contents · force, working toward common goals, is key. diversity with regard to culture,...

Contents

In review

1 Company overview

1 Financial calendar

2 Goals and strategies

3 Corporate responsibility

4 Vision and values

Performance 2011

6 Board of Directors’ report

12 Directors’ responsibility statement

13 Consolidated accounts

33 Parent company accounts

40 Auditor’s report

42 Shares and shareholder matters

Our organization and governance

44 Corporate governance

48 Presentation of the Board of Directors

50 Presentation of the Management Team

52 Company information

In review

Company overview

This is AkerPhiladelphia ShipyardAker Philadelphia Shipyard is a leading U.S. commercial shipyard constructingvessels for operation in the Jones Act market. It possesses a state-of-the-artshipbuilding facility and has earned a reputation as a preferred provider ofocean-going merchant vessels with a track record of delivering quality ships.

Aker Philadelphia Shipyard ASA is headquartered in Oslo, Norway with anoperating subsidiary in Philadelphia, Pennsylvania, USA. The companyconstructs merchant vessels for operation in the U.S. Jones act market (tradebetween U.S. ports).

Aker Philadelphia Shipyard ASA was listed on Oslo Axess* in December 2007.Converto Capital Fund AS, an investment fund controlled by Aker ASA, is themajority shareholder, holding 71.2% of the shares.

Elements contributing to success:

� State-of-the-art shipyard with modern equipment� Access to global shipbuilding expertise through agreements with Hyundai

Mipo Dockyard and Samsung Heavy Industries� A solid track record demonstrated by the delivery of sixteen quality vessels

(four containerships, twelve product tankers)� Skilled workforce consisting of direct and contracted employees

* Regulated and authorized market under the auspices of the Oslo StockExchange (Oslo Børs).

�

HighlightsSecured financing forconstruction of twoproduct tankersAgreements reached betweenAPSI and the Philadelphia Ship-yard Development Corporation,Caterpillar Financial ServicesCorporation and Aker ASA,enable the yard to finance con-struction of two additionalproduct tankers, Hulls 017 and018.

Successful completionof tanker seriesThe Overseas Tampa was deliv-ered in April, marking thesuccessful conclusion of ahistoric shipbuilding programthat began in 2005. It was thelargest commercial ship con-struction effort in the UnitedStates since World War II.

New contract signedAgreement signed withSeaRiver Maritime, Inc., theU.S. marine affiliate of ExxonMobil Corporation, for twoaframax tankers for use intransporting Alaskan NorthSlope crude oil from PrinceWilliam Sound to the U.S. WestCoast.

New union agreementNew union agreement toextend into 2015.

Financial calendar201213 April Annual general

meeting3 May 1st quarter

interim results10 August 2nd quarter

interim results31 October 3rd quarter

interim results

Aker Philadelphia Shipyard annual report 2011 1

2 Aker Philadelphia Shipyard annual report 2011

In review

Goals and Strategies

Goals and Strategies

Be the premier provider of merchant vessels in theU.S. Jones Act market

Zero Incidents

� We will make a personal commitment to embrace safety as our first core value� We will never compromise safety� We will communicate our safety goals and objectives� We will focus on improving safety performance

Improving Productivity

� We will maintain our culture of continuous improvement� We will measure our performance and improvements for everything we do� We will always strive to be better and never accept that things are good enough� We will create accountability at all levels of the organization for our performance

Deliver on Our Promises

� We will be genuine and transparent in our commitments to our stakeholders� We will deliver on-time and to the expected standard for both internal and external

customers� We will be a trusted and preferred partner

Market Leader

� We will evaluate existing and new market segments� We will evaluate best in class designs from world class shipbuilding partners� We will target taking a leading position within attractive market segments by weighing

short-term benefits versus long-term opportunities and value creation

In review

Corporate responsibility

Demonstrating corporateresponsibilityAker Philadelphia Shipyard’s overriding corporate responsibility isconcern for the communities that we are a part of. We strive toprovide products and services in a safe, environmentally sound,ethical, and socially responsible manner.

The way in which we achieve growth andprofitability is as important as the achieve-ments themselves. Aker Philadelphia Ship-yard intends to be recognized forpromoting sustainability and responsibleoperations that are driven by both financialperformance and social responsibility. Wemeet the needs of today’s customers with-out harming future generations.

Our corporate values and ethical guide-lines make responsibility an integral facetof our business. Constant awareness andresponsive actions by Aker PhiladelphiaShipyard instill confidence among employ-ees, investors, customers, suppliers,cooperation partners, and the communitiesof which we are a part. Dedication, know-how, and performance make our companythe preferred partner.

Aker Philadelphia Shipyard is commit-ted to good corporate citizenship andoperates according to fundamental stan-dards for workplace safety, ethical con-duct, and sound business practices.

We are inspired by internationallypromulgated standards and guidelinessuch as the UN’s Global Compact, theGlobal Reporting Initiative™ (GRI), andOECD guidelines. The following five keypoints summarize how Aker PhiladelphiaShipyard daily implements its corporatesocial responsibility policy.

� Expertise: On a daily basis, we shareknow-how and experience with oursuppliers and employees. We con-tinually hone our state-of-the-artexpertise and find new, effective sol-utions in various operations and imple-ment them in deliveries.

� People: A competent, motivated work-force, working toward common goals, iskey. Diversity with regard to culture, reli-

gion, and ethnicity makes us stronger andmore adaptive. We help each employeereach his or her full potential — and takepersonal responsibility for health, safety,and the environment. Cooperation,quality-consciousness, and mutualrespect further Aker Philadelphia Ship-yard’s commitment to protect individualrights and the interests of the company’sstakeholders, our local communities, andthe environment.

� Environment: We work systematicallyto reduce emissions and minimize envi-ronmental stress — at Aker PhiladelphiaShipyard and in our products and serv-ices. The greatest long-term service wecan perform for the environment is todevelop and deliver technologies,products, and solutions that are con-sistent with sustainable development.

� Integrity: Success at Aker PhiladelphiaShipyard depends on a reliable, well-functioning business climate. Our sixcore values help ensure integrity andadherence to high ethical standards.Potential ethical dilemmas are dis-cussed, sharpening awareness of ourguidelines and generating improvements.We never stop building a culture thatvalues honesty, openness, and trans-parency. We are trustworthy and reliable.

� Society: Through profitable invest-ments, Aker Philadelphia Shipyardestablishes good relations with thecommunities in which we operate. Asafe workplace and the desirable eco-nomic ripple effects it propagates is animportant contributor to the develop-ment of local and regional businesses.Aker Philadelphia Shipyard wants to bea good neighbor.

Our commitmentAker Philadelphia Shipyard makes thefollowing commitments to its customers,shareholders, employees, and thecommunities in which we operate.

Our customers can expect� Outstanding health, safety, and

environmental performance� To be listened to and understood� Competitive, on-time quality deliveries� An open, long-term and mutually

beneficial relationship� High ethical standards and integrity

Our shareholders can expect� To be part of an active and value-

creating ownership, full of energy anddetermination

� A decisive management that closelysupervises business activities, deliverssolid profits, and inspires confidence

� Transparency — accurate, consistent,and timely presentation of financial andother relevant information

� Sound corporate governance

Our employees can expect� A safe and inspiring working

environment� Challenging work assignments and

opportunities for growth� A working environment in which diversity

is appreciated� Competitive compensation, relative to

the markets in which they work� To be treated fairly and with respect

The communities in which we operatecan expect� Local and regional value creation� Respect for its inhabitants, laws, and

culture� Value-adding relationships with local

partners, subcontractors, and suppliers� Socially responsible business conduct,

integrity, and high ethical standards� Openness — an open agenda,

transparency, and reliability



In review

Vision and values

Unity and commitmentAker Philadelphia Shipyard’sbusiness activities build onour six corporate values, which areshared by other Aker companies.

Aker’s corporate values support and guide day-to-day priorities and decision-making. Acting inaccordance with our corporate values promotessound attitudes and performance every day.Shared corporate values also reinforce thebonds among Aker companies.

Our employees’ dedication and know-howallow Aker Philadelphia Shipyard to deliver onits commitments to customers, employees,and the communities in which we work.

The values that we share have long tradi-tions. They originated among Aker compa-nies, and have steadily evolved over time,always reflecting the work of the gen-erations at Aker.

Although the companies that comprise Akergenerally engage in distinctly different busi-nesses, they share many common culturalfeatures. An effective corporate culture mustremain dynamic and responsive. Thus, it iswith a combination of humility and pragma-tism that Aker Philadelphia Shipyard works tostrengthen and cultivate its shared values.

Solid values are the foundation that enablesAker companies to achieve sustainable, long-term industrial development. People who “speakthe same language” cooperate more easilywithin their business areas, throughout thecompany, and across Aker company borders.

HSE mindsetWe take personalresponsibility forHSE becausewe care

Customerdrive

Our values

Building customertrust is key to ourbusiness

DeliveringresultsWe deliverconsistently andstrive to beat ourgoals

Hands-onmanagementWe know ourbusiness and getthings done

Open anddirect dialogueWe encourageearly and honestcommunication

Peopleand teamsAll our majorachievements areteam efforts

Aker Philadelphia Shipyard – Ourvalues in context

� We maintain anunrelenting goalof “zero inci-dents” in HSEmatters

� We work safelyin a manner thatprotects and pro-motes the health and well-being of ouremployees and the environment

� We obey HSE guidelines and rules inrecognition that they are for the healthand benefit of our employees, and arenot intended to be restrictive orcounterproductive

� Every employee works proactively toimprove on his/her performance and theperformance of those around them

HSE mindsetWe take personalresponsibility forHSE becausewe care

� We build customertrust by deliveringprojects on timeand on budget,and at theagreed levels ofquality

� We recognize thatevery employee at Aker PhiladelphiaShipyard is in a customer-supplier rela-tionship

� We know our customer’s business andwe are a flexible, competent and reli-able partner at every project phase

CustomerdriveBuilding customertrust is key to ourbusiness

� We deliver on timeand withinbudget, to ourcustomer’s sat-isfaction

� On all levels of aproject, it is thefinal result thatcounts, and we strive to deliver morethan our stakeholders expect and do it“right the first time”

� We make optimal use of resources andadhere to proven, defined processes inorder to produce a superior product

� We are proactive and energetic, andwe strive to generate return on theassets entrusted to us by our stake-holders

DeliveringresultsWe deliverconsistently andstrive to beat ourgoals


In review

Vision and values

� We recognize ourroles and responsi-bilities, takeownership andaccept theconsequencesof our actions

� We act with asense of ownershipin our workplace

� We encourage an environment of risktaking within the context of account-ability

� We are professional and proactive, anddiscover problems early on

Hands-onmanagementWe know ourbusiness and getthings done

� We are committedto honest andsincere com-municationsamong allemployees,creating anenvironment in which ideas are fosteredand shared

� We speak our opinion and fight for ourideas, but once the relevant decisionsare made, we work together and focusall of our energy on execution

� We convey information so that everyonein our company can better understandour business, our objectives and ourperformance

� We deal with errors and improvementsfrankly and constructively

Open anddirect dialogueWe encourageearly and honestcommunication

� We believe ateamwork relation-ship among adiverse collectionof employees is theway to productivityand continuousimprovement

� We work in an inclusive environmentthat embraces change, new ideas,respect for the individual and equalopportunity to succeed

� We are team players, willing to shareand utilize common knowledge

� We empower people and provide oppor-tunities for personal development in anenergetic and challenging atmosphere

Peopleand teamsAll our majorachievements areteam efforts


Performance 2011

Board of Directors’ report

Board of Directors’ report 2011Aker Philadelphia Shipyard ASA and its subsidiaries (referred to herein as “AKPS” or the“Company”) is a leading shipbuilder in the U.S. Jones Act market. During 2011, Aker PhiladelphiaShipyard, Inc. (referred to herein as “APSI” or the “Shipyard”), the sole operating subsidiary of AKPS,delivered one product tanker, the Overseas Tampa, which represented the final tanker in theShipyard’s twelve-tanker series and the sixteenth new build to be delivered by the Shipyard since itsinception.On 31 March 2011, APSI formally closed the transactions contemplated by the Authorization Agree-ment (the “Authorization Agreement”) signed in mid-December 2010 between APSI and the Phila-delphia Shipyard Development Corporation (“PSDC”). The closing of the transactions, in conjunctionwith construction loans provided by Caterpillar Financial Services Corporation (“Cat Financial”) andAker ASA, secured the yard’s ability to finance the construction of two product tankers, Hulls 017and 018.Additionally, on 29 September 2011, APSI and SeaRiver Maritime, Inc. (“SeaRiver”), Exxon MobilCorporation’s U.S. maritime affiliate, executed definitive documentation for the construction of twoaframax tankers, Hulls 019 and 020. The tankers are intended to be used to transport Alaskan NorthSlope crude oil from Prince William Sound, Alaska to the U.S West Coast. Construction of the firstvessel is expected to begin by March 2012 and both vessels are scheduled for delivery in 2014.For the year ended 31 December 2011, AKPS realized operating revenues of USD 30.6 million, adecrease of 86% from 2010 and earnings before interest, taxes, depreciation, and amortization(EBITDA) of negative USD 3.2 million, compared to EBITDA of USD 18.9 million in 2010. The reduc-tion in revenues and EBITDA is driven by the completion by APSI of its twelve-tanker series in thesecond quarter of 2011 and the construction by APSI of Hulls 017 and 018 for its own account, whichdefers all revenue recognition until sale and delivery of each vessel.

Converto Capital Fund AS (formerly namedAker Capital Fund AS), an investment fundcontrolled by Aker ASA, is the majorityshareholder in Aker Philadelphia ShipyardASA owning 71.2% of its total outstandingshares as of 31 December 2011.

ActivitiesThe main entities in the Aker PhiladelphiaShipyard ASA Group are the Norwegianholding company, Aker Philadelphia Ship-yard ASA, and the U.S. operating sub-sidiary, APSI, a leading U.S. commercialshipyard. Aker Philadelphia Shipyard ASAis located in Oslo, Norway, while APSI islocated in Philadelphia, Pennsylvania, USA.

As of 31 December 2011, APSI’s work-force consisted of 646 people, with anapproximate breakdown of 455 directemployees and 191 subcontractedpersonnel.

AKPS’s business strategy for APSI isto build merchant vessels for operation inthe U.S. Jones Act market. The Companydelivered the final vessel in its twelve-tanker series for American Shipping Com-pany ASA (“AMSC”) and OverseasShipholding Group, Inc. (“OSG”) in April2011. The Company is currently buildingtwo additional product tankers for its ownaccount which will be followed by the twoaframax vessels for SeaRiver.

Cost efficient and cost competitiveconstruction of new vessels is critical forthe success of AKPS’s business model.There are several factors that positionAKPS to capitalize on this market: astate-of-the-art shipyard with modernequipment; access to global shipbuildingexpertise with Hyundai Mipo Dockyard andSamsung Heavy Industries; and a solidtrack record as indicated through thedelivery of four container vessels to MatsonNavigation Company and twelve producttankers to AMSC and OSG.

The Jones Act marketU.S. coastwise law, commonly referred toas the Jones Act, requires all commercialvessels transporting merchandise betweenports in the United States to be built,owned, operated and manned by U.S. citi-zens and to be registered under the U.S.flag.

The Master Agreement, ShipyardLease and Authorization Agreementwith PSDCAPSI currently operates its shipyard undera 99-year lease with PSDC, a government-sponsored non-profit corporation. A MasterAgreement, a Shipyard Lease and anAuthorization Agreement govern APSI’srelationship with PSDC and the various

governmental parties that have contributedto the establishment of the Shipyard.

Under the Master Agreement, thegovernmental parties have providedapproximately USD 438 million for therenovation and modernization of the facilityand training of the workforce. APSI wasrequired to make certain qualified infra-structure investments totaling USD135 million, which have been fully satisfied.APSI was also required to match govern-ment funding for certain training coststotaling USD 50 million, which has beenfulfilled.

Under the Shipyard Lease, PSDC hasthe right to recapture the Shipyard if APSIfails to maintain an average of at least 200full-time employees at the Shipyard for 90consecutive days, subject to the right ofAPSI to complete work-in-process projectsand a one-time, limited cure right whichallows APSI to restore the lease to a 5-yearterm under certain circumstances. With thecurrent business plan, the Companyconsiders it unlikely that this terminationevent will be triggered as long as there isongoing shipbuilding activity at the Ship-yard.

Under the Authorization Agreement,APSI is obligated to construct Hulls 017and 018 in accordance with their currentproduction schedules. If those ships arenot completed before certain agreed-upon


Performance 2011


deadlines, as extended for events of forcemajeure, then PSDC may require APSI topay liquidated damages of up to USD35 million per ship. APSI’s obligation to paythe liquidated damages is guaranteed toPSDC by Aker ASA.

StrategyAKPS will, through its unique partnershipsand experience obtained during con-struction of the series of product tankers,continue the development of APSI’s posi-tion to be the most efficient shipyard in theU.S. Jones Act market for production ofmerchant vessels. AKPS expects itspowerful resume to facilitate possibilitiesfor profitable construction of vessels withinexisting and new market segments. AKPSwill continue to monitor and evaluate howto derive the maximum benefit from itscompetitive advantage and market share.APSI will also pursue fabrication oppor-tunities outside of traditional shipbuildingwhere its core competencies in steel fab-rication, heavy lifting, and projectmanagement are advantageous.

Key events 2011On 18 January 2011, a new four-year collec-tive bargaining agreement was ratified bythe Philadelphia Metal Trades Council,which represents the eleven unions at theShipyard. This new labor contract willextend until 31 January 2015.

On 31 March 2011, PSDC and APSIclosed the transactions contemplated bythe Authorization Agreement dated15 December 2010 and effective as of18 February 2011 (the “AuthorizationAgreement”). Pursuant to the AuthorizationAgreement, PSDC purchased certain ship-yard assets from APSI for a purchase priceof USD 42 million, payable in two equaltranches, with funds provided by theCommonwealth of Pennsylvania. APSI willlease back those same assets from PSDCsubject to the terms of its shipyard leaseand the Authorization Agreement. APSI willuse the sale proceeds, in combination withconstruction period financing with privatelenders described below and its own avail-able funds, to construct Hulls 017 and 018.For accounting purposes the transactionwill be accounted for as a sale/leasebackunder a financial lease and no adjustmentswere made to the accounting value of theassets at closing. The proceeds from thesale must be used to construct Hull 017and Hull 018.

In conjunction with the closing, AkerASA, which indirectly owns 71.2% of theshares of AKPS, agreed to make a USD30 million subordinated construction loan toAPSI with funding to be in two tranches ofUSD 15 million each. The loan is subject tocustomary disbursement conditions. Inter-est will be paid at maturity and the interestrate is on market terms. The loan is securedby a second lien on Hulls 017 and 018.

Additionally, in conjunction with thetransaction, PIDC Regional Center, LP XV(the “Welcome Fund”) agreed to restructureits USD 20 million loan to, among otherthings, extend its maturity and secure itwith a second lien on Hulls 017 and 018.

In connection with the closing, the Cityof Philadelphia agreed to temporarily deferUSD 8 million in tax payments due fromAPSI over three years, commencing in2011. The full deferral is due in 2017.

For additional details regarding theAuthorization Agreement and relatedtransactions described above, refer tonote 24.

The final product tanker in the12-tanker series for AMSC and OSG wasdelivered in April 2011, and formally namedthe Overseas Tampa.

