2013 Annual Report - Zetta ASfiles.zetta.no/.../2013_annual_report_low_res_final.pdfIn review Key...

2013 Annual Report

Contents

In review

1 Company overview

2 History

4 Key events

5 Investment highlights

6 Our values

7 Our safety

9 Letter from the President and CEO

Performance 2013

12 Board of Directors’ report

19 Directors’ responsibility statement

20 Consolidated accounts

41 Parent company accounts

48 Auditor’s report

50 Shares and shareholder matters

Our organization and governance

52 Corporate governance

56 Presentation of the Board of Directors

58 Presentation of the Management Team

60 Company information

Financial calendar 2014

Annual general meeting 9 April

Interim report Q1 2014 2 May

Interim report Q2 2014 17 July

Interim report Q3 2014 5 November

Dates are subject to change.

In review

Company overview

This is Aker Philadelphia ShipyardAker Philadelphia Shipyard is a leading U.S. commercial shipyardconstructing vessels for operation in the Jones Act market. Itpossesses a state-of-the-art shipbuilding facility and has earned areputation as a preferred provider of ocean-going merchant ves-sels with a track record of delivering quality ships, having deliveredover 50% of all large ocean-going Jones Act commercial shipssince 2000.

Aker Philadelphia Shipyard ASA is headquartered in Oslo, Norwaywith an operating subsidiary in Philadelphia, PA, USA.

Aker Philadelphia Shipyard ASA was listed on Oslo Axess inDecember 2007. Converto Capital Fund AS, an investment fundcontrolled by Aker ASA, is the majority shareholder, holding 71.2%of the shares as of 31 December 2013.

Elements contributing to success:

• State-of-the-art shipyard with modern equipment

• Strong order backlog exceeding USD 1 billion with deliv-ery dates through 2018

• Access to global shipbuilding and design expertisethrough agreements with Hyundai Mipo Dockyard, Sam-sung Heavy Industries and KOMAC

• A solid track record demonstrated by the delivery of 18quality vessels (4 containerships, 14 product tankers)through 2013

• Skilled workforce consisting of direct and contractedemployees with a strong HSE mindset and culture ofimprovement

U.S. Jones Act

U.S. coastwise law, commonly referred to as the Jones Act,requires all commercial vessels transporting merchandisebetween ports in the United States to be built in the UnitedStates, owned, operated and manned by U.S. citizens andregistered under the U.S. flag. Commonly referred to as theJones Act market, it encompasses all water-borne trans-portation between U.S. ports, including between the mainlandU.S. and non-contiguous areas of Alaska, Hawaii and PuertoRico, as well as shuttle tankers in the Gulf of Mexico.

Aker Philadelphia Shipyard annual report 2013 1

In review

History

1997 1998 2000 2002 2003 2004 2005 2006

Founded by thepublic-privatepartnershipconsisting ofU.S. govern-mental agen-cies and theKvaerner Ship-buildingDivision

Construction ofthe productionfacility andworkforcetraining

Began con-struction of thefirst two con-tainer vessels(CVs)

Matson agreedto purchasethe two CVs

First CVdelivered

Second CVdelivered

Matson agrees topurchase twoadditional CVs

Aker AmericanShipping ASA(AKASA) formedand listed on OsloBors

Third CVdelivered

Constructionprogram of tenproduct tankers(PTs) initiated

Fourth CVdelivered

1997

2 Aker Philadelphia Shipyard annual report 2013

In review

History

2007 2008 2009 2010 2011 2012 2013

First three PTsdelivered

Order of additionaltwo PTs for laterconversion toshuttle tankers

Split of AKASA’sshipbuilding andship owningoperations andlisting of AKPSon Oslo Axess

Fourth and fifthPTs delivered

Graduation ofthe first threeapprenticeclasses

Celebrated ten-year anniversaryof the yard

First dividendpaid toshareholders

Sixth, seventhand eighth PTsdelivered

Finalizedsettlementagreement withAmericanShippingCompany andOverseasShipholdingGroup

Ninth, tenth andeleventh PTsdelivered

New unionagreementextended into2015

Secured financingfor constructionof two PTs

Twelfth PT deliv-ered, markingsuccessful com-pletion of tankerseriesannounced in2005

Signed contractwith SeaRiver fortwo aframaxtankers

Sold thirteenthand fourteenthPTs to Crowley

Deliveredthirteenth PT

Beganconstruction ofSeaRivervessels, Hulls019 and 020

Deliveredfourteenth PT

Signed jointventureagreement withCrowley forfour PTs

Signedagreement withMatson for two3,600 teucontainerships

Celebrated the15-yearanniversary ofthe shipyard

Now


In review

Key events

2013 key events and highlights

Delivered Hull 018 on time

Hull 018, the Florida, wasdelivered to Crowley31 January, one day earlierthan its original deliverydate. Delivery of this vesselmarked the successfulcompletion of a series offourteen product tankersbuilt at Aker PhiladelphiaShipyard.

Entered into agreement with Matson to build two3600 teu containerships

The 850 foot-long container-ships will be delivered in Q3and Q4 2018 and have atotal contract value of USD418 million. They will be thelargest containerships everbuilt for the Jones Acttrade.

Shipyard celebrated 15-year anniversary

On 21 September, the ship-yard was transformed froma place of heavy manu-facturing into a festival forall APSI friends and family.

Entered into joint venture with Crowley for four producttankers

Definitive documentationfor a joint venture forfour new product tankerswith deliveries in 2015 and2016 was signed inNovember providing AKPSwith an economic interest inthe vessels after delivery.

Record strong earnings

Delivered record EBITDA ofUSD 30.1 million.

Share price increased933%.


In review

Investment highlights

Investment highlights

1 Leading commercialJones Act shipyard 2 High visibility

out 2018 3 Direct exposure toshale revolution 4 Strong earnings

potential

Š State-of-the-art facility withmore than USD 650 millioninvested since founding

Š Over USD 1 billion in backlogwith last delivery in 2018

Š Strong market fundamentalswith increasing time-charterrates

Š Expected earnings growthover coming years with back-log sold at attractive margins

Š Built over 50% of all largeocean-going Jones Actcommercial ships since 2000

Š APSI expects to secure avail-able slots 025-028 as PTs in2014

Š Six vessels with exposure totime-charter rates throughprofit sharing and joint ven-ture

Š Shipping assets to contributeto earnings growth as vesselsare delivered

Š Highly skilled workforce withintegrated, fully flexible sub-contracting

Š Series production with famil-iar ships offers operationalbenefits

Š Opportunity to add additionalexposure through partownership of Hulls 025-028

Š Strong balance sheet withavailable debt capacity

Š Culture of high efficiency withproven ability to improveproductivity over time

Š Need to replace aging JonesAct fleet post-2018

Š Partnership with first-classoperator Crowley

Š Paying dividends starting inQ2 2014

AKPS order backlog

115,000 dwt

115,000 dwt

50,000 dwt

19

20

21

Aframax

Aframax

Product

50,000 dwt

50,000 dwt

50,000 dwt

50,000 dwt

50,000 dwt

50,000 dwt

50,000 dwt

22

23

24

"25"

"26"

"27"

"28"

Product

Product

Product

Product

Product

Product

Product

3,600 teu29Container

3,600 teu30Container

Type Unit Size

2014 2015 2016 2017 2018

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Firm contracts Available slots

Key machinery investment:State-of-the-art web line welding robotinstalled Q2 2013.


In review

Our values

Vision: To be - and be recognized as - America’s leading commercial shipyard that

delivers on its commitments, every time.

Our CORE valuesAker Philadelphia Shipyard’s CORE values were designed as a reflection of who we are, and who we aspireto be, as a shipyard, as an organization, and as individuals.

They capture the pride, passion and commitment behind each action we take and decision we make. They are not words on a page, butour stand – a united commitment to conquer all challenges and build long lasting relationships. For years to come we will be united bythese values, that give us the platform to deliver on our commitments, every time.

Caring One shipyard Responsible Efficient

Working as family Selfless for every customer Treat it like you own it Being better than yesterday

We are a shipbuilding family, aunique group comprised ofmany backgrounds and eth-nicities, teams and depart-ments; but at the end of theday, we have a healthy respectand a natural need to protecteach other.

Customers are all around.From ship owner to processowner, we are all powerfullyunited to deliver. That meansdecisions are made in thebest interest of the company,rather than oneself, or oneteam. We are strongest whenwe act together.

If you’re responsible for it,you own it, so treat it like it’syours. This means taking theutmost care for tools andequipment, making deci-sions based on the impact toyour bottom dollar, andsimply doing the right thing.Success is in our hands.

A healthy dissatisfaction forthe status quo lives within us.It fuels the need to challengeourselves, and each other, tofind a better way. Being effi-cient keeps our costs down,while driving our competitiveedge up.

Caring in actionAt Aker Philadelphia Shipyard, the way in which we achieve growth and profitability is asimportant as the achievements themselves. Our overriding corporate responsibility isconcern for the communities that we are a part of. We strive to provide products and serv-ices in a safe, environmentally sound, ethical, and socially responsible manner.

More information regarding the Company’s corporate social responsibility efforts can be foundon pages 16-17 of the Board of Directors’ report.


In review

Our safety

Journey toward world class safety

One of seven new banners installed throughout the shipyard in 2013

At APSI, safety is personal. Our guiding principle is that all incidents arepreventable and extensive measures are taken to ensure the safety ofeveryone.

The credo is clear: We fundamentally believe that all injuries are preventableand safety is everyone’s responsibility; and we promise to be relentless in ourpursuit of an injury-free workplace by creating and maintaining safe workingconditions and never compromising safety for anyone, anywhere, at any time.

In 2013, APSI’s lost time frequency decreased 38% from 2012, which isapproximately 60% below the comparable industry average. Contributing tothis decrease are a number of new initiatives that were introduced throughoutthe year.

A new and highly visible safety campaign was rolled out mid-year. The deeplypersonal campaign featured some of life’s most valuable moments alongsidea tagline reminding employees to “Invest another minute,” not for the SafetyDepartment, but rather for each individual and their loved ones. The cam-paign, which includes two 96-foot and five 50-foot banners, can be seen fromnearly every area inside the gates.

As an example of the “Invest another minute” campaign, an enhanced pre-task planning card was introduced, revised for simplicity and practicality. Thecard is distributed to employees first thing each morning for completionbefore the day’s assignments begin and compliance is audited monthly.

APSI also expanded its recognition program by adding “On the Spot” awards,designed to reward and recognize those who lead the way in safety. In 2013,over 400 awards were given to employees who provide unwavering support.

At APSI, it doesn’t matter what position you have—we are all united on thejourney toward world class safety.

‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13

All incident frequency

APSI and subcontracted employees;OSHA lost time frequency

Lost time frequency

Industryaverage

2011 2012 2013


Surviving to Thriving

In review

Letter from the President and CEO

Dear Shareholders,I intended to write a shorter letter this year, but could not help myself – so much is happening andyou deserve full context when evaluating our business. But fear not – writing this letter has nottaken our eye off the ball. In fact, we are more focused than ever on creating additional value foryou, which is paying dividends…literally.

With record financial results and a stock up 933% in 2013, it is tempting to get carried away aboutour performance, but we prefer to remain humble shipbuilders with resolute confidence in the valuethat our people and assets provide our customers and shareholders. Bear with me as I explain…

2013 IN REVIEW

As I learned while serving in the Norwegian Army, after-actionreviews are essential for continuous improvement. In this spirit,here is a brief review of our 2013 Plan for Success as described inlast year’s letter.

1. Enhance our COREI love the quote, “trick plays make headlines, but winners executethe basics.” Enhancing our CORE is about increasing long-termcompetitiveness through a maniacal focus on the few things thatmove the needle. We can report progress across a number offronts:

Health, Safety & Environment – Lost-time incidents on a fre-quency basis were down 38% for all employees and subcon-tractors combined, reaching a level 60% below the comparableindustry average. While pleased with this progress, we are notsatisfied and will relentlessly pursue an injury free workplace.

People & Culture – Being committed to something larger thanoneself is fundamental to organizational excellence. On that basis,we invested significant time following the layoffs in 2010 redefin-ing “where we’re going” through a new vision and “how we’ll getthere” with a new set of CORE values. This has paid off and I likewhat I see: high employee engagement, displays of personalleadership and an expanding skill base.

E330 – Improvement only occurs with specific intent. That’s thenotion behind our improvement program E330 (“Efficiency,3-years, 30%”). Three areas are currently under the microscope –Project Preparation, Quality and Effective Working Hours – andwe are making systematic improvements to each one with hun-dreds of specific actions. This demonstrates how years of backlogcan provide tangible operational benefits. Down the learning curvewe go.

2. Deliver on Customer CommitmentsDelivering on our commitments to customers – not most of thetime, but every single time – will keep customers coming back toKitty Hawk Avenue. We proudly honored our commitments in2013 by completing the Florida for Crowley, delivering her oneday early and below our internal budget. If we can say so our-selves, it marked a successful end to the series of fourteenVeteran Class product tankers.

We also made substantial progress on two 115,000 dwt Aframaxtankers currently under construction for SeaRiver, ExxonMobil’swholly-owned marine affiliate. The first of the two vessels waslaunched on November 9, three weeks ahead of her contractmilestone date. We have since experienced challenges and seencosts rise while working toward delivery. I will not spend as muchtime citing weather as the Fed Chair did in front of Congress

recently, but one of Philadelphia’s harshest winters on record hasleft its mark. We would of course like to make more money on theships, but I am not complaining. In fact, we count our blessingsevery day – only fish would occupy the building dock had we notwon this project. Despite the challenges, our targeted deliveryremains April 30, 2014 at 10:00 am and yes, I have started count-ing hours…only 1,015 to go…

3. Secure the FutureWe started 2013 with an order backlog of $339 million and hadthe joy of tripling it to over $1.0 billion by year-end after signingcontracts for six vessels – four with the Crowley joint venture (JV)and two with Matson – extending our last firm delivery toDecember 2018. This is a solid platform that we will take advan-tage of operationally.

The four Crowley JV vessels are 50,000 dwt product tankers witha 330,000-barrel carrying capacity. From a shipbuilding per-spective, they are nearly identical to the fourteen product tankerswe delivered between 2007 and 2013, with the exception of extrasteel weight to meet new regulations and some builder-friendlydesign changes (e.g., fewer panels and more standardized plates).From a shipping perspective, they are over 20% more fuel effi-cient. Some have said that we can “build them in our sleep.” Iwould more modestly say that we have high confidence in deliver-ing on our promises.

We were pleased to win the Matson contract for two 3,600 teucontainerships – they will be the largest containerships ever builtfor the Jones Act and will allow us to regain our containership-building stride with a returning customer. Compared to producttankers, they have more propulsion power, tighter tolerances andmore curvature, but also require less high-spec painting and lessoutfitting. A key advantage is the long design time we have beforeproduction start. This allows us to work through design issuesextensively before steel cutting, to support on-time equipmentdeliveries and high-quality work packages. Design determinesmost of the score in shipbuilding and we could not ask for a bet-ter start.

Some decisions are bigger than others and one of those in 2013was whether or not to build containerships in the coming years.One school of thought argued in favor of building product tankersas far as the eye could see. Strategically, we felt it was importantfor AKPS to be well positioned for the longer-term re-tonnaging ofthe containership fleet, given its old age. Furthermore, we did notwant AKPS to become a “one-trick pony.” We have struck adeliberate balance between the two vessel types and we lookforward to serving our customers’ needs in both segments post-2018.


In review


In 2013, we delivered an EBITDA of $30.1 million, 70% higherthan our previous record. AKPS’s total cash position stood at$88.8 million at year-end, with only $5.6 million in interest-bearingdebt. The higher EBITDA was generated mainly by strongperformance on Hull 018 and increased progress on the SeaRiverproject.

2014 PLAN TO WIN

How are we going to realize additional shareholder value fromhere? Tim Cook, who is currently Apple’s CEO and whose fatherworked as a shipyard supervisor, has referenced Apple’sorganizational thinking by saying “we’re simpletons.” Borrowingthat mantra, I’ll answer the above question with the followingthree points: (1) deliver on customer commitments, (2) secureopen slots as product tankers, and (3) maximize value of shippingassets.

1. Deliver on Customer CommitmentsWithout exactly revealing trade secrets, I can say that deliveringhigh-quality ships, on time and on budget, is the commerciallifeblood of our organization. Offering the lowest-cost tonnage ona predictable basis also creates opportunities for AKPS togenerate non-traditional, value-enhancing deals. Historically,delivering as promised has been the exception rather than the rulein the Jones Act, but this is changing and we take pride in leadingthe pack on reliability.

In 2014, we have planned two vessel deliveries for SeaRiver(April 30 and December 31), four ship starts for Crowley (January,April, August and December), and significant design, procurementand planning activity for Matson throughout the year. This ishigher activity levels than ever before, but our organization isready to take on what comes its way.

2. Secure Open Slots as Product TankersIn 2013, we made a strategic decision to invest approximately$115 million in four product tankers alongside Crowley (Hulls 021-024) – not something we had to do, but something we chose todo based on expected returns on invested capital. Although theinvestment was considered on a stand-alone basis, the value-accretive opportunity originated from AKPS being the leadingbuilder of product tankers in the Jones Act. Many would becontent with “just” building the ships, but we like to think we havea flare for the creative when trying to generate incremental value.

