinspectionmaybeperformedbothduringtheloanperiodorpriortosubmittinganoffertofinancesecond-handtonnage.Whenfinancing second-hand tonnage, focus ison theageofthevesselanditscondition.

(DKKmillion) 31.12.2008 31.12.2007

5 largest loans to shipowners*) 25,850 21,990

Lending, gross, at year-end exchange rate*) 49,126 39,095

Of which loans to financial debtors and the Danish government 102 365

The five largest loans to shipowners at 31 December 2008 are secured by mortgages in 146 vessels comprising 17 vessel types. One of the loans is substantially larger than the rest.

*)Excludingwritedownsandforeignexchangeadjustmentatthehedgeprice.

Movementsinthefivelargestloanstoshipowners

17

18

AssessmentsMarket valuations are regularly sourced from inde-pendentbrokerswhofixapriceforthefinancedves-selsonthebasisofsupplyanddemand.

CIRRloans

DanishShipFinancemaygrantso-calledCIRRloansof up to 80% of the net funding requirements to fi-nancecertaintypesofDanish-builtvessels.Thecom-panyhas theexclusiveright inDenmark forvesselscontracteduntiltheendof2012anddeliveredbeforetheendof2015.CIRRloansgrantedtoborrowersofparticularlygoodcreditstandingaretreatedintermsofsolvencylikeotherloanswithin70%ofthevalueofthefinancedvessels.Borrowerswhoaregivenoneofthethreehighestratingsintheinternalclassificationsystem(outofatotaloftenratings)areconsideredtobeofparticularlygoodfinancialstanding.

Financialcounterparties

Transactionswithfinancial counterparties aremadeinconnectionwithinvestingthecompany’sfundsandexcess liquidity and in transactions with derivativefinancialinstrumentsforriskmanagementpurposes.Whenthetransactionsinvolveacreditrisk,riskman-agementishandledaccordingtoaspecificpolicy.

Thepolicy isdedicatedtominimisingthecreditriskon the counterparties.The policy defines limits forhow large credit risks should be accepted and pro-videsguidelines for theuseof collateral to limit thecounterpartyrisk.

Thecontractualbasis for transactionswithfinancialcounterparties is based primarily on market stand-ardssuchasISDA,whichallowsnettinginthecaseofdefaultonthepartofthefinancialcounterparty.

Lossesandwritedowns

Twiceayear,allloansarereviewedinordertore-as-sessthecurrentneedforwritedowns.Allwritedowns

on loans are made according to individual assess-ments.

Theassessmentofanyneedforwritedownsforthein-dividualloansisbasedontheborrower’spresentandexpectedfuturefinancialpositionandonthevalueoftheshipmortgageandanyothercollateral.

Untiltheendof2008,thewritedownswereclassifiedaseither1or2writedowns.Thiswasmadeinaccord-ancewiththeExecutiveOrderonaShipFinanceIn-stitutedated21June2006,whichappliesforthe2008financialyear.A1writedownindicatesaprobableriskoflossfromtheloanfacility.A2writedownindicatesthatalossfromtheloanfacilityisdeemedinevitable,but that the final loss cannot be calculated yet. Assoonasalosscanbecalculated,itiswrittenoff.

Fromthefinancialyear2009, thecompanywillstarttopresentitsaccountsinaccordancewiththeDanishFinancialSupervisoryAuthority’sexecutiveorderonaccounting,whichbuildsoncomponentsoftheInter-nationalFinancialReportingStandards(IFRS).

In connectionwith the preparation of the accounts,theprinciples forwritedownshavebeenadjustedsothatwritedownsfor2008inallmaterialrespectscom-plywiththenewregulations.

Thetransitiontothenewaccountingrulesisnotex-pectedtoleadtoareductionofthecompany’swrite-downs. Compared with the annual report for 2007,thecompanyhasreviseditsexpectations.Attheendof2007, thecompanyexpecteda reductionofwrite-downsbasedonthecriteriaforobjectiveindicationofimpairment.Givendevelopmentsintheglobalecono-myin2008andexpectationstotheshippingmarkets,based on the same criterion the companyno longerexpectsareductionofitswritedownsunderthenewrules.

19

20

Agedistributionofmortgagedvessels(Percentageoftotallendings)

<2 2-5 5-10 10-15 15-20 20+

CONTAINERPOSTPANAMAX

4040

5050

3030

2020

1010

00

<2 2-5 5-10 10-15 15-20 20+

FERRIES/RO-RO

<2 2-5 5-10 10-15 15-20 20+

CRUDEOIL/PRODUCTTANKERS

40

50

30

20

10

0

<2 2-5 5-10 10-15 15-20 20+

OTHERS

40

50

30

20

10

0

Source: Own f igures

<2 2-5 5-10 10-15 15-20 20+

OFFSHOREVESSELS

40

50

30

20

10

0

<2

TOTALFORALLVESSELCATEGORIES

2-5 5-10 10-15 15-20 20+

40

50

30

20

10

0

Loanportfoliobymortgagedvesselsetc.(Percentageoftotallendings)

Exposureonfinancialcounterpartiesbycreditrating

Deptordistributionbycountryincludingdanishgovernmentrisk(Percentageoftotallendings)

21

Source: Own f igures

Aaa 52.3 %

Aa2 4.0%

Aa3 4.4%

A1 2.6%

A2 1.6%

A3 1.2%

Baa1 0.1%

NR 0.1%

Aa1 33.7 %

Container Post Panamax 29.3%

Dry bulk 8.4%

Gas 6.6%Chemical tankers 6.8%

Crude oil tankers 7.4%

Product tankers 13.7%

Ferries / RO-RO 8.8%

Others 4.2%

Danish government risk 0.2%

Offshore vessels 7.5%Container Panama Transitable 7.1%

Denmark incl. Greenland 47.0 %

Bermuda 3.3 %Cayman Islands 2.0%

Bahamas 2.5 %

Others 10.7 %USA 7.1 %

Schwitzerland 3.2%

Singapore 5.5 %

Marshall Islands 3.0%

Norway 10.2 %

Liberia 3.1 %

Germany 2.4%

Financial risks comprise market risks and liquid-ity risks. Market risk is the risk of a loss due to changes in the fair value of assets and liabilities, Market risks concern fixed income, exchange rate and equity positions. Liquidity risk is defined as the risk of a loss because the current liquidity portfolio is not sufficient to cover the current pay-ment obligations.

FinancepolicyThe company pursues a finance policy tomanage itsmarket risks.The policy lays down clear andmeasur-ablelimitsforinterestrate,exchangerate,equity,liquid-ity,optionandcreditrisks.

MarketrisksInterestraterisks:Interestraterisksareadjustedusingaminimumandamaximumfortheoption-adjusteddu-ration.Thecurrentmaximumadjusteddurationonthesecuritiesportfoliohasbeenrestrictedtosixyears.Theoption-adjusteddurationhasbeencalculatedatapprox-imately2.8yearsattheendof2008.