On 1 June 2011, APSI entered into aloan agreement with Caterpillar FinancialServices Corporation (“Cat Financial”) forcredit facilities totaling USD 80 million topartially fund construction of Hulls 017 and018. The loan is subject to customary dis-bursement conditions. Interest will be paidquarterly in arrears and the interest rate ison market terms. The loan is secured by afirst lien on Hulls 017 and 018. The loan isalso secured by a performance guaranty byAker ASA. This loan completed all of thefinancing required to build those vessels.At 31 December 2011 Hull 017 was beingconstructed in the dock and Hull 018 wasprogressing in the shops.

Additionally, on 29 September 2011,APSI and SeaRiver Maritime, Inc.(“SeaRiver”), Exxon Mobil Corporation’sU.S. maritime affiliate, executed definitivedocumentation for the construction of twoaframax tankers. The tankers are intendedto be used to transport Alaskan NorthSlope crude oil from Prince William Sound,Alaska to the U.S West Coast. Con-struction of the first vessel is expected tobegin by the end of Q1 2012 and bothvessels are scheduled for delivery in 2014.

Review of the annual accounts

AKPS prepares and presents its accountsaccording to International Financial Report-ing Standards (IFRS) as adopted by theEuropean Union.

Aker Philadelphia Shipyard ASA wasformed on 16 October 2007 to be the hold-ing company of APSI which owns the ship-yard located in Philadelphia, Pennsylvania,USA.

In accordance with IFRS, AKPS hasrecognized the last nine tankers of thetwelve-tanker order for AMSC and OSG asone single project. As such, revenue andexpense for these tankers have beenrecognized on a total project basis. As of31 December 2011, AKPS was 100%complete with the project.

Order backlog

APSI’s order backlog was USD401.0 million as of 31 December 2011including customer-provided materials ofapproximately USD 80 million. At the endof the year, the order backlog was com-prised of work to be performed on the twoaframax tankers to be built for SeaRiver.The net backlog increase of USD371.2 million over 2010 is due to the com-pletion of the twelve-ship series for AMSCand OSG and the execution of shipbuildingcontracts for the two vessel project forSeaRiver in 2011.

Profit and loss accounts

In 2011, AKPS had revenues of USD30.6 million compared to USD 217.7 in2010. Revenues are recognized accordingto the percentage of completion methodwhen firm contracts are in place, basedprimarily on the scope of completed workcompared to estimated overall projectscope. The recognized revenues in 2011and 2010 represent revenues related to theproduct tankers built for AMSC and OSG.

AKPS’s operating profit before inter-est, taxes, depreciation, and amortization(EBITDA) was negative USD 3.2 million in2011 compared to USD 18.9 million in2010. These figures correspond to EBITDAmargins of (10.6%) and 8.7%, respectively.

Depreciation and amortization expensewas USD 4.6 million in 2011 and USD 7.4million in 2010. AKPS’s operating profitbefore interest and taxes (EBIT) was neg-ative USD 7.9 million in 2011, compared toan operating profit before interest andtaxes of USD 11.5 million in 2010. The


Performance 2011


Company performed procedures todetermine if there was any impairment ofproperty, plant and equipment. Based onthe analysis no impairment has occurred asof 31 December 2011 (see note 1 of theconsolidated financial statements).

Net financial items were negative USD1.6 million in 2011, compared to negativeUSD 0.8 million in 2010. The negative netfinancial items in 2011 are primarilyattributable to losses on foreign currencyforward contracts to economically hedgeforeign exchange risk related to the con-struction of Hulls 017 and 018 andexchange rate losses on cash depositswhich are held in Norwegian Kroner (NOK).The negative financial items in 2010 areprimarily attributable to interest expense.These losses did not impact the overallcost of the two tankers being built forAKPS’s own account. Interest cost relatedto construction financing is capitalized as acost of the project and will therefore notappear under financial items.

Income tax benefit for 2011 was USD5.3 million, compared to income taxexpense of USD 5.0 million in 2010.

In 2011, AKPS’s net loss was USD4.2 million and its basic and diluted lossper share was USD 0.41. The correspond-ing figures for 2010 were net income ofUSD 5.8 million and basic and diluted earn-ings per share of USD 0.57.

The decrease in revenues, EBITDA andnet income year over year was driven bysignificantly less shipbuilding for externalcustomers in 2011 than in 2010, as pro-duction in 2011 was mainly for AKPS’s ownaccount and production in 2010 wasprimarily for AMSC and OSG.

AKPS’s research and development isprimarily related to two areas. The mostimportant area is the development of thebuilding methodology and working methodsto ensure that APSI takes maximum benefitof the learning curve and produces eachgrand block and each vessel more efficientlythan the previous. There is also work relatedto the development of new vessels, but APSIwill not develop its own designs for othervessel types, but rather identify and licenseexisting best in class designs and cooperatewith the owners of such designs.

Cash flowThe Company’s cash flow from operationsis very dynamic, as it in part depends onpayment for construction and deliverysettlement for the vessels sold to external

customers. Total net cash flow used inoperating activities in 2011 was USD25.2 million compared to total net cash flowprovided by operating activities of USD40.2 million in 2010. As noted previously,the significant changes year to year arecaused by the timing of ship deliveries andthe level of completion on vessels.

Net cash flow used in investment activ-ities was USD 2.4 million in 2011 and USD0.7 million in 2010. These expenditureswere primarily for infrastructure improve-ments and equipment replacements.

Net cash flow provided by financingactivities was USD 4.9 million in 2011 andUSD 34.1 million was used in financingactivities in 2010. The changes are causedby the timing of draw-downs on the con-struction financing and timing of vesseldeliveries.

Statement of financial position andliquidityAs of 31 December 2011, AKPS had cashand cash equivalents of USD 18.9 million.The corresponding figure for 2010 wasUSD 41.7 million. The decrease wasprimarily driven by the internal fundingused for construction on Hulls 017 and 018and the restricted cash deposited in anescrow account in connection with theSeaRiver project. At year-end 2011,AKPS’s net working capital was USD30.7 million, compared to USD 25.4 millionat 31 December 2010.

Current assets excluding cash as of31 December 2011 are mainly comprisedof work-in-progress of USD 70.1 millioncompared to work-in-progress andvessels-under-construction receivables ofUSD 61.6 million at year end 2010 andprepayments and other receivables of USD11.8 million in 2011 compared to USD7.9 million in 2010.

Non-current assets as of 31 December2011 of USD 75.5 million are property,plant and equipment, restricted cash, andother non-current assets. As of31 December 2010 non-current assetstotaled USD 62.9 million and consisted ofproperty, plant and equipment and othernon-current assets. The increase is primar-ily due to the restricted cash of USD 20.0million as discussed above.

Current liabilities as of 31 December2011 of USD 51.3 million are mostly relatedto construction financing, trade payables,accrued liabilities, deferred income fromPSDC and current provisions (warranties).

The corresponding figure for 2010 wasUSD 44.0 million. The increase is primarilydriven by the deferred income from PSDCand increased trade and other payables.

Interest-bearing debt increased toUSD 52.1 million at 31 December 2011compared to USD 47.3 million as of31 December 2010. This increase wasattributable to more construction financingdrawn for Hulls 017 and 018 which waspartially offset by repayment on otherinterest-bearing debt.

At year-end 2011, total equity wasUSD 88.9 million and the equity ratio was50% of total assets. Corresponding figuresfor 2010 were USD 93.1 million and 53%respectively. The decrease in equity wascaused by the current year’s loss.

The Board deems that the Company,at the present time, is financially sound andhas an appropriate financing structure.

AKPS’s capital expenditure financingcontains defaults triggered by an AMSCinsolvency event. AKPS closely monitorsthese links to AMSC and their potentialimpact on operations, including throughfrequent updates with AMSC’s manage-ment. If an AMSC insolvency event occurs,then AKPS’s capital expenditure creditfacility would be in default, which wouldrequire the Company to seek waivers fromits lender. As a condition to any such waiver,the lender might, among other things,require additional collateral or guarantees,increase the interest rate, and/or imposefees. There is no guarantee the lender wouldgrant any such waiver, in which case thelender could demand immediate repaymentof its loans, foreclose on its collateral and/orexercise its other rights and remedies.

RisksMarket risksThe overall market risk is related to theJones Act, but market experts believe thatsignificant changes to the legislation areunlikely. AKPS is also exposed to marketrisk related to imbalance between supplyand demand for vessels and the associatedreduction in new projects.

Sales risksAKPS is exposed to sales price risk withrespect to the sale of Hulls 017 and 018.AKPS faces additional risks, including earlytermination of its facility lease at the end ofits current backlog, if it is unable to securenew orders and/or financing for projectsbeyond Hulls 019 and 020.


Performance 2011


Operational risksAKPS faces risks related to construction ofvessels. The risks related to vessel con-struction are primarily the Shipyard’s abilityto meet the anticipated budgets andschedules as well as availability of skilledworkers, and the risk of maintaining stablesupplier networks and subcontractors.Although AKPS has been successful build-ing ships that are identical to Hulls 017 and018 over the past several years, the down-scaling of its workforce over the past yearincreases the risk of not having sufficientskilled workers throughout the constructionperiod. Hulls 019 and 020 are a differenttype of tanker and considerably larger thanthe tankers that the Shipyard has previouslyconstructed. Therefore there exists someseries change management risk as well asintegration risk with the Company’s newengineering and procurement partner,Samsung Heavy Industries.

Financial risksAKPS’s activities expose it to a variety offinancial risks: market risk (including cur-rency risk, commodity risk, and price risk),

credit risk, liquidity risk and cash flowinterest-rate risk. AKPS’s overall riskmanagement program focuses on theunpredictability of financial markets andseeks to minimize potential adverse effectson AKPS’s financial performance. AKPSuses derivative financial instruments toeconomically hedge certain risk exposures.

Risk management is carried out underpolicies and protocols approved by theBoard of Directors. These policies provideprinciples for overall financial riskmanagement as well as policies coveringspecific areas such as foreign exchangerisk, interest-rate risk, credit risk, use ofderivative financial instruments andnon-derivative financial instruments andinvesting excess liquidity.

There is moderate exposure for futurecontracts related to the two tankers beingbuilt for the Company’s own account. Thereis minimal exposure to future contracts forHulls 019 and 020. The Company considersits net currency exposure to be moderate.

AKPS operates in business areas thatare capital intensive. The Company is

dependent upon having access to con-struction financing facilities and other loansand debt facilities to the extent its owncash flow from operations and milestonepayments from customers is insufficient tofund its operations and capitalexpenditures. In turn, AKPS must secureand maintain sufficient equity capital tosupport such borrowing facilities.

Additionally, the challenging U.S.economy continues to put existing andfuture financing sources at risk. AKPS regu-larly monitors the financial health of itsconstruction financing lenders as well asthe financial health of the financialinstitutions which it uses for cash manage-ment services and in which it makes depos-its and other investments. This risk isregarded as minimal by the Company.

Through construction financing, theCompany is exposed to fluctuations ininterest rates. The interest risk related toexternal capital needed for vessels underconstruction is deemed moderate.

The credit risk of ship owners andlessors is evaluated upon contract signing.


Performance 2011


Typically, ship owners have financingapprovals in place before contracts areentered into. At the completion of a vessel,transfer of ownership takes place uponsettlement. Should a ship owner fail to pay,the Company may attempt to dispose ofthe vessel in the open-market to recoverAKPS’s construction costs. Credit riskassociated with AKPS’s receivables isregarded as limited.

The going concern assumption

In view of AKPS’s current financial positionand backlog, the Board confirms that the2011 annual accounts have been preparedbased on the assumption of a going con-cern.

Parent company accounts andallocation of loss for the year

The income/(loss) account of Aker Phila-delphia Shipyard ASA shows a loss for theyear 2011 of USD 0.2 million. The Board ofDirectors proposes that the loss for theyear be allocated as shown below:

Dividend payments USD 0.0 million

Other equity USD (0.2) million

Total allocated USD (0.2) million

Unrestricted equity amounts to USD 14.1million.

The ultimate recovery of the invest-ment in subsidiary and the long-termreceivable from subsidiary is dependentupon APSI remaining a going concern. Theparent company’s only assets are cash, theinvestment in subsidiary (APSI) and thelong-term receivable from subsidiary(APSI).

Health, safety and environment

Maintaining a healthy and safe workplaceand being friendly to the environment is animportant part of AKPS’s strategy. AKPSdevelops policies to comply with or exceedall federal, state and local requirements.Compliance with environmental regulationsis assured by establishing operatingprocedures for best management practicesand is executed through management andsupervision.

At AKPS, the Union-ManagementSafety and Environmental Board reviewsthe various HSE programs, and makesrecommendations on policies and proce-dures. The HSE system includes safety

training of employees and subcontractors,safety inspections, industrial health andwellness programs, drug testing, emer-gency response and environmental pro-grams. The Company expects toimplement new initiatives to continuouslyimprove its HSE mindset during 2012.

In 2011, the frequency of lost-timeincidents (incidents resulting in absencefrom work per one million hours) was 20.5,compared with 8.2 in 2010. The accidentscame from a total of 534,367 hours workedby AKPS employees in 2011, comparedwith 1,466,248 hours worked by AKPSemployees in 2010. AKPS continues towork proactively to further improve thesafety and reduce the number of injuries atthe Shipyard. The Company continues tobelieve that improvements will be made.

To reduce the number of accidentsand injuries, the Shipyard will continue toimprove its in-house systems and proce-dures for exchanging knowledge gainedfrom past accidents and potentiallyhazardous events. The Company is alsoworking with outside parties to obtain andimplement best practices to develop a zeroincident culture. To this end, AKPS enteredinto a cooperative agreement with theDepartment of Labor’s Occupational Safetyand Health Administration (OSHA) in 2008.The agreement was designed to assist theCompany in implementing a successfulsafety and health management system toprotect its employees and to encourage theCompany to participate in OSHA’s Volun-tary Protection Program. The Company hascompleted all of its applicable requirementsregarding this agreement and will considerapplying for OSHA’s Voluntary ProtectionProgram during 2012.

AKPS takes its environmentalresponsibilities seriously. Environmentalstatus reporting is an integral part of theCompany’s reporting system, on par withreporting on financial matters and oper-ations. AKPS aims to comply with appli-cable environmental laws, rules, andregulations. This commitment extends toevaluating and adopting environmentallybeneficial improvements in productionprocesses, alternative materials, and serv-ices. AKPS promotes open communicationon environmental issues with employees,neighbors, public authorities, and otherinterested parties. APSI gathers and sortswaste to promote environmentally respon-sible handling, disposal, and recovery ofany residual value.

OrganizationOn 31 December 2011, AKPS had approx-imately 455 direct employees and 191 subcontractors. Employee turnover in 2011 wasprimarily related to the union workforce.

Equal-opportunity employerAKPS seeks to be an attractive employerand maintains a human relations policy thatis open and fair. AKPS is committed toproviding equal employment opportunity toall employees and applicants for employ-ment, regardless of race, color, ethnicbackground, gender, religion, age, maritalstatus, sexual orientation, national origin,citizenship status, disability, veteran status,or any other legally protected status.Diversity strengthens AKPS’s overallcapacity and skills. In support of this diver-sity, APSI currently maintains an approx-imate 41% minority workforce.

The maritime industry has traditionallybeen male-dominated. The entire industryfaces the challenge of increasing the pro-portion of female employees. The Com-pany has taken affirmative steps to addressthis challenge. For example, the Companyencourages female applicants and hasseen increased interest among potentialfemale employees to pursue a career withthe Company. To further this goal, theCompany has recruited at schools andtraining programs with more women. TheCompany has also continued to trainsupervisors, managers and employees inour EEO Policy.

At year-end 2011, there were nowomen in AKPS senior management, butwomen held key positions such as ProjectCost Controller, Payroll/Benefits Supervisorand PR/Communications Specialist. Inaddition, three of the six members of theBoard of Directors are women.

Corporate governanceAKPS’s corporate governance policy existsto ensure an appropriate division of rolesamong the Company’s owners, Board ofDirectors and Executive Management.Such a separation of roles ensures thatgoals and strategies are prepared, thatadopted corporate strategies areimplemented, and that the results achievedare subject to verification and follow-up.Applying these principles also contributesto satisfactory group-wide monitoring andverification of activities. An appropriatedivision of responsibilities and satisfactorycontrols will contribute to the greatest


Performance 2011


possible value creation over time, to thebenefit of shareholders and other interestgroups. AKPS’s Board of Directorsadopted its corporate governance guide-lines in 2008. AKPS’s corporate gover-nance guidelines are presented in greaterdetail on page 44 of this annual report.

OutlookAker Philadelphia Shipyard has built astrong foundation for its future throughboth its reputation for delivering on itspromises and the efficient and innovativeorganization that has been developed.

With the successful closing of thetransactions with PSDC and SeaRiver, andthe related financings by Cat Financial andAker ASA, shipbuilding activities at APSI’sshipyard are secured through late 2014.The challenging United States economyhas created uncertainties which havedelayed the decision making process fornew builds and has created difficultiesregarding financing of new build projects.However, AKPS remains committed toproviding the Jones Act market with themost cost efficient and environmentallyfriendly merchant vessels possible andbelieves that it will be the supplier of choicewhen these vessels are ordered.

Discussions with potential buyers ofHulls 017 and 018 are ongoing. AKPS con-tinues to pursue prospects for new con-struction projects in all areas of the JonesAct market, including shuttle tankers, con-tainerships, short-sea shipping vessels, off-shore service vessels, barges, wind turbineinstallation vessels, and other large steelfabrication projects, in order to secureadditional backlog in 2014 and onwards.AKPS considers each opportunity for thevalue it would create for AKPS and itsshareholders.

Oslo, Norway 22 February 2012Board of Directors

Aker Philadelphia Shipyard ASA

James H. MillerBoard Chairman

Amy Humphreys Elin Karfjell

Manuel N. Stamatakis Audun Stensvold Thorhild Widvey

Kristian M. RokkeGeneral Manager


Performance 2011

Directors’ responsibility statement

Directors’ responsibility statementToday, the Board of Directors and the ChiefExecutive Officer reviewed and approvedthe Board of Directors’ report and theconsolidated and separate annual financialstatements for Aker Philadelphia ShipyardASA, as of and for the year ending31 December 2011 (annual report 2011).

The Aker Philadelphia Shipyard ASAconsolidated financial statements havebeen prepared in accordance with IFRS, asadopted by the European Union, and addi-tional disclosure requirements in theNorwegian Accounting Act, and that shouldbe used as of 31 December 2011. Theseparate financial statements for Aker

Philadelphia Shipyard ASA have beenprepared in accordance with the Norwe-gian Accounting Act and NorwegianAccounting Standards as of 31 December2011. The Board of Directors’ report forAKPS and the parent company is inaccordance with the requirements in theNorwegian Accounting Act and Norwegianaccounting standard no. 16, as of31 December 2011.

To the best of our knowledge:

� The consolidated and separate annualfinancial statements for 2011 have beenprepared in accordance with applicableaccounting standards

� The consolidated and separate annualfinancial statements give a true and fairview of the assets, liabilities, financialposition and profit as a whole as of31 December 2011 for AKPS and theparent company

� The Board of Directors’ report for AKPSand the parent company includes a trueand fair review of:– The development and performance of

the business and the position ofAKPS and the parent company

– The principal risks and uncertaintiesAKPS and the parent company face








Performance 2011

Consolidated accounts


Consolidated Income Statement

Amounts in USD thousands Note 2011 2010

Operating revenues 30 607 217 655Cost of vessels (15 972) (190 790)Wages and other personnel expenses, net 2 (3 546) (1 912)Other operating expenses 3 (14 334) (6 021)

Operating (loss)/income before depreciation (3 245) 18 932

Depreciation 6 (4 612) (7 398)

Operating (loss)/income (7 857) 11 534

Financial income 4 270 481Financial expenses 4 (1 906) (1 289)

(Loss)/income before tax (9 493) 10 726

Income tax benefit/(expense) 5 5 285 (4 974)

Net (loss)/income for the year * (4 208) 5 752


Consolidated Statementof Comprehensive Income

Amounts in USD thousands (except shares and per share amounts) 2011 2010

Net (loss)/income for the year (4 208) 5 752Other comprehensive income, net of income tax - -

Total comprehensive (loss)/income for the year * (4 208) 5 752

Average number of shares 12 10 165 305 10 165 305Basic (loss)/earnings per share (USD) 12 (0.41) 0.57Diluted (loss)/earnings per share (USD) 12 (0.41) 0.57

* All attributable to equity holders of the parent company.