For these secured hulls, Crowley is firmly in the driver’s seat –both literally and conceptually. We will rely on Crowley’s expertiseas technical operator and trust their long-term approach toserving customers. I sleep well at night knowing Crowley isworking hard to maximize the value of our investment.

This brings me to our open slots, Hulls 025-028. We see multipleoptions that are attractive; varying in partner type, charter strategyand ownership percentage for AKPS. We are currently pursuing anumber of opportunities, all of which retain a significant portion ofshipping exposure by investing capital in a joint venture. We areworking with several interested parties and expect to have anagreement in place during 2014.

3. Maximize Value of Shipping AssetsAt the risk of sounding trite, I dare say that we have transformedas a company over the past 18 months and no longer resemblethe company we once were. We now have a backlog exceeding$1 billion, an organization capable of handling considerableparallel activity, a record strong financial position, and morerobust access to capital markets.

As part of the transformation, we have built a sizable base ofshipping assets consisting of a two-vessel profit sharing

agreement, four JV vessels with Crowley and expectantly fourmore JV vessels with a third party (some have started to call us ashipping company with a shipyard). A key question is thereforehow to maximize their long-term value? Our base assumption isto keep them “as is,” ownership-wise and financing-wise, allowingour CFO to cash growing checks over the coming years to thebenefit of shareholders. However, better long-term homes mayexist for these assets and we intend to explore all options.

As an example of a potential value-enhancing possibility, it maybe beneficial to include these assets in a Master LimitedPartnership (MLP) after delivery. MLPs have received mediaattention lately due to their increased usage and many inherentbenefits, including lower after-tax cost of capital than mostcorporations. The assessment is still in its early stages, but restassured that we will consider the right alternatives in cooperationwith our partners to maximize the value of our shipping assets.

**************************Dividend payments will restart in 2014, picking up where we leftoff six years ago. Our commitment is to pay $0.25 per share perquarter starting in Q2 2014, and we’re expecting to grow payoutsover time. AKPS’s long-term dividend target will be set when boththe investment amount for Hulls 025-028 is clarified and fundingplans are finalized. We currently have an attractive commitmentthrough the PIDC Welcome Fund loan program for a five-yearterm-loan with a fixed 2.75% interest rate that will be used to funda portion of the Crowley JV investment. We have the possibility toleverage further, but we will consider the cost of capital, risk andflexibility, while taking into consideration such factors as ouranticipated investment needs, operational profile and targetedshareholder distributions, when determining AKPS’s optimalcapital structure.

**************************

The current boom in Jones Act shipping will inevitably normalize,but strong tailwinds continue to blow without signs of easinganytime soon. We have believed in this market since engaging intwo “spec” product tankers in 2011 (when many thought we werecrazy), and we continue to believe in the fundamentals of themarket. The increasing production of U.S. shale oil is a game-changer and to the extent it continues without radical land-basedinfrastructure developments to support new transportation routes(which will take time), demand will be high for Jones Act tonnage.Pipelines and rail will always play important roles, but ships offer aflexible, cost-efficient and environmentally-friendly way of movingcrude, which is why tankers will be an essential mode oftransportation for decades to come. Furthermore, ship technologycontinues to progress, increasing fuel efficiency and furtherimproving the relative economics of moving oil by ships.

Crude export policy is a wild-card that has received increasedmedia attention lately. Predicting what will happen is not easygiven the political nature of the issue, but few expect an overnightshift in policy. Foreigners often question why the United Statesmaintains regulations from the 1970’s limiting crude exports, butthey sometimes underestimate this country’s determination to dowhat it thinks is right for its consumers, despite criticism ofundermining policies of free trade (the Jones Act is anotherexample, which remains steadfast). Although many oil companiesare lobbying hard for change, it seems the public is concernedabout the potential negative effects of exporting U.S. oil on gasprices, domestic jobs, and national energy security. The debatecontinues, but we are not holding our breath.

Independent of national crude export policy, it is only reasonableto expect time-charter rates to normalize in the future. I do nothave a specific prediction to offer (it would be wrong), but we are


In review


“There are many stakeholders who have been instrumental in the transformation – first and foremost the men and women of AKPS withtheir passion for building high-quality ships.” Left to right: Kristian Rokke with James Close (Supervisor) and Glenn Cumbest (Manager)

still positive toward market fundamentals and have assumedreasonable rates in the medium term in our own analysis. Iftoday’s levels continue, then that is only a positive variance.

SURVIVING TO THRIVING

AKPS has gone from merely “surviving” in 2011, when manyconsidered us down for the count, to having a robust platform for“thriving,” where we are playing a meaningful role in therevitalization of the country’s energy infrastructure. There aremany stakeholders who have been instrumental in thetransformation – first and foremost the men and women of AKPSwith their passion for building high-quality ships, but also ourcustomers, the City of Philadelphia, the State of Pennsylvania,AKPS’s Board of Directors and Converto, to mention a few.

Sometimes you have to follow your gut, and for me personally, thetime feels right to move on from Philadelphia as the companyembarks on a new era and I look to other roles within the AkerGroup. I have savored every moment of the three-year journey –pouring all my energy into the CEO role while earning an MBA onthe side and, of course, enjoying Philadelphia. On April 9, I expectto become Executive Chairman of the Board and Steinar Nerbovikto become Managing Director. Steinar has been the SVPOperations over the past year and is the right person for AKPS –he has strong personal values, and the skills, experience andleadership to elevate the company to new heights and realize thefull “thriving” potential of the organization. I intend to be full-timein Philadelphia out the year and upon my departure, I will revert toChairman with customary responsibilities. In the meantime, I haveslots to sell and Steinar has ships to deliver.

There are many things I could have done better, but overall, I feelgood about my contributions to the company. I am frequentlyasked about the stock price that is up over 4,000% since I becameCEO and why I do not own shares myself. The plan at the outsetwas for me to buy 10% of the company, but this was cancelled outof related-party concerns and a potential triggering of a mandatoryoffer for all outstanding shares, given my relationship to Aker’sprincipal shareholder. I likely could have handled the issue with abit of effort, but I was 100% focused on doing the best possiblejob as CEO, not building a large personal bank account. Thepersonal gain would have been approximately $30 million.

I have not lost a second of sleep over the $30 million – as PaulMcCartney of The Beatles said, “material possessions are all verywell, but they won’t buy me what I really want.” Seeingbusinesses win and creating long-term value for owners, inaddition to being a responsible custodian of the “shareholder’swallet,” is what gives me a kick. You have my word that I will(a) focus on long-term value creation, (b) communicate reliablyand transparently, (c) treat all owners fairly, and (d) allocate capitalin a shareholder friendly manner. Shareholders are the ones whoshould be wheeling out barrels of cash, not CEOs. But do not getany ideas…I would still like a salary.

In closing, I would like to express my appreciation for all who havecontributed to making AKPS such a great company, with anexciting future. Jim Miller, who is passing the Chairman baton tome, deserves a special thanks – he has provided leadership overmany years and has served as a mentor for me personally, forwhich I am grateful. AKPS would not be the company it is todaywithout his personal engagement through thick and thin. Thankyou.

This shipyard has been tested over its lifetime, but from thosechallenges has emerged a workforce that knows the value ofpersistence, believes failure is not an option, and is thus betterequipped to face any issues head-on. We have proven this timeand again, and that is what makes AKPS unlike any othershipyard.

We are in the middle of an energy revolution and it is exhilaratingto play a role in the development of a viable nationaltransportation network. I appreciate the support and look forwardto giving my all for shareholders in a new role.

Kristian RokkePresident and CEOPhiladelphia, March 19, 2014


Performance 2013

Board of Directors’ report

Board of Directors’ report 2013Aker Philadelphia Shipyard ASA and its subsidiaries (referred to herein as “AKPS” or the “Company”) is aleading shipbuilder in the U.S. Jones Act market.

In January 2013, Aker Philadelphia Shipyard, Inc. (referred to herein as “APSI” or the “Shipyard”), the soleoperating subsidiary of AKPS, delivered Hull 018, the Florida, to Crowley Tankers, LLC, an affiliate of CrowleyMaritime Corporation (“Crowley”). This delivery completed the series of fourteen product tankers that APSIbegan in 2005.

In August 2013, APSI signed shipbuilding contracts with Crowley for the construction of four 50,000 dwtproduct tankers with deliveries in 2015 and 2016 (Hulls 021-024). These vessels will be part of a joint venturebetween Crowley, APSI and certain of their affiliates for the operation and chartering of product tankers.Definitive documentation for the joint venture was signed in November 2013.

In November 2013, APSI signed shipbuilding contracts with Matson Navigation Company (“Matson”) for two3,600 teu containerships with deliveries in 2018 (Hulls 029 and 030). These vessels will be the largest contain-erships ever built for the Jones Act market and will be utilized in Matson’s service from the U.S. West Coastto Hawaii.

As of 31 December 2013, the project to construct two aframax tankers (Hulls 019 and 020) for SeaRiver Mar-itime, Inc. (“SeaRiver”), ExxonMobil Corporation’s U.S. marine affiliate, was approximately 71% complete.Both vessels are scheduled for delivery in 2014. These tankers are intended to be used to transport AlaskanNorth Slope crude oil from Prince William Sound, Alaska to the U.S. West Coast.

For the year ended 31 December 2013, AKPS realized operating revenues of USD 279.0 million, an increase ofUSD 138.0 million from 2012, and earnings before interest, taxes, depreciation, and amortization (EBITDA) ofUSD 30.1 million, compared to EBITDA of USD 17.9 million in 2012. The increase in revenues and EBITDA isdriven by increased production activities on the SeaRiver project.

Converto Capital Fund AS, an investment fundcontrolled by Aker ASA, is the majority share-holder in Aker Philadelphia Shipyard ASA.

ActivitiesThe main entities in the Aker PhiladelphiaShipyard ASA Group are the Norwegianholding company, AKPS, and the U.S.operating subsidiary, APSI, a leading U.S.commercial shipyard. AKPS is located inOslo, Norway, while APSI is located inPhiladelphia, Pennsylvania, USA.

As of 31 December 2013, APSI’s work-force consisted of 1,130 people, with abreakdown of 581 direct employees and549 subcontracted personnel.

AKPS’s business strategy for APSI is tobuild merchant vessels for operation in theU.S. Jones Act market and to opportunisti-cally participate in the economics of thosevessels in operation. The Company is cur-rently building the two aframax vessels forSeaRiver and has profit sharing agreementsin place for two product tankers (Hulls 017and 018) with Crowley and a joint venture forthe operation and chartering of four addi-tional product tankers (Hulls 021-024) alsowith Crowley. Construction started on Hull021 in January 2014.

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: a state-of-the-art shipyard with modern equip-ment; strong order backlog exceeding USD1 billion with delivery dates through 2018;access to global shipbuilding and designexpertise with Hyundai Mipo Dockyard,Samsung Heavy Industries and KOMAC;and a solid track record as evidenced bythe delivery of four container vessels toMatson, twelve product tankers to Ameri-can Shipping Company ASA (“AMSC”) andOverseas Shipholding Group, Inc. (“OSG”)and two product tankers to Crowley.

The Jones Act marketThe U.S. Jones Act generally restricts themarine transportation of cargo and pas-sengers between points in the United Statesto vessels built in the United States, regis-tered under the U.S. flag, manned by pre-dominately U.S. crews, and 75% owned andcontrolled by U.S. citizens. The ability of theCompany to win contracts is in partdependent on its unique ability to constructvessels that are eligible for U.S. Jones Acttrades, and the Jones Act requirement for

construction of the vessels in the UnitedStates limits competition for future contracts.

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 variousgovernmental parties that have contributedto the establishment of the Shipyard.

Under the Master Agreement, the gov-ernmental parties have provided approx-imately USD 438 million for the renovationand modernization of the facility and train-ing of the workforce. APSI was required tomake certain qualified infrastructureinvestments totaling USD 135 million, whichhave been fully satisfied. APSI was alsorequired to match government funding forcertain training costs totaling USD50 million, which has been fulfilled.

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 of


Performance 2013


APSI 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.

Pursuant to the Authorization Agree-ment, PSDC purchased certain shipyardassets from APSI for a purchase price ofUSD 42 million, payable in two equaltranches, with funds provided by theCommonwealth of Pennsylvania. APSI isleasing back those same assets fromPSDC subject to the terms of the ShipyardLease and the Authorization Agreement.APSI used the sale proceeds, in combina-tion with construction period financing withprivate lenders and its own available funds,to construct Hulls 017 and 018. Upon thedelivery of Hull 018 to Crowley in January2013, the Authorization Agreement(excluding the lease of shipyard assetsdescribed above) was terminated.

StrategyAKPS will, through its unique partnershipsand experience obtained during con-struction of the series of product tankers,strive to be the most efficient shipyard inthe U.S. Jones Act market for production ofmerchant vessels. AKPS intends to lever-age its significant backlog and visibility into2018 to drive improvement in all aspects ofits business. AKPS will continue to monitorand evaluate how to derive the maximumbenefit from its competitive advantage andmarket share and invest in the vessels itconstructs when it creates additional value.If production capacity is available, APSI willalso pursue fabrication opportunities out-side of traditional shipbuilding where itscore competencies in steel fabrication,heavy lifting, and project management areadvantageous.

Key events 2013On 30 January 2013, APSI delivered Hull018, the Florida, to Crowley. Compensationfor this vessel was in the form of a fixedpurchase price of USD 90 million and avariable component based on the vessel’sfinancial performance over the life of thevessel. This delivery completed the series offourteen product tankers that APSI began in2005. In conjunction with the sale anddelivery of Hull 018 to Crowley, APSI’s USD80 million construction loan from CaterpillarFinancial Services was terminated andAPSI’s USD 30 million construction loanfrom Aker ASA was repaid. In addition,because Hulls 017 and 018 were completedbefore their agreed-upon deadlines, APSI

was discharged of its contingent obligationunder the Authorization Agreement to payliquidated damages to PSDC of up to USD70 million.

On 8 August 2013, APSI signed ship-building contracts with Crowley for theconstruction of four 50,000 dwt producttankers (Hulls 021-024) with a total contractvalue of approximately USD 490 million.These vessels will be part of a joint venturebetween Crowley, APSI and certain of theiraffiliates for the operation and chartering ofproduct tankers. Definitive documentationfor the joint venture was signed on6 November 2013. After the vessels aredelivered, Crowley and APSI will share inthe economics of the operation andchartering of the vessels throughout theiruseful lives. APSI expects to hold aninvestment of approximately USD115 million in the APSI-Crowley partnershipafter delivery of the fourth vessel.

On 6 November 2013, APSI signedshipbuilding contracts with Matson for two3,600 teu containerships with deliveries in2018 (Hull 029 and 030) and a total value ofUSD 418 million. These vessels will be thelargest containerships ever built for theJones Act market and will be utilized inMatson’s service from the U.S. West Coastto Hawaii.

During Q4 2013, APSI signed commit-ment letters with Caterpillar Financial Serv-ices for a loan facility of USD 120 million forthe construction of Hulls 021-024 and PIDCRegional Center for a secured term loan ofup to USD 60 million. The companyexpects to sign definitive documentationfor these two commitments in Q1 2014.

As of 31 December 2013, the projectto construct two aframax tankers (Hulls 019and 020) for SeaRiver was approximately71% complete. Both vessels are scheduledfor delivery in 2014. These tankers areintended to be used to transport AlaskanNorth Slope crude oil from Prince WilliamSound, Alaska to the U.S. West Coast.

Review of the annual accountsAKPS prepares and presents its accountsaccording to International Financial Report-ing Standards (IFRS) as adopted by theEuropean Union.

AKPS was formed on 16 October 2007to be the holding company of APSI whichowns the shipyard located in Philadelphia,Pennsylvania, USA.

In accordance with IFRS, AKPS isrecognizing the two aframax tanker orderfor SeaRiver as one single project. As such,revenue and expense for these tankers havebeen recognized on a total project basis. Asof 31 December 2013, AKPS was approx-imately 71% complete with the project.

Order backlogAPSI’s order backlog was USD1,017.7 million, including customer-provided materials of approximately USD11.9 million, as of 31 December 2013. Atthe end of the year, the order backlog wascomprised of remaining work to be per-formed on the two aframax tankers to bebuilt for SeaRiver, four product tankers fordelivery to Crowley and two containervessels to be built for Matson. The netbacklog increase of USD 679.0 million from2012 is due to the firm contracts enteredinto with Crowley and Matson which werepartially offset by continued progress madeon the SeaRiver project.

Profit and loss accountsIn 2013, AKPS had revenues of USD279.0 million compared to USD141.0 million in 2012. Revenues are typi-cally recognized according to the percent-age of completion method when firmcontracts are in place, based primarily onthe scope of completed work compared toestimated overall project scope. Therecognized revenues in 2013 primarilyrepresent revenues related to the sale ofHull 018 to Crowley in Q1 and progress onthe aframax tankers being built forSeaRiver. The recognized revenues in 2012primarily relate to the sale of Hull 017 toCrowley and progress on the aframaxtankers being built for SeaRiver.

AKPS’s operating profit before inter-est, taxes, depreciation, and amortization(EBITDA) was USD 30.1 million in 2013compared to USD 17.9 million in 2012.These figures correspond to EBITDA mar-gins of 10.8% and 12.7%, respectively.

Depreciation and amortization expensewas USD 6.9 million in 2013 and USD1.8 million in 2012. The increase in 2013depreciation expense is due to a large por-tion of 2012 depreciation expense beingcapitalized into work-in-process for thevessels being built for AKPS’s ownaccount. AKPS’s operating profit beforeinterest and taxes (EBIT) was USD23.2 million in 2013, compared to EBIT ofUSD 16.1 million in 2012.

