Philly Shipyard — Annual Report 2013

Mar 19, 2014

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.

This is Aker Philadelphia Shipyard

Aker Philadelphia Shipyard is a leading U.S. commercial shipyard constructing vessels for operation in the Jones Act market. It possesses a state-of-the-art shipbuilding facility and has earned a reputation as a preferred provider of ocean-going merchant vessels with a track record of delivering quality ships, having delivered over 50% of all large ocean-going Jones Act commercial ships since 2000.

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

Aker Philadelphia Shipyard ASA was listed on Oslo Axess in December 2007. Converto Capital Fund AS, an investment fund controlled 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 delivery dates through 2018
• Access to global shipbuilding and design expertise through agreements with Hyundai Mipo Dockyard, Samsung Heavy Industries and KOMAC
• A solid track record demonstrated by the delivery of 18 quality vessels (4 containerships, 14 product tankers) through 2013
• Skilled workforce consisting of direct and contracted employees with a strong HSE mindset and culture of improvement

U.S. Jones Act

U.S. coastwise law, commonly referred to as the Jones Act, requires all commercial vessels transporting merchandise between ports in the United States to be built in the United States, owned, operated and manned by U.S. citizens and registered under the U.S. flag. Commonly referred to as the Jones Act market, it encompasses all water-borne transportation between U.S. ports, including between the mainland U.S. and non-contiguous areas of Alaska, Hawaii and Puerto Rico, as well as shuttle tankers in the Gulf of Mexico.

1997

1997	1998	2000	2002	2003	2004	2005	2006
Founded by the public-private partnership	Construction of the production facility and	Began con struction of the first two con	Matson agreed to purchase the two CVs	First CV delivered	Second CV delivered	Matson agrees to purchase two additional CVs	Fourth CV delivered
consisting of U.S. govern mental agen cies and the Kvaerner Ship building	workforce training	tainer vessels (CVs)				Aker American Shipping ASA (AKASA) formed and listed on Oslo Bors
Division						Third CV delivered
						Construction program of ten product tankers (PTs) initiated

Now

First three PTs delivered Order of additional two PTs for later conversion to shuttle tankers Split of AKASA's shipbuilding and ship owning operations and listing of AKPS on Oslo Axess

Fourth and fifth PTs delivered Graduation of the first three apprentice classes Celebrated tenyear anniversary of the yard First dividend paid to shareholders Group

Sixth, seventh and eighth PTs delivered Finalized settlement agreement with American Shipping Company and Overseas Shipholding

2007 2008 2009 2010 2011 2012 2013

Ninth, tenth and eleventh PTs delivered New union agreement extended into 2015

Secured financing for construction of two PTs Twelfth PT delivered, marking successful completion of tanker series announced in 2005 Signed contract with SeaRiver for two aframax tankers

Sold thirteenth and fourteenth PTs to Crowley Delivered thirteenth PT Began construction of SeaRiver vessels, Hulls 019 and 020

Delivered fourteenth PT Signed joint venture agreement with Crowley for four PTs Signed agreement with Matson for two 3,600 teu containerships Celebrated the 15-year anniversary of the shipyard

2013 key events and highlights

Delivered Hull 018 on time

Hull 018, the Florida, was delivered to Crowley 31 January, one day earlier than its original delivery date. Delivery of this vessel marked the successful completion of a series of fourteen product tankers built at Aker Philadelphia Shipyard.

Entered into joint venture with Crowley for four product tankers

Definitive documentation for a joint venture for four new product tankers with deliveries in 2015 and 2016 was signed in November providing AKPS with an economic interest in the vessels after delivery.

Entered into agreement with Matson to build two 3600 teu containerships

The 850 foot-long containerships will be delivered in Q3 and Q4 2018 and have a total contract value of USD 418 million. They will be the largest containerships ever built for the Jones Act trade.

Record strong earnings

Delivered record EBITDA of USD 30.1 million.

Share price increased 933%.

Shipyard celebrated 15-year anniversary

On 21 September, the shipyard was transformed from a place of heavy manufacturing into a festival for all APSI friends and family.

Investment highlights

1 Leading commercial Jones Act shipyard 2 High visibility

• Š State-of-the-art facility with more than USD 650 million invested since founding
• Š Built over 50% of all large ocean-going Jones Act commercial ships since 2000
• Š Highly skilled workforce with integrated, fully flexible subcontracting

• Š Culture of high efficiency with proven ability to improve productivity over time

• Š Over USD 1 billion in backlog with last delivery in 2018

• Š APSI expects to secure available slots 025-028 as PTs in 2014
• Š Series production with familiar ships offers operational benefits
• Š Need to replace aging Jones Act fleet post-2018

out 2018 3 Direct exposure to shale revolution 4 Strong earnings

• Š Strong market fundamentals with increasing time-charter rates
• Š Six vessels with exposure to time-charter rates through profit sharing and joint venture
• Š Opportunity to add additional exposure through part ownership of Hulls 025-028
• Š Partnership with first-class operator Crowley

potential

• Š Expected earnings growth over coming years with backlog sold at attractive margins
• Š Shipping assets to contribute to earnings growth as vessels are delivered
• Š Strong balance sheet with available debt capacity
• Š Paying dividends starting in Q2 2014

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 Container 29 3,600 teu Container 30 3,600 teu 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 robot installed Q2 2013.