Performance 2011



Consolidated Statement of Financial Positionas of 31 DecemberAmounts in USD thousands Note 2011 2010

ASSETSProperty, plant and equipment 6 54 850 59 757Restricted cash 11 20 000 -Other non-current assets 7 664 3 171

Total non-current assets 75 514 62 928

Vessels-under-construction receivables 8 - 51 939Work-in-process 8 70 120 9 634Prepayments and other receivables 9 11 023 7 399Income tax receivable 5 797 473Cash and cash equivalents 10 18 913 41 699

Total current assets 100 853 111 144

Total assets 176 367 174 072

EQUITY AND LIABILITIESPaid in capital 13 70 995 70 995Other equity 17 879 22 087

Total equity attributable to equity holders of the parent company 88 874 93 082

Total equity 88 874 93 082

Interest-bearing long-term debt 14 31 805 29 020Other long-term liabilities 15 3 621 1 257Deferred tax liabilities 5 806 6 702

Total non-current liabilities 36 232 36 979

Construction loans 14, 20 8 000 16 000Interest-bearing short-term debt 14, 20 12 315 2 240Trade payables and accrued liabilities 19 28 326 21 011Income taxes payable 5 - 1 878Other provisions - warranties 18 2 620 2 882

Total current liabilities 51 261 44 011

Total liabilities 87 493 80 990

Total equity and liabilities 176 367 174 072








Performance 2011



Consolidated Statement of Changes in Equity

Amounts in USD thousands Share Capital Share Premium Other Equity Total Equity

Balance at 31 December 2009 18 709 52 286 16 335 87 330

Net income for the year 2010 - - 5 752 5 752


Net loss for the year 2011 - - (4 208) (4 208)



Performance 2011



Consolidated Cash Flow Statement


(Loss)/income before tax (9 493) 10 726Unrealized foreign exchange loss/(gain) 4,19 431 (142)Depreciation 6 4 612 7 398Write-off of assets-under-construction 6 207 372Net financial expense 4 873 799(Increase)/decrease in:

Vessels-under-construction receivables 8 51 939 42 676Work-in-process 8 (57 956) (9 634)Other current assets 9 (3 624) 6 269Other non-current assets 7,11 (17 492) 203

Increase/(decrease) in:Trade payables and accrued liabilities 18,19 6 624 (16 860)Other long-term liabilities 15 2 364 (176)

Income taxes paid 5 (2 813) (554)Interest paid, net of capitalized interest 4 (1 431) (1 471)Interest received 4 558 622

Net cash flow (used in)/from operating activities (25 201) 40 228

Investments in property, plant and equipment 6 (2 445) (679)

Net cash flow used in investing activities (2 445) (679)

Proceeds from interest-bearing long-term debt 14 15 100 100Repayment of interest-bearing long-term debt 14 (2 240) (2 175)Proceeds from construction loans 14 32 000 184 000Repayment of construction loans 14 (40 000) (216 000)

Net cash flow from/(used in) financing activities 4 860 (34 075)

Net change in cash and cash equivalents (22 786) 5 474

Cash and cash equivalents as of 1 January 41 699 36 225

Cash and cash equivalents as of 31 December 10 18 913 41 699


Performance 2011



Notes to the accounts

� Note 1: Accounting principles

STATEMENT OF COMPLIANCEThe consolidated financials statements of AkerPhiladelphia Shipyard ASA and its subsidiaries(AKPS or the Company) have been prepared inaccordance with International Financial ReportingStandards (IFRS) as adopted by the EuropeanUnion in effect at each financial reporting period.

These accounts have been approved forissue by the Board of Directors on 22 February2012.

BACKGROUND AND BASIS FORPREPARATIONAker Philadelphia Shipyard ASA was formed on16 October 2007 to be the holding company ofAker Philadelphia Shipyard, Inc. (APSI or theShipyard) which owns and operates a shipyardlocated in Philadelphia, Pennsylvania, USA. On3 December 2008, APSI formed Aker Phila-delphia Priming, Inc. (APPI), a wholly-ownedsubsidiary, to own and operate APSI’s prime-plating operations. On 30 December 2011, APPIwas merged with and into APSI.

On 24 March 2011, APSI formed APSIShipholding 017, Inc. and APSI Shipholding 018,Inc., each a wholly-owned subsidiary, to hold thecontracts for Hulls 017 and 018, respectively.

AKPS is domiciled in Norway. APSI is domi-ciled in the Commonwealth of Pennsylvania,USA. The two subsidiaries of APSI are domiciledin the state of Delaware, USA.

These consolidated financial statementshave been prepared on a historical cost basis,except for derivative financial instruments thathave been measured at fair value.

The consolidated financial statements arepresented in USD (thousands), except whenindicated otherwise.

USE OF ESTIMATESThe preparation of financial statements in con-formity with IFRS requires the use of estimatesand assumptions that affect the reportedamounts in the financial statements. Althoughthese estimates are based on management’sbest knowledge of current events and actions,actual results may ultimately differ from thoseestimates.

Critical accounting estimates and assump-tions are as follows:

Revenue and Cost RecognitionAKPS uses the percentage of completion methodfor accounting for customer projects in process.The use of the percentage of completion methodrequires AKPS to estimate the stage of com-pletion of contract activity at each statement offinancial position date and estimate the ultimateoutcome of costs and profit on contracts. Rev-

enue recognition and cost estimates dependupon variables such as steel prices, labor costsand availability, and other production inputs.AKPS must also evaluate and estimate the out-come of variation orders, contract claims andrequests from customers to modify contractualterms which can involve complex negotiationswith customers. Generally, estimates are subjectto a greater level of uncertainty when a vesseldesign is new to AKPS than if a vessel is beingconstructed later in a series. As Hulls 017 and018 currently have no third party customers,AKPS is not using the percentage of completionmethod for these vessels.

Estimates of the Fair Value of its CashGenerating UnitAKPS has concluded that it has only one cashgenerating unit and must determine the fair valueof its cash generating unit in order to performimpairment tests of its long-lived assets.Determining the fair value of the cash generatingunit that includes AKPS’s activities is subject touncertainty and requires estimates of therecoverable amount which is the higher of the fairvalue less costs to sell and value in use. Theestimated recoverable amount is determinedbased upon the present value of the future cashflows of the cash generating unit. Generally, therewill be uncertainties regarding the timing andamount of cash flows for various reasons, includ-ing the costs of production and demand in theU.S. Jones Act shipping market. In addition,AKPS must determine an appropriate interestrate to discount expected future cash flows.

Deferred Income TaxesDeferred income tax assets are recognized whenit is probable that they will be realized. Determin-ing probability requires AKPS to estimate thesources of future taxable income from operationsand reversing taxable temporary differences.Determining these amounts is subject touncertainty and is based primarily upon historicalearnings, reversals of taxable temporary differ-ences and expected earnings due to contracts inprogress and contract backlog.

Accruals/ProvisionsAKPS has various accruals/provisions whichrequire management to make estimates.Management uses all available facts and circum-stances when determining these estimatesincluding historical experiences as well as inputfrom outside advisors.

Estimates and underlying assumptions arereviewed on an ongoing basis. Revisions toaccounting estimates are recognized in theperiod in which the estimates are revised if the

revision affects that period or in the period ofrevision and future periods if the revision affectsboth current and future periods.

AKPS ACCOUNTING ANDCONSOLIDATION PRINCIPLESSubsidiariesThe consolidated financial statements include thefinancial statements of the parent company, AkerPhiladelphia Shipyard ASA, and its subsidiaries.A subsidiary is an entity in which Aker Phila-delphia Shipyard ASA either owns, directly orindirectly, over 50% of the voting rights, orotherwise has the power to govern the operatingand financial policies.

All intercompany transactions are eliminatedin consolidation.

FOREIGN CURRENCY TRANSLATION ANDTRANSACTIONSFunctional CurrencyItems included in the financial statements of eachentity in AKPS are initially recorded in the entity’sfunctional currency, i.e. the currency that bestreflects the economic substance of the under-lying events and circumstances relevant to thatsubsidiary.

The consolidated financial statements arepresented in United States dollars (USD),rounded to the nearest thousand, which is thereporting currency for the consolidated accountsand the functional currencies for all the entitieswithin AKPS.

Transactions and BalancesForeign currency transactions are translated intothe functional currency using the exchange ratesprevailing at the dates of the transactions. Mone-tary assets and liabilities in foreign currencies aretranslated into the functional currency at theexchange rates in effect on the statement offinancial position date. Foreign exchange gainsand losses resulting from the settlement of suchtransactions and from the translation of monetaryassets and liabilities denominated in foreign cur-rencies are recognized in the consolidatedincome statement. Foreign exchange differencesarising in respect of operating items are includedin operating profit in the consolidated incomestatement, and those arising in respect of finan-cial assets and liabilities are recorded net as afinancial item.

PROPERTY, PLANT AND EQUIPMENTGeneralProperty, plant and equipment acquired by AKPScompanies is stated at cost at the date of acquis-ition. Depreciation is calculated on a straight-linebasis and adjusted for impairment charges, ifany. The carrying value of the property, plant and


Performance 2011


equipment on the statement of financial positionrepresents the cost net of government grantsand subsidies received (if applicable) less accu-mulated depreciation and any impairment charg-es. Cost includes expenditures that are directlyattributable to the asset. The cost of self-constructed assets includes the costs of materialand direct labor, and any other costs directlyattributable to bringing the asset to workingcondition for its intended use. Interest costs onborrowings to finance the construction of prop-erty, plant and equipment are capitalized duringthe period of time that is required to completeand prepare the asset for its intended use.

Land is not depreciated, but other property,plant, and equipment in use are depreciated on astraight-line basis. Expected useful lives of long-lived assets are reviewed annually and, wherethey differ significantly from previous estimates,depreciation periods are changed accordingly.

Ordinary repairs and maintenance costs arecharged to the consolidated income statementduring the financial period in which they areincurred. The cost of improvements is included inthe asset’s carrying amount when it is probablethat AKPS will derive future economic benefits inexcess of the originally assessed standard ofperformance of the existing asset. Improvementsare depreciated over the useful lives of therelated assets.

Gains and losses on disposals aredetermined by comparing the disposal proceedswith the carrying amount and are included inoperating profit. Assets to be disposed of arereported at the lower of the carrying amount andthe fair value less selling costs.

Component Cost AccountingThe Company allocates the amount initially recog-nized in respect of an item of property, plant andequipment to its significant components anddepreciates separately each such componentpart over its useful life.

IMPAIRMENT OF LONG-LIVED ASSETSProperty, plant and equipment and othernon-current assets are reviewed for potentialimpairment whenever events or changes in cir-cumstances indicate that the carrying amount ofan asset may not be recoverable.

For the purposes of assessing impairment,assets are grouped at the lowest levels for whichthere are separately identifiable, mainlyindependent, cash flows. An impairment loss isthe amount by which the carrying amount of theassets exceeds the recoverable amount. Therecoverable amount is the higher of the asset’snet selling price and its value in use. The value inuse is determined by discounted cash flows andfair market value is based on recent third partyappraisals.

A previously recognized impairment loss isreversed only if there has been a change in theestimates used to determine the recoverableamount, however not to an extent higher than thecarrying amount that would have been determinedhad no impairment loss been recognized in prioryears.

LEASESLeases of property, plant and equipment, whereAKPS has substantially all the risks and rewardsof ownership, are classified as finance leases.

Finance leases are capitalized at the inception ofthe lease at the lower of the fair value of theleased property or the present value of the mini-mum lease payments. Lease payments areapportioned between the finance charges andreduction of the lease liability. Finance chargesare charged directly against income. Property,plant and equipment acquired under financeleases are depreciated over the shorter of theuseful life of the asset or the lease term.

Leases where a significant portion of therisks and rewards of ownership are retained bythe lessor are classified as operating leases.Payments made under operating leases net ofany incentives received from the lessor ischarged to the consolidated income statementon a straight-line basis over the period of thelease when annual instalments vary.

When a sale and leaseback results in afinance lease, any gain on the sale is deferredand recognized as income over the lease term. Ifthe leaseback is classified as an operating lease,then any gain is recognized immediately if thesale and leaseback are at fair value.

CONSTRUCTION CONTRACTSAKPS’s business activities mainly involve deliv-eries of vessels and services under contract tocustomers. Revenue related to constructioncontracts for customers is recognized using thepercentage of completion method, based primar-ily on the scope of completed work compared toestimated overall project scope at the statementof financial position date. The stage of com-pletion is assessed by reference to productionhours incurred to total estimated productionhours. As soon as the outcome of the con-struction contract can be estimated reliably,contract revenue and expenses are recognized inthe consolidated income statement in proportionto the degree of completion of the contract.

If the final outcome of a contract cannot beestimated reliably, contract revenue is recog-nized only to the extent costs incurred areexpected to be recovered. Any projected losseson future work done under existing contracts areexpensed and classified as accrued costs/provisions in the statement of financial positionunder accrued liabilities. Losses on contracts arerecognized in full when identified. Recognizedcontract profit includes profit derived fromchange orders and disputed amounts when, inmanagement’s assessment, realization is prob-able and reasonable estimates can be made.

Project costs include costs directly relatedto the specific contract and indirect costsattributable to the contract. Interest expense isincluded in project costs to the extent there arequalifying assets, which normally occurs whencustomer payments lag behind constructionprogress.

To the extent AKPS’ procurement activitiesresult in it acting as an agent for its customer, therelated costs and revenues are presented netwithin revenue. This situation typically occurswhen certain materials are paid for and suppliedby the customer directly.

Project revenue is classified as operatingrevenues in the consolidated income statement.Vessels-under-construction receivable is classi-fied as a current asset in the statement of finan-cial position. Advances from customers arededucted from the value of vessels-under-

construction receivable of the contract involvedor, to the extent they exceed this value, recordedas customer advances. Customer advances thatexceed contract offsets would be classified ascurrent liabilities.

VESSEL CONSTRUCTION FOR UNSPECIFIEDCUSTOMERSVessels which do not have a contractual buyerand are being built with the expectation of identi-fying a customer during the construction phaseare capitalized into work-in-process. When thevessel is completed and sold both revenue andcost are recognized. If conditions indicate thatthe ultimate sales price will be below the esti-mated cost of the vessel, AKPS determines theestimated sales price and records an impairmentcharge as appropriate. The accumulated costsfor vessels-under-construction receivables forunspecified customers is included inwork-in-process.

GOVERNMENT GRANTS AND SUPPORTGovernment grants and support are recognizedat their fair value where there is reasonableassurance that amounts will be received andconditions have been met. In some cases,recognition occurs over a period of time asrestrictions lapse or as conditions are met.Grants and support related to capitalexpenditures or construction of assets forAKPS’s account are recognized as a reduction ofthe related asset cost. For assets held for use,this results in a lower depreciation charge overthe useful life of the asset. Grants related tospecific programs or projects are recognized asincome over the period in which work that relatesto the grant is performed.

CASH AND CASH EQUIVALENTSCash and cash equivalents comprise cash onhand, demand deposits with banks and othershort-term highly liquid investments with originalmaturities of three months or less.

SHARE CAPITALOrdinary shares are classified as equity.Incremental costs directly attributable to theissue of new shares or options are shown inequity as a deduction, net of tax, from the pro-ceeds. Where any subsidiary purchases AKPS’sequity share capital (treasury shares), theconsideration paid, including any directlyattributable incremental costs, is deducted fromequity.

INTEREST-BEARING LIABILITIESAll loans and borrowings are initially recognizedat cost, being the fair value of the considerationreceived net of issue costs associated with theborrowing.

After initial recognition, interest-bearingborrowings are subsequently measured at amor-tized cost using the effective interest method;any difference between proceeds (net of trans-action costs) and the redemption value is recog-nized in the consolidated income statement overthe period the interest bearing liabilities are out-standing. Amortized cost is calculated by takinginto account any issuance costs, and any dis-count or premium.


Performance 2011


Gains and losses are recognized in net profitor loss when the liabilities are derecognized orimpaired, as well as through the amortizationprocess.

INCOME TAXESCurrent Income TaxesIncome taxes receivable and payable for thecurrent period are measured at the amountexpected to be recovered or paid to the taxationauthorities. The tax rates and tax laws as used tocompute the amount are those that are enactedor substantively enacted by the statement offinancial position date.

Deferred Income TaxesDeferred income tax is provided, using the asset/liability method, on all temporary differences atthe statement of financial position date betweenthe tax bases of assets and liabilities and theircarrying amounts for financial reporting pur-poses, except upon initial recognition of an assetor a liability that does not impact income.

Deferred income tax assets are recognizedfor all deductible temporary differences, andcarry-forward of unused tax losses and credits,to the extent that it is probable that taxable profitwill be available against which the deductibletemporary differences, and the carry-forward ofunused tax losses and credits can be utilized.The carrying amount of deferred income taxassets is reviewed at each statement of financialposition date and reduced to the extent that it isno longer probable that sufficient taxable profitwill be available to allow all or part of thedeferred income tax asset to be utilized. Theexpected utilization of tax losses are not dis-counted when calculating the deferred tax asset.

Deferred income tax assets and liabilities aremeasured at the tax rates that are expected toapply to the year when the asset is realized orthe liability is settled, based on tax rates (and taxlaws) that have been enacted or substantivelyenacted at the statement of financial positiondate.

Income tax relating to items recognizeddirectly in equity is recognized in equity.

PENSION OBLIGATIONSAKPS has a pension plan that covers itsnon-union employees whereby contributions arepaid to a qualifying pension plan. The Company’sunion employees are participants in a unionselected pension plan. Although the Union Planis a defined benefit pension plan, because theunion does not provide information on theCompany’s employees and their share of thepension assets and obligations, the plan isaccounted for in accordance with the require-ments of a defined contribution plan. Underdefined contribution pension plans, contributionsare charged to the consolidated income state-ment in the period to which the contributionsrelate.

PROVISIONSA provision is recognized when AKPS has apresent obligation (legal or constructive) as aresult of a past event and it is probable (i.e. morelikely than not) that an outflow of resourcesembodying economic benefits will be required tosettle the obligation, and a reliable estimate can

be made of the amount of the obligation. Provi-sions are reviewed at each statement of financialposition date and adjusted to reflect the currentestimate.

The amount of the provision is the presentvalue of the risk adjusted expenditures expectedto be required to settle the obligation,determined using the estimated risk free interestrate as the discount rate. Where discounting isused, the carrying amount of provision increasesin each period and is recognized as interestexpense.

FINANCIAL RISK MANAGEMENTAKPS’s activities expose it to a variety of finan-cial risks: market risk (including commodity pric-ing risk, currency risk, and price risk), credit risk,and cash-flow interest-rate risk. AKPS’s overallrisk management program focuses on theunpredictability of financial markets and seeks tominimize potential adverse effects on AKPS’sfinancial performance. AKPS uses derivativefinancial instruments to hedge certain riskexposures.