AccordingtotheExecutiveOrderonbondissuance,thebalance principle and risk management, interest rateriskonthecompany’sassets,liabilitiesandoff-balancesheetitemsmustnotexceed8%ofthecompany’scapi-talbase.

Risinginterestrateshaveanadverseimpactonthemar-ket value of the securities portfolio,whichmay resultinanoverallnegativefinancialperformanceandare-

sultingnegativeimpactonthesolvencyratio.UsingtheDanishFinancialSupervisoryAuthority’sguidelinesforcalculatinginterestraterisks,theriskwascalculatedatDKK389millionat31December2008againstDKK613millionat31December2007.ThecompanyhasoptedtohedgepartoftheinterestrateriskinDKKusinginter-estrateswapsdenominated inEUR. If futurechangesintheDKKratefullymirrorchangesintheEURrate,theabove-mentioned interestrateriskswouldamounttoapproximatelyDKK250millionfor2008andapprox-imatelyDKK393millionfor2007.

PursuanttotheExecutiveOrderonbondissuance,thebalanceprincipleandriskmanagement,theinterestrateriskbetweenfundingandlendingmustnotexceed1%ofthecapitalbase.Thefinancepolicyacceptsinterestrateriskssolelywhencausedbytimingdifferencesindeter-miningthereferenceinterestrate(suchasLIBOR)forvariableratefundingandlending.Thecompanyseekstominimisetheinterestrateriskbetweenfundingandlendingbyapplyingconservativeprinciples,butalossoragainmayariseduetochangesininterestrates.

Foreignexchangerisks:Thefinancepolicydoesnotacceptcurrency risks arising due tomismatch of funding andlending except for inevitable, limited foreign exchangerisks resulting fromtheongoingcashmanagement.Thecompany’slendingmarginiscollectedinthesamecurren-cyinwhichtheloanwasgranted.Accordingly,netinterestincomefromlendingoperationsisaffectedbyexchangerate fluctuations.The primary impact derives from theUSD,whichistheborrowers’preferredlendingcurrency.

The Executive Order on bond issuance, the balanceprincipleandriskmanagementstipulatesthatthecom-

FinancialRisks

22

binedforeignexchangeriskonassets,liabilitiesandoff-balancesheetitemsmustnotexceed2%ofthecapitalbase.Forcertaincurrencypositions,theriskislimitedtoDKK30millionpercurrency.

Equityrisks:Thefinancepolicydefineslimitsfortheeq-uity risk. Equity investmentsmay not representmorethan10%ofthecapitalbase.

Derivatives and structured notes: The finance policyspecifieswhichderivatives the companymayuseandfor which purposes. These are typically transactionsmadetohedgerisksbetweenfundingandlendingandinconnectionwithinvestmentactivities.

Thepolicyalsoincludesguidelinesonstructurednotes.Structurednotesrefertofundingwithconditionsotherthanstandardfixed/floating-rateconditions.Issuesmayonlybestructuredusinginterestrateandexchangerateinstruments, and they must not represent more than10%ofthetotalloanamount.

Thecompanydoesnotpresentlyhaveanyissuedstruc-turedbonds.

LiquidityrisksThe specific balance principle permits a cash deficit,whichisadeficitbetweenissuedbondsandloanspro-vided.Suchacashdeficit–resultingfromthefuturepay-mentsrelatedtobondsissuedbyDanishShipFinance,other fundingandfinancial instrumentswhichexceedthefutureincomingpaymentsonloans,financialinstru-mentsand investments–maynotexceed100%of thecapitalbase.

Pursuanttothecompany’sin-housepolicy,thecompa-nymusthaveoverallpositiveliquiditywithinthefirst-coming18-monthperiod.Thecalculationofthelimitin-cludesthesecuritiesportfolioatmarketvalue,andloanoffersareincludediftheyareexpectedtobedisbursedduringtheperiod.

BondsaretypicallyissuedinDKK,butmostoftheloansaredisbursed inUSD.ThecompanyhassourcedUSDforfundingofallloandisbursementsandformostoftheloanofferssubmitted.Theriskoflackofaccesstocon-vertDKKfunding intoUSD involveshigherfinancingcostsor the lossofbusinessopportunities.Theoppor-tunitiesforsourcingliquidityrelyonaneffectiveswapmarket.Lackofliquidityismanagedasaliquidityriskandformspartofthestresstest.

Stress test: The Board of Directors will consider themethodologyusedinthestresstestatleastonceayear,and theoutcomeof the stress test is reportedat leastonce very quarter to theBoard ofDirectors.A test ismadeofsensitivitytoshiftsinthefinancialmarketandthecreditqualityoftheloanportfolio.Thestartingpointisthefinancialimpactwithintwelvemonthsandwithinaselecteddegreeofsecurity.

InvestmentoffundsAccording to theExecutiveOrder, at least 60%of thecapitalbasemustbeinvestedinthehighestqualityin-vestmentgradesecurities.

23

60

50

40

30

20

10

0

Amortisation loan incl. loan offers and revolving credits

Amortisation debt

Theratiooftheissuedbondsandloansprovided

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

BillionDKK

Operational risk is the risk of a loss due to lack of procedures or resources to manage the risks fac-ing the company. The key operational risks relate to credit and finance functions and the use of in-formation technology.

Inthecreditfunction,theriskrelatestothehandlingoffacilityagreementsandsecuritydocumentsandregularfollow-uponloancovenants.Inaddition,theriskrelatestothehandlingofanyship’smortgageswhichitprovesnecessarytotakeoverincasetheborrowerdefaultsonhisloan.

Inthefinancefunction,theriskrelatestotheconclusionandimplementationoffinancialcontracts.

In theareaof information technology, the risk relatestothederivedconsequencesofasystembreakdownorserioussystemerrors.

The company seeks to mitigate each of these risksthroughtheuseofbusinessprocedures,segregationoffunctionsandinternalcontrols.

OperationalRisks

24

The rules governing bond issuance are described in the act, the Executive Order and the Executive Order on bond issuance, the balance principle and risk management. The lending operations are funded through previous issuance of debenture bonds, issuance of ship mortgage bonds, through lending of own funds and through proceeds from loans raised in money markets and capital mar-kets. Individual borrowers have no direct obliga-tions towards the bondholders.

CoveredbondsasdefinedbytheCRD

Like banks and mortgage credit institutions, DanishShipFinancemayissuecoveredbonds.Thetermcover-edbondsisusedtodescribeparticularlysecurebondsissued to finance lending secured by real property,ships or government risks within defined loan limits.Danish Ship Finance can only issue covered bondsagainst ship’smortgages.The riskweight for coveredbondsasdefinedbytheCRDis10%.

Inbondissuanceactivities,theissuerfacesstricterre-quirementstoqualifyforthecoveredbonddesignation.For example, the bondsmust be issued in a separatecapitalcentre,andtheloan-to-valueratiooftheunderly-ingloansmustnotexceed70%.Ifthevalueofthemort-gagedassetdeclines,DanishShipFinancemustprovidesupplementarysecurityintheformofapprovedsecuri-tiesorcashdeposits tokeep the loan-to-valueratioatamaximumof70%.Thevalueof themortgagedassetmustcontinuouslybemonitoredusingupdatedmarketvaluations. Danish Ship Finance has still not used itspermissiontoissuecoveredbonds.