Net financial items were positive USD0.2 million in 2013, compared to negativeUSD 0.3 million in 2012. Net financial itemsin 2013 were primarily driven by higherinterest income on cash balances, interestincome on the profit share receivable fromHulls 017 and 018 and lower net interestexpense as compared to 2012.

Income tax expense for 2013 was USD7.8 million, compared to income taxexpense of USD 6.3 million in 2012.

In 2013, AKPS’s net income was USD15.6 million and its basic and diluted earn-ings per share was USD 1.53. The corre-


Performance 2013


sponding figures for 2012 were net incomeof USD 9.5 million and basic and dilutedearnings per share of USD 0.93.

The increase in revenues, EBITDA andnet income year over year was driven bysignificantly more shipbuilding progress onthe SeaRiver aframax vessels in 2013. TheCompany sold and delivered Hulls 017 and018 to Crowley in August 2012 andJanuary 2013, respectively, at substantiallythe same revenue and profit.

AKPS’s research and development isprimarily related to two areas. The mostimportant area is the development of APSI’sbuilding methodology and working methodsto ensure that APSI takes maximum benefitof the learning curve and produces eachgrand block and each vessel more effi-ciently than the previous. There is also workrelated to the development of new vessels,but APSI will not develop its own designsfor other vessel types, but rather identifyand license existing best in class designsand cooperate with the owners of suchdesigns to make such modifications as arenecessary for its customers.

Cash flowThe Company’s cash flow from operationsis very dynamic, as it in part depends onpayment for construction and delivery set-tlement for the vessels sold to externalcustomers. Total net cash flow fromoperating activities in 2013 was USD49.2 million compared to total net cashflow from operating activities of USD61.9 million in 2012. 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 4.9 million in 2013 and USD9.8 million in 2012. These expenditureswere primarily for infrastructure improve-ments and equipment replacements.

Net cash flow used in financing activ-ities was USD 33.8 million in 2013 and USD12.7 million in 2012. The changes arecaused primarily by the repayment of theUSD 30.0 million construction loan fromAker ASA (referred to herein as the “AkerASA loan”) in 2013 and repayment of theUSD 20.0 million loan by PIDC RegionalCenter, LP XV through the Welcome Fundloan program (referred to herein as the“Welcome Fund loan”) in 2012.

Statement of financial position andliquidityAs of 31 December 2013, AKPS had cashand cash equivalents of USD 68.8 million.The corresponding figure for 2012 wasUSD 58.3 million. The increase was primar-ily driven by the sale and delivery of Hull018 to Crowley in January 2013 and mile-

stone payments made by SeaRiver inaccordance with the shipbuilding contractsfor Hulls 019 and 020. At year-end 2013,AKPS’s net working capital was USD48.6 million, compared to USD 27.0 millionat 31 December 2012.

Current assets as of 31 December2013 are mainly comprised of cash andcash equivalents of USD 68.8 million andprepayments and other receivables of USD35.3 while current assets as of31 December 2012 were mainly comprisedof cash and cash equivalents of USD58.3 million, work-in-process of USD67.7 million and prepayments and otherreceivables of USD 20.5 million. Thedecrease in current assets is primarily dueto the change in work-in-process whichoccurred in conjunction with the sale anddelivery of Hull 018 to Crowley in Q1 2013.Non-current assets as of 31 December2013 of USD 83.2 million are property,plant and equipment, restricted cash,deferred tax assets and other non-currentassets. As of 31 December 2012 non-current assets totaled USD 83.8 million andconsisted of property, plant and equip-ment, restricted cash, deferred tax assetsand other non-current assets.

Current liabilities as of 31 December2013 of USD 55.5 million are mostly relatedto trade payables, accrued liabilities, cus-tomer advances, net and current provisions(warranties). The corresponding figure for2012 was USD 119.5 million. The decreaseis primarily driven by a decrease incustomer advances, net and a decrease ininterest bearing short-term debt which wasdue to repayment of the Aker ASA loan.Interest-bearing debt decreased to USD5.6 million at 31 December 2013 comparedto USD 39.4 million as of 31 December2012. This decrease was attributable to therepayment of the Aker ASA loan and con-tinued amortization on the other loans.

At year-end 2013, total equity wasUSD 113.9 million and the equity ratio was61% of total assets. Corresponding figuresfor 2012 were USD 98.4 million and 43%respectively. The increase in equity wascaused by the current year’s profit.

The Board deems that the Companyas of 31 December 2013 is financiallysound and has an appropriate financingstructure. The Company’s financial positionwas further strengthened after year-endwith a successful private placement.

RisksMarket risksThe overall market risk is related to theJones Act. Interest groups have lobbied theU.S. Congress in the past to repeal or mod-ify the Jones Act, but market expertsbelieve that significant changes to the legis-

lation are unlikely. Repeal of or significantchanges to the Jones Act could, amongother things, increase competition fromforeign (non-U.S.) shipbuilders with lowercosts or require increased use of higherpriced domestic content, and as a resultreduce the demand for U.S. built vessels. Inorder to address this risk, the Company hascontinuous engagement with local, stateand federal government officials.

AKPS is also exposed to market riskrelated to imbalance between supply anddemand for vessels in the Jones Actmarket, which may result in a reduction ofvessel prices and/or delay in new projects.AKPS faces risks, including early termi-nation of its facility lease at the end of itscurrent backlog, if it is unable to securenew orders and/or financing for Hulls025-028, which are planned to be built asproduct tankers, or projects beyond theMatson project (i.e., Hulls 029 and 030).

Operational risks

AKPS faces risks related to construction ofvessels. The Shipyard’s ability to meetbudgets and schedules may be adverselyaffected by many factors, including changesin productivity, shortages of materials,equipment and labor and changes in theavailability and pricing of key vendors fordesign and procurement. The Shipyard’soperations also depend on stable suppliernetworks. The Company furthermore facesrisks related to the construction of newclasses of vessels, as the adaption to newclasses may be challenging due to the strictand sometimes unfamiliar requirements ofsuch vessels. These challenges sometimestend to impact quality, timely delivery andcost efficiencies. In order to address theserisks, the Company has entered into con-tracts with design and procurement partnersfor the SeaRiver project (i.e., Hulls 019 and020) and the Crowley project (i.e., Hulls 021-024). The Company has also entered into acontract with a design and engineeringconsultant for the Matson project (i.e., Hulls029 and 030).

The Company depends on unionizedlabor for construction of vessels. Workstoppages or other labor disturbancescould have a material adverse effect on theCompany’s business, results of operationsand financial condition. In order to mitigatethis risk, the Company and Unions havesigned a collective bargaining agreement,which is effective until February 2015. Thecollective bargaining agreement includes ano-strike clause.

The Company further depends upon a99-year lease agreement for the shipyardfacility and the future operations of the yardwill accordingly be dependent upon theCompany fulfilling its obligations under this


Performance 2013


lease agreement. For more details regard-ing this lease, see “The Master Agreement,Shipyard Lease and Authorization Agree-ment with PSDC” on pages 12-13.

The Company’s operations are subjectto the usual hazards inherent in shipbuild-ing, such as the risk of equipment failureand work accidents. These hazards cancause personal injury and loss of life, busi-ness interruption, property and equipmentdamage, pollution and environmentaldamage. The Company continues toimplement its Health, Safety and Environ-ment (HSE) management system and pro-vide training to its workforce to mitigatethese risks. The Company’s policy ofcovering these risks through contractuallimitations of liability and indemnities andthrough insurance may not always beeffective, and customers and subcon-tractors may not have adequate financialresources to meet their indemnity obliga-tions to the Company.

The Company’s operations are subjectto numerous national, international, stateand local environmental, health and safetylaws, regulations, treaties and conventions,including, inter alia, those controlling thepermitted and unpermitted discharge of

materials into the environment, requiringremoval and cleanup of environmentalcontamination, establishing certification,licensing, health and safety, labor andtraining standards, or otherwise relating tothe protection of human health and theenvironment. Sanctions for failure tocompany with these requirements, whichmay be applied retroactively, may include:administrative, civil and criminal liabilities,revocation of permits to conduct businessand corrective action orders, includingorders to investigate and clean up con-tamination.

After Hulls 021-024 are delivered and inservice, the Company will be exposed toadditional risks due to its continued owner-ship interests in the companies that willown, charter and operate the vessels underthe Crowley joint venture. These risksinclude, but are not limited to, fluctuations inthe market value of the vessels, damage orloss of the vessels, inadequacy of insuranceto cover such damages and losses, reduc-tions in charter revenue, non-compliancewith environmental laws and regulations,unexpected drydock costs, increases inoperating costs and capital expenses as the

vessels age, and repeal or significantchanges to the Jones Act. By partneringwith Crowley, a first class operator, AKPShas sought to mitigate these risks.

Financial risksAKPS’s activities expose it to a variety offinancial risks: market risk (includingcommodity pricing risk, currency risk, andprice risk), credit 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 tohedge certain risk exposures.

Risk management is carried out underpolicies and protocols approved by theBoard of Directors. The Board of Directorsprovides principles for overall financial riskmanagement as well as policies coveringspecific areas such as foreign exchangerisk, interest-rate risk, credit risk, use ofderivative financial instruments and non-derivative financial instruments.

The Company is exposed to changesin prices of steel and other materials. The


Performance 2013


Company attempts to mitigate its exposurewith respect to steel and other materialprice escalation. SeaRiver bears the risk ofsteel and other material price escalation onHulls 019 and 020. APSI and Crowley sharethe risk of steel price escalation on Hulls021-024 through the joint venture structure.Matson bears the risk of steel price escala-tion on Hulls 029 and 030.

The Company is subject to exchangerate risk. There is minimal foreign exchangeexposure for Hulls 019 and 020. In order tomitigate exposure to exchange rate risk forother vessels, the Company has begunsecuring foreign exchange forward con-tracts for Hulls 021-024 and the Companywill continue to follow its foreign exchangepolicy with respect to Hulls 029-030.

AKPS operates in business areas thatare capital intensive. The Company isdependent upon having access toconstruction financing facilities and otherloans and debt facilities to the extent itsown cash flow from operations and mile-stone payments from customers areinsufficient to fund its operations and capi-tal expenditures. In turn, AKPS must secureand maintain sufficient equity capital tosupport construction financing facilities.

AKPS regularly monitors the financialhealth of its construction financing lendersas well as the financial health of the finan-cial institutions which it uses for cashmanagement services and in which itmakes deposits and other investments.

Through construction financing, theCompany is exposed to fluctuations ininterest rates. There is no constructionfinancing for the SeaRiver project (i.e., Hulls019 and 020) or the Matson project (i.e.,Hulls 029 and 030), as these contracts willbe fully funded by customer milestonepayments.

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

The Company accrues an estimate forfuture warranty claims on its outstandingprojects. Thus far the claims have been inline with the reserve amounts. In order tomitigate the risk of warranty claims exceed-ing warranty provisions, the Company hassecured back-to-back warranties for mostmajor components on the vessels.

The Company accepted a profit shar-ing component as part of the compensa-tion for the sale of Hulls 017 and 018 toCrowley in August 2012 and January 2013,

respectively. Profit sharing is to occurbased on the performance of each vesselover its life and could be less than pro-jected. In order to monitor this risk, theCompany built in certain third party report-ing to validate profit sharing calculations aswell as active review of projections andactual costs. Additionally, there is no shar-ing in losses going forward if the vessels donot perform.

The Company is exposed to risksrelated to the take-out financing upondelivery of Hulls 021-024. The actualamount of APSI’s investment in the jointventure with Crowley will depend in part onthe net amount of this take-out financing. Inaddition, APSI cannot draw under its con-struction loan facility for Hulls 021-024 untilthis take-out financing is obtained. As partof the joint venture efforts, APSI and Crow-ley are currently working together to securethis financing on favorable terms.

Events after 31 December 2013On 17 January 2014, the Companyobtained commitments in a private place-ment to sell equity totalling USD 60 million,or 2.25 million shares at an issue price ofNOK 165 per share. The private placementwas approved at an extraordinary generalmeeting on 7 February 2014 and trading ofthe new shares commenced on10 February 2014. The Board intends tocarry out a subsequent offering in order tooffer shares to existing shareholders thatdid not participate in the private placementin March 2014.

The Company announced on 20 January2014 that the commitment it had receivedfrom a group of private lenders for a securedterm loan of USD 65 million had expired andwill not be closed. The Company will incur acharge of USD 1.2 million in Q1 2014 relatedto the expiration of this commitment.

On 24 February 2014, APSI prepaid infull the remaining balance of approximatelyUSD 4.0 million under its loans by the Penn-sylvania Industrial Development Authority(PIDA) and PIDC Local Development Corpo-ration (PIDC), without premium or penalty,and the mortgages and all other liens secur-ing such loans were released.

The going concern assumptionIn view of AKPS’s current financial positionand backlog, the Board confirms that the2013 annual accounts have been preparedbased on the assumption of a going concern.

Parent company accounts andallocation of income for the yearThe income/(loss) account of Aker Phila-delphia Shipyard ASA shows income for theyear 2013 of USD 2.0 million. The Board of

Directors proposes that the income for theyear be allocated as shown below:

Dividend payments USD 0

Other equity USD 2.0 million

Total allocated USD 2.0 million

As of 31 December 2013, the parentcompany has approximately USD 68 mil-lion of equity which could be distributed toshareholders by the Board in accordancewith the Company’s dividend policy. Basedon the equity level of the parent company,the Board intends to begin paying divi-dends during Q2 2014.

The parent company’s only assets arecash, the investment in subsidiary (APSI),and the profit sharing interests in Hulls 017and 018. See note 9 of the parent companyaccounts for details regarding the profitsharing interests.

Corporate social responsibilityMaintaining 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. Allof the Company’s employees are located inPhiladelphia, Pennsylvania in the UnitedStates of America. Compliance with envi-ronmental regulations is assured by estab-lishing operating procedures for bestmanagement practices and is executedthrough management and supervision. TheCompany believes that being a goodcorporate citizen is good business. TheCompany organizes a toy collection driveand a food donation event each year inaddition to targeted contributions to vari-ous charitable organizations.

AKPS seeks to be an attractiveemployer and maintains a human relationspolicy that is open and fair. AKPS is com-mitted to providing equal employmentopportunity to all employees and appli-cants for employment, regardless of race,color, ethnic background, gender, religion,age, marital status, sexual orientation,national origin, citizenship status, disability,veteran status, or any other legally pro-tected status. Diversity strengthens AKPS’soverall capacity and skills. In support ofthis diversity, APSI currently maintains anapproximately 33% 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 some affirmative steps toaddress this challenge. For example, theCompany encourages female applicantsand has seen increased interest amongpotential female employees to pursue a


Performance 2013


career with the Company. To further thisgoal, the Company participates in availablegovernment programs that encouragewomen in manufacturing and has recruitedat schools and training programs with morewomen. The Company has also continuedto train supervisors, managers andemployees in our Equal EmploymentOpportunity (EEO) Policy.

At year-end 2013, 4% of the workforcewas women. While there were no women inAKPS senior management, women heldkey positions such as Project Cost Con-troller, Payroll/Benefits Supervisor andPR/Communications Specialist. In addition,two of the five members of the Board ofDirectors are women.

The Company is committed to maintain-ing a work environment that is free of dis-crimination, harassment and hostilities. Inkeeping with this commitment, AKPS main-tains a strict Harassment Free EnvironmentPolicy and does not tolerate unlawfulharassment of employees by anyone.

AKPS believes all people share thesame fundamental human rights. TheCompany follows legal and responsiblesourcing practices and expects its suppli-ers to uphold the same standards. In 2013,the Company did not have a formal policyregarding human rights as its sole operat-ing company is located in the UnitedStates, which has extensive human rightslaws in place. The Company monitors itssupply chain for potential human rightsissues through periodic site visits.

At the operating subsidiary in Phila-delphia, worker’s rights are protected byfederal, state, and local laws. In addition,approximately three quarters of thecompany’s employees are members of thePhiladelphia Metal Trades Council(“PMTC”) union and are covered under thecollective bargaining agreement betweenthe PMTC and the Company. This agree-ment is effective until January 2015.

Under this collective bargaining agree-ment, union employees are granted vaca-tion and personal time, and the shipyard isshut down during the week of Fourth ofJuly holiday and in between Christmas andNew Year’s holidays. In addition, unionemployees may take up to 10 unpaid dayswithin a 24 month period. Traditional sickdays are not part of the collective bargain-ing agreement. Non-union employeesaccrue sick time on a monthly basis andmay maintain a balance of up to 200 hours.During 2013, approximately 170 non-unionemployees used 4,085 hours of sick time,representing 1% of total non-union workhours. Comparably, in 2012, 153 non-unionemployees used 3,248 hours of sick time,also representing approximately 1% of thetotal non-union work hours.

At AKPS, HSE responsibility is not justa priority but is a core value and influencesall decisions and actions. The Union-Management Safety and EnvironmentalBoard reviews the various HSE programs,and makes recommendations on policiesand procedures. The HSE system includessafety training of employees and subcon-tractors, safety inspections, industrialhealth and wellness programs, drug test-ing, emergency response and environ-mental programs. The Company expects toimplement new initiatives to continuouslyimprove its HSE mindset during 2014.