Risk-management is carried out under poli-cies approved by the Board of Directors. TheBoard of Directors provides principles for overallfinancial risk management as well as policiescovering specific areas such as foreign exchangerisk, interest-rate risk, credit risk, and use ofderivative financial instruments andnon-derivative financial instruments.

Credit RiskDue to the nature of AKPS’s operations, rev-enues and related receivables are typically con-centrated amongst a few customers. As of31 December 2011, AKPS had only one custom-er, SeaRiver Maritime, Inc. (SeaRiver). AKPScontinually evaluates the credit risk associatedwith customers and manages this risk by requir-ing payment for substantially the entire con-tractual amount prior to delivering a vessel,including milestone payments upon completionof specified milestones.

Interest Rate RiskAKPS is exposed to fluctuations in interest ratesfor its variable interest rate debt related to con-struction financing.

Foreign Exchange RiskAKPS is exposed to foreign currency risk forpurchases made in currencies other than theU.S. dollar which primarily relates to materials,supplies and costs related to the services ofexpatriate workers purchased from Korea, Nor-way and other countries in Europe. AKPSattempts to mitigate this risk through its foreignexchange hedging program.

Commodity Price RiskAKPS is exposed to commodity price risk on thesteel that it procures in the shipbuilding process.AKPS attempts to mitigate this risk by attemptingto pass this risk on to its end customers.

Capital Management RiskAKPS’s objectives when managing capital are tosafeguard its ability to continue as a going con-cern in order to provide returns for shareholdersand benefits for other stakeholders, while main-taining an optimal capital structure to minimizethe cost of capital. To meet these capital struc-

ture objectives, AKPS will review annually with itsBoard any proposed dividends as well as anyneeds to raise additional equity for future busi-ness opportunities or to reduce debt.

Counter-Party Credit RiskAKPS’s capital expenditure financing containdefaults triggered by an AMSC insolvencyevent. AKPS closely monitors these links toAMSC and their potential impact on operations,including through frequent updates with AMSC’smanagement. If an AMSC insolvency eventoccurs, then AKPS’s capital expenditure creditfacility would be in default, which would requirethe Company to seek waivers from its lender. Asa condition to any such waiver, the lender might,among other things, require additional collateralor guarantees, increase the interest rate, and/orimpose fees. There is no guarantee the lenderwould grant any such waiver, in which case thelender could demand immediate repayment of itsloans, foreclose on its collateral and/or exerciseits other rights and remedies.

Funding/Investment RiskThe challenging global economy has placed exist-ing and future financing sources at risk. AKPSregularly monitors the health of its constructionfinancing lenders. Additionally, AKPS monitorsthe financial health of the financial institutionswhich it uses for cash management services andin which it makes deposits and other invest-ments. AKPS responds to changes in conditionsaffecting its financing sources and deposit rela-tionships as situations warrant.

Liquidity RiskLiquidity risk is the risk that AKPS will encounterdifficulty in meeting the obligations associatedwith its financial liabilities that are settled bydelivering cash or other financial assets. AKPS’sapproach to managing liquidity is to ensure, asfar as possible, that it will always have sufficientliquidity to meet its liabilities when due, underboth normal and stressed conditions, withoutincurring unacceptable losses or risking damageto AKPS’s reputation. AKPS attempts to mitigatethis risk through project financing, progresspayments from the customers, and materialsupplied and paid directly by its customers.

Accounting for Derivative FinancialInstruments and Hedging ActivitiesDerivative financial instruments are recognizedinitially and in subsequent periods on the state-ment of financial position at fair value with theresulting gains and losses included in the con-solidated income statement.

In accordance with its treasury policy, AKPSdoes not hold or issue derivative financialinstruments for trading purposes. However,derivatives that do not qualify for hedge account-ing are accounted for as trading instruments.

Estimates of the fair value for foreign cur-rency contracts are obtained from a third party.The fair value of derivative long-term financialliabilities is disclosed in note 22 regarding finan-cial instruments.

RELATED PARTY TRANSACTIONSAll transactions, agreements and business activ-ities with related parties are conducted on anarm’s length basis according to ordinary busi-ness terms and conditions.


Performance 2011


SEGMENT INFORMATIONAKPS has one business segment which is build-ing vessels for the U.S. Jones Act market.

DIVIDENDSDividends are recorded in AKPS’s financial state-ments in the period in which they are approvedby AKPS’s shareholders. AKPS did not pay divi-dends in 2010 or 2011.

BASIC AND DILUTED EARNINGS PER SHAREThe calculation of basic earnings per share isbased on the profit attributable to ordinaryshareholders using the weighted average numberof shares outstanding during the year afterdeduction of the average number of treasuryshares held over the period. The calculation ofdiluted earnings per share is consistent with the

calculation of basic earnings per share while giv-ing effect to all potential dilutive ordinary sharesthat were outstanding during the period. AKPScurrently has no potentially dilutive shares out-standing.

EVENTS AFTER 31 DECEMBER 2011A distinction is made between events both favor-able and unfavorable that provide evidence ofconditions that existed at the statement of finan-cial position date (adjusting events) and thosethat are indicative of conditions that arose afterthe statement of financial position date (non-adjusting events). Financial statements will onlybe adjusted to reflect adjusting events and notnon-adjusting events (although there are dis-closure requirements for such events).

RECENTLY ISSUED ACCOUNTINGSTANDARDS AND PRONOUNCEMENTSA number of new standards, amendments tostandards and interpretations are effective forannual periods beginning after 1 January 2012,and have not been applied in preparing theseconsolidated financial statements. None of theseis expected to have a significant effect on theconsolidated financial statements of AKPS,except for IFRS 9 Financial Instruments, whichbecomes mandatory for AKPS’s 2013 con-solidated financial statements and could changethe classification and measurement of financialassets. AKPS does not plan to adopt this stan-dard early and the extent of the impact has notbeen determined.

� Note 2: Wages and other personnel expenses

Wages and other personnel expenses consist of:

Amounts in USD thousands (except number of employees) 2011 2010

Wages 22 679 34 026Social security contributions 2 273 3 177Pension costs (note 17) 708 836Other expenses 5 030 9 033

Total gross expense 30 690 47 072Expenses related to vessel construction (27 144) (45 160)

Wages and other personnel expenses, net 3 546 1 912

Average number of employees 329 552Number of employees at year-end 455 332

Other expenses relate primarily to workers' compensation and employee benefits.

� Note 3: Other operating expenses

Other operating expenses consist of:

Amounts in USD thousands 2011 2010

Rent and leasing expenses 1 539 1 550Other operating expenses 12 795 4 471

Total other operating expenses 14 334 6 021

Other operating expenses primarily relate to selling, general and administrative expenses. Fees to auditors for AKPS were for ordinary audit services andare included in other operating expenses. Such fees totaled USD 312 thousand for 2011 and USD 274 thousand for 2010. In 2011 APSI operated at belownormal capacity levels. The increase in other operating expenses was caused by unallocated overhead which was considered stranded cost and expensedin 2011.

� Note 4: Financial income and financial expenses


Interest income 270 339Gain on foreign currency forward contracts - 142

Financial income 270 481

Interest expense (1 500) (2 719)Interest capitalized on construction contracts 357 1 581Loss on foreign currency forward contracts (431) -Foreign exchange loss, net (332) (151)

Financial expenses (1 906) (1 289)

Net financial items (1 636) (808)


Performance 2011


Details regarding the Company's debt facilities and interest rates are provided in note 14 and foreign exchange gain/(loss) details are provided in note 22.The loss on foreign currency forward contracts in 2011 and gain in 2010 are attributable to mark-to-market of foreign exchange forward contracts in KoreanWon, Norwegian Kroner and Euro. The foreign exchange losses are attributable to certain cash balances which are held in Norwegian Kroner and KoreanWon.

� Note 5: Taxes

Income tax (benefit)/expenseRecognized in the income statement

Amounts in USD thousand 2011 2010

Current tax (benefit)/expense:Current year - U.S. 611 3 618Current year - Norway - (724)

Total current tax expense 611 2 894

Deferred tax (benefit)/expense:Origination and reversal of temporary differences - U.S. (5 896) 2 080Origination of temporary differences - Norway - -

Total deferred tax (benefit)/expense (5 896) 2 080

Total income tax (benefit)/expense in the income statement (5 285) 4 974

Reconciliation of effective tax rate:


(Loss)/income before tax (9 493) 10 726

Nominal Norwegian tax rate 28.0% 28.0%Expected tax (benefit)/expense using nominal Norwegian tax rate (2 658) 3 003Effect of differences between nominal Norwegian tax rate and U.S. federal, state and city tax rate (1 585) 1 999Additional deductions for tax purposes - (263)Loss not subject to tax (929) -Expenses not deductible for tax purposes 39 1 081Foreign exchange - 140Tax refund from 2009 deficit - (724)Other differences (152) (262)

Total income tax (benefit)/expense in the income statement (5 285) 4 974

The effective tax rate differs from the expected tax rate primarily due to the difference between the nominal Norwegian tax rate and U.S. federal, state andcity tax rate; expenses that were not deductible in the U.S. (2010) and for a tax refund of Norwegian taxes (2010).

Deferred tax assets and liabilitiesDeferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, andwhen the deferred income taxes relate to the same fiscal authority, which through 31 December 2011 for AKPS was primarily the U.S., the Commonwealthof Pennsylvania and the City of Philadelphia.

The offset amounts for U.S. items are as follows:


Deferred tax assets 8 449 4 791Deferred tax liabilities (9 255) (11 493)

Net deferred tax liabilities (806) (6 702)

Deferred tax assets and liabilities shown in the statement of financial position are mainly attributable to the U.S. tax jurisdiction.

Deferred assets have not been recognized in respect of the following items:Norwegian unrecognized tax assets represent net operating losses with no expiration date. At 31 December 2011 the Company also had USD 0.1 million ofdeferred tax assets related to the Norwegian tax jurisdiction which are not recognized in the financial statements due to lack of expected future taxableincome in Norway.

The gross movement in the deferred income tax account for all tax jurisdictions is as follows:


Beginning of the period (6 702) (4 622)Deferred tax benefit/(expense) 5 896 (2 080)

End of the year (806) (6 702)


Performance 2011


The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same taxjurisdiction, is as follows:

Deferred tax assets:

Amounts in USD thousand Provisions of assets Tax losses Total

31 December 2010 4 791 - 4 791Charged/(credited) to the income statement 3 658 - 3 658

31 December 2011 8 449 - 8 449

Deferred tax liabilities:

Amounts in USD thousandProperty,

plant and equipment Projects Other Total

31 December 2010 (10 421) (1 072) - (11 493)Charged/(credited) to the income statement 1 475 763 - 2 238

31 December 2011 (8 946) (309) - (9 255)

� Note 6: Property, plant and equipment

Movements in property, plant and equipment for 2011 are shown below:

Amounts in USD thousandsMachinery and

Vehicles BuildingsLand

ImprovementsAssets-Under-

Construction Total

Cost at 1 January 2011 29 209 51 411 18 172 350 99 142Purchases 474 6 - 1 965 2 445Transfers 5 22 - (27) -Write-off of assets-under-construction (1) - - - (207) (207)Write-off of assets - (692) - - (692)

Cost at 31 December 2011 29 688 50 747 18 172 2 081 100 688

Depreciation and impairment losses at 1 January 2011 20 074 15 537 3 774 - 39 385Depreciation 4 032 2 352 761 - 7 145Write-off of assets - (692) - - (692)

Depreciation and impairment losses at 31 December 2011 24 106 17 197 4 535 - 45 838

Book value at 31 December 2011 (2) 5 582 33 550 13 637 2 081 54 850

(1) The Company wrote off concept projects that were in assets-under-construction.(2) Book value of assets under financial leasing agreements recorded in the

statement of financial position (see note 16 and note 24): 3 913 17 052 11 179 - 32 144

Depreciation period 3-12 years 7-30 years 20 yearsDepreciation method Straight-line Straight-line Straight-line

Movements in property, plant and equipment for 2010 are shown below:

Amounts in USD thousandsMachinery and

Vehicles BuildingsLand

ImprovementsAssets-Under-

Construction Total

Cost at 1 January 2010 28 789 51 338 18 172 536 98 835Purchases 351 60 - 268 679Transfers 69 13 - (82) -Write-off of assets-under-construction (1) - - - (372) (372)

Cost at 31 December 2010 29 209 51 411 18 172 350 99 142

Depreciation and impairment losses at 1 January 2010 15 783 13 191 3 013 - 31 987Depreciation 4 291 2 346 761 - 7 398

Depreciation and impairment losses at 31 December 2010 20 074 15 537 3 774 - 39 385

Book value at 31 December 2010 (2) 9 135 35 874 14 398 350 59 757

(1) The Company wrote off concept projects that were in assets-under-construction.

(2) Book value of assets under financial leasing agreements recorded in the

statement of financial position: 15 - - - 15

Depreciation period 3-12 years 7-30 years 20 yearsDepreciation method Straight-line Straight-line Straight-line


Performance 2011


Leased plant and machineryThe Company leases production equipment under a number of finance lease agreements. At the end of each of the leases, the Company has the option topurchase the equipment at a beneficial price. The leased equipment secures lease obligations (see note 14). In January 2012 the Company entered into afinance lease for certain production equipment with a fair value of USD 1.5 million.

Security granted on property, plant and equipmentAt 31 December 2011, property, plant and equipment with a carrying amount of USD 54.9 million (2010: USD 59.8 million) are subject to mortgages tosecure loans (see note 14).

Property, plant and equipment under constructionAssets-under-construction primarily relate to upgrades in facilities and equipment.

DepreciationDepreciation charges for equipment and property used in the construction of vessels are included in depreciation expense and capitalized in the value ofvessels-under-construction receivables (2010) and work-in-process (2011). See note 8 for discussion of depreciation expense allocation.

Determination of recoverable amounts/fair valueThe Company evaluated any potential impairment of property, plant and equipment. Based on its analysis, which included alternative uses under differentscenarios, third party valuations of certain assets and a discounted cash flows approach, the Company concluded that no impairment of property, plantand equipment had occurred in 2011 or 2010. The discounted cash projections were based on future cash flow budgets and forecasts for the period withfirm backlog (2012-2014) and an annual growth rate of 2% for subsequent periods. A discount rate (WACC) of 8% before tax has been used.

Sales leasebackThe assets sold and leased back from PSDC are being accounted for as a finance lease and as such the gain is being deferred and recognized over theassets' useful life since the lease term is 99 years.

� Note 7: Other non-current assets

Other non-current assets consist of the following items:

Amounts in USD thousands 31 Dec. 2011 31 Dec. 2010

Prepaid lease payments and deposits 582 3 046Interest-bearing long-term receivable 82 125

Total 664 3 171

The lease payments and deposits are unsecured and have no collateral. For 31 December 2011, the amount includes USD 0.4 million for refundabledeposits for Hulls 019 and 020 as product tankers (USD 2.7 million for 31 December 2010). The interest-bearing long-term receivable has a fixed interestrate of 5.0% per annum.

� Note 8: Construction contracts/vessels built for own account

The order backlog represents an obligation to deliver vessels that have not yet been produced for our customer. The contract signing with SeaRiver hascreated an order backlog of USD 401.0 million as of 31 December 2011 and represents future sales. Order backlog represents base contract price pluscertain materials (approximately USD 80 million) supplied by the customer and is subject to adjustments based on change orders as defined in theconstruction contracts. The materials supplied by the customer will not be recognized as revenue by AKPS.

Amounts in USD thousandsOrder Backlog

31 Dec. 2011Order Intake

2011Order Backlog31 Dec. 2010

Order Intake2010

Order Backlog31 Dec. 2009

Crude oil tankers 401 000 401 000 29 841 - 246 693

Total 401 000 401 000 29 841 - 246 693

As of 31 December 2011 and 2010, the incurred costs billable to customers upon delivery of the ships were USD 0 and USD 51.9 million, respectively,using the percentage of completion method.

Revenue recognition will occur upon sale and delivery of Hull 017 and Hull 018 which are scheduled to be completed in Q3 2012 and Q1 2013, respectively.Additionally, the proceeds from the sale/leaseback transaction with the Philadelphia Shipyard Development Corporation (PSDC) described in note 24 arebeing treated as a reduction in the work-in-process of Hull 017 and Hull 018 ratably as construction costs are incurred due to refund clauses (liquidateddamages) which lapse upon vessel completion. Accordingly, accumulated costs less recognized proceeds are presented in the statement of financialposition and any income statement impact will be deferred until the sale and/or delivery of the vessels to third parties.

Work-in-process of USD 70.1 million at 31 December 2011 represents accumulated costs on vessel-under-construction for APSI’s own account net ofrecognized PSDC support of USD 16.9 million. APSI recognized depreciation expense for the year ended 31 December 2011 of USD 7.1 million of whichUSD 2.5 million was capitalized as part of work-in-process and USD 4.6 million was expensed in the income statement.

As of 31 December 2011, APSI has purchase commitments of approximately USD 36.5 million for Hulls 017-020.

Advances from customers as of 31 December 2011 and 2010 totaled USD 2.4 million and USD 24.7 million, respectively.


Performance 2011


� Note 9: Prepayments and other receivables

Prepayments and other receivables consist of the following items:


Advance payments to suppliers 5 692 7 267PSDC receivable (see note 24) 4 995 -Other short-term interest-free receivables 336 132

Total 11 023 7 399

� Note 10: Cash and cash equivalents

Cash and cash equivalents consist of the following items:


Cash and bank deposits 18 913 41 699

Cash and cash equivalents in the statement of cash flows 18 913 41 699

Cash and bank deposits are invested in overnight deposits. There are no restrictions on cash.

� Note 11: Restricted cash

Restricted cash consists of the following items:


Restricted cash 20 000 -

Total 20 000 -

Restricted cash represents an escrow account established in conjunction with the SeaRiver contract. The monies will be released after delivery of thesecond vessel (Hull 020) as defined in the contract.

� Note 12: Earnings per share

Basic and dilutedBasic and diluted (loss)/earnings per share are calculated by dividing the (loss)/income attributable to equity holders of the Company by the weightedaverage number of ordinary shares.

Amounts in USD thousands (except shares and per share data) 2011 2010

(Loss)/income attributable to equity holders of the Company (4 208) 5 752Weighted average number of ordinary shares in issue 10 165 305 10 165 305

Basic and diluted (loss)/earnings per share (USD) (0.41) 0.57

There were no potentially dilutive securities outstanding as of 31 December 2011 and 2010.

� Note 13: Paid in capital

The current share capital is 10,165,305 shares issued and outstanding, each with a par value of NOK 10 (USD 1.85 at an exchange rate of NOK/USD 5.4:1at the transaction date), fully paid. There are currently no additional authorized shares.

Amounts in USD thousands Share Capital Share Premium Total Paid-in-Capital

31 December 2010 18 709 52 286 70 995

31 December 2011 18 709 52 286 70 995


Performance 2011


� Note 14: Interest-bearing loans and liabilities

This note provides information about AKPS’s contractual terms of interest-bearing loans and borrowings. For more information about AKPS’s exposure tointerest rate and foreign currency risk, see note 22.


Interest-bearing long-term debt:Borrowings, net of unamortized financing costs of USD 24 in 2011and USD 124 in 2010 16 805 29 020Aker ASA loan 15 000 -

Total interest-bearing long-term debt 31 805 29 020

Interest-bearing short-term debt:PIDA/PIDC/Welcome Fund loans 12 315 2 230Finance lease liabilities - 10Construction loan 8 000 16 000

Total interest-bearing short-term debt 20 315 18 240

Secured Loans as of 31 December 2011 Maturity Balance Interest rate

Pennsylvania Industrial Development Authority (PIDA) Oct. 2015 6 222 3.75%PIDC Local Development Corporation (PIDC) July 2015 2 922 3.75%PIDC Regional Center, LP XV (Welcome Fund) Various 19 976 2.75%

Total Secured Loans 29 120

The PIDA and PIDC loans are secured by a joint first mortgage against certain property, plant and equipment with a carrying amount of USD 54.9 million asof 31 December 2011 (see note 6) and have a fixed interest rate until maturity. Payments are fixed and are paid monthly through maturity.