ShipmortgagebondsAs an alternative to covered bonds as defined in theCRD, Danish Ship Finance may issue ship mortgagebonds.

Asforissuanceofcoveredbonds,DanishShipFinancemustcomplywithabalanceprinciplewhenissuingshipmortgage bonds. In other areas, the rules on issuingshipmortgagebondsare less restrictive than thepre-viousrules thatapplytodebenturebonds.There isnorequirementthatthebondsmustbeissuedinaseparatecapitalcentre.

Bondsincirculation

Issued bonds are primarily bullet loans denominatedinDKK.At31December2008,bondsincirculationto-talledDKK62.5billion,nominalvalue,ofwhichbondsissued inDKKaccounted for 84%.Thebondsmaybeunlisted,butthebulkofthebondsarelistedandtradedonNASDAQOMXCopenhagenwith terms tomaturi-tiesrangingfrom1to20years.Theaveragematurityofthebondsexceedstheaveragematurityoftheloans.

Rating

DanishShipFinanceholdsanAa3IssuerRating,whichwasassignedtoitbyMoody’sInvestorsServiceLimitedon14November1998.AnIssuerRatingextendstotheseniordebtoftheentirebond-issuinginstitutionratherthantoindividualbondseries.

Mostofthebondshavesubsequentlybeenallocatedaspecificrating.AratingofAa3hasbeenassignedtoallissuedbondsthatcarryarating.

Bonds

Bondsincirculation

Debenturebonds:Bonds issued before 1 January 2008. By definition, the bonds are covered bonds (as defined by the CRD) until maturity, even though there is no requirement for regular compliance with loan values. The risk weight for debenture bonds is 10%.

Shipmortgagebonds:Bonds issued after 1 January 2008 which do not qualify for the covered bond designation. The risk weight for ship mortgage bonds is 20%.

All bonds issued by Danish Ship Finance are on the European Commission’s list of bonds meeting the gilt-edged requirements of Article 22(4) of the UCITS direc-tive (the “Investment Directive”).

Issued before 2008

Issued in 2008

2% 3% 8%4% 6% CIRRFloating Index

25

20

15

10

5

0

Circulatingbondsbybondtype

25

BillionDKK

The Board of Directors and the Management BoardhavetodayconsideredandadoptedtheannualreportofDanishShipFinanceA/S (DanmarksSkibskreditA/S)forthefinancialyearended31December2008.Thean-nualreporthasbeenprepared inaccordancewith theprovisionsofDanishlegislationonthepresentationofaccounts.

TheManagement’sreviewincludesafairpresentationof the developments in the company’s activities andfinancialpositionaswell asadescriptionof themost

materialrisksandelementsofuncertaintythatmayaf-fectthecompany.

TheBoardofDirectorsandtheManagementBoardcon-sidertheappliedaccountingpoliciestobeappropriatefortheannualreporttogiveatrueandfairviewofthecompany’s financial position at 31December 2008 aswellasofitsactivitiesandcashflowsforthefinancialyear1Januaryto31December2008.

Werecommendtheannualreportforadoptionatthean-nualgeneralmeeting.

ManagementBoard

Erik I. LassenChiefExecutiveOfficer

Per SchnackExecutiveVicePresidentandCFO

BoardofDirectors

Per SkovhusChairman

Jens ThomsenDeputyChairman

Thorkil H. Christensen Flemming Ipsen Torben S. Jørgensen Michael Rasmussen

StatementbytheManagementBoardandtheBoardofDirectors

Copenhagen,5.February2009

26

Erling Garrelts Lisbeth N. Pedersen Henrik R. Søgaard

TotheshareholdersofDanishShipFinanceWe have audited the annual report of Danish ShipFinanceA/S(DanmarksSkibskreditA/S)forthefinancialyearended31December2008,comprisingastatementbytheManagementBoardandtheBoardofDirectors,Man-agement’sreview,accountingpolicies,profitandlossac-count,balancesheet,statementofchangesincapitalandreservesandnotestotheaccounts.Theannualreportispresented in accordancewithExecutiveOrder no. 674dated21June2006onaShipFinanceInstitute.

Management’sresponsibilityfortheannualreportManagementisresponsibleforpreparingandpresent-inganannualreportthatgivesatrueandfairviewinaccordancewithExecutiveOrderno.674dated21June2006onaShipFinanceInstitute.Thisresponsibilityin-cludes:designing,implementingandmaintaininginter-nal controls relevant to thepreparationand fairpres-entationofanannualreportthatisfreefrommaterialmisstatement,whetherdue to fraudorerror;selectingandapplyingappropriateaccountingpolicies;andmak-ingaccountingestimatesthatarereasonableinthecir-cumstances.

Auditor’sresponsibilityandbasisofopinionOurresponsibilityistoexpressanopinionontheannu-alreportbasedonouraudit.WeconductedourauditinaccordancewithDanishStandardsonAuditing.TheseStandardsrequirethatwecomplywithethicalrequire-mentsandplanandperformouraudittoobtainreason-ableassurancewhethertheannualreport is freefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthean-nualreport.Theproceduresselecteddependontheau-ditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementoftheannualreport,whetherduetofraudorerror.Inmakingthoseriskassessments,the auditor considers internal controls relevant to thepreparationandfairpresentationof theannualreportinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpress-inganopinionontheeffectivenessofinternalcontrols.Anaudit also includes evaluating the appropriatenessofaccountingpoliciesusedand thereasonablenessofaccounting estimates made by Management, as wellasevaluatingtheoverallpresentationoftheannualre-port.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourau-ditopinion.

Ouraudithasnotresultedinanyqualification.

OpinionInouropinion, theannualreportgivesatrueandfairview of the company’s assets, liabilities and financialpositionat31December2008aswellasoftheresultsofthecompany’soperationsandcashflowsforthefinan-cialyearthenendedinaccordancewithExecutiveOrderno.674dated21June2006onaShipFinanceInstitute.

Copenhagen,5.February2009

DeloitteStatsautoriseretRevisionsaktieselskab

Søren Dinesen Henrik PriskornStateAuthorisedPublicAccountants

IndependentAuditors’Report

27

28

Directorships–BoardofDirectorsTheinformationrelatestotheoccupationsoftheboardmembers, directorships held in otherDanish and for-eigncompaniesandotherimportantmanagementposi-tionsanddirectorshipsatthedateofthepublicationofthisannualreport.