In 2013, the frequency of lost-timeincidents (incidents resulting in absencefrom work per one million hours) was 4.7,compared with 7.6 in 2012 (0.94 and 1.52,respectively, using OSHA frequency rates).The incidents came from a total of2,343,632 hours worked by AKPS employ-ees and subcontractors in 2013, comparedwith 1,840,341 hours worked by AKPSemployees and subcontractors in 2012.AKPS had 11 lost time incidents in 2013.The most serious incident to occur during2013 involved a limb being caught in apinch point. The most common injurieswere bruises and contusions followed bysprains and strains and eye injuries. AKPScontinues to work proactively to furtherimprove safety and reduce the number ofincidents at the Shipyard. For example, in2013 APSI introduced a new pre-task plan-ning tool, backed by a new HSE campaign,titled “Invest another minute,” which aimedto make safety personal by encouragingemployees to invest the time needed toprotect their futures and loved ones. Withthese initiatives and additional trainingopportunities, the Company continues tobelieve that improvements will be made.

In 2014, the Shipyard will continue toimprove its in-house systems and proce-dures for exchanging knowledge gained frompast accidents and potentially hazardousevents. The Company is also working withoutside parties to obtain and implement bestpractices to develop a zero incident culture.

AKPS takes its environmentalresponsibilities seriously beginning with thevessel design. The Company uses the lat-est IMO requirements as guidance for envi-ronmental protection and efficiency duringthe design and production process. Theindustrial nature of the Company’s activ-ities requires the use of significant amountsof energy, both electrical and gas, as wellas the release of particulate and VOCemissions. During 2013 the Company usedapproximately 26.5 MW of electricity andapproximately 388,400 ccf of natural gas.Its VOC emissions were 62.5 tons for thereporting period ending in 2013. TheCompany had no reported discharges into

the surrounding waterways. AKPS aims tocomply with or exceed applicableenvironmental laws, rules, and regulations.Environmental status reporting is anintegral part of the Company’s reportingsystem, on par with reporting on financialmatters and operations. This commitmentextends to evaluating and adoptingenvironmentally beneficial improvements inproduction processes, alternative materi-als, and services. AKPS promotes opencommunication on environmental issueswith employees, neighbors, public author-ities, and other interested parties and hasimplemented a system through whichemployees can make observations andsuggestions about AKPS’s environmentalperformance.

In 2013, APSI generated approximately1,300 tons of waste and recycled approx-imately 2,100 tons of steel. APSI hasexpanded its program to gather and sortwaste to promote environmentally respon-sible handling, disposal, and recovery ofany residual value and during 2013instituted a program to environmentallydispose of aerosol cans.

A basic principle of ethical businessconduct requires that each employee of theCompany support positively, both on andoff the job, the Company’s business activ-ities. One important way we satisfy thisresponsibility is to ensure that our businessdealings are never influenced by – or evenappear to be influenced by – our own per-sonal interests. The Company has zerotolerance for corruption and maintains astrict Conflict of Interests policy, which isreflected in its employee handbook, as wellas its Terms and Conditions to outsidesuppliers.

In support of the above initiatives andpolicies, AKPS maintains a formal policy forthe disclosure of wrongful conduct andprotection from retaliation (the Company’s“Whistleblower Policy”). This policy isavailable to all employees and isadministered by the Vice President ofHuman Resources. In 2013, there were nocases reported. In 2014, the Company willmake efforts to revisit the policy andreintroduce it to employees, as well assimplify the process to anonymously reportviolations.

OrganizationOn 31 December 2013, AKPS had 581direct employees and 549 subcontractors.Employee turnover in 2013 was primarilyrelated to the union workforce.

Corporate governanceAKPS’s corporate governance policy existsto ensure an appropriate division of rolesamong the Company’s owners, Board of


Performance 2013


Directors and Executive Management. Sucha separation of roles ensures that goals andstrategies are prepared, that adoptedcorporate strategies are implemented, andthat the results achieved are subject to ver-ification and follow-up. Applying these prin-ciples also contributes to satisfactorygroup-wide monitoring and verification ofactivities. An appropriate division ofresponsibilities and satisfactory controls willcontribute to the greatest possible valuecreation over time, to the benefit of share-holders and other interest groups. AKPS’sBoard of Directors adopted its corporategovernance guidelines in 2008. AKPS’scorporate governance guidelines are pre-sented in greater detail on pages 52-55 ofthis annual report.

OutlookAker Philadelphia Shipyard has built astrong foundation for its future throughboth its reputation for delivery on its prom-ises and the efficient and innovative orga-

nization that has been developed. TheCompany’s large backlog provides anexcellent platform for operationalimprovement and a formal improvementprogram, E330, has been introduced to theorganization. The Company’s shippingassets, consisting of the existing profitsharing interests in Hulls 017 and 018 andthe future economic interests in the Crow-ley joint venture for Hulls 021-024, providea mechanism for AKPS to receive returnson the ownership, chartering and operationof the vessels it builds, in addition toreturns on traditional shipbuilding activities.These shipping assets will be managedwith an opportunistic ownership strategy tomaximize their value.

The contracts with SeaRiver for Hulls019 and 020 and Crowley for Hulls 021-024secure AKPS’s backlog through Q2 2016.The containerships under contract withMatson (Hulls 029 and 030) are scheduledfor delivery in 2018. The Company’s orderbacklog for these three projects exceeds

USD 1 billion at 31 December 2013. Allfinancing required for the Company’s firmbacklog has been arranged.

Key focus areas for 2014 will be thesuccessful completion of the SeaRiveraframax program and the efficient start tothe new series of product tankers. TheCompany expects to build Hulls 025-028as product tankers with deliveries in 2016and 2017. AKPS remains confident in theproduct tanker market and is currentlyworking with several interested parties toenter into definitive shipbuilding contractsfor the four product tankers and agree-ments for joint ownership in the vessels. Inaddition, AKPS continues to pursue pros-pects for new construction projects in allareas of the Jones Act market but specifi-cally looks to expand on its experience intankers and containerships.

AKPS remains committed to providingthe Jones Act market with the most cost effi-cient and environmentally friendly merchantvessels possible and believes that it will be thesupplier of choice when vessels are ordered.

Oslo, Norway26 February 2014Board of Directors

Aker Philadelphia Shipyard ASA

James H. Miller Amy Humphreys Elin KarfjellBoard Chairman

Manuel N. Stamatakis Audun Stensvold Kristian M. RokkeDeputy Board Chairman General Manager


Performance 2013

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 2013 (annual report 2013).

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 2013. Theseparate financial statements for Aker

Philadelphia Shipyard ASA have beenprepared in accordance with the Norwe-gian Accounting Act and NorwegianAccounting Standards as of 31 December2013. 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 2013.

To the best of our knowledge:

� The consolidated and separate annualfinancial statements for 2013 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 2013 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 ofthe business and the position ofAKPS and the parent company

– The principal risks and uncertaintiesAKPS and the parent company face






Performance 2013

Consolidated accounts


Consolidated Income Statement

Amounts in USD thousands (except shares and per share amounts) Note 2013 2012

Operating revenues 279 025 141 040Cost of vessels (240 962) (116 207)Wages and other personnel expenses, net 2 (2 288) (2 430)Other operating expenses 3 (5 660) (4 529)

Operating income before depreciation 30 115 17 874Depreciation 6 (6 919) (1 813)

Operating income 23 196 16 061Financial income 4 1 084 981Financial expenses 4 (871) (1 303)

Income before tax 23 409 15 739Income tax expense 5 (7 814) (6 263)

Net income for the year * 15 595 9 476

Average number of shares 12 10 165 305 10 165 305Basic earnings per share (USD) 12 1.53 0.93Diluted earnings per share (USD) 12 1.53 0.93


Consolidated Statementof Comprehensive Income

Amounts in USD thousands 2013 2012

Net income for the year 15 595 9 476Other comprehensive income, net of income tax - -

Total comprehensive income for the year * 15 595 9 476

* All attributable to equity holders of the parent company.


Performance 2013



Consolidated Statement of Financial Positionas of 31 DecemberAmounts in USD thousands Note 2013 2012

ASSETSProperty, plant and equipment 6 54 824 56 986Restricted cash 11 20 003 20 001Deferred tax assets 5 2 976 3 553Other non-current assets 7 5 380 3 300

Total non-current assets 83 183 83 840

Work-in-process 8 - 67 718Prepayments and other receivables 9 32 051 19 294Income tax receivable 3 287 1 154Cash and cash equivalents 10 68 775 58 333

Total current assets 104 113 146 499

Total assets 187 296 230 339

EQUITY AND LIABILITIESPaid in capital 13 70 995 70 995Other equity 42 950 27 355

Total equity attributable to equity holders of the parent company 113 945 98 350

Total equity 113 945 98 350

Interest-bearing long-term debt 14, 16 2 870 5 565Other long-term liabilities 15 7 030 5 980Deferred tax liabilities 5 7 896 902

Total non-current liabilities 17 796 12 447

Interest-bearing short-term debt 14, 16 2 695 33 839Trade payables and accrued liabilities 19 18 293 22 809Customer advances, net 8 33 821 60 057Other provisions—warranties 18 746 2 837

Total current liabilities 55 555 119 542

Total liabilities 73 351 131 989

Total equity and liabilities 187 296 230 339






Performance 2013



Consolidated Statement of Changes in Equity

Amounts in USD thousands Share capital Share premium Other equity Total equity

Balance at 31 December 2011 18 709 52 286 17 879 88 874

Net income for the year 2012 - - 9 476 9 476


Net income for the year 2013 - - 15 595 15 595



Performance 2013



Consolidated Cash Flow Statement

Amounts in USD thousands Note 2013 2012

Income before tax 23 409 15 739Unrealized foreign exchange gain 4 (57) (431)Depreciation 6 6 919 1 813Write-off of assets/assets-under-construction 6 - 723Net financial (income)/expense 4 (303) 989(Increase)/decrease in:

Work-in-process 8 67 718 7 574Other current assets 9 (12 504) (8 271)Other non-current assets 7, 11 (2 082) (2 637)

Increase/(decrease) in:Trade payables and accrued liabilities 18, 19 (6 607) (4 869)Customer advances, net 8 (26 236) 60 057Other long-term liabilities 15 1 050 2 359

Income taxes paid 5 (2 376) (10 076)Interest paid, net of capitalized interest 4 (724) (1 303)Interest received 4 1 027 314

Net cash flow from operating activities 49 234 61 981

Investments in property, plant and equipment 6 (4 953) (9 844)

Net cash flow used in investing activities (4 953) (9 844)

Proceeds from interest-bearing long-term debt 14 - 17 408Repayment of interest-bearing long-term debt 14 (2 695) (12 315)Proceeds from interest-bearing short-term debt 14 - 32 190Repayment of interest-bearing short-term debt 14 (31 144) (50 000)

Net cash flow used in financing activities (33 839) (12 717)

Net change in cash and cash equivalents 10 442 39 420Cash and cash equivalents as of 1 January 58 333 18 913

Cash and cash equivalents as of 31 December 10 68 775 58 333


Performance 2013



Notes to the accounts

� Note 1: Accounting principles

STATEMENT OF COMPLIANCEThe consolidated financial 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 26 February2014.

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.

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 Oslo, Norway. APSI isdomiciled 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 construction contracts. Theuse 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 and

requests 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 and 018 had no third partycustomers upon construction start, AKPS did notrecognize revenue using the percentage of com-pletion method for these vessels. Instead, rev-enue was recognized upon the sale and deliveryof the related vessels to a third party whichoccurred in August 2012 and January 2013,respectively.

AKPS has variable revenues which include aprofit sharing component from the sales of Hull017 and Hull 018 to Crowley Tankers LLC(Crowley). The key factors in estimating futurecash flows at the time of revenue recognitioninclude determining the days of vessel operationin revenue generating activities, estimating vesseloperating expenditures and determining theappropriate discount rate. The rates to be paidby Crowley’s customers are not a significantcomponent of the estimation process becauseAKPS has determined that the criteria for recog-nizing profit sharing revenue are not met untilCrowley has a signed charter agreement with acustomer at which time the rates are known. Anysubsequent changes to the estimates on whichrecorded revenues are based will be treated asadjustments to revenue in the applicable periods.

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. In futureyears AKPS may have additional cash generatingunits based on the joint venture with Crowley(see note 24). Determining the fair value of thecash generating unit that includes AKPS’s activ-ities is subject to uncertainty and requires esti-mates of the recoverable amount which is thehigher of the fair value less costs to sell andvalue in use. The estimated recoverable amountis determined based upon the present value ofthe future cash flows of the cash generating unit.Generally, there will be uncertainties regardingthe timing and amount of cash flows for variousreasons, including the costs of production anddemand in the U.S. Jones Act shipping market.In addition, AKPS must determine an appropriateinterest rate to discount expected future cashflows.

Deferred Income TaxesDeferred income tax assets are recognized when itis probable that they will be realized. Determining

probability requires AKPS to estimate the sources offuture taxable income from operations, includingprofit sharing agreements and reversing taxabletemporary differences. Determining these amountsis subject to uncertainty and is based primarily uponhistorical earnings, reversals of taxable temporarydifferences and expected earnings due to contractsin progress and contract backlog. The recognition ofdeferred tax assets is primarily applicable to Norwaywhere AKPS has a net deferred tax asset position.

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

AKPS ACCOUNTING AND CONSOLIDATIONPRINCIPLESSubsidiariesThe 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 has the power to controland govern the operating and financial policies.

All intercompany balances and transactionsare eliminated in consolidation.

Foreign currency translation and transactionsFunctional 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 the


Performance 2013


exchange 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 andequipment 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 other non-current assets are reviewed for potential impair-ment whenever events or changes incircumstances indicate that the carrying amountof an asset may not be recoverable.

For the purposes of assessing impairment,assets are grouped at the lowest levels for which

there 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 beendetermined had no impairment loss been recog-nized in prior years.

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 to interest expense. Property, plantand equipment acquired under finance leases aredepreciated over the shorter of the useful life ofthe 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 installments 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 under contract to customers.Revenue related to construction contracts forcustomers is recognized using the percentage ofcompletion method, based primarily on thescope of completed work compared to estimatedoverall project scope at the statement of financialposition date. The stage of completion isassessed by reference to production hoursincurred to total estimated production hours. Assoon as the outcome of the construction contractcan be estimated reliably, contract revenue andexpenses are recognized in the consolidatedincome statement in proportion to the degree ofcompletion 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 from

change 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’s 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, net. Customer advances,net that exceed contract offsets would be classi-fied as current liabilities.

Variable or contingent revenues are alsoclassified as operating revenues in the con-solidated income statement and are recognizedunder applicable standards when estimable.

VESSEL CONSTRUCTION FOR UNSPECIFIEDCUSTOMERSVessels which do not have a contractual buyer atthe start of construction and are being built withthe expectation of identifying a customer duringthe construction phase are capitalized into work-in-process. When the vessel is completed andsold both revenue and cost are recognized. Ifconditions indicate that the ultimate sales pricewill be below the estimated cost of the vessel,AKPS determines the estimated sales price andrecords an impairment charge as appropriate.The accumulated costs for vessels-under-construction receivables for unspecified custom-ers are included in work-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 asreductions in expense over the period in whichwork that relates to the grant or support is per-formed.

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.


Performance 2013


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.

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.

PENSION OBLIGATIONSAKPS has a pension plan that covers its non-union employees whereby contributions are paidto 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. Under

defined 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 canbe 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 and non-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 2013, AKPS has three customers:SeaRiver Maritime, Inc. (SeaRiver), CrowleyTankers, LLC (Crowley) and Matson NavigationCompany (Matson). AKPS continually evaluatesthe credit risk associated with customers andmanages this risk by requiring payment for sub-stantially the entire contractual amount prior todelivering a vessel, including milestone paymentsupon completion of 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 foreign

exchange hedging program or passing this riskonto its end customers by having them purchasecertain materials directly in foreign currency.

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 by hav-ing them purchase materials directly or by cap-ping the increase in pricing to be paid by AKPS.

Capital Management RiskAKPS’s objectives when managing capital are tosafeguard its ability to continue as a going concernin order to provide returns for shareholders andbenefits for other stakeholders, while maintainingan optimal capital structure to minimize the cost ofcapital. To meet these capital structure objectives,AKPS will review annually with its Board any pro-posed dividends as well as any needs to raiseadditional equity for future business opportunitiesor to reduce debt. Based on the low level of debt,recent equity offering (see note 26) and significantbacklog secured, AKPS plans to begin payingdividends quarterly beginning with the secondquarter of 2014.

Funding/Investment RiskThe challenging global economy has placed exist-ing and future financing sources at risk. AKPSregularly monitors the financial condition of itsconstruction financing lenders. Additionally,AKPS monitors the financial condition of thefinancial institutions which it uses for cash man-agement services and in which it makes depositsand other investments. AKPS responds tochanges in conditions affecting its financingsources and deposit relationships as situationswarrant.

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, tothe extent possible, that it will always have suffi-cient liquidity to meet its liabilities when due,under both normal and stressed conditions,without incurring unacceptable losses or riskingdamage to AKPS’s reputation. AKPS attempts tomitigate this risk through project financing, prog-ress payments from its 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 21 regarding finan-cial instruments.


Performance 2013


RELATED PARTY TRANSACTIONSThe Company’s policy is that all transactions,agreements and business activities with relatedparties are conducted on an arm’s length basisaccording to ordinary business terms and con-ditions.