The Welcome Fund loan is secured by a second mortgage against certain property, plant and equipment with a carrying amount of USD 54.9 million as of31 December 2011 (see note 6) and has a fixed interest rate until the original maturity date (27 March 2012). Interest is paid semi-annually. The amendedrepayment schedule requires USD 5.0 million to be paid at the original maturity date of 27 March 2012; a minimum of USD 5.0 million and a maximum ofUSD 15.0 million (subject to certain sales price thresholds being met) to be repaid upon the sale and delivery of Hull 017; and any remaining loan balance tobe repaid upon the sale and delivery of Hull 018 (see note 24). The interest rate increases to 4.75% after the original maturity date. The Welcome Fund loanis also secured by a second lien on Hulls 017 and 018. Such lien is pari passu with the second lien of Aker ASA on such vessels.

Construction Loans as of 31 December 2011 Maturity Balance Interest rate

Caterpillar Financial Services Corporation < 12 months 8 000 3.60%

3-month LIBOR + 2.80%

The Caterpillar construction loan is a USD 80.0 million facility for construction of Hulls 017 and 018 with a maximum borrowing amount of USD 40.0 millionper vessel and is secured by a first lien on those vessels. The loan is also secured by a performance guaranty by Aker ASA.

The margin of 2.80% is subject to an increase or decrease depending upon the lender’s cost of funds as defined in the loan agreement. In no event will themargin be adjusted below 2.80%.

The Caterpillar construction loan outstanding at 31 December 2011 is for construction of Hull 017 and is secured by a first lien on work-in-process, valuedat USD 50.9 million as of 31 December 2011. The undrawn amount for Hull 017 as of 31 December 2011 is USD 32.0 million.

The Caterpillar loan balance for each vessel is repayable at the delivery of such vessel.

Maturity Balance Interest rate

Aker ASA > 12 months 15 000 4.33%

3-month LIBOR + 3.80%

The Aker construction loan is a USD 30.0 million facility for construction of Hulls 017 and 018 with a maximum borrowing amount of USD 15.0 million pervessel and is secured by a second lien on those vessels. Such lien is pari passu with the second lien of the Welcome Fund on such vessels.

The Aker construction loan outstanding at 31 December 2011 is for construction of Hull 017 and is secured by a second lien on work-in-process, valued atUSD 50.9 million as of 31 December 2011. The undrawn amount as of 31 December 2011 is USD 15.0 million. The second tranche was drawn on 11January 2012.

The Aker loan balance is repayable at the delivery of Hull 018 provided that certain sales price thresholds with respect to Hull 017 and Hull 018 are met.

Construction loan covenantsThe Caterpillar and Aker ASA loans contain certain financial covenants related to a minimum tangible net worth, as defined, of USD 40.0 million (USD 88.9million at 31 December 2011) and debt to tangible net worth of no more than 4.0 to 1.0 (0.6 at 31 December 2011). As of 31 December 2011, the Companywas in compliance with the existing covenants and is expected to remain in compliance during 2012.


Performance 2011


Undrawn credit facilitiesAs of 31 December 2011, the Company has USD 5.0 million of undrawn credit facilities with a bank, out of a total available balance of USD 6.0 million. Thedrawn amount is being used for letters of credit. The credit facilities are secured by a lien on deposit accounts held at the bank. The Company anticipatedthat it would be out of compliance with a financial covenant tested as of year-end for this facility but a waiver was obtained in December 2011.

� Note 15: Other long-term liabilities


Deferred real estate tax liability 3 621 1 257

Total 3 621 1 257

In connection with the PSDC agreement (see note 24), the City of Philadelphia agreed to temporarily defer USD 8.0 million in tax payments due from APSIover three years, commencing in 2011. The full deferral is due in 2017. The Company has discounted the deferred payments and is imputing interestexpense over the deferred period.

� Note 16: Operating and financial leases

Non-cancelable operating lease rentals are payable as follows as of 31 December:


Less than one year 220 469Between one and five years 742 100

Total 962 569

The operating leases are for priming and blasting equipment and facilities, vehicles, and printing and copying equipment. In February 2012 the Companyextended the priming facility lease for an additional five years. The lease payments are included in the above table.

The Company operates on land leased from PSDC through April 2018. Lease payments include rent, taxes and operating expenses. The lease paymentsare subject to an annual revision based on PSDC's operating expenses. The Company has options to renew the lease for three consecutive periods of 20years each and one final period of 19 years. The Company can acquire the land for USD 1 after the expiration of all renewal periods. The lease may beterminated if APSI fails to maintain certain employment levels at the shipyard. For additional information regarding this termination event, see note 24.Lease payments under the financing lease are USD 1 per year through April 2018 with options concurrent with the facility lease noted above.

� Note 17: Pensions

Pension expense recognized in the income statement:


Contribution plans (employer's contribution) 708 836

Total net pension expense 708 836

The Company has a defined contribution plan for its non-union employees which provides for a Company contribution based on a fixed percentage ofcertain employee contributions plus a discretionary percentage of salaries. In addition, the Company's union employees are participants in a multi-employerunion selected pension plan (Union Plan). The Company contributes a fixed amount per hour worked to the Union Plan. If the Company were to terminateits relationship with the Union Plan, the Company could be statutorily liable for a termination liability calculated at the termination date. Currently theCompany has no plans to terminate this relationship. Thus no termination liability has been recognized in the financial statements.

� Note 18: Other provisions-warranties


Current balance as of 1 January 2 882 3 400Provisions made during the period 300 660Provisions used during the period (562) (1 178)

Current balance as of 31 December 2 620 2 882

The warranty provision relates to the warranty work for product tankers (Hulls 005-016) delivered through April 2011.


Performance 2011


� Note 19: Trade payables and other accruals

Trade payables and other accruals comprise the following items:


Trade payables 2 881 1 160Ship material and subcontracting accruals 7 030 7 262Derivative financial instruments 431 -Employee-related cost accruals 3 942 8 430Overhead cost accruals 4 854 4 098Deferred income from PSDC 9 126 -Other short-term interest-free liabilities 62 61

Total 28 326 21 011

Deferred income represents amounts received from PSDC but not yet recognized as a reduction in ship cost (see notes 8 and 24).

� Note 20: Interest-bearing short-term debt

Interest-bearing short-term debt comprises the following items at 31 December:


Construction loans 8 000 16 000Current portion of interest-bearing long-term debt 12 315 2 240

Total 20 315 18 240

See note 14 for further details on interest-bearing debt.

� Note 21: Net interest-bearing debt

Net interest-bearing debt comprise the following items at 31 December:


Interest-bearing long-term debt (see note 14) 31 805 29 020+ Interest-bearing short-term debt excluding construction loans (see notes 14 and 20) 12 315 2 240

Total interest-bearing debt 44 120 31 260

- Interest-bearing long-term receivable (see note 7) (82) (125)- Cash and cash equivalents (see note 10) (18 913) (41 699)- Restricted cash (see note 11) (20 000) -

Total interest-bearing assets (38 995) (41 824)

Net interest-bearing debt (+)/assets (-) 5 125 (10 564)

� Note 22: Financial instruments

Exposure to credit, liquidity, currency and interest rate risks arise in the normal course of AKPS's business. Derivative financial instruments are used tohedge exposure to fluctuations in foreign exchange rates for business purposes.

Credit riskThe carrying amount of financial assets represents the maximum credit exposure. At 31 December 2011 and 2010, respectively, the maximum exposure tocredit risk is as follows:


Cash and cash equivalents 18 913 41 699

Restricted cash 20 000 -

Total 38 913 41 699


Interest-bearing long-term receivable 82 125Security deposits 357 2 880Vessels-under-construction receivables - 51 939PSDC receivable 4 995 -

Total 5 434 54 944


Performance 2011


Liquidity risk:The following are the contractual maturities of financial liabilities including interest payments:

31 December 2011

Amounts in USD thousands Book valueContractual

cash flowLess than6 months

6-12months

1-2years

2-5years

More than5 years

Non-derivative financial liabilities:Long-term portion of secured loans (gross) 16 829 (17 218) - - (12 638) (4 580) -Current portion of interest-bearing long-term external debt 12 315 (13 133) (6 626) (6 507) - - -Construction loans 8 000 (8 186) 31 424 (40 227) - - -Aker ASA loan 15 000 (15 935) 15 000 - (31 628) - -Trade payables 2 881 (2 881) (2 881) - - - -

Derivative financial liabilities:Forward exchange contracts 431 (431) (431) - - - -

Total 55 456 (57 784) 36 486 (46 734) (44 266) (4 580) -

31 December 2010

Amounts in USD thousands Book valueContractual

cash flowLess than6 months

6-12months

1-2years

2-5years

More than5 years

Non-derivative financial liabilities:Long-term portion of secured loans (gross) 29 144 (29 957) - - (2 618) (27 339) -Current portion of interest-bearing long-term external debt 2 240 (3 185) (1 595) (1 590) - - -Construction loans 16 000 (16 454) (16 454) - - - -Trade payables 1 160 (1 160) (1 160) - - - -

Derivative financial liabilities:Forward exchange contracts - - - - - - -

Total 48 544 (50 756) (19 209) (1 590) (2 618) (27 339) -

Book values included in the above tables are gross loan amounts. Balances included in the statement of financial position are shown net of unamortizedfinancing costs of USD 24 thousand in 2011 and USD 124 thousand in 2010.

Currency riskAKPS incurs foreign currency risk on purchases that are denominated in a currency other than USD. The currencies giving rise to this risk are primarily EUR(Euro), NOK (Norwegian Kroner) and KRW (Korean Won).

As of 31 December 2011 AKPS's portfolio of foreign exchange transaction exposures represented the following currencies and maturities. Amountsindicated represent the underlying notional amounts.

Amounts in USD thousandsMaturing

in 2012 2013 2014Lateryears Total

Buy KRW 4 601 - - - 4 601

Buy total 4 601 - - - 4 601

Net position 4 601 - - - 4 601

Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies and for which hedgeaccounting is not applied are recognized in the income statement. Both the changes in fair value of the forward contracts and the foreign exchange gainsand losses relating to the monetary items are recognized as part of net financial items (see note 4). The fair value of exchange contracts used as economichedges of monetary assets and liabilities in foreign currencies at 31 December 2011 and 2010 were USD 431 thousand and USD 0, respectively,recognized in current liabilities.


Performance 2011


Exposure to currency riskThe Company's exposure to currency risk at 31 December 2011 and 2010 was as follows based on the following notional amounts:

2011 2010

Amounts in USD thousands Euro KRW NOK Euro KRW NOK

Gross balance sheet exposureTrade payables (-) - - - (18) - -Cash - - 2 179 - - 2 669

Gross balance sheet exposure - - 2 179 (18) - 2 669Estimated forecast expenses (-) - (4 529) - (444) (14 026) -

Gross exposure - (4 529) - (444) (14 026) -Forward exchange contracts - 5 623 - - - -

Net exposure - 1 094 2 179 (462) (14 026) 2 669

Sensitivity analysisIn managing interest rate and currency risks AKPS aims to reduce the impact of short-term fluctuations on AKPS's earnings. Over the longer term, however,permanent changes in interest and foreign exchange rates would have an impact on consolidated earnings.

At 31 December 2011 it is estimated that a 10% strengthening of the USD against other foreign currencies would decrease AKPS's loss before tax by lessthan USD 1 thousand.

Exposure to interest rate riskIt is estimated that a general increase of one percentage point in interest rates would increase AKPS's loss before tax on an annual basis by approximatelyUSD 95 thousand for 2011 and decrease income before tax by USD 136 thousand for 2010. The estimate for financial liabilities includes only the variableinterest rate construction loan and the loan from Aker ASA (2011).

Fair valuesThe fair values of financial instruments together with the carrying amounts shown in the statement of financial position as of 31 December are as follows:

Amounts in USD thousands

Carryingamount

2011

Fairvalue2011

Carryingamount

2010

Fairvalue2010

Interest-bearing long-term receivables 82 82 125 125

Cash and cash equivalents 18 913 18 913 41 699 41 699

Forward exchange contracts 431 431 - -Secured loans (gross) (29 144) (25 436) (31 374) (27 790)Aker ASA loan (15 000) (12 860) - -Construction loans (8 000) (8 000) (16 000) (16 000)Finance lease liabilities - - (10) (10)

The fair value of fixed-interest long-term debt (i.e. secured loans) is calculated based on the present value of future principal and interest cash flowsdiscounted at a market rate of 8.0% for both 2011 and 2010.

Carrying amounts included in the above table are gross loan amounts. Balances included in the statement of financial position are shown net ofunamortized financing costs of USD 24 thousand in 2011 and USD 124 thousand in 2010.

In accordance with its treasury policy, AKPS does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do notqualify for hedge accounting are accounted for as trading instruments.

The Company has categorized its assets and liabilities that are recorded at fair value, based on the priority of the input to the valuation technique, into athree-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1)and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets and liabilities fall within different levels of the hierarchy, thecategorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The categories are described below:

Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have theability to access.

Level 2. Assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly orindirectly for substantially the full term of the asset or liability. Examples of Level 2 inputs include quoted prices for identical or similar assets or liabilities innon-active markets and pricing models whose inputs are observable for substantially the full term of the asset or liability.

Level 3. Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to theoverall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing theasset or liability.

Foreign exchange contracts as of 31 December 2011 are measured using Level 2 inputs.


Performance 2011


� Note 23: Shares owned or controlled by the President and Chief Executive Officer, Board of Directors and Senior Employees of AKPS

Shares owned in Aker Philadelphia Shipyard ASA as of 31 December 2011

Name PositionAKPS

Number of shares

Jim Miller Board Chairman 20 000Elin Karfjell Board Member 1 200Jeffrey Theisen Chief Financial Officer 500Scott Clapham Senior Vice President 1 000

There is no share option agreement between Aker Philadelphia Shipyard ASA and Senior Management or Directors.

Remuneration to the Board of Directors for the year ended 31 December 2011

Name Position Remuneration (NOK) Remuneration (USD)

Jim Miller Board Chairman 300 000 50 411Elin Karfjell Board Member 200 000 33 607Amy Humphreys Board Member 200 000 33 607Thorhild Widvey Board Member 200 000 33 607Audun Stensvold Board Member 200 000 33 607Manuel Stamatakis Board Member - -

Sum Directors' fees 1 100 000 184 839

No board members received any remuneration other than Directors' fees. Manuel Stamatakis agreed to waive his fees as a board member.

Remuneration to the audit committeeThe audit committee of AKPS is comprised of Elin Karfjell (Chairperson) and Audun Stensvold. Remuneration for the Chairperson is NOK 40,000 (USD6,721) and for each member is NOK 30,000 (USD 5,041).

Remuneration to the nomination committeeThe nomination committee of Aker Philadelphia Shipyard ASA has the following members: Leif-Arne Langoy, Oyvind Eriksen and Gerhard Heiberg.Remuneration earned by each member of the committee in 2011 was NOK 30,000 (USD 5,041).

Guidelines for remuneration to the President and CEO and members of the Executive TeamThe basis of the remuneration of the President and CEO and Members of the Executive Team has been developed in order to create a performance-basedsystem. This system of reward is designed to contribute to the achievement of good financial results and increase shareholder value.

The President and CEO and members of the Executive Team receive a base salary. In addition, a variable pay may be awarded. This variable pay programwas implemented in 2007. This variable pay is based on the achievement of financial and personal performance targets and leadership performance inaccordance with the Company’s values.

The variable pay program represents a potential for an additional variable pay in the range of 20% to 50% of base salary depending on the achievement ofdefined short-term and long-term results such as financial targets (profit, working capital and vessel sales) and personal targets (project targets,development of commercial solutions, alignment with values and improvement of Health, Safety and Environment).

The President and CEO and members of the Executive Team are eligible for participation in the variable pay program.

The President and CEO and Executive Team participate in the standard pension and insurance schemes, applicable to all employees. The Companypractices standard employment contracts and standard terms and conditions regarding notice period and severance pay for the President and CEO andthe members of the Executive Team.

The Company does not offer share option programs to the Executive Team.

Remuneration to Executive ManagementKristian Rokke was appointed President and CEO on 5 April 2011. His compensation for the period of 5 April 2011 through 31 December 2011 was a salaryof USD 184,981, variable pay of USD 11,500, pension contributions of USD 7,000 and other benefits of USD 55,826. Contractual severance obligations aresix months compensation.

Jim Miller was President and CEO for the period of 1 January 2011 through 4 April 2011 and remained in executive management of AKPS through June2011. During this period he received a salary of USD 215,929, variable pay of USD 248,514, pension contributions of USD 26,057 and other benefits of USD72,605. Jim Miller's compensation in 2010 was a salary of USD 485,000, variable pay of USD 547,400, pension contributions of USD 13,300 and otherbenefits of USD 142,400. Contractual severance obligations are eighteen months compensation.

In 2011, Jeffrey Theisen, CFO, received a salary of USD 243,558, variable pay of USD 54,500, pension contributions of USD 9,697 and other benefits ofUSD 15,784. His paid compensation in 2010 was a salary of USD 239,900, variable pay of USD 203,100, pension contributions of USD 8,100 and otherbenefits of USD 15,800. Contractual severance obligations are nine months compensation.


Performance 2011


� Note 24: PSDC agreement

On 31 March 2011, PSDC and APSI closed the transactions contemplated by the Authorization Agreement dated 15 December 2010 and effective as of 18February 2011 (the “Authorization Agreement”), which secured the yard's ability to construct two additional product tankers (Hull 017 and Hull 018).Pursuant to the Authorization Agreement, PSDC purchased certain shipyard assets from APSI for a purchase price of USD 42 million, payable in two equaltranches, with funds being (or to be) provided by the Commonwealth of Pennsylvania. APSI will lease back those same assets from PSDC subject to theterms of its shipyard lease and the Authorization Agreement. APSI will use the sale proceeds, in combination with construction period financing with privatelenders and its own available funds, to construct Hull 017 and Hull 018. For accounting purposes the transaction will be accounted for as a sale/leasebackand no adjustments will be made to the accounting value of the assets at closing and the proceeds will be proportionately recognized as a reduction ofvessel cost over the construction of Hull 017 and Hull 018. On 21 November 2011, PSDC advanced the first USD 21 million tranche to APSI.

In conjunction with the closing, Aker ASA, which indirectly owns 71.2% of the shares of AKPS, agreed to make a USD 30 million subordinated constructionloan to APSI with funding to be in two tranches of USD 15 million each. The loan is subject to customary disbursement conditions. Interest will be paid atmaturity and the interest rate is on market terms. The loan is secured by a lien on Hull 017 and Hull 018. The loan can be repaid no sooner than upon saleand delivery of both Hull 017 and Hull 018 and full repayment can be delayed further if certain sales price thresholds are not met. On 4 November 2011,Aker ASA advanced the first USD 15 million tranche to APSI. On 11 January 2012, Aker ASA advanced the second USD 15 million tranche to APSI.

Additionally, in conjunction with the transaction, PIDC Regional Center, LP XV (the Welcome Fund) agreed to restructure its USD 20 million loan to, amongother things, extend its maturity and secure it with a lien on Hull 017 and Hull 018. As restructured, USD 5 million will be paid at the original maturity date of27 March 2012; a minimum of USD 5 million and a maximum of USD 15 million (subject to certain sales price thresholds being met) will be repaid upon thesale and delivery of Hull 017; and any remaining loan balance will be repaid upon the sale and delivery of Hull 018.