PerSkovhusDanskeBankA/SElectedtotheBoardofDirectorsofDanishShipFinanceon28.04.2003Member of the Board of Directors of:RealkreditDanmarkA/STheDanishBankersAssociation(DeputyChairman)

JensThomsenNationalbankenElectedtotheBoardofDirectorsofDanishShipFinanceon28.04.2003MemberofDetFinansielleVirksomhedsråd

ThorkilH.ChristensenDanskeMaritimeElectedtotheBoardofDirectorsofDanishShipFinanceon19.04.1995Member of the Board of Directors of:DenDanskeMaritimeFond(DeputyChairman)

FlemmingIpsenA.P.Møller-MærskA/SElectedtotheBoardofDirectorsofDanishShipFinanceon28.08.2006Member of the Board of Directors of:44subsidiariesoftheA.P.Møller-MærskA/SGroupinDenmarkandabroad.TheDanishInstituteofArbitration(DeputyChairman)MemberofTheBoardofDirectorsofTheBritanniaSteamShipInsuranceAssociationLimited

Directorships–ManagementBoard

ChiefExecutiveOfficerErikI.LassenMemberoftheManagementBoardsince09.04.2008

ExecutiveVicePrecidentandCFOPerSchnackMemberoftheManagementBoardsince09.04.2008

TorbenS.JørgensenTrygVestaForsikringA/SElectedtotheBoardofDirectorsofDanishShipFinanceon24.04.2008Member of the Board of Directors of:AktieselskabetForsikringensHus

MichaelRasmussenNordeaDanmarkA/SElectedtotheBoardofDirectorsofDanishShipFinanceon24.04.2008Member of the Board of Directors of:NordeaKreditA/S(Chairman)NordeaLiv&PensionDanmarkA/SLRRealkreditA/S

ErlingGarreltsDanmarksSkibskreditA/SElectedtotheBoardofDirectorsofDanishShipFinanceon24.04.2008

LisbethN.PedersenDanmarksSkibskreditA/SElectedtotheBoardofDirectorsofDanishShipFinanceon24.04.2008

HenrikR.SøgaardDanmarksSkibskreditA/SElectedtotheBoardofDirectorsofDanishShipFinanceon24.04.2008

Directorships

29

TheannualreportofDanishShipFinanceA/Sispre-sentedinaccordancewithExecutiveOrderno.674dat-ed21June2006onaShipFinanceInstituteissuedbytheDanishMinistryofEconomicandBusinessAffairs.Theaccountingpoliciesareunchangedfromthe2007financialyear.

The company has changed its accounting estimateconcerningwritedownsondebtors.Asaresultofthischange,objectivecriteriawilltoagreaterextentbeap-pliedwhen calculating the need forwritedowns.Thechangedoesnotaffecttheprofitfortheyear.

Theformatandcontentsoftheprofitandlossaccount,the balance sheet and the notes are prepared on thebasisoftheguidelinesissuedbytheDanishFinancialSupervisoryAuthorityonthepresentationofaccountsbybanks.However,afewadjustmentshavebeenmadeasaresultofDanishShipFinance’slegalframework.

Transitiontonewaccountingrules

The EU has resolved that listed companies mustpresent their consolidated accounts in accordancewith accounting standards (IAS/IFRS) issued by theInternationalAccountingStandardsBoard(IASB)andadoptedbytheEU.

TheRegulationcompriseslistedcompanies,i.e.compa-nieswhosesharesordebtinstruments(suchasbonds)are listed. Furthermore the Regulation allows mem-ber countries to permit or require that other compa-niesmustcomplywiththeapprovedstandardsintheirfinancialreporting.

AccountingPolicies

Witheffectfromthe2009financialyear,DanishShipFinancewill be comprised by theDanish accountingrulesforfinancialenterprisesandexpectstofollowtheDanish Financial Supervisory Authority’s IFRS-con-sistentrulesintheformoftheExecutiveOrderonthePresentationofFinancialStatementsbyBankswithef-fectfortheannualreportfor2009.

Recognitionandmeasurement

Assetsarerecognised in thebalancesheetwhenit isprobable that future economic benefits will flow toDanishShipFinanceandthevalueoftheassetcanbereliablymeasured.

Liabilities are recognised in the balance sheet whentheyareprobableandcanbereliablymeasured.

Oninitialrecognition,assetsandliabilitiesaremeas-ured at cost. Subsequently, assets and liabilities aremeasuredasdescribedbelowinrespectofeach indi-vidualitem,andalladjustmentsarerecognisedintheprofitandlossaccount.

Recognitionandmeasurementtakeintoconsiderationgains, losses and risks that arise before the time ofpresentationoftheannualreportandthatconfirmorinvalidatemattersexistingatthebalancesheetdate.

Incomeisrecognisedintheprofitandlossaccountasearned, including value adjustments of assets and li-abilities. Moreover costs paid to generate the year’searnings, including depreciation and provisions forbadanddoubtfuldebts,arerecognised.

30

Foreigncurrencytranslation

Transactions denominated in foreign currency aretranslatedwhenfirstrecordedattheexchangeratepre-vailingontheentrydate.Exchangedifferencesarisingbetween the exchange rate at the entry date and theexchange rateat thedateofpaymentare recognisedin theprofitand lossaccountunderfinancial incomeandexpenses.

Receivables, payables and other monetary items de-nominated in foreigncurrenciesare translatedat theexchangeratesapplyingatthebalancesheetdate.Thedifferencebetweentheexchangerateapplyingat thebalancesheetdateand theexchangerateat the timewhenthereceivableorpayablearoseorwasrecordedin themost recentannual report is recognised in theprofitandlossaccountunderfinancial incomeorex-penses.

DanishShipFinanceusesderivativefinancial instru-mentstohedgefinancialrisksonanongoingbasis.Re-ceivablesandpayablesdenominatedinforeigncurren-ciesandreturnsthereofarerecognisedintheaccountsat thehedgedvalues to the extent that the exchangerateriskhasbeenfullyhedged.

Derivativefinancialinstruments

Swaps, forward exchange contracts, forward rateagreements andoptions that are entered into for thepurpose of fully hedging exchange rate, interest rateandequityexposureonrecognisedfinancialassetsorliabilitiesarenotstatedinthebalancesheetasseparateitems,but are stated togetherwith thehedged items.Recognitionintheprofitandlossaccountalsofollows

thehedgeditem.Principalamountsandmarketvaluesofthederivativefinancialinstrumentsaredisclosedinanotetotheaccounts.

Apart fromminor interest margins, the net value ofsuch interest and currency swapagreements and theassetsandliabilitieshedgedisnil.

Derivative financial instruments entered into to fullyhedgeexchangerateandinterestrateexposureincon-junctionwithanticipated future transactionsand for-wardsecuritiestransactionsarerecognisedinthebal-ance sheetunderotherassetsorother liabilities andmeasuredatthemarketvalueonthebalancesheetdate.Valueadjustmentsarerecognisedintheprofitandlossaccountundermarketvalueadjustments.However,ac-crual of interest is recognised under interest incomeandexpenses.

Derivative financial instruments not entered into tofullyhedgefinancialrisksorhedgingassetsmeasuredatmarketvaluearerecognisedinthebalancesheetun-derotherassetsorother liabilitiesandaremeasuredatmarketvalues.Valueadjustmentsarerecognisedintheprofitandlossaccountundermarketvalueadjust-ments.However,accrualof interest is recognisedun-derinterestincomeandexpenses.