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

BASIC AND DILUTED EARNINGS PER SHAREThe calculation of basic earnings per share is basedon the profit attributable to ordinary shareholdersusing the weighted average number of shares out-standing during the year. The calculation of dilutedearnings per share is consistent with the calculationof basic earnings per share while giving effect to allpotential dilutive ordinary shares that were out-standing during the period. AKPS currently has nopotentially dilutive shares outstanding.

EVENTS AFTER 31 DECEMBER 2013A 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).

NEW STANDARDS AND INTERPRETATIONSNOT YET ADOPTEDIFRS 13, Fair Value Measurement was effective1 January 2013. IFRS 13 replaces the fair valueguidance contained in individual IFRS with a singlesource of fair value measurement guidance includ-ing a “fair value hierarchy”. The standard alsorequires additional disclosures that enable users toassess the methods and inputs used to develop fairvalue measurements. The adoption of IFRS 13 did

not result in material impact on the consolidatedfinancial statements.

There have not been any new IFRS stan-dards or interpretations issued after the com-pletion of the annual consolidated financialstatements for the year ended 31 December2013 that have a significant impact on AKPS’sfinancial reporting.

IFRS 10 Consolidated Financial Statements,IFRS 11 Joint Arrangements, IFRS 12 Disclosure ofInterests in Other Entities and the amendments toIAS 27 Separate Financial Statements and IAS 28Investments in Associates and Joint Ventures mustbe adopted effective 1 January 2014. Given thenature of the Company’s structure and investmentactivities, the adoption of these standards andamendments are not expected to have a materialimpact on the consolidated financial statements.

� Note 2: Wages and other personnel expenses

Wages and other personnel expenses consist of:

Amounts in USD thousands (except number of employees) 2013 2012

Wages 40 571 34 347Social security contributions 3 908 3 246Pension costs (note 17) 1 339 1 016Other expenses 7 921 6 884

Total gross expense 53 739 45 493Expenses related to vessel construction (51 451) (43 063)

Wages and other personnel expenses, net 2 288 2 430

Average number of employees 580 515Number of employees at year-end 581 545

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

� Note 3: Other operating expenses

Other operating expenses consist of:


Other operating expenses 5 660 4 529

Other operating expenses 5 660 4 529

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 213 thousand for 2013 and USD 250 thousand for 2012. Non-attest fees wereUSD 20 thousand and USD 16 thousand in 2013 and 2012, respectively.


Performance 2013


� Note 4: Financial income and financial expenses


Interest income 1 027 314Gain on foreign currency forward contracts 57 431Foreign exchange gain, net - 236

Financial income 1 084 981

Interest expense (774) (3 085)Interest capitalized on construction contracts 50 1 782Foreign exchange loss, net (147) -

Financial expenses (871) (1 303)

Net financial items 213 (322)

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 21. In2013, the foreign exchange loss, net is attributable to certain cash balances which were held in Norwegian Kroner and the gain on foreign currency forwardcontracts is attributable to mark-to-market of foreign exchange forward contracts in Korean Won. In 2012, the foreign exchange gain, net was attributableto certain cash balances which were held in Norwegian Kroner and Korean Won and the gain on foreign currency forward contracts was attributable tomark-to-market of foreign exchange forward contracts in Korean Won.

� Note 5: Taxes

Income tax expense/(benefit)Recognized in the income statement


Current tax expense/(benefit):Current year – U.S. 242 9 720Current year – Norway - -

Total current tax expense 242 9 720

Deferred tax expense/(benefit):Origination and reversal of temporary differences – U.S. 6 995 96Origination and reversal of temporary differences – Norway 577 (3 553)

Total deferred tax expense/(benefit) 7 572 (3 457)

Total income tax expense/(benefit) in the income statement 7 814 6 263

Reconciliation of effective tax rate:


Income before tax 23 409 15 739

Nominal Norwegian tax rate 28.0% 28.0%Expected tax expense/(benefit) using nominal Norwegian tax rate 6 555 4 407Effect of differences between nominal Norwegian tax rate and U.S. federal, state and city tax rate 2 023 1 850Expenses not deductible for tax purposes 55 88Income not subject to tax (756) -Other differences (63) (82)

Total income tax expense/(benefit) in the income statement 7 814 6 263


Performance 2013


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, and income that was not taxable in Norway.

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 2013 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 U.S. tax jurisdiction 3 629 8 942Deferred tax liabilities U.S. tax jurisdiction (11 525) (9 844)

Net deferred tax assets/(liabilities) (7 896) (902)

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


Beginning of the period 2 651 (806)Deferred tax (expense)/benefit (7 572) 3 457

End of the year deferred tax assets/(liabilities), net (4 921) 2 651

The movement in deferred tax assets and liabilities during the year for the U.S. tax jurisdiction is as follows:

Deferred tax assets:

Amounts in USD thousands Other assets Tax losses Total

31 December 2012 8 942 - 8 942(Charged)/credited to the income statement (5 313) - (5 313)

31 December 2013 3 629 - 3 629

Deferred tax liabilities:

Amounts in USD thousandsProperty,

plant and equipment Projects Other Total

31 December 2012 (8 638) (1 206) - (9 844)(Charged)/credited to the income statement 101 (1 782) - (1 681)

31 December 2013 (8 537) (2 988) - (11 525)

The movement in deferred tax assets and liabilities during the year for the Norwegian tax jurisdiction is as follows:

Deferred tax assets:

Amounts in USD thousands Other assets Tax losses Total

31 December 2012 3 553 - 3 553(Charged)/credited to the income statement (815) 238 (577)

31 December 2013 2 738 238 2 976

The Norwegian tax assets are expected to be utilized to offset taxable income in Norway resulting from the profit sharing agreements.


Performance 2013


� Note 6: Property, plant and equipment

Movements in property, plant and equipment for 2013 are shown below:

Amounts in USD thousandsMachinery and

vehicles BuildingsLand

improvementsAssets-under-

construction Total

Cost at 1 January 2013 35 211 52 858 18 172 2 756 108 997Purchases - - - 4 953 4 953Transfers 4 268 2 690 - (6 958) -Write-off of assets (141) (256) - - (397)

Cost at 31 December 2013 39 338 55 292 18 172 751 113 553

Depreciation and impairment losses at 1 January 2013 27 354 19 362 5 295 - 52 011Depreciation 3 937 2 417 761 - 7 115Write-off of assets (141) (256) - - (397)

Depreciation and impairment losses at 31 December 2013 31 150 21 523 6 056 - 58 729

Book value at 31 December 2013 (1) 8 188 33 769 12 116 751 54 824

(1) Book value of assets under financial leasing agreementsrecorded in the statement of financial position (see note 16and note 23): 3 483 12 664 9 997 - 26 144

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

Movements in property, plant and equipment for 2012 are shown below:

Amounts in USD thousandsMachinery and

vehicles BuildingsLand

improvementsAssets-under-

construction Total

Cost at 1 January 2012 29 688 50 747 18 172 2 081 100 688Purchases 1 493 - - 8 351 9 844Transfers 4 798 2 301 - (7 099) -Write-off of assets-under-construction (1) - - - (577) (577)Write-off of assets (768) (190) - - (958)

Cost at 31 December 2012 35 211 52 858 18 172 2 756 108 997

Depreciation and impairment losses at 1 January 2012 24 106 17 197 4 535 - 45 838Depreciation 3 870 2 355 760 - 6 985Write-off of assets (622) (190) - - (812)

Depreciation and impairment losses at 31 December 2012 27 354 19 362 5 295 - 52 011

Book value at 31 December 2012 (2) 7 857 33 496 12 877 2 756 56 986

(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: 4 294 14 590 10 587 - 29 471

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

Leased plant and machineryThe Company leases production equipment and land improvements under a number of finance lease agreements. At the end of each of the leases, theCompany has the option to purchase the equipment at a beneficial price. The leased equipment secures lease obligations (see note 16).

Security granted on property, plant and equipmentAt 31 December 2013, property, plant and equipment with a carrying amount of USD 54.8 million (2012: USD 57.0 million) are subject to mortgages tosecure loans (see notes 14 and 26).

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

DepreciationAKPS’s normal practice is to present its annual depreciation expense on a separate line item in its consolidated income statement when it is building ves-sels under construction contracts.

During 2013 and 2012, AKPS built two vessels for its own account. The cost of these vessels, including depreciation expense related to vessel con-struction, was capitalized in work-in-process. When Hull 017 was sold in 2012, and Hull 018 was sold in 2013, the cost of the vessels included capitalizeddepreciation from the current and prior periods.


Performance 2013


A reconciliation of depreciation on property, plant and equipment to depreciation recognized in the consolidated income statement is as follows:


Depreciation of property, plant and equipment in current year 7,115 6,985Amount capitalized as vessel cost of Hulls 017 and 018 (196) (5,172)

Net depreciation expense 6,919 1,813

Determination of recoverable amounts/fair valueDue to the market and company specific developments including operating results and backlog, no impairment indicators were identified in 2013 for prop-erty, plant and equipment.

Sale 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 lives.

� Note 7: Other non-current assets

Other non-current assets consist of the following items:

Amounts in USD thousands 31 Dec. 2013 31 Dec. 2012

Long-term portion of profit sharing receivable 4 607 3 051Prepaid lease payments and deposits 210 209Interest-bearing receivable 10 40Other non-current assets 553 -

Total 5 380 3 300

The lease payments and deposits are unsecured and have no collateral. The interest-bearing receivable has a fixed interest rate of 5.0% per annum and thelong-term portion of the profit sharing receivable accretes interest at 10% per annum.

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

The order backlog is USD 1,017.7 million at 31 December 2013 and represents an obligation to deliver vessels that have not yet been produced for ourcustomers: SeaRiver, Crowley and Matson. The order backlog consists of future revenues plus certain materials (approximately USD 11.9 million) to besupplied by SeaRiver and is subject to adjustments based on change orders as defined in the construction contracts. The materials to be supplied bySeaRiver will not be recognized as future revenues by AKPS.

The backlog on long-term contracts is as follows:

Amounts in USD thousandsOrder backlog

31 Dec. 2013Order intake

2013Order backlog31 Dec. 2012

Order intake2012

Order backlog31 Dec. 2011

Total 1 017 694 909 060 338 717 14 385 401 000

The recognized profits on long-term contracts in process at year-end are as follows:

Amounts in USD thousands 31 Dec. 2013

Contract revenue recognized as revenue to date 233 359Less contract expenses recognized to date (218 425)

Recognized profit to date 14 934

Other construction contracts figures:Contract costs incurred to date 214 379

Customer milestone payments as of 31 December 2013 and 31 December 2012 totaled USD 263.1 million and USD 116.2 million, respectively.

Customer advances, net as of 31 December 2013 and 2012 totaled USD 33.8 million and 60.1 million, respectively, and represents customer milestonepayments net of work-in-process and earned profit.

Revenue (comprised of the fixed purchase price plus a portion of the variable component of the compensation payable to the Company) with respect toHull 018 was recognized upon the sale and delivery of Hull 018 to Crowley on 30 January 2013. Revenue with respect to Hull 017 was recognized upon thesale and delivery of Hull 017 to Crowley on 30 August 2012.


Performance 2013


Because AKPS has no obligation towards Crowley with respect to Hulls 017 and 018 after delivery other than standard warranty, it recognizes all variablerevenue when the amount can be measured reliably and it is probable that it will receive the economic benefits associated with the transaction. AKPS hasdetermined that these criteria are met once Crowley has executed a firm charter agreement with a third party because at this stage the estimated rates andcharter duration can be determined within an appropriate range. The profit sharing agreement with Crowley covers the entire useful lives of the vesselswhich could extend over 25 years. As a result, profit sharing revenue may be recognized several times over multiple years. Based on the existing three-yearfirm charters, profit sharing revenue of USD 3.2 million for Hull 018 was recognized in 2013 and profit sharing revenue of USD 3.3 million for Hull 017 wasrecognized in 2012. Payments will be received annually based on actual results of the vessel over the three-year charter periods (see notes 7 and 9).

As of 31 December 2013, APSI has non-cancellable purchase commitments for materials and equipment of approximately USD 50.1 million for the con-struction of Hulls 019-024.

� Note 9: Prepayments and other receivables

Prepayments and other receivables consist of the following items:


Trade receivable 21 091 15 431Prepayments to suppliers/other 8 354 3 051Short-term portion of profit sharing receivable 2 606 350Other short-term interest-free receivables - 462

Total 32 051 19 294

Trade receivable represents milestone billings which have not been paid as of year end.

� Note 10: Cash and cash equivalents

Cash and cash equivalents consist of the following items:


Cash and bank deposits 68 775 58 333

Cash and cash equivalents in the statement of cash flows 68 775 58 333

Cash and bank deposits are invested in overnight deposits.

� Note 11: Restricted cash

Restricted cash consists of the following items:


Restricted cash 20 003 20 001

Total 20 003 20 001

Restricted cash represents an escrow account established in conjunction with the SeaRiver contract. The monies held in the escrow account will bereleased in stages after delivery of the second vessel (Hull 020) as defined in the escrow agreement.

� Note 12: Earnings per share

Basic and dilutedBasic and diluted earnings per share are calculated by dividing the income attributable to equity holders of the Company by the weighted average numberof ordinary shares.

Amounts in USD thousands (except shares and per share data) 2013 2012

Income attributable to equity holders of the Company 15 595 9 476Weighted average number of ordinary shares in issue 10 165 305 10 165 305

Basic and diluted earnings per share (USD) 1.53 0.93


Performance 2013


There were no potentially dilutive securities outstanding as of 31 December 2013 and 2012.

� Note 13: Paid in capital

The current share capital is 10,165,305 shares issued and outstanding as of 31 December 2013, each with a par value of NOK 10 (USD 1.85 at anexchange rate of NOK/USD 5.4:1 at the transaction date), fully paid. As of 31 December 2013, there are no additional authorized shares (see note 26).

Amounts in USD thousands Share capital Share premium Total paid in capital

31 December 2012 18 709 52 286 70 995

31 December 2013 18 709 52 286 70 995

� Note 14: Interest-bearing debt

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 21.


Interest-bearing long-term debt:PIDA/PIDC loans 1 932 4 427Finance lease liabilities 938 1 138

Total interest-bearing long-term debt 2 870 5 565

Interest-bearing short-term debt:PIDA/PIDC loans 2 495 2 403Finance lease liabilities 200 190Aker ASA loan - 31 246

Total interest-bearing short-term debt 2 695 33 839

Secured loans as of 31 December 2013 Maturity Balance Interest rate

Pennsylvania Industrial Development Authority (PIDA) Oct. 2015 3 088 3.75%PIDC Local Development Corporation (PIDC) July 2015 1 339 3.75%

Total secured loans 4 427

The PIDA and PIDC loans are secured by a joint first mortgage against certain property, plant and equipment with a carrying amount of USD 54.8 million asof 31 December 2013 (see note 6) and have a fixed interest rate until maturity. Payments are fixed and are paid monthly through maturity (see note 26).

In conjunction with the delivery of Hull 018 on 30 January 2013, the Aker ASA loan was repaid.

On 1 October 2013, APSI executed a commitment letter with Caterpillar Financial Services for USD 120 million of construction financing for Hulls 021-024.The commitment letter provides that the loan will be subject to a maximum borrowing amount of USD 58-60 million per vessel and will be secured by a firstlien on Hulls 021-024. The commitment letter provides further that the loan will accrue interest at three-month LIBOR plus 3.0%, subject to an increase ordecrease depending on the lender’s cost of funds as defined in the commitment letter.

On 6 November 2013, APSI executed a commitment letter with PIDC Regional Center, LP XXXI, a partnership between CanAm Enterprises and PIDC, for asecured term loan of up to USD 60 million. The commitment letter provides that the loan will have a five-year term and will be initially secured by a secondlien on Hulls 021-024 during construction. After the vessels are delivered, the lender will have a lien on the economic interests in the vessels under the jointventure with Crowley. The commitment letter provides further that the loan will have a fixed interest rate of 2.75% through maturity. The funds are antici-pated to be drawn in Q4 2014 and Q1 2015. This loan will be made through the Welcome Fund loan program, a source of low-cost capital generally avail-able to commercial, retail, industrial or non-profit firms that create significant job growth and are located in or planning to locate to the City of Philadelphia.

The company expects to sign definitive documentation for the Caterpillar and Welcome Fund loans described above in Q1 2014.

Undrawn credit facilitiesAs of 31 December 2013, APSI has USD 5.2 million of undrawn credit facilities with a bank, out of a total available balance of USD 6.0 million. The drawnamount is being used for letters of credit. The bank requires a debt service coverage, as defined, of no less than 1.2 to 1.0 (5.5 as of 31 December 2013).As of 31 December 2013, APSI was in compliance with this covenant and is expected to remain in compliance during 2014.

� Note 15: Other long-term liabilities


Deferred real estate tax liability 7 030 5 980

Total 7 030 5 980

In connection with the PSDC agreement (see note 23), the City of Philadelphia agreed to temporarily defer USD 8.0 million in real estate tax payments duefrom APSI over three years (2011-2013). The full deferred amount is due in 2017. The Company has discounted the deferred payments and is imputinginterest expense over the deferral period.


Performance 2013


� Note 16: Operating and finance lease liabilities

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


Less than one year 251 236Between one and five years 522 748

Total 773 984

The operating leases are for facilities, vehicles, and printing and copying equipment.

Finance lease liabilities are payable as follows as of 31 December:

Amounts in USD thousandsPayments

2013Interest

2013Principal

2013Payments

2012Interest

2012Principal

2012

Less than one year 255 55 200 256 66 190Between one and five years 1 044 106 938 1 022 153 869Greater than five years - - - 277 8 269

Total 1 299 161 1 138 1 555 227 1 328

The Company has a finance lease for priming equipment.