In connection with the closing, the City of Philadelphia agreed to temporarily defer USD 8 million in tax payments due from APSI over three years,commencing in 2011. The full deferral is due in 2017.

Under the Authorization Agreement, APSI is obligated to construct Hull 017 and Hull 018 in accordance with their current production schedules. If thoseships are not completed before certain agreed-upon deadlines, as extended for events of force majeure, then PSDC may require APSI to pay liquidateddamages of up to USD 35 million per ship. APSI's obligation to pay the liquidated damages is guaranteed to PSDC by Aker ASA. As part of the transactionPSDC has released APSI and Aker Maritime Finance AS, a wholly-owned subsidiary of Aker ASA, from the USD 20 million “employment guarantee”,provided to guarantee a minimum employment level at the shipyard through the end of 2014. In addition, APSI has agreed to a new termination event underits shipyard lease, pursuant to which PSDC has the right to recapture the shipyard if APSI fails to maintain an average of at least 200 full-time employees atthe shipyard for 90 consecutive days, subject to the right of APSI to complete work-in-process projects and a one-time, limited cure right which allowsAPSI to restore the lease to a 5-year term under certain circumstances. Additionally, the PSDC Chairman is now a member of the AKPS Board.

� Note 25: Commitments and contingencies

Government grantsThe Shipyard has been funded by various federal, state, and local government agency subsidies for periods including those prior to the purchase by AKPSon 30 June 2005, totaling USD 438.6 million, as set forth in the Master Agreement between the Government Parties and the Shipyard, dated 16 December1997, as amended 30 July 1999.

Funding under the Master Agreement was allocated as follows: USD 42.0 million for preliminary shipyard development, USD 259.6 million for initialconstruction costs, and USD 137.0 million for employee training programs. In 2001, the Shipyard was granted a transfer of USD 50.0 million from thepreliminary shipyard development budget to the initial construction costs budget, but the overall amount of USD 438.6 million did not change. Funding wasprovided through loans to the Shipyard (see note 14) as well as grants.

The Shipyard has exhausted the funding under the Master Agreement and did not receive any funding in 2011 or 2010.

For the year ended 31 December 2011, the Shipyard received USD 51 thousand reimbursement of employee training costs from various governmentalagencies (USD 245 thousand reimbursement in 2010). For the year ended 31 December 2011, the Shipyard received USD 386 thousand of grant funds forcapital and infrastructure improvements under the Small Shipyard Grant Program (USD 452 thousand of grant funds in 2010).

Other commitments and contingenciesUnder the Master Agreement, the Shipyard is required to pay a common area maintenance charge each month to PSDC of approximately USD 34thousand through the term of the agreement.

On 13 September 2002, the Shipyard finalized an agreement with the City of Philadelphia (and others), whereby the parties agreed to the Real Estate andUse and Occupancy Tax for the years 2001 through 2017. The Shipyard is committed to a fixed assessment of approximately USD 3.3 million to USD 3.6million per year, commencing in 2003. On 31 March 2011, the City of Philadelphia agreed to temporarily defer USD 8.0 million in tax payments over the nextthree years (see note 24) until 2017.

As of 31 December 2011, the Company has entered into commitments with various third-party suppliers for approximately USD 36.5 million of shipproduction and overhead related expenditures on Hulls 017-020.

APSI and American Shipping Company ASA (AMSC) are jointly and severally liable for indemnifying Overseas Shipholding Group, Inc. (OSG) in respect ofany losses suffered by it due to a breach of APSI or AMSC of the framework agreement and related transaction documents governing the construction andleasing of the initial ten Jones Act tankers of APSI's twelve-ship series, which was completed in April 2011. APSI and AMSC have entered into a cross-indemnity agreement to allocate these liabilities among themselves based on relative fault. As all of the vessels have been completed and delivered, APSIhas fulfilled all of its construction obligations under the OSG documents other than certain unexpired warranty obligations. AMSC's primary leasingobligation under the OSG documents is to provide OSG with quiet enjoyment of the vessels. AMSC may breach its quiet enjoyment covenant under certaincircumstances. The Company regards this risk as remote.

During 2011, APSI concluded its audit by the Internal Revenue Service for the year ended 31 December 2007 and the year ended 31 December 2008. Theultimate resolution of the audit did not have a material adverse effect on the Company's financial position or results of operations.


Performance 2011


The Company is obligated to pay liquidated damages to PSDC of up to USD 70.0 million if Hulls 017 and 018 are not completed before certain agreed-upon deadlines. For additional information regarding this obligation, see note 24.

Legal mattersAKPS is involved in various legal disputes in the ordinary course of business related primarily to personal injury matters, employment matters andcommercial matters. Provisions have been made to cover the expected outcomes when it is probable that a liability has been incurred and the amount isreasonably estimable. Although the final outcome of these matters is subject to uncertainty, in AKPS's opinion the ultimate resolution of such legal matterswill not have a material adverse effect on AKPS's financial position or results of operations.

� Note 26: Transactions, guarantees and agreements with related parties and concentration of business

Converto Capital Fund AS, an investment fund controlled by Aker ASA, is the majority shareholder in AKPS owning 71.2% of the total outstanding shares ofAKPS as of 31 December 2011. In addition, Kristian Rokke, the President and CEO of AKPS, is a Board member of TRG Holding AS, which owns 66.7% ofthe total outstanding shares of Aker ASA as of 31 December 2011. APSI has business relations with several companies which are ultimately controlled byAker ASA. AKPS believes that related party transactions are made on terms equivalent to those that prevail in arm's length transactions.

TransactionsAKPS has service agreements with Aker ASA and its affiliates which provide certain specified consulting, accounting, financial and administrative services.Related administrative costs and financial statement amounts were as follows:

Amounts in USD thousandsExpenses

2011Expenses

2010Payables

31 Dec. 2011Payables

31 Dec. 2010

Aker ASA 129 136 - 32

In its day to day activities AKPS subcontracts and hires services from several affiliated companies on behalf of APSI. Related balances were as follows:

Amounts in USD thousandsExpenses

2011Expenses

2010Payables

31 Dec. 2011Payables

31 Dec. 2010

Resource Group International 75 65 - -Aker Solutions - (30) - 1

ConcentrationsOperating revenues were from sales to entities controlled by AMSC.

Vessels-under-construction receivables

Amounts in USD thousandsRevenue

2011Revenue

2010 31 Dec. 2011 31 Dec. 2010

AMSC 29 841 216 910 - 51 939

AgreementsA service agreement with Aker ASA exists for economic and accounting services, IT support and operation and administrative services.

As part of the settlement with OSG, AMSC, and Aker ASA on 11 December 2009, Aker ASA was required to provide a guarantee under the constructionloan facility with Caterpillar for USD 150.0 million for the construction financing of Hull 015 and Hull 016. AKPS paid Aker ASA USD 185 thousand related tothis guarantee in 2011. The guarantee was extinguished upon the delivery of the Overseas Tampa in April 2011.

Aker ASA provided a guarantee under the construction loan facility with Caterpillar for USD 80.0 million for the construction financing for Hull 017 and Hull018. AKPS paid Aker ASA USD 406 thousand related to this guarantee in 2011.

Aker ASA also committed to a USD 30.0 million loan in 2011 to partially finance the construction of Hulls 017 and 018. USD 15.0 million was drawn as ofyear end and the remaining USD 15.0 million was drawn in January 2012 (see note 14). Interest expense in 2011 on the loan was USD 104 thousand (seenotes 14 and 24 for further discussion).

AKPS issued a USD 70.0 million counter guarantee to Aker ASA related to APSI's obligation to pay liquidated damages to PSDC under the AuthorizationAgreement. For additional information regarding this obligation, see note 24.


Performance 2011

Parent company accounts


Income Statement


Operating revenues 86 88Operating expenses 2 (617) (779)

Operating loss (531) (691)

Interest income from subsidiary 261 265Other interest and financial income 120 117Other interest and financial expenses (39) (220)

Loss before tax (189) (529)

Tax income 4 - 724

Net (loss)/income for the year (189) 195

Allocation of net (loss)/income:Net (loss)/income for the year (189) 195Other equity 5 189 (195)

Total - -


Performance 2011



Statement of Financial Positionas of 31 December


ASSETS

Shares in subsidiary 3 67 000 67 000Long-term receivable from subsidiary 10 000 10 000

Total non-current assets 77 000 77 000

Other short-term receivables 22 26Cash and cash equivalents 6 10 290 10 547

Total current assets 10 312 10 573

Total assets 87 312 87 573

EQUITY AND LIABILITIESShare capital 18 709 18 709Share premium reserve 52 286 52 286

Total paid in capital 70 995 70 995

Other equity 14 103 14 292

Total equity 5 85 098 85 287

Other short-term liabilities 2 214 2 286

Total current liabilities 2 214 2 286

Total equity and liabilities 87 312 87 573








Performance 2011



Cash Flow StatementAmounts in USD thousands 2011 2010

Loss before tax (189) (529)Income tax benefit received - 724Change in short-term receivables 4 217Change in short-term liabilities (72) (54)

Net cash flow (used in)/from operating activities (257) 358

Net cash flow used in investing activities - -

Net cash flow used in financing activities - -

Net change in cash and cash equivalents (257) 358

Cash and cash equivalents at beginning of period 10 547 10 189

Cash and cash equivalents as of 31 December 10 290 10 547


Performance 2011



Notes to the accounts

� Note 1: Basis for preparation

The accounts of Aker Philadelphia Shipyard ASA(AKPS or the Company) are presented inconformity with Norwegian legislation andgenerally accepted accounting principles inNorway. The Company's functional and reportingcurrency is the U.S. dollar (USD), except whenindicated otherwise.

SubsidiariesSubsidiaries are presented on a historical costbasis in the parent company accounts. Theinvestment is valued at historical cost for theshares unless impairment write-downs havebeen deemed necessary. The shares are writtendown to fair value if the impairment is not of atemporary nature and is necessitated bygenerally accepted accounting principles. Write-downs are reversed when the basis for the write-down no longer exists.

Dividends and other payments are taken toincome in the year they are accrued in thesubsidiary. If dividends exceed retained earningsafter the purchase, the excess representsrepayment of invested capital and the paymentsare deducted from the invested value in theCompany's statement of financial position.

Classification and valuation of statement offinancial position itemsCurrent assets and current liabilities includeitems that have less than one year to maturity,and other items that are deemed operationalworking capital. Other items are classified asnon-current assets/non-current liabilities.

Current assets are valued at the lower ofhistorical cost and fair value. Current liabilitiesare valued at their nominal historical value at thetime the liability arises.

Non-current assets are valued at historical cost,but are written down to fair value if impairment isdeemed to be of a permanent nature. Non-current liabilities are valued at nominal historicalvalues.

TaxTax expense in the income statement comprisesboth current payable taxes and the change indeferred tax. Payable tax is calculated on thebasis of the profit for the period in NorwegianKroner (NOK). Deferred tax is calculated using a28% income tax rate utilizing the difference thatexists between book values and tax values andthe net operating losses that can be carriedforward at the statement of financial positiondate. Tax-increasing and tax-reducing temporarydifferences that are reversing or can reverse inthe same period are offset against each other.Net tax assets are shown in the statement offinancial position to the extent it is probable thatthese assets can be utilized.

To the extent a group contribution is not shownin the income statement, the tax effect is takendirectly against the investment item in thestatement of financial position.

Cash flow statementThe cash flow statement is shown using theindirect method. Cash and cash equivalentscomprises cash, bank deposits and other short-term liquid placements.

Use of estimatesPreparation of financial statements in conformitywith generally accepted accounting principles inNorway requires management to make estimatesand assumptions that affect the incomestatement, the reported amounts of assets andliabilities and also the disclosure of contingentassets and liabilities on the statement of financialposition date.

Contingent losses that are probable andquantifiable are expensed when they areidentified.


Performance 2011


� Note 2: Other operating expenses

Fees to the auditors of USD 41,505 and USD 44,368 for ordinary audit have been expensed in 2011 and 2010, respectively.

The Company has no employees. The senior management is employed in the operating company. Fees to the Board of Directors of USD 184,840 and USD187,715 were expensed in 2011 and 2010, respectively.

� Note 3: Shares

This item comprises the following as of 31 December 2010:

Amounts in USD thousandsOwnership and

voting rights (%)Businessaddress

Historicalcost

Bookvalue

Aker Philadelphia Shipyard, Inc. (APSI) 100% Philadelphia 67 000 67 000

Total shares 67 000 67 000

APSI's results after-tax in 2011 and equity at the end of 2011 are:

Results after-tax 2011 (4 019)Equity at 31 December 2011 70 776

Based on the net asset position of APSI (the investment in subsidiary) as well as the cash on hand at APSI, AKPS has concluded that no impairment hasoccurred to either the investment in subsidiary or the long-term receivable from subsidiary at December 2011.

� Note 4: Taxes

The table below shows the difference between book and tax values by the end of 2011 and 2010 and the amounts of deferred taxes at these dates and thechange in deferred taxes.


Operating loss carried forward measured in NOK for taxation purposes (437) (766)

Total differences (437) (766)

Net deferred tax asset, 28% (122) (214)

Tax losses not recognized 122 214

Tax asset in the statement of financial position - -

Deferred tax asset is not recognized due to lack of expected future taxable income in Norway.

Estimated result for tax purposes:


Loss before tax measured in NOK for taxation purposes 354 (28)

Transaction cost offset equity (32) -Utilization of loss carried forward (322) -

Estimated loss for tax purposes - (28)

Payable current tax - -

Tax (expense)/income in the income statement:


Tax payable - -Tax income recognized during the year related to refund - 724Change in deferred tax in the statement of financial position - -

Tax (expense)/income - -


Performance 2011


� Note 5: Total equity

Changes in equity are:

Amounts in USD thousandsShare

capitalShare

premiumTotal paid-in

capital Other equity Total equity

Equity as of 1 January 2011 18 709 52 286 70 995 14 292 85 287Net loss - - - (189) (189)

Equity as of 31 December 2011 18 709 52 286 70 995 14 103 85 098

The share capital of NOK 101 653 050 consists of 10 165 305 shares with a par value of NOK 10. The Company is a part of the consolidated accounts ofAker ASA, Fjordalleen 16, 0115 Oslo.

Twenty largest shareholders(as of 1 February 2012)

ShareholderNumber of

shares heldOwnership

(in %)

Converto Capital Fund AS 7 237 631 71.2%Deutsche Bank AG Lon Prime Brokerage Full 1 249 625 12.3%State Street Bank AN A/C Client Omnibus D 456 800 4.5%Commerzbank AG Frank Meglerkonto 380 224 3.7%Bank of New York Mel BNY GCM Client Account 157 422 1.5%Deutsche Bank AG Lon 156 785 1.5%Skandinaviska Enskil 128 902 1.3%Kovaci Ramadan 105 421 1.0%Ro Lars 60 030 0.6%Seb Enskilda ASA Egenhandelskonto 29 280 0.3%Meehan David 27 500 0.3%First Clearing A/C L C/O JP Morgan Chase B (Executive Management) 20 500 0.2%Schlosser-Moller GRU V/Erik Schlosser Mol 14 100 0.1%Ulvolden AS 14 000 0.1%Elsjo AS V/Erling Sigvart Joh 10 200 0.1%Camelback Holding AS V/ Tore Bjark 9 800 0.1%Intelligent Trading 8 600 0.1%Hove Ove 6 000 0.1%Loligo AS 4 800 0.0%Tinderholt Kjell 4 000 0.0%

Total, 20 largest shareholders 10 081 620 99.2%

Other shareholders 83 685 0.8%

Total 10 165 305 100.0%

� Note 6: Cash and cash equivalents

There is no restricted cash.

� Note 7: Shares owned by the Board of Directors and the Senior Management

For information regarding shares owned by the members of the Board of Directors and the Senior Management, see note 23 to the Consolidated Accounts.

� Note 8: Guarantee on behalf of subsidiary and affiliated Companies

The Company has made the following guarantees:

Description BeneficiaryAmount

(USD thousands) Borrower

Capital expenditure facility PIDC Regional Center, LP XV 20 000 APSIConstruction loan facility Caterpillar Financial Services Corp. 80 000 APSIConstruction loan facility Aker ASA 30 000 APSIWorking capital TD Bank, N.A. 6 000 APSI


Performance 2011


The capital expenditure facility is for capital improvements at the yard.

The construction loan facilities are for the construction of the product tankers. USD 15.0 million was drawn under the Aker loan at 31 December 2011 andthe remaining USD 15.0 million was drawn in January 2012.

The working capital facility supports the issuance of letters of credit.

The Company has a service agreement with Aker ASA for economic and accounting services, IT support and operations and administrative services. Totalexpense incurred under this agreement in 2011 and 2010 were USD 86 thousand and USD 87 thousand, respectively.

The Company entered into a loan agreement in the amount of USD 20.0 million with APSI. USD 10.0 million is outstanding at 31 December 2011. Interest ispayable quarterly in arrears at three-month LIBOR plus 2.25%. The loan is payable upon demand and unsecured.

The Company issued a USD 70.0 million counter guarantee to Aker ASA related to APSI's obligation to pay liquidated damages to PSDC under theAuthorization Agreement. For additional information regarding this obligation, see note 24 to the Consolidated Accounts.


Performance 2011

Auditor’s report


Performance 2011

Auditors’ report


Performance 2011

Shares and shareholder matters

Good dialogueAker Philadelphia Shipyard ASA (referenced to herein as AKPS or theCompany) is committed to maintaining an open and direct dialogue withits shareholders, potential investors, analysts, brokers, and the financialcommunity in general.

The timely release of information to themarket that could affect the Company’sshare price helps ensure that Aker Phila-delphia Shipyard ASA’s share price reflectsits underlying value.

Aker Philadelphia Shipyard’s goal is thatthe Company’s shareholders will, over time,receive competitive returns on their invest-ments through a combination of dividendsand share price growth. On 25 February2008, the Company’s Board of Directorsadopted the following dividend policy:

“The Company’s objective is to provideits shareholders with a competitive returnover time based on its earnings. Any divi-dends will be considered in conjunction withthe Company’s financial position, debt cove-nants, its capital requirements and potentialstrengthening of the Company’s financialstructure. The Company aims to pay outbetween 50% and 100% of its net profits.”

The Board of Directors will propose toAker Philadelphia Shipyard’s annual share-holders’ meeting that no dividend be paidfor the 2011 accounting year.

Year Dividend (in NOK)

2009 02010 02011 Proposed 0

Shares and share capitalAker Philadelphia Shipyard ASA has 10 165305 ordinary shares; each share has a parvalue of NOK 10 (see note 5 to the parentcompany’s 2011 accounts). As of

31 December 2011, the Company had 99shareholders, of whom 13.3% werenon-Norwegian shareholders.

Aker Philadelphia Shipyard has a sin-gle share class. Each share is entitled toone vote. The Company held 0 of its own(treasury) shares as of 31 December 2011.No share issues were carried out in 2011.

Stock-exchange listingAker Philadelphia Shipyard ASA was listedon Oslo Axess on 17 December 2007(ticker: AKPS). Aker Philadelphia Shipyard’sshares are registered in the NorwegianCentral Securities Depository; the shareshave the securities registration numberISIN NO 0010395577. DNB Bank ASA isthe Company’s registrar.

Majority shareholderAker Philadelphia Shipyard ASA’s majorityshareholder is Converto Capital Fund AS,an investment fund controlled by Aker ASA.Companies that are part of Aker are legallyand financially independent units. ConvertoCapital Fund AS exercises active owner-ship as part of systematic efforts to createvalue for all Aker Philadelphia Shipyardshareholders.