31

ProfitandlossaccountOtheroperatingincome:Otheroperatingincomeinclu-des rental income less expenses for operating prop-erties.Rent is chargedatmarket rates for theuseofpremisesinthecompany’sownofficebuilding.

Tax:Tax for theyear,comprising income taxpayablefortheyearandmovementsindeferredtax,isrecog-nised in theprofitand lossaccount. Income taxpay-able for the year is calculated at 25% of the pre-taxprofitfortheyear,adjustedforanyincomethatisnotliablefortaxandforexpensesthatarenottax-deducti-ble.Deferredtaxiscalculatedaccordingtothebalancesheetliabilitymethodas25%ofalltimingdifferencesbetweentheaccountingandtaxvalueoftheassetsandliabilities. Deferred tax assets are recognised to theextenttheyareexpectedtoberealisedthroughfutureearnings.

BalancesheetLoans: Loans, including arrears on instalments, areassessed individually and writedowns are made tomeet any anticipated losses, basedon a conservativeassessment. Receivables considered to be irrecover-ablearewrittenoff.Lossesandwritedownsondebtorsare deducted from lending. Provisions for guaranteecommitments andfinancial counterparties are recog-nisedunderotherliabilities.

Securities:Listed securities aremeasured at the offi-ciallyquotedpricesatthebalance-sheetdate.Unlistedsecuritiesaremeasuredatthemarketvalueatthebal-ancesheetdate.

Bonds are recognised at the hedged values if a con-currentswapagreementwitheffectivehedging(assetswap)hasbeenconcluded.

Saleandrepurchasetransactionsandobligationconcern-ingsecurities:Securitiessold,forwhichasimultaneousrepurchaseagreement ismade,are recognised in thebalance sheet as if the securitieswere still held.Theamountreceivedisrecordedasanamountowedtothebuyer,andanydifferencebetweenthebuyingandsell-ingpriceisrecognisedasinterestexpensesintheprofitandlossaccount.Returnsonsecuritiesarerecognisedintheprofitandlossaccount.

Securitiesacquired,forwhichasimultaneousreversetransactionismade,arenotrecognisedinthebalancesheet.Theamountpaidisrecordedunderdebtors,andanydifferencebetweenthebuyingandsellingpriceisrecognisedasinterestincomeintheprofitandlossac-count.

Upontheresaleofsecuritiesboughtinareversetrans-action,theobligationtobuythesecuritiesisrecognisedas a short-term securities portfolio under“Securitiesobligations”andmeasuredatofficiallyquotedprices.Valueadjustmentsarerecognisedintheprofitandlossaccountunder"Marketvalueadjustments".

Issuedbonds:Fixed-rateissuedbondsbothinDKKandinforeigncurrencyarerecognisedinthebalancesheetat nominal values as they are valued together withswapagreements.Index-linkedloansaremeasuredattheyear-endindexvalue.

Floating-rate issuedbonds are recognised in the bal-ancesheetatcost,whichcorrespondstothefairvalueof the proceeds received, net of transaction costs in-curred. Subsequently, floating-rate issued bonds aremeasuredatamortisedcost.

Tangible assets:Tangible assets aremeasured at costlessaccumulateddepreciationandimpairmentlosses.

Assets are depreciated on a straight line basis overtheirestimateduseful liveswithdueconsideration toanyscrapvalue,asfollows

Officeproperty 50yearsOthertangibleassets 3years

However,specialbuildinginstallationsarechargedtotheprofitand lossaccount in theyearofacquisition.OthertangibleassetswithapurchasepriceoflessthanDKK250,000arealsowrittenoffintheyearofacquisi-tion.

CommercialInterestReferenceRate(CIRR):

In 2003,Danish Ship Finance acquired the exclusiveright toofferCIRR loans for vesselsuntil the endof2012.The price of the exclusive right was subject tocontractingvolumesofcertainvesseltypesinDanishshipyardsintheperiodfrom31March2004,calculatedatatotalofDKK225million.

TheDKK225millionpayment to theDanishgovern-mentwas offset by additional earnings from lendingoperations and is charged over the life of the CIRRloans(12years)totheitem“Netinterestincomefromlendingoperations”.Thepartofthepaymentwhichhasstill not been expensed is recognised in the balancesheetunder“Otherassets”.

DanishShipFinance’spaymenttotheDanishgovern-ment fell due as the shipyards started to deliver thevesselsinquestion.TheremainingobligationwaspaidinJanuary2007.

33

Note

1 Interestincome

2 Interestexpenses

3 Net interest income

Dividendsonshares

4 Feeandcommissionincome

Feesandcommissionspaid

Net interest and fee income

5 Marketvalueadjustments

Otheroperatingincome

6,7 Staffcostsandadministrativeexpenses

16 Depreciationandwritedownsoftangibleassets

12 Lossesandwritedownsondebtors

Profit before tax

8 Tax

Profit for the year

Proposed allocation of profit

Dividendforthefinancialyear

Retainedearnings

2008

3,394.3

(2,668.3)

726.0

16.9

52.6

0.0

795.5

(377.8)

3.3

(91.9)

(1.1)

(199.7)

128.3

(91.3)

37.0

5.6

31.4

37.0

2007

2,412.9

(1,795.8)

617.1

2.2

41.4

(2.1)

658.6

(160.0)

3.2

(85.9)

(1.1)

103.7

518.5

(124.1)

394.4

335.2

59.2

394.4

ProfitandLossAccount1January–31December

34

AmountsinDKKmillion

asat31December

Note

Assets9 Duefromcreditinstitutionsandcentralbanks10,11,12 Loans13,14 Bonds15 Shares,etc.16 Tangibleassets17 Otherassets Total assets Liabilities, capital and reserves Liabilities18 Duetocreditinstitutionsandcentralbanks19 Issuedbonds20,21 Otherliabilities

Total liabilities22 Capital and reserves Sharecapital Tied-upreservecapital Retainedprofit

Total capital and reserves

ofwhichdividendproposedforthefinancialyear Total liabilities, capital and reserves

23 Solvency24 Guaranteecommitments25 Othercommitments26 Relatedparties27 Notionalprincipalsofoutstandingderivativefinancialinstrumentsasat31December28 Marketvaluesofoutstandingderivativefinancialinstrumentsasat31December200729 Exchangerateriskanduseofderivativefinancialinstrumentsat31December2007i

2008

1,503.251,043.626,851.2444.253.5

1,735.9

81,631.6

8,428.462,519.81,804.3

72,752.5

333.38,343.1202.7

8,879.1

5.6

81,631.6

2007

10,550.442,689.821,394.4679.953.6

1,291.8

76,659.9

1,333.864,962.31,186.6

67,482.7

333.38,343.1500.8

9,177.2

335.2

76,659.9

BalanceSheet

35

AmountsinDKKmillion

Capital and reserves at 1 January 2007

Dividendsdistributed

Profitfortheperiod

Capital and reserves at 1 January 2008

Dividendsdistributed

Profitfortheperiod

Capital and reserves at 31 December 2008

Sharecapital

333.3

-

-

333.3

-

-

333.3

Tied-upreservecapital

8,343.1

-

-

8,343.1

-

-

8,343.1

Profitbroughtforward

106.5

-

59.2

165.7

-

31.4

197.1

Total

9,158.3

(375.4)