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 23.Lease payments for rent due under the finance lease are USD 1 per year.

� Note 17: Pension costs

Pension costs recognized in the income statement:


Contribution plans (employer’s contribution) 1 339 1 016

Total net pension costs 1 339 1 016

The Company has a defined contribution plan for its non-union employees which provides for a Company contribution based on a fixed percentage of cer-tain 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. The terminationliability at 31 December 2013 was USD 3.9 million. Currently, the Company has no plans to terminate this relationship. Thus, no termination liability hasbeen recognized in the financial statements. The Company estimates that it will contribute approximately USD 1.1 million to the Union Plan in 2014. TheCompany’s contributions over the last five years represented 0.2% of total contributions to the Union Plan for the same five-year period.

� Note 18: Other provisions – warranties


Current balance as of 1 January 2 837 2 620Provisions made during the period 300 300Provisions released during the period (1 440) -Provisions used during the period (951) (83)

Current balance as of 31 December 746 2 837

The warranty provision relates to the warranty work for product tankers (Hulls 016-018) which were delivered through January 2013.


Performance 2013


� Note 19: Trade payables and accrued liabilities

Trade payables and accrued liabilities comprise the following items:


Trade payables 5 878 4 329Ship material and subcontracting accruals 5 457 7 483Employee-related cost accruals 4 466 4 338Overhead and capital projects accruals 2 492 5 771Deferred income from PSDC - 888

Total 18 293 22 809

Deferred income from PSDC represented amounts received from PSDC but not yet recognized as a reduction in ship cost (see note 23).

� Note 20: Net interest-bearing debt

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


Interest-bearing long-term debt (see note 14) 2 870 5 565+ Interest-bearing short-term debt (see note 14) 2 695 33 839

Total interest-bearing debt 5 565 39 404

- Interest-bearing receivable (see note 7) (10) (40)- Profit sharing receivable (see notes 7 and 9) (7 213) (3 401)- Cash and cash equivalents (see note 10) (68 775) (58 333)- Restricted cash (see note 11) (20 003) (20 001)

Total interest-bearing assets (96 001) (81 775)

Net interest-bearing debt (+)/assets (-) (90 436) (42 371)

Net interest-bearing debt is defined by the Company to be total interest-bearing debt less interest-bearing receivables, cash and cash equivalents, andrestricted cash.

� Note 21: 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 2013 and 2012, respectively, the maximum exposure tocredit risk is as follows:


Cash and cash equivalents 68 775 58 333Restricted cash 20 003 20 001Trade receivable 21 091 15 431Profit sharing receivable 7 213 3 401Interest-bearing receivable 10 40

Total 117 092 97 206

Trade receivable represents milestone payments due from SeaRiver (see note 9).


Performance 2013


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

31 December 2013

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) 1 932 (1 961) - - (1 961) - -Short-term portion of interest-bearing long-term external debt 2 495 (2 618) (1 309) (1 309) - - -Finance lease 1 138 (1 299) (128) (128) (256) (787) -Deferred real estate tax liability 7 030 (8 000) - - - (8 000) -Trade payables 5 878 (5 878) (5 878) - - - -

Total 18 473 (19 756) (7 315) (1 437) (2 217) (8 787) -

31 December 2012

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) 4 427 (4 579) - - (2 618) (1 961) -Short-term portion of interest-bearing long-term external debt 2 403 (2 618) (1 309) (1 309) - - -Aker ASA loan 31 247 (31 510) (31 510) - - - -Finance lease 1 328 (1 555) (128) (128) (256) (766) (277)Deferred real estate tax liability 5 980 (8 000) - - - (8 000) -Trade payables 4 329 (4 329) (4 329) - - - -

Total 49 714 (52 591) (37 276) (1 437) (2 874) (10 727) (277)

Book values included in the above tables are gross loan amounts.

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).

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 2013 was USD 57 thousand recognized in current assets.

Exposure to currency riskThe Company’s exposure to currency risk at 31 December 2013 and 2012 was as follows based on the following notional amounts:

2013 2012Amounts in USD thousands Euro KRW NOK Euro KRW NOK

Gross balance sheet exposureTrade payables (-) (311) - - (67) (366) -Cash - - 1 272 - - 1 876

Gross balance sheet exposure (311) - 1 272 (67) (366) 1 876Estimated forecast expenses (-) (4 969) (36 868) - (401) (211) -

Gross exposure (4 969) (36 868) - (401) (211) -Forward exchange contracts 5 183 18 361 - - - -

Net exposure (97) (18 507) 1 272 (468) (577) 1 876

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 2013 it is estimated that a 10% strengthening of the USD against other foreign currencies would have increased AKPS’s income before taxby USD 16 thousand. At 31 December 2012 it is estimated that a 10% strengthening of the USD against other foreign currencies would have increasedAKPS’s income before tax by USD 103 thousand.

Exposure to interest rate riskIt is estimated that a general increase of one percentage point in interest rates would not impact AKPS’s income before tax for 2013 and would decreaseAKPS’s income before tax by USD 490 thousand for 2012. None of AKPS’s financial assets and liabilities are measured at fair value.


Performance 2013


Fair valuesThe following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. Itdoes not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approx-imation of fair value.

Amounts in USD thousands

Carryingamount

2013

Fairvalue2013

Fair valuehierarchy

level2013

Carryingamount

2012

Fairvalue2012

Fair valuehierarchy

level2012

Profit sharing receivable 7 213 7 213 3 3 401 3 401 3Interest-bearing receivable 10 10 2 40 40 2

Secured loans (gross) (4 427) (4 129) 2 (6 830) (6 220) 2Finance lease liabilities (1 138) (978) 2 (1 328) (1 112) 2Forward exchange contracts (57) (57) 2 - - -Aker ASA loan - - - (31 246) (31 246) 2

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 flows dis-counted at a market rate of 5.0% for 2013 and 5.0% for 2012.

Financial instruments measured at fair valueThe following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used:

Type Valuation technique Significant unobservable inputs

Inter-relationship betweensignificant unobservable inputsand fair value measurement

Profit sharing receivable Discounted cash flows:The valuation model considers thepresent value of the expected pay-ments based on firm charters in place,discounted using a risk adjusted dis-count rate.

Forecasted annual revenue growth rate(2013: 2.5%);

forecasted operating expenses growthrate (2013: 2.5%);

risk adjusted discount rate(2013: 10%).

The estimated fair value wouldincrease/(decrease) if:

the annual revenue growth rate werehigher/(lower);

the annual operating expenses growthrate were lower/(higher);

the risk adjusted discount rate werelower/(higher).

Forward exchange contracts Market comparison technique:The fair values are based on bankerquotes. Similar contracts are traded inan active market and the quotes reflectthe actual transactions in similarinstruments.

Not applicable. Not applicable.

Reconciliation of Level 3 fair valuesThe following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values:


Profit sharing receivable at beginning of year 3 401 -

Addition from sale of Hull 018, included in operating revenues 3 187 -

Addition from sale of Hull 017, included in operating revenues - 3 290

Accreted interest, included in financial income 657 111Cash payment received (32) -

Profit sharing receivable at end of year 7 213 3 401

There were no transfers from Level 3 in 2013.

Sensitivity analysisFor fair value of profit sharing receivable, reasonably possible changes at the reporting date to one of the significant unobservable inputs, holding otherinputs constant, would have the following effects:

2013 2012Effect in USD thousands Increase Decrease Increase Decrease

1% change in annual revenue growth rate 472 (468) 238 (236)

1% change in annual operating expense growth rate (293) 290 (152) 151

1% change in discount rate (149) 153 (77) 79


Performance 2013


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 hier-archy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The categories are describedbelow:

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.

� Note 22: Shares owned or controlled by the President and Chief Executive Officer, Board of Directors and Senior Management of AKPS

Shares owned in Aker Philadelphia Shipyard ASA as of 31 December 2013

Name PositionNumber of

shares held

Jim Miller Board Chairman 20 000Elin Karfjell Board Member 1 200Jeffrey Theisen Chief Financial Officer 500Steinar Nerbovik Senior Vice President 1 000Scott Clapham Senior Vice President 1 000Sanjay Deshmuk Vice President Purchasing 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 2013

RemunerationName Position (NOK) (USD)

Jim Miller Board Chairman 312 000 51 360Elin Karfjell Board Member 208 000 34 240Amy Humphreys Board Member 208 000 34 240Thorhild Widvey Board Member 104 000 17 120Audun Stensvold Deputy Board Chairman 208 000 34 240Manuel Stamatakis Board Member - -

Sum Directors’ fees 1 040 000 171 200

No Board members received any remuneration other than Directors’ fees. Manuel Stamatakis agreed to waive his fees as a Board member. Thorhild Wid-vey resigned from the Board of Directors in October 2013.

Remuneration to the audit committeeThe audit committee of AKPS is comprised of Elin Karfjell (Chairperson) and Audun Stensvold. Remuneration for the Chairperson is NOK 42,000 (USD6,917) and for each member is NOK 32,000 (USD 5,268).

Remuneration to the nomination committeeThe nomination committee of Aker Philadelphia Shipyard ASA has the following members: Leif-Arne Langoy, Kjetil Kristiansen and Gerhard Heiberg. Remu-neration earned by each member of the committee in 2013 was NOK 32,000 (USD 5,268).

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 in accordance with a varia-ble pay program which was implemented in 2007. This variable pay program is based on the achievement of financial and personal performance targetsand leadership performance in accordance with the Company’s values.


Performance 2013


The variable pay program for the President and CEO represents a potential for an additional variable pay up to 90% of base salary depending on the ach-ievement of defined short-term and long-term results such as financial targets (profit and working capital) and personal targets (project targets, develop-ment of commercial solutions, alignment with values and improvement of Health, Safety and Environment).

The variable pay program for other members of the Executive Team represents a potential for an additional variable pay in the range of 20% to 60% ofbase salary depending on the achievement of the same factors described for the President and CEO.

The President and CEO and Executive Team participate in the standard pension and insurance schemes, applicable to all employees. The Company practi-ces standard employment contracts and standard terms and conditions regarding notice period and severance pay for the President and CEO and mem-bers of the Executive Team.

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

Remuneration paid to Executive Management for 2013

Amounts in USDBase

salaryVariable

payPension

contributionOther

benefitsTotal

remunerationSeverance

pay

Kristian Rokke President and CEO Jan. - Dec. 228 827 80 114 7 000 53 587 369 528 6 months

Jeffrey Theisen CFO Jan. - Dec. 263 991 73 555 13 755 15 961 367 262 9 months

Remuneration paid to Executive Management for 2012

Amounts in USDBase

salaryVariable

payPension

contributionOther

benefitsTotal

remunerationSeverance

pay

Kristian Rokke President and CEO Jan. - Dec. 219 615 86 825 7 000 54 056 367 496 6 months

Jeffrey Theisen CFO Jan. - Dec. 253 849 77 223 10 077 15 792 356 941 9 months

� Note 23: PSDC Agreement

On 31 March 2011, Philadelphia Shipyard Development Corporation (PSDC) and APSI closed the transactions contemplated by the Authorization Agree-ment dated 15 December 2010 and effective as of 18 February 2011 (the Authorization Agreement). Pursuant to the Authorization Agreement, PSDC pur-chased certain shipyard assets from APSI for a purchase price of USD 42 million, payable in two equal tranches funded on 21 November 2011 and 4 June2012, respectively, with funds provided by the Commonwealth of Pennsylvania. APSI is leasing back those same assets from PSDC subject to the terms ofits shipyard lease and the Authorization Agreement. APSI used the sale proceeds in combination with construction period financing with private lenders andits own available funds, to construct Hulls 017 and 018. Upon the delivery of Hull 018 to Crowley in January 2013, the Authorization Agreement (excludingthe lease of shipyard assets described above) was terminated. For accounting purposes the transaction is accounted for as a sale leaseback and noadjustments were made to the net accounting value of the assets at closing and the gross proceeds were proportionately recognized as a reduction ofvessel cost over the construction of Hulls 017 and 018.

In connection with the closing, the City of Philadelphia agreed to temporarily defer USD 8.0 million in tax payments due from APSI over three years (2011-2013). The full deferred amount is due in 2017.

In addition, APSI agreed to a new termination event under its shipyard lease, pursuant to which PSDC has the right to recapture the shipyard if APSI fails tomaintain an average of at least 200 full-time employees at the shipyard for 90 consecutive days, subject to the right of APSI to complete work-in-processprojects and a one-time, limited cure right which allows APSI to restore the lease to a 5-year term under certain circumstances. Based on its current con-struction schedule and backlog, AKPS expects that it will have at least 200 full-time employees on staff for the foreseeable future.

� Note 24: Government grants, commitments and contingencies

Government grantsFor the year ended 31 December 2013, the Shipyard received USD 726 thousand reimbursement of employee training costs from various governmentalagencies (USD 1.3 million reimbursement in 2012). For the year ended 31 December 2013, the Shipyard received USD 195 thousand of grant funds forcapital and infrastructure improvements under the Small Shipyard Grant Program (USD 918 thousand of grant funds in 2012). All grants were recognized asa reduction in expenses or asset cost.

Other commitments and contingenciesAPSI is required to pay a common area maintenance charge each month of approximately USD 34 thousand, subject to escalation, through the term of itsshipyard lease.

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. In connection with the PSDC agreement (see note 23), the City of Philadelphia agreed to temporarily defer USD 8.0million in tax payments due from APSI over three years (2011-2013). The full deferred amount is due in 2017.

Legal mattersAKPS is involved in various legal disputes in the ordinary course of business related primarily to personal injury matters, employment matters and commer-cial matters. Provisions have been made to cover the expected outcomes when it is probable that a liability has been incurred and the amount is reason-ably estimable. Although the final outcome of these matters is subject to uncertainty, in AKPS’s opinion the ultimate resolution of such legal matters will nothave a material adverse effect on AKPS’s financial position or results of operations.


Performance 2013


Joint ventureOn 6 November 2013, APSI executed definitive agreements for a joint venture with Crowley Maritime Corporation and certain of its affiliates (“CMC”) relatedto the ownership, operation and chartering of four product tankers. The vessels will be delivered in 2015 and 2016 and Crowley will maintain control overthe ownership, technical operation, and commercial management of the vessels. APSI and CMC will share approximately 49.9% and 50.1%, respectively,in the economic benefits from the vessels. It is anticipated that APSI will have an investment in the joint venture of approximately USD 115 million once allfour vessels are delivered. The actual amount of the investment will depend upon the total capital cost of the vessels to the joint venture and the netamount of take out financing upon delivery of the vessels. The vessels owned by the joint venture will be subject to mortgage debt residing at the jointventure. Due to the nature of the transaction, approximately 49.9% of the gross margin on each vessel being constructed by APSI for the joint venture willbe deferred and recognized ratably over the life of such vessel once it is delivered. All four vessels have multi-year charters in place at 31 December 2013.

� Note 25: 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 2013. 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 2013. AKPS believes that related party transactions are made on terms equivalent to thosethat prevail in arm’s length transactions.

TransactionsAKPS has service agreements with Aker ASA and its affiliates which provide certain specified consulting, accounting, tax, financial and administrative serv-ices. AKPS also has a secondment agreement with Aker ASA which establishes a framework for the mutual secondment of personnel between theirrespective organizations. All payables under these agreements are paid within the normal course of business. Related administrative costs and financialstatement amounts were as follows:

Amounts in USD thousandsExpenses

2013Expenses

2012Payables

31 Dec. 2013

Aker ASA 338 76 -Aker US Services LLC(formerly Resource Group International) 60 60 -

ConcentrationsOperating revenues are detailed below:

Amounts in USD thousandsRevenue

2013Revenue

2012

Crowley 93 267 93 290SeaRiver 185 742 47 625

AgreementsAPSI has agreed to reimburse Aker ASA for certain support and assistance provided by Aker ASA to APSI in connection with the SeaRiver project. Relatedexpenses for the twelve-month period ending 31 December 2013 were USD 80 thousand (USD 68 thousand in 2012).

Aker ASA provided a guarantee under the construction loan facility with Caterpillar Financial Services Corporation (Cat Financial) for USD 80.0 million forthe construction financing for Hulls 017 and 018. This guarantee was released in conjunction with the sale and delivery of Hull 018 to Crowley on31 January 2013. AKPS paid Aker ASA a fee of USD 407 thousand related to this guarantee in 2012.

AKPS issued a counter-guarantee to Aker ASA related to APSI’s obligation to pay liquidated damages to PSDC under the Authorization Agreementdescribed in note 23. This obligation was discharged in conjunction with the sale and delivery of Hull 018 to Crowley on 31 January 2013.

� Note 26: Events after 31 December 2013

On 17 January 2014, the Company obtained commitments in a private placement to sell equity totalling USD 60 million, or 2.25 million shares at an issueprice of NOK 165 per share. The private placement was approved at an extraordinary general meeting on 7 February 2014 and trading of the new sharescommenced on 10 February 2014. The Board intends to carry out a subsequent offering in order to offer shares to existing shareholders that did not partic-ipate in the private placement in March 2014.

The Company announced on 20 January 2014 that the commitment it had received during Q4 2013 from a group of private lenders for a secured term loanof USD 65 million had expired and will not be closed. The Company will incur a charge of USD 1.2 million in Q1 2014 related to this transaction.