From time to time, agreements areentered into between two or more Akercompanies. The Boards of Directors andother parties involved in the decision-making processes related to such agree-ments are all critically aware of the need tohandle such matters in the best interests of

the involved companies, in accordancewith good corporate governance practice.If needed, external, independent opinionsare sought.

Current Board authorizationsAs of 31 December 2011, Aker PhiladelphiaShipyard ASA has no current Board author-izations to issue shares.

Stock option plansAs of 31 December 2011, Aker PhiladelphiaShipyard ASA has no options program.

Investor relationsAker Philadelphia Shipyard ASA seeks tomaintain an open and direct dialogue withshareholders, financial analysts, and thefinancial market in general.

All Aker Philadelphia Shipyard pressreleases and investor relations (IR) pub-lications, including archived material, areavailable at the Company’s website:www.akerphiladelphia.com. This onlineresource includes the Company’s quarterlyand annual reports, prospectuses, articlesof association, financial calendar, and itsInvestor Relations and Corporate Gover-nance policies, along with other information.

Shareholders can contact the Com-pany at [email protected].

Electronic interim and annual reportsAker Philadelphia Shipyard ASA encour-ages its shareholders to subscribe to theelectronic version of the Company’s annual

Share capital development over the past three years

DateChange in

share capitalShare capital

(in NOK)Number of

sharesPar value(in NOK)

31 December 2008 - 101 653 050 10 165 305 10.00Change in 200931 December 2009 - 101 653 050 10 165 305 10.00Change in 201031 December 2010 - 101 653 050 10 165 305 10.00Change in 201131 December 2011 - 101 653 050 10 165 305 10.00


Performance 2011

Shares and shareholder matters

reports. Annual reports are published onthe Company’s website at the same timeas they are made available via websiterelease by the Oslo Stock Exchange/OsloAxess: www.newsweb.no (ticker: AKPS).Subscribers to this service receive annualreports in PDF format by email.

Quarterly reports, which are generallyonly distributed electronically, are availablefrom the Company’s website and othersources. Shareholders who are unable toreceive the electronic version of interim andannual reports, may subscribe to theprinted version by contacting Aker Phila-delphia Shipyard’s investor relations staff.

Nomination committeeThe Company’s nomination committee hasthe following members: Leif-Arne Langoy,Gerhard Heiberg, Oyvind Eriksen.

Shareholders who wish to contactAker Philadelphia Shipyard’s nominationcommittee may do so using the followingaddress:

Nomination Committee ofAker Philadelphia Shipyard ASAP.O. Box 1423 VikaNO-0115 Oslo, Norway

Annual shareholders’ meetingAker Philadelphia Shipyard ASA’s annualshareholders’ meeting is normally held in

March or early April. Written notification issent to all shareholders individually or toshareholders’ nominee. To vote at share-holders’ meetings, shareholders (or theirduly authorized representatives) musteither be physically present or must vote byproxy.

2011 share dataThe Company’s total market capitalizationas of 31 December 2011 was NOK 37.6million. During 2011, a total of 540 747Aker Philadelphia Shipyard ASA sharestraded, corresponding to .0532 times theCompany’s freely tradable stock. Theshares traded on 46 trading days in 2011.

Twenty largest shareholders(as of 01 February 2012)

ShareholderNumber of


(in %)

Converto Capital Fund AS 7 237 631 71.2%Deutsche Bank AG Lon Prime Brokerage Full 1 249 625 12.3%State Street Bank AN A/C Client Omnibus D 456 800 4.5%Commerzbank AG Frank Meglerkonto 380 224 3.7%Bank of New York MEL BNY GCM 157 422 1.5%Deutsche Bank AG Lon 156 785 1.5%Skandinaviska Enskil 128 902 1.3%Kovaci Ramadan 105 421 1.0%Ro Lars 60 030 0.6%Seb Enskilda ASA Egenhandelskonto 29 280 0.3%Meehan David 27 500 0.3%First Clearing A/C L C/O JP Morgan Chase B 20 500 0.2%Schlosser-Moller GRU V/Erik Schlosser MOL 14 100 0.1%Ulvolden AS 14 000 0.1%Elsjo AS V/Erling Sigvart Joh 10 200 0.1%Camelback Holding AS V/ Tore Bjark 9 800 0.1%Intelligent Trading 8 600 0.1%Hove Ove 6 000 0.06%Loligo AS 4 800 0.05%Tinderholt Kjell 4 000 0.04%

Total, 20 largest shareholders 10 081 620 99.2%Other shareholders 83 685 0.8%

Total 10 165 305 100.0%

Geographic distribution of shareholders(as of 1 February 2012)

NationalityNumber of


(in %)

Non-Norwegian shareholders 2 584 318 25.4%Norwegian shareholders 7 580 987 74.6%

Total 10 165 305 100.0%

Ownership structure by number of shares held(as of 1 February 2012)

Shares ownedNumber of

shareholders

Percentof share

capital

1 – 100 4 0.0%101 – 1 000 40 0.2%1001 – 10 000 42 1.0%10 001 – 100 000 7 1.7%100 001 – 500 000 6 13.6%Over 500 000 2 83.5%

Total 101 100.0%

Share price development in 20112011 share data

Highest traded NOK 15.00Lowest traded NOK 1.50Share price as of 31 Dec. NOK 3.70Shares issued as of 31 Dec. 10 165 305Own (treasury) shares as of 31 Dec. 0Shares issued and outstanding as of 31 Dec. 10 165 305Market capitalization as of 31 Dec. NOK million 37.6Proposed share dividend NOK per share 0.0

Share price developmentAker Philadelphia Shipyard ASA OAAX

0

20

40

60

80

100

120

Dec2007

Feb2012



Corporate governance

Corporate governanceAker Philadelphia Shipyard ASA aims to create maximum value for itsshareholders over time. Good corporate governance will help to reducerisk and ensure sustainable value creation.

In line with the Accounting Act §3-3, sec-tion b and the Norwegian Code of Practicefor Corporate Governance, which was lastamended in 2011, the Board has reviewedand updated the Company’s principles forcorporate governance. The principles alsoapply to Aker Philadelphia Shipyard ASA’ssubsidiaries when relevant. The Board’sstatement of corporate governance isincluded in the annual report. The followingpresents Aker Philadelphia Shipyard ASA’scurrent practice regarding each of therecommendations contained in the Code ofPractice. Any deviations from the recom-mendations are explained under the item inquestion.

PurposeAker Philadelphia Shipyard ASA’s Corpo-rate Governance principles ensure anappropriate division of roles andresponsibilities among the Company’sowners, its Board of Directors, and itsExecutive Management, and that businessactivities are subject to satisfactory control.The appropriate division of roles and sat-isfactory control contribute to the greatestpossible value creation over time, to thebenefit of owners and other stakeholders.

Values and ethical guidelinesThe Board has adopted Aker ASA’s corpo-rate values and ethical guidelines, whichare shared by Aker companies worldwide.

The ethical guidelines are a corner-stone of the Company’s ownership. AKPSworks to promote a sustainable andresponsible company that is driven bygood results and the demands for socialresponsibility.

Aker Philadelphia Shipyard ASA’scorporate values are presented on pages4-5 of this annual report. These valuesconsist of HSE mindset; customer drive;delivering results; hands-on management;open and direct dialogue; and people andteams.

BusinessAker Philadelphia Shipyard ASA’s businesspurpose clause in the articles of associa-tion is as follows:

“The Company’s business is to ownand manage industry and other relatedbusiness related to building of ships, capitalmanagement and other operations for thegroup, including participating in or acquir-ing other business.”

The function of the business purposeclause is to ensure that shareholders havecontrol of the business and its risk profile,without limiting the Board or manage-ment’s ability to carry out strategic andfinancially viable decisions within thedefined purpose. AKPS’s goals and mainstrategies are presented on page 2 of thisannual report and in the Board of Directors’report. The Company’s overall goal is to bethe premier provider of merchant vessels inthe U.S. Jones Act market and its primarystrategies include striving for a zeroincident culture; increasing productivity;delivering on our promises; and being amarket leader.

Equity and dividendsEquityAKPS’s equity as of 31 December 2011amounted to USD 88.9 million, whichcorresponds to an equity ratio of 50%.Aker Philadelphia Shipyard ASA regardsthe Company’s current equity structure asappropriate and adapted to its objectives,strategy, and risk profile.

DividendsAker Philadelphia Shipyard ASA’s dividendpolicy is included in the section “Sharesand shareholder matters” (see page 42). Asstated in that policy:

“The Company’s objective is to pro-vide its shareholders with a competitivereturn over time based on its earnings. Anydividends will be considered in conjunctionwith the Company’s financial position, debtcovenants, its capital requirements andpotential strengthening of the Company’sfinancial structure. The Company aims topay out between 50% and 100% of its netprofits.”

Given the Company’s challenges overthe past several years in securing financing

and backlog, the Company has not paid adividend since 2008. Instead, the Companyhas sought to maximize its equity to helpthe Company obtain funding and neworders and to ensure sufficient resources inthe event it is unable to do so.

Board authorizations regarding sharesIt is the intention that the Board’s pro-posals for future Board authorizations toissue shares and to undertake share buy-backs are to be limited to defined purposesand to be valid only until the next annualshareholders’ meeting.

The Board currently has no author-izations to issue shares or undertake sharebuybacks.

Equal treatment of shareholders andtransactions with close associatesThe Company has a single class of shares,and all shares carry the same rights in theCompany. Equal treatment of all share-holders is crucial. If existing shareholders’pre-emptive rights are proposed waivedupon an increase in share capital, theBoard must justify the waiver. The Boardmust also publicly disclose such justifica-tion in a stock exchange announcementissued in connection with such increase inshare capital. Transactions in own(treasury) shares are executed on the OsloStock Exchange or by other means at thelisted price.

If there are material transactionsbetween the Company and a shareholder,Board member, member of Executive Man-agement, or a party closely related to any ofthe aforementioned, the Board shall ensurethat independent valuations are available.

Aker Philadelphia Shipyard ASA hasprepared guidelines designed to ensurethat members of the Board of Directors andExecutive Management notify the Board ofany direct or indirect stake they may havein agreements entered into by AKPS.




See additional information on trans-actions with related parties in note 26 tothe consolidated accounts. 71.2% of theshares in Aker Philadelphia Shipyard ASAare owned by Converto Capital Fund AS,an investment fund controlled by Aker ASA.For further details on the relationshipbetween Aker Philadelphia Shipyard ASAand Aker ASA, see note 26 to the con-solidated accounts.

Freely negotiable sharesAker Philadelphia Shipyard ASA’s sharesare freely negotiable. No restrictions ontransferability are found in the Company’sarticles of association/incorporation.

Annual shareholders’ meetingsThe Board of Directors encourages share-holders to participate in shareholders’meetings. It is the Company’s priority tohold the annual shareholders’ meeting asearly as possible after the year-end. Noticeof shareholders’ meetings and compre-hensive supporting information, includingthe recommendations of the nominationcommittee, is made available for the share-holders on the Company’s home page andsent to the shareholders according to thedeadlines stated in the Norwegian PublicCompany Act (allmennaksjeloven) and therecommendations in the Norwegian Codeof Practice when possible. The Board seeksto ensure that the resolutions and support-ing information are sufficiently detailed andcomprehensive to enable the shareholdersto form a view on all matters to be consid-ered at the meeting. The deadline forshareholders to register to the shareholders’meetings is set as close to the date of themeeting as possible. Shareholders who areunable to attend the meeting in person mayvote by proxy, and normally the proxy maybe given to the chairman of the meeting orany other person appointed by the chair-man. Both on the attendance and proxyform and the notice of meeting, all proce-dures for registration are thoroughlyexplained. In addition, information on howto propose a resolution to the items on theagenda at the annual general meeting willbe included in the notice.

Pursuant to Aker Philadelphia ShipyardASA’s articles of association, the Chairmanof the Board, or any other personappointed by the Chairman, chairs theshareholders’ meetings. It is the view of theCompany that this procedure provides effi-

cient and well prepared general meetingsand is in the interests of the shareholders.The Board of Directors and the personchairing the meeting make appropriatearrangements for the general meeting tovote separately on each candidate nomi-nated for election to the Company’s corpo-rate bodies. To the extent possible, thenomination committee leader and auditorattend annual shareholders’ meetings.

In its work, the nomination committeeemphasizes composing a board that worksas a team, and that the Board members’experience and qualifications support eachother. The shareholders’ meeting is invitedto vote for each nominee up for election.

Minutes of shareholders’ meetings arepublished as soon as practically possibleon the Oslo Stock Exchange,www.newsweb.no (ticker: AKPS) and onthe Company’s home pagewww.akerphiladelphia.com, under theheading “Media Center”.

Nomination committeeAker Philadelphia Shipyard ASA has anomination committee, as set forth in Sec-tion 7 of the Company’s articles of associa-tion. Pursuant to the articles of association,the nomination committee is to compriseno fewer than three members. Eachmember is normally elected for a two-yearperiod. The composition of the nominationcommittee reflects the interests of theshareholders, and the nomination commit-tee members’ independence from AkerPhiladelphia Shipyard ASA’s Board andExecutive Management. Nomination com-mittee members and Chairman are electedby the Company’s annual shareholders’meeting, which also determines remuner-ation payable to committee members.

Pursuant to Aker Philadelphia ShipyardASA’s articles of association, the nomi-nation committee recommends candidatesfor members of the Board of Directors. Thenomination committee also makes recom-mendations as to remuneration of Boardmembers. The nomination committeeshould justify its recommendation.

Aker Philadelphia Shipyard’s nomi-nation committee comprises the followingmembers:

– Leif Arne Langoy, Chairman (2011-2013)

– Gerhard Heiberg (2011-2013)– Oyvind Eriksen (2011-2013)

None of the members of the nomi-nation committee is a member of the Boardof Directors. Neither the general managernor any other senior executive is a memberof the nomination committee.

The general meeting has stipulatedguidelines for the duties of the nominationcommittee.

Board composition and independenceThe Company does not have a corporateassembly because Aker Philadelphia Ship-yard ASA, excluding its subsidiaries, hasfewer than 200 employees.

Pursuant to Section 4 of the Compa-ny’s articles of association, the Boardcomprises between three and sevenmembers. The Board is currently com-prised of a total of six members. TheCompany’s shareholders elect the Chair-man of the Board at the annual share-holders’ meeting. The Board may elect itsown Deputy Chairman. Board members areelected for a period of two years.

The composition of the Board of Direc-tors is designed to ensure that it can oper-ate independently of any special interestsand function effectively as a collegiatebody. A majority of the shareholder-electedBoard members are independent of theCompany’s Executive Management and itssignificant business associates. The Boardof Directors does not include any executivepersonnel. Since the last shareholders’meeting in 2011, Manuel Stamatakis, hasserved as a Board member. Mr. Stamatakisis also the Chairman of the PhiladelphiaShipyard Development Corporation(PSDC), the Company’s landlord and aparty to the Master Agreement and theAuthorization Agreement. For moreinformation regarding these agreements,see page 31 of the annual report. Further,four of the shareholder-elected Boardmembers are independent of the Compa-ny’s main shareholder. Currently, two of theBoard members are employed by affiliatesof Aker ASA. Jim Miller is Executive VicePresident E&C Americas of Kvaerner, aportfolio company of Aker ASA. AudunStensvold is the CFO and InvestmentDirector of the investment advisor to Con-verto Capital Fund AS, an investment fundcontrolled by Aker ASA and the majorityshareholder of Aker Philadelphia ShipyardASA.




The current composition of the Boardis presented on pages 48-49 of this annualreport; the Board members’ expertise,capabilities, and independence are alsopresented. Board members’ shareholdingsare presented in note 23 to the con-solidated accounts. The Company encour-ages the Board members to invest in theCompany shares. The shareholder-electedBoard members represent a combination ofexpertise, capabilities, and experience fromvarious businesses and industries in boththe private and public sectors.

Two of the shareholder-elected Boardmembers are up for election.

The work of the Board of DirectorsThe Board of Aker Philadelphia ShipyardASA annually adopts a plan for its work,emphasizing goals, strategies, andimplementation. The plan also recognizesthe Company’s corporate social responsi-bility. Also, the Board has adopted informalguidelines that regulate areas of responsi-bility, tasks, and division of roles of theBoard, Board Chairman, and President andCEO/General Manager. The Board plans toadopt formal instructions to regulate theseareas in 2012. The Board anticipates thatthese instructions will also feature rulesgoverning Board schedules, rules for noticeand chairing of Board meetings, decision-making rules, the President and CEO’s/General Manager’s duty and right to dis-close information to the Board, pro-fessional secrecy, impartiality, and otherissues.

In order to ensure a more independentconsideration of matters of a materialcharacter in which the Board Chairman is,or has been, personally involved, theBoard’s consideration of such matters arechaired by the Deputy Board Chairman, ifthere is one serving at the time, or someother member of the Board in the absenceof a Deputy Board Chairman.

The Board of Aker Philadelphia Ship-yard ASA established an audit committee in2010. The audit committee consists of twomembers, Elin Karfjell (Chairperson) andAudun Stensvold. Both members areindependent from operations of the Com-pany. As discussed above, Mr. Stensvold islinked to the Company’s main shareholder.

Aker Philadelphia Shipyard ASA doesnot have any other active Board committees

at this time. In particular, the Company doesnot have a remuneration committee becauseall members of the Board are independent ofthe Company’s executive personnel.

The Board evaluates its own perform-ance and expertise once a year.

Risk management and internal controlThe Board is to ensure that the Companymaintains solid in-house control practicesand protocols and appropriate riskmanagement systems tailored to theCompany’s business activities. These prac-tices and systems encompass the Compa-ny’s corporate values, ethical guidelinesand guidelines for corporate social respon-sibility. The Company’s policy regardingcorporate social responsibility is set forthon pages 4-5 of this annual report. TheBoard annually reviews the Company’smost important risk areas and internal con-trol systems and procedures, and the mainelements of these assessments are men-tioned in the Board of Directors’ report. Theissue is further described in notes 1 and 22to the consolidated accounts.

Audit CommitteeThe audit committee has reviewed thecompany’s internal reporting systems,internal control and risk management andhad dialogues with the company’s auditor.The audit committee has also consideredthe auditor’s independence.

AKPS’ financial policies ensurefollow-up of financial risk. Key targets areidentified by the Board and management toensure timely follow-up of currencyexposure, interest rate exposure and com-pliance with covenants.

The Company has prepared an author-ization matrix and approval procedures forcosts included in the governing documents.

Financial Statement Close ProcessThe Company has implemented AkerASA’s accounting and reporting handbookwhich contains requirements and proce-dures for the preparation of both the quar-terly and annual reporting. The reporting isdone quarterly through AKPS’s reportingand consolidation system. Consolidationand control over the financial statementclose process is the CFO’s responsibility.Financial results and cash development are

analyzed and compared to the budget bythe CEO and CFO and reported to theBoard monthly.

Remuneration ofthe Board of DirectorsBoard remuneration reflects the Board’sresponsibility, expertise, time spent, andthe complexity of the business. Remuner-ation does not depend on Aker Phila-delphia Shipyard ASA’s financialperformance and the Company does notgrant share options to members of itsBoard. Board members and companieswith whom they are associated are not totake on special tasks for the Companybeyond their Board appointments unlesssuch assignments are disclosed to the fullBoard and the remuneration for such addi-tional duties is approved by the Board.

Additional information on remunerationpaid to Board members for 2011 is presentedin note 23 to the consolidated accounts.