394.4

9,177.3

(335.2)

37.0

8,879.1

Proposeddividendsfor

thefinancialyear

375.4

(375.4)

335.2

335.2

(335.2)

5.6

5.6

StatementofChangesinCapitalandReserves

AmountsinDKKmillion

36

InterestincomeInterestfromcreditinstitutionsInterestonloansIndexrevaluationsofindex-linkedloansInterestonbondsOtherinterestincomeDerivativefinancialinstruments Interestratecontracts Foreignexchangecontracts

Total interest income

InterestexpensesInteresttocreditinstitutionsInterestonissuedbondsIndexrevaluationsonissuedbondsOtherinterestexpenses

Total interest expenses

NetinterestincomeNet interest income from lending operationsInterestonloansInterestonbondsInterestonblockissuesincludedininterestduefromcreditinstitutionsInteresttocreditinstitutionsInterestexpensesonissuedbondsOtherinterestexpensesDerivativefinancialinstruments Interestratecontracts Foreignexchangecontracts

Total net interest income on lending operations

Net interest income from financing operationsInterestonbondsInterestonloansInterestduefromcreditinstitutionsexcludinginterestonblockissuesOtherinterestincomeInteresttocreditinstitutionsOtherinterestexpenses

Total net interest income from financing operations

Total net interest income

2008

147.52,188.9

8.71,265.112.5

(243.1)14.7

3,394.3

(149.6)(2,480.1)

(8.7)(29.9)

(2,668.3)

2,197.1712.2

126.2(32.9)

(2,488.8)(29.9)

(243.1)14.7

255.5

553.00.5

21.212.5

(116.7)0.0

470.5

726.0

2007

293.82,204.316.1661.43.3

(775.9)9.9

2,412.9

(47.4)(1,693.2)(16.1)(39.1)

(1,795.8)

2,219.8170.1

294.7(1.9)

(1,709.3)(32.9)

(775.9)9.9

174.5

491.30.7

(1.0)3.3

(45.5)(6.2)

442.6

617.1

Note1

Note2

Note3

Notes

38

AmountsinDKKmillion

FeeandcommissionincomeGuaranteecommissionFeeandothercommissionincome

Total fee and other commission income

MarketvalueadjustmentsMarketvalueadjustmentsofbondsRealisedgains/lossesonredemptionandsalesUnrealisedmarketvalueadjustment

Total market value adjustment of bonds

MarketvalueadjustmentsofsharesExchangerateadjustmentsMarketvalueadjustmentsoffinancialinstruments

Total market value adjustments

StaffcostsandadministrativeexpensesRemunerationfortheBoardofDirectorsStaffcostsOtheradministrativeexpenses

Total staff costs and administrative expenses

Numberofemployees-full-timeequivalentsAveragenumberofemployees-full-timeequivalents

AuditfeesAuditfeesforstatutoryauditFeesforconsultancyservicesandotherprofessionalservices

Total audit fees

2008

2.150.5

52.6

(75.4)38.0

(37.4)

(232.8)38.2

(145.8)

(377.8)

(1.4)(60.2)(30.3)

(91.9)

5857

(0.8)(1.0)

(1.8)

2007

0.041.4

41.4

(12.7)(200.2)

(212.9)

28.34.320.3

(160.0)

(1.1)(54.9)(29.9)

(85.9)

5755

(0.7)(1.0)

(1.7)

Note4

Note5

Note6

Note7

Notes

39

AmountsinDKKmillion

TaxEstimatedtaxontheprofitfortheyearChangeindeferredtaxontheprofitfortheyearAdjustmentduetoloweringofcorporationtaxrateto25%Prior-yearadjustmentsofcurrenttax

Total tax

Duringthefinancialyear,DKK67,8millionwaspaidundertheon-accounttaxscheme.Overpaymentoftaxfor2007amountedtoDKK9,6million.

DuefromcreditinstitutionsandcentralbanksRepo/reversetransactionsOtherdebtors

Total due from credit institutions and central banks

2008

(269.1)179.7

-(1.9)

(91.3)

0.01,503.2

1,503.2

2007

(105.9)(18.0)1.5(1.7)

(124.1)

0.010,550.4

10,550.4

Note8

Note9

Notes

40

AmountsinDKKmillion

LoansAt1JanuaryAdditionsIndexrevaluationsduringtheyearOrdinaryrepaymentsandredemptionsExtraordinaryprepaymentsNetchangeconcerningrevolvingcreditfacilitiesNetchangeconcerningdebentureswithDanmarksNationalbankExchangerateadjustmentofadditionsanddisposalsathedgedexchangerateLossesandwritedownsfortheyear

At 31 December

LoansLoanssecuredagainstaship'smortgageFinancialdebtorsTheFinancialAdministrationAgencyCompensationfromtheDanishStateforinterestsubsidiesandinflationguaranteesDanmarksNationalbank

Gross loans at exchange rates at the balance-sheet date

ExchangerateadjustmentsathedgedexchangeratesAccumulatedwritedowns

Total loans

"Exchangerateadjustmentsathedgedexchangerates"relatetothedifferencebetweenthevalueofloanscalculatedatexchangeratesatthebalance-sheetdateandthevalueofloanscalculatedathedgedexchangerates,asallsignifi-cantforeignexchangerisksarefullyhedged.

2008

42,689.812,897.2

8.7(5,172.0)(1,574.4)2,243.3

(264.2)

416.8(201.6)

51,043.6

49,023.4--

-102.4

49,125.8

2,810.2(892.4)

51,043.6

2007

37,745.711,760.3

16.1(4,156.3)(2,735.5)2,008.2

(334.3)

(1,713.3)98.9

42,689.8

38,730.7-

6.3

0.2358.1

39,095.3

4,325.2(730.7)

42,689.8

Note10

Note11

Notes

41

AmountsinDKKmillion

AccumulatedwritedownsThe following writedowns have been made on debtors1writedownswhichinvolveaprobableriskoflosses2writedownswhichinvolvelossesthataredeemedunavoidable

Total accumulated writedowns

As a percentage of loans and writedowns1writedownswhichinvolveaprobableriskoflosses2writedownswhichinvolvelossesthataredeemedunavoidable

Total accumulated writedowns

Total accumulated writedowns consist ofSetoffagainstloansProvisionsmadeforotherliabilities

Total accumulated writedowns

Movements in accumulated writedownsAt1JanuaryNewwritedownsmadeReversedwritedownsLossescoveredbyprior-yearwritedowns

Total accumulated writedowns

Losses and writedowns on debtorsNewwritedownsmadeReversedwritedownsLossesnotcoveredbyprior-yearwritedownsRecoveredfrompreviousclaimswrittenoff

Total losses and writedowns on debtors

(Note12continuesonthefollowingpage)