On 24 February 2014, APSI prepaid in full the remaining balance of USD 2.8 million under a USD 20 million loan by the Pennsylvania Industrial DevelopmentAuthority (PIDA) and the remaining balance of USD 1.2 million under a USD 10 million loan from PIDC Local Development Corporation (PIDC), without pre-mium or penalty, and the mortgages and all other liens securing such loans were released.


Performance 2013

Parent company accounts


Income Statement


Operating revenues 85 76Operating expenses 2 (611) (552)Reversal of guarantee provisions 2 2 000 -

Operating income/(loss) 1 474 (476)Interest income from subsidiary - 200Interest expense to subsidiaries (407) (72)Other interest and financial income 699 316Other interest and financial expenses (136) -

Income/(loss) before tax 1 630 (32)

Tax benefit 4 410 -

Net income/(loss) for the year 2 040 (32)

Allocation of net income/(loss):Net income/(loss) for the year 2 040 (32)Other equity 5 (2 040) 32

Total - -


Performance 2013



Statement of Financial Positionas of 31 December


ASSETSShares in subsidiary 3 67 000 67 000Deferred tax asset 4 410 -Non-current portion of profit sharing assets 7 14 110 15 741

Total non-current assets 81 520 82 741

Current portion of profit sharing assets 7 2 606 350Other current assets 36 34Cash and cash equivalents 6 17 527 10 181

Total current assets 20 169 10 565

Total assets 101 689 93 306

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

Total paid in capital 70 995 70 995Other equity 16 111 14 071

Total equity 5 87 106 85 066

Long-term notes payable to subsidiaries 9 13 980 6 052

Total non-current liabilities 13 980 6 052

Other short-term liabilities 603 2 188

Total current liabilities 603 2 188

Total liabilities 14 583 8 240

Total equity and liabilities 101 689 93 306






Performance 2013



Cash Flow Statement


Income/(loss) before tax 1 630 (32)Change in profit sharing assets (625) (350)Change in other current assets (2) (12)Change in short-term liabilities (1 585) (26)

Net cash flow used in operating activities (582) (420)

Repayment of long-term receivable from subsidiary - 10 000Cash paid for profit sharing assets - (10 000)

Net cash flow from investing activities - -

Proceeds from long-term notes payable to subsidiary 7 928 311

Net cash flow from financing activities 7 928 311

Net change in cash and cash equivalents 7 346 (109)

Cash and cash equivalents at beginning of period 10 181 10 290

Cash and cash equivalents as of 31 December 17 527 10 181


Performance 2013



Notes to the accounts

� Note 1: Basis for preparation

The accounts of Aker Philadelphia Shipyard ASA(AKPS or the Company) are presented in con-formity with Norwegian legislation and generallyaccepted accounting principles in Norway. TheCompany’s functional and reporting currency isthe U.S. dollar (USD), except when indicatedotherwise.

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 by gen-erally 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 the sub-sidiary. 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 operational

working 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 historicalcost, but are written down to fair value if impair-ment is deemed to be of a permanent nature.Non-current liabilities are valued at nominalhistorical values.

The profit sharing assets were recorded atfair value at the purchase date in 2012 and inter-est will accrete based on the firm charters inplace. Annual payments received will be appliedagainst the assets plus accreted interest. TheCompany will review the actual results of theprofit sharing assets compared to its forecastsand adjust the profit sharing assets accordingly.The Company evaluates the potential impairmentto these assets using a discounted cash flowmethod taking into account the historical andfuture vessel performances.

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 at 31 December 2013is calculated using a 27% income tax rate utiliz-ing the difference that exists between book val-ues and tax values and the net operating losses

that can be carried forward at the statement offinancial position date. Tax-increasing and tax-reducing temporary differences that are reversingor can reverse in the same period are offsetagainst each other. Net tax assets are shown inthe statement of financial position to the extent itis probable that these assets can be utilized.

To the extent a group contribution is notshown in the income statement, the tax effect istaken directly 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 income state-ment, 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 are identi-fied.


Performance 2013


� Note 2: Other operating expenses

Fees to the auditors of USD 45,269 and USD 42,075 for ordinary audit have been expensed in 2013 and 2012, respectively. Non-attest fees were USD15,389 and USD 2,214 in 2013 and 2012, respectively.

The Company has no employees. The senior management is employed in the operating company. Fees to the Board of Directors of USD 188,320 and USD197,240 were expensed in 2013 and 2012, respectively.

Accrued guarantee provisions of USD 2.0 million related to the government support on Hulls 017 and 018 were reversed in 2013 when the contingent obliga-tion was discharged.

� Note 3: Shares in subsidiary

This item comprises the following as of 31 December 2013:

Amounts in USD thousandsOwnership and

voting rights (%)Businessaddress

Historicalcost

Bookvalue

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

Total shares in subsidiary 67 000 67 000

APSI’s results after-tax in 2013 and equity at the end of 2013 are:

Results after-tax 2013 11 355Equity at 31 December 2013 100 776

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 the investment in subsidiary at 31 December 2013.

� Note 4: Taxes

The table below shows the difference between book and tax values by the end of 2013 and 2012 and the amounts of deferred taxes at these dates and thechange in deferred taxes.


Losses carried forward 883 (1 558)

Other temporary differences 635 -

Total differences 1 518 (1 558)

Net deferred tax asset, 27/28% 410 (436)

Tax (gains)/losses not recognized - 436

Tax asset in the statement of financial position 410 -

Estimated result for tax purposes:


Income/(loss) before tax measured in NOK for taxation purposes 2 614 (1 089)

Permanent differences (2 699) -Change in temporary differences 991 -Utilization of loss carried forward (906) -

Estimated income/(loss) for tax purposes - (1 089)

Payable current tax - -

Tax benefit/(expense) in the income statement:


Tax payable - -Tax benefit recognized during the year related to refund - -Change in deferred tax in the statement of financial position 410 -

Tax benefit 410 -


Performance 2013


� Note 5: Total equity

Changes in equity are:

Amounts in USD thousandsShare

capitalShare

premiumTotal paid in

capitalOtherequity

Totalequity

Equity as of 1 January 2013 18 709 52 286 70 995 14 071 85 066Net income - - - 2 040 2 040

Equity as of 31 December 2013 18 709 52 286 70 995 16 111 87 106

The share capital of NOK 101,653,050 consists of 10,165,305 shares with a par value of NOK 10 as of 31 December 2013.

The Company is a part of the consolidated accounts of Aker ASA, Fjordalleen 16, 0115, Oslo, Norway.

Twenty largest shareholders(as of 31 December 2013)

ShareholderNumber of

shares heldOwnership

(in %)

Converto Capital Fund AS 7 237 631 71.2%Deutsche Bank AG London 1 205 047 11.9%Goldman Sachs & Co Equity Segragat 224 994 2.2%Citibank, N.A. 208 819 2.1%SEB Private Bank S.A. 128 902 1.3%Citibank, N.A. 92 350 0.9%Nordnet Pensjonsforsikring 60 558 0.6%JP Morgan Clearning Corp. 55 272 0.5%Ro Lars 46 000 0.5%Kovaci Ramadan 45 412 0.4%Sunde Frank Robert 40 201 0.4%Wilson Ole Johnny 23 251 0.2%First Clearing A/C LLC * 20 500 0.2%The Bank of New York Mellon SA/NVT 20 426 0.2%Bodin Per Asgeir 20 000 0.2%Rika AS 15 000 0.1%Werner Jorgen 15 000 0.1%State Street Bank and Trust Co. 14 498 0.1%Deutsche Bank AG 12 679 0.1%Haugen Jarle 12 600 0.1%

Total, 20 largest shareholders 9 499 140 93.3%

Other shareholders 666 165 6.7%

Total shareholders 10 165 305 100.0%

* Represents the shareholdings of Jim Miller (Board Chairman) and Jeffrey Theisen (Chief Financial Officer).

� Note 6: Cash and cash equivalents

There is no restricted cash.

� Note 7: Current and non-current profit sharing assets

Current and non-current profit sharing assets are the profit sharing interests purchased from APSI Shipholding 017, Inc. (Shipholding 17) and APSIShipholding 018, Inc. (Shipholding 18); (see note 9). Interest is being accreted at 10% per annum based on the firm charters in place which run into 2015and 2016, respectively.

� Note 8: 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 22 to the Consolidated Accounts.


Performance 2013


� Note 9: Related party transactions/guarantees

The Company has made the following guarantees:

Description BeneficiaryAmount

(USD thousands) Borrower

Working capital TD Bank, N.A. 6 000 APSI

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

The Company has supplied a parent guarantee for the four construction contracts with Crowley Maritime Corporation and the two construction contractswith Matson Navigation Company.

AKPS has service agreements with Aker ASA and its affiliates which provide certain specified consulting, accounting, tax, financial and administrative serv-ices. AKPS also has a secondment agreement with Aker ASA which establishes a framework for the mutual secondment of personnel between theirrespective organizations. All payables under these agreements are paid within the normal course of business. Total expenses incurred under this agree-ment in 2013 and 2012 were USD 338 thousand and USD 76 thousand, respectively.

On 18 July 2013, AKPS entered into a loan agreement with its subsidiary Aker Philadelphia Shipyard, Inc. The facility is for up to USD 10 million and interestis at a fixed rate of 4.0% per annum. AKPS had drawn USD 8 million under the facility at 31 December 2013. AKPS repaid the USD 8 million in February2014.

On 20 September 2012, AKPS purchased the variable component of the purchase price (profit sharing interests) from the sale of Hulls 017 and 018 fromShipholding 17 and Shipholding 18, which are wholly-owned indirect subsidiaries. The purchase price, which was based on third party appraisals of eachprofit share interest, was paid in cash of USD 5.0 million to both Shipholding 17 and Shipholding 18 and demand promissory notes (notes) of USD3.06 million and USD 2.92 million to Shipholding 17 and Shipholding 18, respectively. The notes are payable on demand. The interest rate on the notes is4.25% per annum and can be prepaid at any time without penalty or premium in whole or in part. AKPS believes that the transaction was accounted for inaccordance with arms length principles.

The profit sharing asset represents a future variable component of the sale of Hulls 017 and 018. It provides a mechanism whereby AKPS will receiveannual payments based on firm charters in place for the lives of the vessels. Interest income is being recognized to the extent there is a firm charter in placewith an end customer.

The Company performed an analysis using recent third party valuations and current market conditions to conclude that there was no impairment to theyear-end asset value of the profit sharing asset.

� Note 10: Events after 31 December 2013

On 17 January 2014, the Company obtained commitments in a private placement to sell equity totalling USD 60 million, or 2.25 million shares at an issueprice of NOK 165 per share. The private placement was approved at an extraordinary general meeting on 7 February 2014 and trading of the new sharescommenced on 10 February 2014. The Board intends to carry out a subsequent offering in order to offer shares to existing shareholders that did not partic-ipate in the private placement in March 2014.


Performance 2013

Auditor’s report


Performance 2013

Shares and shareholder matters

Good dialogueAker Philadelphia Shipyard ASA (referenced to herein as “AKPS” or the “Company”) is committed to maintain-ing an open and direct dialogue with its 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 26 February2014, the Company’s Board of Directorsadopted the following dividend policy:

“The Company’s objective is to provideits shareholders with a competitive returnon its shares over time based on theCompany’s earnings. The Company aims topay a quarterly dividend of USD 0.25 pershare, beginning with the second quarter of2014, with intentions of increasing theamount over time. Any payment of divi-dends will be considered in conjunctionwith the Company’s financial position, debtcovenants, capital requirements, marketprospects and potential strengthening ofthe Company’s financial structure.”

The Company did not pay a dividendin 2013.

Recent changes to the NorwegianPublic Limited Liability Companies Actallow for the Board of Directors to paydividends on the basis of an authorizationfrom the general meeting. The Board ofDirectors will therefore propose to theannual general meeting in 2014 that theBoard of Directors is granted an author-ization to pay dividends based on theCompany’s annual accounts for 2013, validup to the Company’s annual general meet-ing in 2015. Such authorization will facili-tate payments of dividends by the Board ofDirectors on a quarterly basis, in accord-ance with the Company’s dividend policy.

Shares and share capitalAs of 31 December 2013, Aker PhiladelphiaShipyard ASA has 10,165,305 ordinaryshares; each share has a par value of NOK 10(see note 5 to the parent company’s 2013accounts). As of 31 December 2013, theCompany had 621 shareholders, of whom21.5% were non-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 2013.No share issues were carried out in 2013.

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 ofthe involved companies, in accordance

with good corporate governance practice.If needed, external, independent opinionsare sought.

Current Board authorizationsAs of 31 December 2013, Aker PhiladelphiaShipyard ASA has no Board authorizationsto issue or buy back shares. Please see“Board authorizations” on page 52.

Stock option plansAs of 31 December 2013, 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 annualreports. 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.

Share capital development over the past three years

DateChange in

share capitalShare capital

(in NOK)Number of

sharesPar value(in NOK)

Change in 201131 December 2011 - 101 653 050 10 165 305 10.00Change in 201231 December 2012 - 101 653 050 10 165 305 10.00Change in 201331 December 2013 - 101 653 050 10 165 305 10.00


Performance 2013

Shares and shareholder matters

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 committee

The Company’s nomination committee hasthe following members: Leif-Arne Langoy,Gerhard Heiberg and Kjetil Kristiansen.

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

Nomination Committee ofAker Philadelphia Shipyard ASAPostboks 1423 VikaNO-0115 Oslo, Norway

Annual shareholders’ meetingAker Philadelphia Shipyard ASA’s annualshareholders’ meeting is normally held inMarch or early April. Written notification issent to all shareholders individually or to

shareholders’ nominee. To vote at share-holders’ meetings, shareholders (or theirduly authorized representatives) musteither be physically present or must vote byproxy.

2013 share dataThe Company’s total market capitalizationas of 31 December 2013 was NOK 1422million. During 2013, a total of 11,242,542Aker Philadelphia Shipyard ASA sharestraded, corresponding to 1.1 times theCompany’s freely tradable stock. Theshares traded on 240 trading days in 2013.

Twenty largest shareholders(as of 31 December 2013)

ShareholderNumber of


(in %)

Converto Capital Fund AS 7 237 631 71.2%Deutsche Bank AG London 1 205 047 11.9%Goldman Sachs & Co Equity Segragat 224 994 2.2%Citibank, N.A. 208 819 2.1%SEB Private Bank S.A. 128 902 1.3%Citibank, N.A. 92 350 0.9%Nordnet Pensjonsforsikring 60 558 0.6%JP Morgan Clearing Corp. 55 272 0.5%Ro Lars 46 000 0.5%Kovaci Ramadan 45 412 0.4%Sunde Frank Robert 40 201 0.4%Wilson Ole Johnny 23 251 0.2%First Clearing A/C LLC * 20 500 0.2%The Bank of New York Mellon SA/NVT 20 426 0.2%Bodin Per Asgeir 20 000 0.2%Rika AS 15 000 0.1%Werner Jorgen 15 000 0.1%State Street Bank and Trust Co. 14 498 0.1%Deutsche Bank AG 12 679 0.1%Haugen Jarle 12 600 0.1%

Total, 20 largest shareholders 9 499 140 93.3%Other shareholders 666 165 6.7%

Total 10 165 305 100.0%

* Represents the shareholdings of Jim Miller (Board Chairman)and Jeffrey Theisen (Chief Financial Officer).

Geographic distribution of shareholders(as of 31 December 2013)

NationalityNumber of


(in %)

Non-Norwegian shareholders 2 190 272 21.5%Norwegian shareholders 7 975 033 78.5%

Total 10 165 305 100.0%

Ownership structure by number of shares held(as of 31 December 2013)

Shares ownedNumber of

shareholdersPercent of

share capital

1 – 100 167 0.08%101 – 1 000 293 1.35%1001 – 10 000 130 3.94%10 001 – 100 000 26 6.05%100 001 – 500 000 3 5.54%Over 500 000 2 83.04%

Total 621 100.00%

Share price development in 20132013 share data

Highest traded NOK 139.88Lowest traded NOK 13.14Share price as of 31 Dec. NOK 139.88Shares issued as of 31 Dec. 10 165 305Own (treasury) shares as of 31 Dec. -Shares issued and outstanding as of31 Dec. 10 165 305Market capitalization as of 31 Dec. NOK million 1 422Proposed share dividend NOK per share -



Corporate governance

Corporate governanceAker Philadelphia Shipyard ASA aims to create maximum value for its shareholders over time. Good corpo-rate governance will help to reduce risk 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 2012, 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.

Purpose

Aker 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 guidelines

The Board has adopted corporate valuesand ethical guidelines. Aker PhiladelphiaShipyard ASA’s corporate values are pre-sented on page 6 of this annual report.These values consist of the following“CORE” principles: Caring, One shipyard,Responsible and Efficient. AKPS works topromote a sustainable and responsiblecompany that is driven by good results andthe demands for social responsibility.

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 management’sability to carry out strategic and financiallyviable decisions within the defined purpose.AKPS’s goals and main strategies are pre-sented in the Board of Directors’ report. TheCompany’s vision is “to be – and be recog-nized as – America’s leading commercialshipyard that delivers on its commitments,every time,” and its supporting strategies for2014 are to deliver on customer commit-ments, secure open slots as product tankersand maximize value of its shipping assets.

Equity and dividendsEquity

AKPS’s equity as of 31 December 2013amounted to USD 113.9 million, whichcorresponds to an equity ratio of 61% oftotal assets. Aker Philadelphia ShipyardASA regards the Company’s current equitystructure as appropriate and adapted to itsobjectives, strategy, and risk profile.