Remuneration ofExecutive ManagementThe Board has adopted guidelines forremuneration of Executive Management inaccordance with the Norwegian PublicLimited Company Act (Allmennaksjeloven §6-16a). Salary and other remuneration ofthe President and CEO of Aker PhiladelphiaShipyard ASA are determined in a Board ofDirectors’ meeting. The basis of remuner-ation of Executive Management has beendeveloped in order to create aperformance-based system. The system ofreward is designed to contribute to theachievement of good financial results andincrease in shareholder value.

Aker Philadelphia Shipyard ASA doesnot have stock option plans or other suchshare award programs for employees.Further information on remuneration for2011 for members of Aker PhiladelphiaShipyard ASA’s Executive Management ispresented in note 23 to the consolidatedaccounts. AKPS’s guidelines for remuner-ation to Executive Management are dis-cussed on page 30 of this annual reportand will be presented to the shareholdersat the annual shareholders’ meeting. Themaximum size of any payment under theexisting performance-related remunerationprogram to any executive is linked to thesize of the executive’s base salary.




Information and communicationsAker Philadelphia Shipyard ASA’s reportingof financial and other information is basedon openness and on equal treatment ofshareholders, the financial community, andother interested parties.

The long-term purpose of Aker Phila-delphia Shipyard ASA’s investor relationsactivities is to ensure the Company’saccess to capital at competitive terms andto ensure shareholders correct pricing ofshares. These goals are to be accom-plished through correct and timely dis-tribution of information that can affect theCompany’s share price; the Company isalso to comply with current rules andmarket practices, including the requirementof equal treatment.

All stock exchange notifications andpress releases are made available on theCompany’s home pagewww.akerphiladelphia.com; stockexchange notices are also available fromwww.newsweb.no. All information that isdistributed to shareholders is simulta-neously published on Aker PhiladelphiaShipyard ASA’s home page.

The Company’s financial calendar isfound on page 1 of this annual report.

The Company’s investor relations staffis responsible for maintaining regular con-tact with the Company’s shareholders,potential investors, analysts and otherfinancial market stakeholders. The Board isregularly informed about the Company’sinvestor relations activities. For moreinformation regarding the Company’sguidelines for reporting of financial andother information, see pages 42-43.

TakeoversThe Company has not produced specialprinciples for how it will act in the event ofa takeover bid. However, if a takeover bidoccurred the Board would follow the over-riding principle of equal treatment for allshareholders.

Unless the Board has particular rea-sons for so doing, it will not take steps toprevent or obstruct a take-over bid for theCompany’s business or shares, nor useshare issue authorizations or other meas-ures to hinder the progress of the bid,without such actions being approved by ashareholders’ meeting after the take-overoffer has become public knowledge.

Upon the issuance of an offer for theCompany’s shares, the Board will make astatement to shareholders that provides anassessment of the bid, the Board’srecommendations, and reasons for theserecommendations. For each instance, anassessment will be made as to the neces-sity of bringing in independent expertiseand if a third party valuation is to beobtained. If a third party valuation isobtained the Board will aim at recordingsuch valuation in its statement. It may benecessary to obtain an independent valu-ation where a competing bid is made andthe bidder either is the main shareholder orhas a connection to the Board members orexecutive personnel.

Transactions that have the effect ofsale of the Company or a major componentof it are to be decided on by shareholdersat a shareholders’ meeting.

AuditorThe auditor makes an annual presentationto the Board of a plan for the auditing workfor the year. Further, the auditor has pro-vided the Board with a written confirmationthat the requirement of independence ismet.

The auditor participates in the Boardmeeting that deals with the annualaccounts, and the auditor has reviewed thecompanies’ internal control with the Board.At these meetings, the auditor reviews anymaterial changes to the Company’saccounting principles, comments on anymaterial estimated accounting figures andreports all matters on which there havebeen disagreement between the auditorand the Company’s executive personnel.Once a year a meeting is held between theauditor and the Board, at which no repre-sentatives of Executive Management arepresent. In addition to the presentations tothe full Board, the auditor is present at allaudit committee meetings which occurthroughout the year and presents both itspreliminary and final audit findings to thecommittee during such meetings.

Guidelines have been established forExecutive Management’s use of auditorsfor services other than auditing. Auditorsare to provide the Board with an annualoverview of services other than auditingthat have been supplied to the Company.

Remuneration for auditors is presentedin note 3 to the consolidated accounts,detailed in auditing and other services. Inaddition, these details are presented at theannual general meeting.



Presentation of the Board of Directors

Presentation of the Board of DirectorsJim MillerBoard Chairman

Jim Miller (b. 1955) is Executive Vice President of E&C Americas at Kvaerner. Prior to that, Mr. Miller served asPresident and CEO of Aker Philadelphia Shipyard from June 2008 to April 2011. Before coming to theshipyard, Mr. Miller was President of Aker Solutions Process & Construction (P&C) Americas, where he wasresponsible for financial operations of seven business units which generated approximately 8-9 billion NOK inrevenues per year. During his tenure, Aker Solutions P&C Americas became a leading provider of globalengineering and construction solutions with 7,500 employees, including 4,500 construction trades personnel.Prior to joining Aker Solutions P&C Americas, Mr. Miller held the position of President of Aker Construction Inc.which is one of the largest union construction companies in the North America and is recognized as one of thetop three largest employers of the union construction trades. Mr. Miller graduated from the University ofEdinboro in Pennsylvania with a BA. Mr. Miller is a U.S. citizen. As of 1 February 2012, Mr. Miller holds 20,000shares in the company and has no stock options. He has been elected for the period 2011-2013.

Amy HumphreysBoard Member

Amy Humphreys, (b. 1966) is President of Delta Western, Inc., a leading petroleum marketing and distributioncompany in Alaska and a subsidiary of Saltchuk Resources. Prior to her current role and beginning in late2006, Ms. Humphreys was CFO of North Star Utilities Group, the parent company of five fuel distributionoperating companies and also a subsidiary of Saltchuk Resources. From 1996 to 2006, Ms. Humphreys heldvarious leading positions in her 10 year tenure with American Seafoods Group including VP CorporateDevelopment and Treasurer. For the past 15 years, Ms. Humphreys has worked within companies operatingunder the Jones Act and, for the past several years, has managed companies in the oil industry within anenvironment subject to OPA 90 regulation. Ms. Humphreys holds a Master of Business Administration (MBA),with honors, from University of Washington, is a Certified Public Accountant (CPA) and holds Bachelor of Arts(BA) in Accounting and Finance, magna cum laude, from University of Puget Sound. Ms. Humphreys is a U.S.citizen. As of 1 February 2012, Ms. Humphreys holds zero shares in the company and has no stock options.She has been elected for the period 2010-2012.

Elin KarfjellBoard Member

Elin Karfjell (b. 1965) is CEO of Fabi Group AS. Prior to that, she was Director of Finance and Administration ofAtea AS. She is former partner of Ernst & Young AS. Ms. Karfjell joined Ernst & Young AS in 2002. Prior to this,Ms. Karfjell held various positions including partner at Arthur Andersen. At Ernst & Young/Arthur Andersen, sheheld various leading positions, both within advisory and audit, and she has experience from a broad specter ofindustries. Ms. Karfjell is also a Board Member of Aktiv Kapital ASA and Aker Floating Production ASA.Previously she had been a Board member of DNO International ASA. Ms. Karfjell is a state authorized publicaccountant. She has a bachelor accountant’s degree from Okonomisk College (Hoyskolen i Oslo) and a masterof accounting and auditing from the Norwegian School of Economics and Business Administration. Ms. Karfjellis a Norwegian citizen. As of 1 February 2012, Ms. Karfjell holds 1,200 shares in the company and has nostock options. She has been elected for the period 2011-2013.

Manuel StamatakisBoard Member

Mr. Stamatakis (b. 1949) is president and chief executive officer of Capital Management Enterprises, a financialservices and employee benefit consulting company. He served as one of the lead negotiators for GovernorTom Ridge’s efforts to bring Kvaerner (now Aker Philadelphia Shipyard) to Philadelphia in order to operate aworld-class shipbuilding facility at the Philadelphia Naval Shipyard. Mr. Stamatakis serves as the Chairman ofthe Philadelphia Shipyard Development Corporation (PSDC) and also serves on several other boards andcommittees for Pennsylvania organizations. He has vast experience in leading different joint public/privateefforts to strengthen the local economy and improve Pennsylvania’s role in world trade. Mr. Stamatakis alsodevotes his time and resources to several charitable activities in the Philadelphia region. Mr. Stamatakisachieved a Bachelor of Science degree in Industrial Engineering in 1969 from the Pennsylvania State Universityand an honorary doctorate from Drexel University in 2005. Mr. Stamatakis is a U.S. citizen. As of 1 February2012, Mr. Stamatakis holds zero shares in the company and has no stock options. He has been elected for theperiod 2011-2013.



Presentation of the Board of Directors

Audun StensvoldBoard Member

Audun Stensvold (b. 1972) is CFO and Investment Director for Converto Capital Management, which is theinvestment advisor for Aker Philadelphia Shipyard’s largest shareholder, Converto Capital Fund. Prior to joiningConverto Capital Management in 2009, Mr. Stensvold worked for Aker ASA as Vice President of the M&A andBusiness Development team, and was involved in the initial stock exchange listing of Aker PhiladelphiaShipyard (then named Aker American Shipping ASA) and later follow-up of Aker’s ownership in the yard.Before joining Aker, Mr. Stensvold worked as a strategy and finance consultant for Selmer, and as a financialanalyst for DnB NOR. Mr. Stensvold holds an MSc in Business and Economics from the Norwegian School ofEconomics and Business Administration (NHH). Mr. Stensvold is a Norwegian citizen. As of 1 February 2012,Mr. Stensvold holds zero shares in the company and has no stock options. He has been elected for the period2010-2012.

Thorhild WidveyBoard Member

Mrs. Widvey (b. 1956) has extensive political experience, and has been a member of the Norwegian Parliamentfrom 1989 to 1997. She was Norway’s Minister of Petroleum and Energy from 2004 to 2005 and has also beenState Secretary of the Ministry of Foreign Affairs and of the Ministry of Fisheries. She currently works as aprivate consultant, holding board positions in several oil and gas industry related companies. Mrs. Widvey hasheld a number of political positions and honorary posts both for the Conservative Party and variousorganizations. She also has former work experience as sale and marketing director for a large hotel chain inNorway. Mrs. Widvey has a degree from the College of Physical Education in Århus, Denmark and has alsocompleted several management programs at BI Norwegian School of Management. Mrs. Widvey is aNorwegian citizen. As of 1 February 2012, Mrs. Widvey holds zero shares in the company and has no stockoptions. She has been elected for the period 2011-2013.



Presentation of the Management Team

Presentation of the Management TeamKristian RøkkePresident and CEO

Kristian Røkke (b. 1983) joined Aker Philadelphia Shipyard as SVP Operations in May 2010. Previously, heworked for Aker Philadelphia Shipyard as Senior Shop Manager responsible for prefabrication, sectionassembly and shop outfitting. Mr. Røkke has experience from offshore service and shipbuilding from severalcompanies in the Aker group. In 2006—2007, he participated in Aker Solutions’ International Trainee Program,working for Aker Solutions Subsea in Malaysia. Mr. Røkke is a Board member of TRG Holding AS which owns66.7% of Aker ASA. Mr. Røkke has studied economics and mathematics at Colby College, London School ofEconomics and Political Science and the Norwegian School of Management (BI). Mr. Røkke is a Norwegiancitizen. Mr. Røkke lives in Philadelphia, PA, USA. As of 1 February 2012, Mr. Røkke holds zero shares in thecompany and has no stock options.

Jeffrey TheisenChief Financial Officer

Jeffrey Theisen (b. 1968) joined APSI in May 2007. Mr. Theisen has over 20 years experience in financial andstrategic planning, organizational leadership, budgeting and cost management, including seven years withArthur Andersen. Prior to joining APSI, Mr. Theisen served as Chief Financial Officer for The Regulus Group, amarket leader in transaction and information processing services to financial institutions and commercialend-users. Mr. Theisen holds a Bachelor of Science in Accounting from Villanova University and is a certifiedpublic accountant (inactive) in the state of Pennsylvania. Mr. Theisen lives in Lansdale, PA, USA. Mr. Theisen isa U.S. citizen. As of 1 February 2012, Mr. Theisen holds 500 shares in the company and has no stock options.

Eirik FadnesVice President

Eirik Fadnes (b.1980) is Vice President of Aker Philadelphia Shipyard. In addition to this responsibility,Mr. Fadnes serves as Financial Controller for Converto Capital Management. Mr. Fadnes joined ConvertoCapital Management in 2010. Prior to this, he worked as an auditor in Ernst & Young. Mr. Fadnes holds anMSc in Business and Economics from the Norwegian School of Economics and Business Administration (NHH)and an MSc in Professional Accountancy from the Norwegian School of Management (BI). Mr. Fadnes is aState Authorized Public Accountant in Norway. Mr. Fadnes lives in Oslo, Norway. As of 1 February 2012, Mr.Fadnes holds zero shares in the company and has no stock options.

Scott ClaphamSenior Vice President Projects and Business Improvements

Scott Clapham (b. 1974) has been with Aker Philadelphia Shipyard since its inception in 1998. Mr. Claphamprovided critical support to the CV2600 and CV2500 containership projects from design through production.Since joining the management team in 2005, Mr. Clapham has been responsible for marketing efforts,advanced projects, and other business development issues at the shipyard. Mr. Clapham holds a degree inNaval Architecture and Marine Engineering from the University of Michigan. Mr. Clapham lives in FortWashington, PA, USA. Mr. Clapham is a U.S. citizen. As of 1 February 2012, Mr. Clapham holds 1,000 sharesin the company and has no stock options.

Robert FitzpatrickVice President Production

Robert Fitzpatrick (b. 1964) joined Aker Philadelphia Shipyard in April 2001 and had held numerous keypositions including Prefabrication Manager and Senior Production Manager before being promoted to VPProduction in January 2007. Prior to coming to the shipyard, Mr. Fitzpatrick amassed 16 years experience inindustrial manufacturing including 12 years as a production manager responsible for the fabrication of navalcircuit breakers and switchgear. Mr. Fitzpatrick holds a Bachelor of Science in Mechanical Engineering fromSpring Garden College in Philadelphia, PA, USA. Mr. Fitzpatrick lives in Burlington, NJ, USA. Mr. Fitzpatrick isa U.S. citizen. As of 1 February 2012, Mr. Fitzpatrick holds zero shares in the company and has no stockoptions.



Presentation of the Management Team

Michael GiantomasoVice President Human Resources

Michael Giantomaso (b. 1966) joined Aker Philadelphia Shipyard as Human Resources Manager in May 1998and was the shipyard’s first locally hired manager. Mr. Giantomaso was promoted to VP in August 2001. Hehas over 20 years of human resources experience in the manufacturing and health care fields. Mr. Giantomasoholds a Bachelor of Arts in Business Administration and Human Resources from Temple University.Mr. Giantomaso lives in Huntingdon Valley, PA, USA. Mr. Giantomaso is a U.S. citizen. As of 1 February 2012,Mr. Giantomaso holds zero shares in the company and has no stock options.

Sanjay DeshmukVice President Purchasing

Sanjay Deshmuk (b. 1952) joined Aker Philadelphia Shipyard in 2000 and held several positions such as DesignManager, Project Manager and Procurement Manager before being promoted to VP Purchasing in April 2009.Mr. Deshmuk began his career in the maritime industry as a Hull Engineer and, in total, has amassed over 30years of experience in Engineering, Project Management and Procurement. Mr. Deshmuk has a Master ofBusiness Administration (MBA) from Drexel University and holds a Bachelor of Engineering in NavalArchitecture and Marine Engineering from the Indian Institute of Technology in India. Mr. Deshmuk lives inSomerdale, NJ, USA. Mr. Deshmuk is a U.S. citizen. As of 1 February 2012, Mr. Deshmuk holds zero shares inthe company and has no stock options.

Dean GrabelleGeneral Counsel

Dean Grabelle (b. 1970) was appointed General Counsel at Aker Philadelphia Shipyard in May 2008. Prior tojoining the shipyard, Mr. Grabelle was employed with the law firm Drinker Biddle & Reath LLP in Philadelphia,PA USA, where he established a legal career spanning 12 years. Past experience includes mergers andacquisitions, business counseling, lending, private equity and corporate finance. Mr. Grabelle graduated fromDuke University with a Bachelor of Arts in Economics and Public Policy Studies. He also holds a Juris Doctorfrom the University of Pennsylvania Law School. Mr. Grabelle lives in Voorhees, NJ, USA. Mr. Grabelle is a U.S.citizen. As of 1 February 2012, Mr. Grabelle holds zero shares in the company and no stock options.



Company information

DisclaimerThis annual report includes and is based, inter alia, on forward-looking information and statements that are subject to risks anduncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expect-ations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are majormarkets for Aker Philadelphia Shipyard ASA and its subsidiaries and affiliates (the “Aker Philadelphia Shipyard Group”) lines of business.These expectations, estimates, and projections are generally identifiable by statements containing words such as “expects”, “believes”,“estimates” or similar expressions. Important factors that could cause actual results to differ materially from those expectations include,among others, economic and market conditions in the geographic areas and industries that are or will be major markets for the AkerPhiladelphia Shipyard Group’s businesses, oil prices, market acceptance of new products and services, changes in governmental regu-lations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. AlthoughAker Philadelphia Shipyard ASA believes that its expectations and the information in this annual report were based upon reasonableassumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actualresults will be as set out in this annual report. Neither Aker Philadelphia Shipyard ASA nor any other company within the Aker Phila-delphia Shipyard Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness ofthe information in the annual report, and neither Aker Philadelphia Shipyard ASA, any other company within the Aker Philadelphia Ship-yard Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use ofthe information in the annual report.

Aker Philadelphia Shipyard ASA undertakes no obligation to publicly update or revise any forward-looking information or statements inthe annual report, other than what is required by law.

The Aker Philadelphia Shipyard Group consists of various legally independent entities, constituting their own separate identities. AkerPhiladelphia Shipyard is used as the common brand or trade mark for most of these entities. In this annual report we may sometimes use“Aker Philadelphia Shipyard”, “Group”, “we” or “us” when we refer to Aker Philadelphia Shipyard companies in general or where no use-ful purpose is served by identifying any particular Aker Philadelphia Shipyard company.

Aker Philadelphia Shipyard ASAFjordalleen 16, P.O. BOX 1423, Vika,NO-0115 Oslo, NORWAYTel: + 47 24 13 00 00, Fax: + 47 24 13 01 01

Aker Philadelphia Shipyard, Inc.2100 Kitty Hawk AvenuePhiladelphia, PA 19112 USATel: +1 (215) 875 2600, Fax: +1 (215) 875 2700

website: www.akerphiladelphia.comemail: [email protected]

Save the environment —read reports online

The annual reports of AkerPhiladelphia Shipyard ASA areavailable via the Internet: www.akerphiladelphia.com. Alternatively,Aker Philadelphia Shipyard ASAencourages its shareholders tosubscribe to the company’s annualreports via the electronic deliverysystem of the Norwegian CentralSecurities Depository (VPS). Pleasenote that VPS services (VPSlnvestortjenester) are designedprimarily for Norwegian shareholders.Subscribers to this service receiveannual reports in PDF format byemail. VPS distribution takes place atthe same time as distribution of theprinted version of Aker PhiladelphiaShipyard’s annual report toshareholders who have requested it.

Electronic distribution is the fastestchannel for accessing companyinformation; it is also cost-effectiveand environmentally friendly.

Photos/illustrations:All photos courtesy ofAker Philadelphia Shipyard, Inc.

Layout/production:RR Donnelley

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