2008

816.2116.2

932.4

1.70.2

1.9

892.440.0

932.4

730.8891.7(690.1)

-

932.4

(891.7)690.10.01.9

(199.7)

2007

720.110.7

730.8

1.90.0

1.9

730.70.1

730.8

829.7361.4(460.3)

-

730.8

(361.4)460.30.04.8

103.7

Note12

Notes

42

AmountsinDKKmillion

Writedowns broken down by countries:BermudaCaymanIslandsCypernDenmarkGreenlandHongKongItalyLiberiaLuxembourgNorwaySwitzerlandSingaporeSwedenGermanyUSA

Total accumulated writedowns

BondsBond portfolioNon-callablebondsCallablebonds

Total bonds

BondholdingsspecifiedbytimetomaturityBond portfolioBondswithamaturityofuptoandincluding1yearBondswithamaturityofover1yearanduptoandincluding5yearsBondswithamaturityofover5yearsanduptoandincluding10yearsBondswithamaturityofover10years

Total bond holdings specified by time to maturity

Shares,etc.Shares/unittrustcertificateslistedonNASDAQOMXCopenhagenUnlistedshares/unittrustcertificatesrecognisedatfairvalue

Total shares, etc.

2008

79.764.951.4362.9

-2.611.641.5

-3.895.78.16.2

164.040.0

932.4

18,084.58,766.7

26,851.2

81.9

16,638.5

2,919.57,211.3

26,851.2

255.4188.8

444.2

2007

60.5--

233.24.9

-38.1

-57.697.2

-45.8

--

193.5

730.8

13,511.07,883.4

21,394.4

-

12,743.8

641.18,009.5

21,394.4

445.3234.6

679.9

Note13

Note14

Note15

Notes

43

AmountsinDKKmillion

TangibleassetsOffice propertyPurchasepriceincludingleaseholdimprovements,1JanuaryLeaseholdimprovementsduringyear

Purchase price including leasehold improvements, 31 December

Accrueddepreciation,1JanuaryDepreciationduringtheyear

Accrued depreciation, 31 December

Total office property

TheassetcomprisestheofficepropertyatSanktAnnæPlads1-3,Copenhagen,thepublicvaluationofwhichisassessedatDKK81.0millionat1October2006.

Other tangible assetsPurchaseprice,1JanuaryDisposalsduringtheyearAdditionsduringtheyear

Purchase price, 31 December

Accumulateddepreciation,1JanuaryDisposalsduringtheyearDepreciationduringtheyear

Accumulated depreciation, 31 December

Totalothertangibleassets

OthertangibleassetscompriseacquisitionswithapurchasepriceexceedingDKK250,000.00.

Total tangible assets

OtherassetsInterestreceivableAccrualsrelatedtoCIRRfinancingOn-accountcorporationtaxreceivableDeferredtaxMarketvalueofderivativefinancialinstrumentsMiscellaneousreceivables

Total other assets

2008

59.40.0

59.4

6.60.6

7.2

52.2

2.7(0.7)1.0

3.0

1.9(0.7)0.5

1.7

1.3

53.5

1,418.8133.6

-149.0

-34.5

1,735.9

2007

59.00.4

59.4

6.00.6

6.6

52.8

1.90.00.8

2.7

1.40.00.5

1.9

0.8

53.6

1,013.2163.544.5-

26.244.4

1,291.8

Note16

Note17

AmountsinDKKmillion

Notes

44

DuetocreditinstitutionsandcentralbanksRepotransactionsOthercreditors

Total due to credit institutions and central banks

ISSUEDBONDSAt1JanuaryAdditionsinconjunctionwithnewloansandblockissuesAmortizedcostpriceonfloatersIndexrevaluationsduringtheyearOrdinaryredemptions

At 31 December

Specification of issued bonds

Bonds issued in DKKBulletbondsIndex-linkedloans,nominalvalue

Total nominal valueIndexpremium

Total issued bonds in DKK

Bonds issued in foreign currencyAmortisingCIRRbonds,atyear-endexchangeratesTotal issued bonds in foreign currency

Total issued bonds

2008

8,412.016.4

8,428.4

64,962.35,524.211.68.7

(7,987.0)

62,519.8

52,355.191.5

52,446.6126.2

52,572.8

9,947.0

9,947.0

62,519.8

2007

1,274.259.6

1,333.8

50,039.224,021.3

1.216.1

(9,115.5)

64,962.3

57,488.2255.0

57,743.2334.9

58,078.1

6,884.2

6,884.2

64,962.3

Note18

Note19

AmountsinDKKmillion

Notes

45

OtherliabilitiesInterestpayableIncometaxpayableMarketvalueofderivativefinancialinstrumentsDeferredtaxProvisionguarantees,etc.Miscellaneousliabilities

Total other liabilities

DeferredtaxDeferredtax,1JanuaryEstimateddeferredtaxontheprofitfortheyearAdjustmentduetoloweringofcorporationtaxrateto25%

At 31 December

CapitalandreservesSharecapital:AsharesBshares

Total share capital

Tied-upreservecapitalProfitbroughtforward

Total capital and reserves

ofwhichproposeddividend,cf.allocationofprofit

The share capital is divided into the following denominations:Ashares 300,000,000sharesofDKK1.00eachBshares 33,333,334sharesofDKK1.00each

EachAshareofDKK1.00entitlestheholderto10votesEachBshareofDKK1.00entitlestheholderto1vote

2008

1,429.8201.3118.2

-40.015.0

1,804.3

30.7(179.7)

-

(149.0)

300.033.3

333.3

8,343.1202.7

8,879.1

5.6

2007

1,141.3--

30.70.114.5

1,186.6

14.218.0

(1.5)

30.7

300.033.3

333.3

8,343.1500.8

9,177.2

335.2

Note20

Note21

Note22

46

AmountsinDKKmillion

Notes

SolvencyTier 1 capitalSharecapitalTied-upreservecapitalProfitbroughtforward

Total Tier 1 capital

Deductions in Tier 1 capitalProposeddividendsAdditionalstrainingrelativetotheExecutiveOrderonaShipFinanceInstitute

Total deductions in Tier 1 capital

Tier 1 capital less deductions

Capital base

WeighteditemsnotincludedinthetradingportfolioWeightedoff-balancesheetitemsWeighteditemswithcounterpartyriskoutsidethetradingportfolioWeighteditemswithmarketrisk,etc.WeighteditemswithoperationalriskTotal weighted items

Tier 1 capital less deductions as a percentage of total risk-weighted items

Solvency ratio pursuant to the Executive Order on a Ship Finance Institute(Minimumrequirementfixedat10%)

Weighted items with market risk, etc. consist ofItemswithpositionrisk:DebtinstrumentsItemswithpositionrisk:SharesTotalcurrencyposition

Total weighted items with market risk, etc.