Dividends

Aker Philadelphia Shipyard ASA’s dividendpolicy is included in the section “Sharesand shareholder matters” (see page 50). Asstated in that policy:

“The Company’s objective is to provideits shareholders with a competitive returnon its shares over time based on theCompany’s earnings. The Company aims topay a quarterly dividend of USD 0.25 pershare, beginning with the second quarter of2014, with intentions of increasing theamount over time. Any payment of divi-dends will be considered in conjunction

with the Company’s financial position, debtcovenants, capital requirements, marketprospects and potential strengthening ofthe Company’s financial structure.”

Board authorizations

It 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 other than an authorization toincrease share capital by up to NOK3,370,000 in connection with a subsequentoffering of shares, valid up to the Compa-ny’s annual general meeting in 2014. TheBoard will propose to the annual generalmeeting in 2014 that the Board is grantedan authorization for payment of dividends,an authorization to increase the share capi-tal and an authorization to purchase ownshares.

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, the Boardwill justify the waiver. The Board will alsopublicly disclose such justification in a stockexchange announcement issued in con-nection with such increase in share capital.Transactions in own (treasury) shares areexecuted on the Oslo Stock Exchange or byother means at the listed 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 25 to theconsolidated accounts. As of 31 December2013, 71.2% of the shares in Aker Phila-delphia Shipyard ASA are owned by Con-verto Capital Fund AS, an investment fundcontrolled by Aker ASA. For further details onthe relationship between Aker PhiladelphiaShipyard ASA and Aker ASA, see note 25 tothe consolidated 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, ordina-rily in March or early April. Notice of share-holders’ meetings are sent physically bypost and comprehensive supportinginformation, including the recommendationsof the nomination committee, is madeavailable for the shareholders on theCompany’s home page, in each case notlater than 21 days prior to the annualshareholders’ meeting. The Board seeks toensure that the resolutions and supportinginformation 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 Chairman

of the Board, or any other person appointedby the Chairman, chairs the shareholders’meetings. Although the Code of Practicerecommends an independent chair forannual general meetings, it is the view ofthe Company that the procedure followedby the Company provides efficient and wellprepared general meetings and is in theinterests of the shareholders. The Board ofDirectors and the person chairing the meet-ing make appropriate arrangements for thegeneral meeting to vote separately on eachcandidate nominated for election to theCompany’s corporate bodies. To the extentpossible, the General Manager, nominationcommittee leader and auditor attend annualshareholders’ meetings. If the GeneralManager is absent from an annual share-holders’ meeting for valid reasons, then theGeneral Manager may appoint a deputy toattend in his or her place.

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 possible onthe Oslo Stock Exchange, www.newsweb.no(ticker: AKPS) and on the Company’s homepage www.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 committee will

justify its recommendation and such justifi-cation will address the criteria specified inSection 8 of the Code of Practice on thecomposition of the Board of Directors.

Aker Philadelphia Shipyard ASA’snomination committee comprises the fol-lowing members:

– Leif Arne Langoy, Chairman (2013-2015)

– Gerhard Heiberg (2013-2015)– Kjetil Kristiansen (2013-2015)

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 five members. TheBoard had been comprised of a total of sixmembers, but Thorhild Widvey resignedfrom the Board in October 2013, creating avacancy that has not been filled. TheCompany’s shareholders elect the Chair-man of the Board at the annual share-holders’ meeting. The Board may elect itsown Deputy Board Chairman. Boardmembers are elected for a period of twoyears.

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 shareholders’ meetingin 2011, Manuel Stamatakis has served asa Board member. Mr. Stamatakis is alsothe Chairman of the Philadelphia ShipyardDevelopment Corporation (PSDC), theCompany’s landlord and a party to theMaster Agreement and the AuthorizationAgreement. For more information regardingthese agreements, see page 39 of the




annual report. Further, three of the fiveshareholder-elected Board members areindependent of the Company’s mainshareholder, Aker ASA. Currently, two ofthe Board members are not independent ofAker ASA. Jim Miller is Executive VicePresident E&C Americas of Kvaerner, aportfolio company of Aker ASA. AudunStensvold is Financial Investment Directorof Aker ASA.

The current composition of the Board,as well as the Board members’ expertise,capabilities, and experience, are presentedon pages 56-57 of this annual report. Theshareholder-elected Board membersrepresent a combination of expertise,capabilities, and experience from variousbusinesses and industries in both the pri-vate and public sectors.

The Board members’ shareholdingsare presented in note 22 to the con-solidated accounts. The Company encour-ages the Board members to invest in theCompany shares.

Two of the shareholder-elected Boardmembers are up for election. AKPS willprovide the relevant information regardingsuch Board members in accordance withthe Code of Practice guidelines at theannual general meeting.

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 adoptedinstructions that regulate areas ofresponsibility, tasks, and division of roles ofthe Board, Board Chairman, and Presidentand CEO/General Manager. Theseinstructions feature rules governing Boardschedules, rules for notice and chairing ofBoard meetings, decision-making rules, thePresident and CEO’s/General Manager’sduty and right to disclose information tothe Board, professional secrecy,impartiality, and other issues.

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.

The Board of Aker Philadelphia Ship-yard established a tendering committee in2012 to review tenders for new business.The tendering committee consists of twomembers, Jim Miller (Chairman) and AmyHumphreys. Both members areindependent from operations of the Com-pany. As discussed above, Mr. Miller islinked to the Company’s main shareholder.

Aker Philadelphia Shipyard ASA doesnot have any other active Board commit-tees at this time. In particular, the Companydoes not have a remuneration committeebecause all members of the Board areindependent of the Company’s executivepersonnel.

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. Thesepractices and systems encompass theCompany’s corporate values, ethical guide-lines and guidelines for corporate socialresponsibility. The Company’s policyregarding corporate social responsibility isset forth on pages 16-17 of this annualreport. The Board annually reviews theCompany’s most important risk areas andinternal control systems and procedures,and these risk areas are mentioned in theBoard of Directors’ report. Through the useof a risk matrix and log, the Board alsomonitors the key risks related to theCompany’s business goals and assessesthose risks, taking into account mitigatingactions, on a quarterly basis. The issue isfurther described in notes 1 and 21 to theconsolidated accounts.

Audit committeeThe audit committee has reviewed theCompany’s internal reporting systems,internal control and risk management andhad dialogue with the Company’s auditor.The audit committee has also consideredthe auditor’s independence.

AKPS’s financial policies ensure follow-up of financial risk. Key targets are identifiedby the Board and management to ensuretimely follow-up of currency exposure,interest rate exposure and compliance withcovenants.

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

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

Remuneration of the Board ofDirectorsBoard 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 2013 is pre-sented in note 22 to the consolidatedaccounts.

Remuneration of ExecutiveManagementThe 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 a




performance-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 for2013 for members of Aker PhiladelphiaShipyard ASA’s Executive Management ispresented in note 22 to the consolidatedaccounts. AKPS’s guidelines for remuner-ation to Executive Management are dis-cussed on pages 38-39 of this annualreport and will be presented to the share-holders at the annual shareholders’ meet-ing. The maximum size of any paymentunder the existing performance-relatedremuneration program to any executive islinked to the size of the executive’s basesalary.

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’s accessto capital at competitive terms and to ensureshareholders’ correct pricing of shares.These goals are to be accomplished throughcorrect and timely distribution of informationthat can affect the Company’s share price;the Company is also to comply with currentrules and market practices, including therequirement of equal treatment.

All stock exchange notifications and pressreleases are made available on the Company’shome page www.akerphiladelphia.com; stockexchange notices are also available fromwww.newsweb.no. All information that is dis-tributed to shareholders is simultaneously pub-lished on Aker Philadelphia Shipyard ASA’shome page.

The Company’s financial calendar isfound on the inside front cover of thisannual 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 is

regularly informed about the Company’sinvestor relations activities. For moreinformation regarding the Company’sguidelines for reporting of financial andother information, see pages 50-51.

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. The Board will not take stepsto prevent or obstruct a take-over bid forthe Company’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.

The Company will not enter into anyagreement with a bidder that acts to limit theCompany’s ability to arrange other bids forthe Company’s business or shares unless itis self-evident that such an agreement is inthe common interest of the Company and itsshareholders. This provision shall also applyto any agreement on the payment of financialcompensation to the bidder if the bid doesnot proceed. Any financial compensation willbe limited to the costs the bidder hasincurred in making the bid.

Agreements entered into between theCompany and a bidder that are material tothe market’s evaluation of the bid will beannounced to the public no later than atthe same time as the disclosure that thebid has been made is published.

Upon the issuance of an offer for theCompany’s shares, the Board will make astatement to the shareholders that providesan assessment of the bid, the Board’srecommendations, and reasons for theserecommendations. If the Board cannotrecommend the shareholders whether theyshould or should not accept the bid, theBoard will explain the reasons for this. TheBoard’s statement on the offer will make itclear whether the views expressed areunanimous, and if this is not the case it willexplain the basis on which specific mem-bers of the Board have excluded them-selves from the Board’s statement.

For each instance, an assessment willbe made as to the necessity of bringing in

independent expertise and obtaining a thirdparty valuation. If a third party valuation isobtained, such valuation will include anexplanation, and the Board will aim atrecording such valuation in its statement. Itmay be necessary to obtain a valuationfrom an independent expert where a com-peting bid is made and the bidder either isthe main shareholder or has a connection tothe Board members or executive 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 presentation tothe Board of a plan for the auditing work forthe year. Further, the auditor has providedthe Board with a written confirmation that therequirement of independence is met.

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 andnote 2 to the parent company 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 2014, Mr. Miller holds 20,000shares in the company and has no stock options. He has been elected for the period 2013-2015.

Amy HumphreysBoard Member

Amy Humphreys (b.1966) is President and CEO of Icicle Seafoods, Inc. Icicle’s core business is the processingand marketing of seafood including salmon, pollock, crab, halibut, cod and herring in fisheries throughoutAlaska, with both on-shore and floating processing facilities. Icicle also owns the largest United States salmonfarming company located in the Pacific Northwest. Prior to joining Icicle Seafoods, Ms. Humphreys served asCFO of North Star Petroleum Group, the Petroleum Division of Saltchuk Resources including five fueldistribution operating companies. Prior to her current role, Ms. Humphreys was President of Delta Western,Inc., a leading petroleum marketing and distribution company in Alaska and a subsidiary of SaltchukResources. From 1996 to 2006, Ms. Humphreys held various leading positions in her 10 year tenure withAmerican Seafoods Group, including VP Corporate Development and Treasurer. For the past 15 years, Ms.Humphreys has worked within companies operating under the Jones Act and, for the past several years, hasmanaged companies in the oil industry within an environment subject to OPA 90 regulation. Ms. Humphreysholds a Master of Business Administration (MBA), with honors, from University of Washington, is a CertifiedPublic Accountant (CPA) and holds a Bachelor of Arts (BA) in Accounting and Finance, magna cum laude, fromUniversity of Puget Sound. Ms. Humphreys is a U.S. citizen. As of 1 February 2014, Ms. Humphreys holds zeroshares in the company and has no stock options. She has been elected for the period 2012-2014.

Elin KarfjellBoard Member

Elin Karfjell (b. 1965) is Managing Consultant of Elika AS. Prior to that, she was CEO of Fabi Group andDirector of Finance and Administration of Atea AS. She is former partner of Ernst & Young AS. Ms. Karfjelljoined Ernst & Young AS in 2002. Prior to this, Ms. Karfjell held various positions including partner at ArthurAndersen. At Ernst & Young/Arthur Andersen, she held various leading positions, both within advisory andaudit, and she has experience from a broad specter of industries. Ms. Karfjell is also a Board Member of NorseEnergy Corporation ASA. Previously she had been a Board member of Aktiv Kapital ASA, Aker FloatingProduction ASA and DNO International ASA. Ms. Karfjell is a state authorized public accountant. She has abachelor accountant’s degree from Okonomisk College (Hoyskolen i Oslo) and a master of accounting andauditing from the Norwegian School of Economics and Business Administration. Ms. Karfjell is a Norwegiancitizen. As of 1 February 2014, Ms. Karfjell holds 1,200 shares in the company and has no stock options. Shehas been elected for the period 2013-2015.



Presentation of the Board of Directors

Manuel StamatakisBoard Member

Manuel Stamatakis (b. 1949) is president and chief executive officer of Capital Management Enterprises, afinancial services and employee benefit consulting company. He served as one of the lead negotiators forGovernor Tom Ridge’s efforts to bring Kvaerner (now Aker Philadelphia Shipyard) to Philadelphia in order tooperate a world-class shipbuilding facility at the Philadelphia Naval Shipyard. Mr. Stamatakis serves as theChairman of the Philadelphia Shipyard Development Corporation (PSDC) and also serves on several otherboards and committees for Pennsylvania organizations. He has vast experience in leading different joint public/private efforts to strengthen the local economy and improve Pennsylvania’s role in world trade. Mr. Stamatakisalso devotes 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 February2014, Mr. Stamatakis holds zero shares in the company and has no stock options. He has been elected for theperiod 2013-2015.

Audun StensvoldDeputy Board Chairman

Audun Stensvold (b. 1972) holds the position of Investment Director for Aker ASA. Previously, he was CFO andInvestment Director for Converto Capital Management, which is the investment advisor for Aker PhiladelphiaShipyard’s largest shareholder, Converto Capital Fund. Prior to joining Converto Capital Management in 2009,Mr. Stensvold worked for Aker ASA as Vice President of the M&A and Business Development team, and wasi.a. involved in the initial stock exchange listing of Aker Philadelphia Shipyard (then named Aker AmericanShipping ASA) and later follow-up of Aker’s ownership in the yard. Before joining Aker, Mr. Stensvold workedas a strategy and finance consultant for Selmer, and as a financial analyst for DnB NOR. Mr. Stensvold holdsan MSc in Business and Economics from the Norwegian School of Economics and Business Administration(NHH). Mr. Stensvold is a Norwegian citizen. As of 1 February 2014, Mr. Stensvold holds zero shares in thecompany and has no stock options. He has been elected for the period 2012-2014.



Presentation of the Management Team

Presentation of the Management TeamKristian RøkkePresident and CEO

Mr. Røkke (b. 1983) joined Aker Philadelphia Shipyard in 2007. Mr. Røkke has held various roles, including SVPOperations and Senior Shop Manager. Mr. Røkke has experience from offshore service and shipbuilding fromseveral companies in the Aker group. Mr. Røkke is a Board Member of TRG Holding AS which owns 66.7% ofAker ASA. Mr. Røkke is currently completing his MBA at The Wharton School and has also studied economicsand mathematics at Colby College, London School of Economics, and Political Science at the NorwegianSchool of Management (BI). Mr. Røkke lives in Philadelphia, PA, USA. Mr. Røkke is a Norwegian and a U.S.citizen. As of 1 February 2014, Mr. Røkke holds zero shares in the company and has no stock options.

Jeffrey TheisenChief Financial Officer

Jeffrey Theisen (b. 1968) joined APSI in May 2007. Mr. Theisen has over 20 years of 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 commercial end-users. Mr. Theisen holds a Bachelor of Science in Accounting from Villanova University and is a certified publicaccountant (inactive) in the state of Pennsylvania. Mr. Theisen lives in Lansdale, PA, USA. Mr. Theisen is a U.S.citizen. As of 1 February 2014, 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 Aker ASA. Mr. Fadnes joined Aker in 2012. Prior to this, he hasworked in Converto Capital Management and Ernst & Young. Mr. Fadnes holds an MSc in Business andEconomics from the Norwegian School of Economics and Business Administration (NHH) and an MSc inProfessional Accountancy from the Norwegian School of Management (BI). Mr. Fadnes is a State AuthorizedPublic Accountant in Norway. Mr. Fadnes lives in Oslo, Norway. As of 1 February 2014, Mr. Fadnes holds zeroshares 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 2014, Mr. Clapham holds 1,000 sharesin the company and has no stock options.

Steinar NerbøvikSenior Vice President Operations

Steinar Nerbøvik (b. 1961) was appointed SVP Operations in 2013. Prior to this, Mr. Nerbøvik served as SVPYard Director for Norwegian Shipyard VARD Langsten (former Aker Yards and STX OSV Langsten), a leadingprovider of sophisticated offshore support vessels. Mr. Nerbøvik first joined Aker Philadelphia Shipyard in 2003as Vice President Projects. Mr. Nerbøvik has held other management positions as combined Design Managerand Project Manager at Aker Langsten from 1991 – 2003. Mr. Nerbøvik holds a Master of Science in ShipNaval Engineering from the Norwegian Institute of Technology (NTNU) in Trondheim. Mr. Nerbøvik lives inPhiladelphia, PA, USA. Mr. Nerbøvik is a Norwegian citizen. As of 1 February 2014, Mr. Nerbøvik holds1,000 shares in the company and has no stock options.



Presentation of the Management Team

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 20 years of 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 2014, Mr. Fitzpatrick holds zero shares in the company and has no stockoptions.

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 2014,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 2014, Mr. Deshmuk holds 1,000 sharesin the 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 2014, Mr. Grabelle holds zero shares in the company and has 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, Postboks 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. andCharles Cerrone Photography

Layout/production:RR Donnelley

2013 Annual Report - Zetta ASfiles.zetta.no/.../2013_annual_report_low_res_final.pdfIn review Key...

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