2008

333.38,343.1202.7

8,879.1

5.6

280.2

285.8

8,593.3

8,593.3

52,032.16,024.5

582.96,794.5717.0

66,151.0

13.0

13.0

5,418.9454.1921.5

6,794.5

2007

333.38,343.1500.8

9,177.2

335.2

38.2

373.4

8,803.8

8,803.8

42,069.16,158.2

629.98,808.9

-

57,666.1

15.3

15.3

7,367.01,019.9422.0

8,808.9

Note23

47

AmountsinDKKmillion

Notes

GuaranteecommitmentsIntheordinarycourseofitslendingoperations,DanishShipFinancehasundertakenguaranteecommitmentsof

Intheordinarycourseofitslendingoperations,DanishShipFinancehasundertakenobligationstotakeoverloancommitmentsattheendofsyndicationperiodsexpiringbeforetheloansmatureforanamountof

PaymentguaranteeprovidedtotheDanishSecuritiesCentre

GuaranteesprovidedtotheDanishSecuritiesCentre

Total guarantee commitments

OthercommitmentsAsanormalpartofitslendingoperations,DSFhasundertakenobligationsinconnectionwithunutiliseddrawingrightsonloanswithrevolvingcreditfacilitiesintheamountof

RelatedpartiesRelatedpartiescomprisemembersofthecompany’sManagementandBoardofDirectorsandsubsidiaries.Relatedpartiesalsocompriseshareholderswhoholdmorethan20%ofthesharesormorethan20%ofthevotingrightsinthecompany.

Allrelated-partytransactionsinvolvingdepositsanddebtandtransactionswithfinancialinstrumentsintheformofswapagreements,forwardcurrencyagreements,forwardrateagreementsandforwardsecuritiestransactions,etc.aremadeonanarm’slengthbasis.Inspecialcases,however,thetermsandconditionsaremadeinaccordancewithshipyardsubsidyschemesorinternationalrulesongovernmentparticipationinthefinancingofnewbuildings.

Note24

Note25

Note26

2008

458.8

59.5

3.2

1.5

523.0

1,123.7

2007

380.2

57.1

3.7

1.7

442.7

1,444.5

48

AmountsinDKKmillion

Notes

Notionalprincipalsofoutstandingderivativefinancialinstrumentsasat31December

Swap agreementsSwapagreementshavebeenmadewiththefollowingpartiestohedgetheexchangerateexposureonloansandissuedbonds: DanmarksNationalbank Banks

Swapagreementshavebeenmadewiththefollowingpartiestohedgetheinterestrateexposureonloansandissuedbonds: Debtors Banks

Matchingswapagreementshavebeenmadewithdebtorsandbanksasfollows: Debtors Banks

Swapagreements,forwhichfinancialrisksarenotfullyhedged,havebeenmadewiththefollowingparties: Banks

Forward currency agreementsForwardcurrencysales

Forward interest rate and currency agreementsForwardinterestrateandcurrencyagreementsconcludedtohedgeinterestrateandexchangerateriskhavebeenmadewiththefollowingparties: Banks

Forward securities transactionsBuyingSelling

2008

1,105.348,599.6

654.958,299.2

--

4,387.2

132.1

1,955.8

-

751.8

2007

1,530.038,548.5

444.149,867.1

2.32.3

1,738.4

11.3

394.5

-

830.0

Note27

49

AmountsinDKKmillion

Notes

Marketvaluesofoutstandingderivativefinancialinstrumentsasat31December2008

Swap agreementsSwapagreementshavebeenmadewiththefollowingpartiestohedgetheexchangerateexposureonloans: DanmarksNationalbank Banks

Swapagreementshavebeenmadewiththefollowingpartiestohedgetheinterestrateexposureonloans: Debtors Banks

Swapagreements,forwhichfinancialrisksarenotfullyhedged,havebeenmadewiththefollowingparties: Banks

Forward currency agreementsForwardcurrencysales

Forward interest rate and currency agreementsForwardinterestrateandcurrencyagreementsconcludedtohedgeinterestrateandexchangerateriskhavebeenmadewiththefollowingparties: Banks

Forward securities transactionsBuyingSelling

Netting of exposure valueThepositivegrossfairvalueoffinancialcontractsafternetting,pursuanttoappendix17totheDanishExecutiveOrderonCapitalAdequacy Counterpartywithriskweightof0% Counterpartywithriskweightof20% Counterpartywithriskweightof100%

Valueoftotalcounterpartyriskcalculatedaccordingtothemarketvaluationmethodforcounterpartyrisk Counterpartywithriskweightof0% Counterpartywithriskweightof20% Counterpartywithriskweightof100%

Note28

Positive

205.53,738.2

17.6458.6

41.3

3.3

-

-

0.1

205.51,122.917.6

205.54,241.517.6

Negative

741.9

113.32,640.0

166.8

-

47.9

-

29.3

50

AmountsinDKKmillion

Notes

51

Exchangerateriskanduseofderivativefinancialinstrumentsat31December2008

Thetotalunhedgedforeigncurrencypositionat31December,translatedatyear-endexchangeratesintoDKKamountstoDKK533.4mio.(DKK339.9millionat31December2007).

AllamountsaretranslatedintoDKKattheyear-endexchangerates.Thenetpositionisspecifiedasfollows:

Loansatyear-endexchangeratesForeignexchangeadjustmentathedgepriceProvisionforloans

Loans as per the balance sheet

DuefromcreditinstitutionsandcentralbanksBondportfoliosInterestreceivable,etc.Otherassets

Total assets as per the balance sheet

Issuedbondsatyear-endexchangeratesForeignexchangeadjustmentathedgeprice

Issued bonds as per the balance sheet

DuetobanksInterestpayableOthercreditorsTotalcapitalandreserves

Total liabilities as per the balance sheet

Derivativefinancialinstruments –debtors

Derivativefinancialinstruments –creditors

Total net position(translatedintoDKK)

USD

42,777.7

1,069.90.0

311.40.0

44,159.0

(9,947.0)

0.0(338.4)

(10,285.4)

1,232.9

(35,224.8)

(118.3)

Othercurrencies

4,803.3

186.63,456.8121.215.5

8,583.4

0.0

(0.1)(150.3)

(150.4)

(1,830.3)

(9,611.6)

651.7

Totalforreigncurrency

47,581.0

1,256.53,456.8

432.615.5

52,742.4

(9,947.0)

(0.1)(488.7)

(10,435.8)

3,063.2

(44,836.4)

533.4

DKK

1,544.82,810.2(892.4)

246.723,394.41,004.0781.5

28,889.2

(52,572.8)0.0

(8,428.3)(941.1)(374.5)

(8,879.1)

(71,195.8)

Total

49,125.82,810.2(892.4)

51,043.6

1,503.226,851.21,436.6797.0

81,631.6

(62,519.8)0.0

(62,519.8)

(8,428.4)(1,429.8)(374.5)

(8,879.1)

(81,631.6)

Note29

Notes

Danish Ship Finance A/S(Danmarks Skibskredit A/S)

SanktAnnæPlads3·DK-1250CopenhagenKT:+4533339333·F:+4533339666·danish@shipfinance.dk

CVR-no.:27492649

www.shipfinance.dk