AKPS order backlog

Vision: To be - and be recognized as - America's leading commercial shipyard that delivers on its commitments, every time.

Our CORE values

Aker Philadelphia Shipyard's CORE values were designed as a reflection of who we are, and who we aspire to 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, but our stand – a united commitment to conquer all challenges and build long lasting relationships. For years to come we will be united by these values, that give us the platform to deliver on our commitments, every time.

We are a shipbuilding family, a unique group comprised of many backgrounds and ethnicities, teams and departments; but at the end of the day, we have a healthy respect and a natural need to protect each other.

Customers are all around. From ship owner to process owner, we are all powerfully united to deliver. That means decisions are made in the best interest of the company, rather than oneself, or one team. We are strongest when we act together.

If you're responsible for it, you own it, so treat it like it's yours. This means taking the utmost care for tools and equipment, making decisions based on the impact to your bottom dollar, and simply doing the right thing. Success is in our hands.

A healthy dissatisfaction for the status quo lives within us. It fuels the need to challenge ourselves, and each other, to find a better way. Being efficient keeps our costs down, while driving our competitive edge up.

Caring in action

At Aker Philadelphia Shipyard, the way in which we achieve growth and profitability is as important as the achievements themselves. Our overriding corporate responsibility is concern for the communities that we are a part of. We strive to provide products and services in a safe, environmentally sound, ethical, and socially responsible manner.

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

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 are preventable and extensive measures are taken to ensure the safety of everyone.

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

In 2013, APSI's lost time frequency decreased 38% from 2012, which is approximately 60% below the comparable industry average. Contributing to this decrease are a number of new initiatives that were introduced throughout the year.

A new and highly visible safety campaign was rolled out mid-year. The deeply personal campaign featured some of life's most valuable moments alongside a tagline reminding employees to "Invest another minute," not for the Safety Department, but rather for each individual and their loved ones. The campaign, which includes two 96-foot and five 50-foot banners, can be seen from nearly every area inside the gates.

As an example of the "Invest another minute" campaign, an enhanced pretask planning card was introduced, revised for simplicity and practicality. The card is distributed to employees first thing each morning for completion before 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 the journey toward world class safety.

All incident frequency

Lost time frequency

Dear Shareholders,

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

With record financial results and a stock up 933% in 2013, it is tempting to get carried away about our performance, but we prefer to remain humble shipbuilders with resolute confidence in the value that 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-action reviews are essential for continuous improvement. In this spirit, here is a brief review of our 2013 Plan for Success as described in last year's letter.

1. Enhance our CORE

I love the quote, "trick plays make headlines, but winners execute the basics." Enhancing our CORE is about increasing long-term competitiveness through a maniacal focus on the few things that move the needle. We can report progress across a number of fronts:

Health, Safety & Environment – Lost-time incidents on a frequency basis were down 38% for all employees and subcontractors combined, reaching a level 60% below the comparable industry average. While pleased with this progress, we are not satisfied and will relentlessly pursue an injury free workplace.

People & Culture – Being committed to something larger than oneself is fundamental to organizational excellence. On that basis, we invested significant time following the layoffs in 2010 redefining "where we're going" through a new vision and "how we'll get there" with a new set of CORE values. This has paid off and I like what I see: high employee engagement, displays of personal leadership and an expanding skill base.

E330 – Improvement only occurs with specific intent. That's the notion behind our improvement program E330 ("Efficiency, 3-years, 30%"). Three areas are currently under the microscope – Project Preparation, Quality and Effective Working Hours – and we are making systematic improvements to each one with hundreds of specific actions. This demonstrates how years of backlog can provide tangible operational benefits. Down the learning curve we go.

2. Deliver on Customer Commitments

Delivering on our commitments to customers – not most of the time, but every single time – will keep customers coming back to Kitty Hawk Avenue. We proudly honored our commitments in 2013 by completing the Florida for Crowley, delivering her one day early and below our internal budget. If we can say so ourselves, it marked a successful end to the series of fourteen Veteran Class product tankers.

We also made substantial progress on two 115,000 dwt Aframax tankers currently under construction for SeaRiver, ExxonMobil's wholly-owned marine affiliate. The first of the two vessels was launched on November 9, three weeks ahead of her contract milestone date. We have since experienced challenges and seen costs rise while working toward delivery. I will not spend as much time citing weather as the Fed Chair did in front of Congress

recently, but one of Philadelphia's harshest winters on record has left its mark. We would of course like to make more money on the ships, but I am not complaining. In fact, we count our blessings every day – only fish would occupy the building dock had we not won this project. Despite the challenges, our targeted delivery remains April 30, 2014 at 10:00 am and yes, I have started counting hours…only 1,015 to go…

3. Secure the Future

We started 2013 with an order backlog of \$339 million and had the joy of tripling it to over \$1.0 billion by year-end after signing contracts for six vessels – four with the Crowley joint venture (JV) and two with Matson – extending our last firm delivery to December 2018. This is a solid platform that we will take advantage of operationally.

The four Crowley JV vessels are 50,000 dwt product tankers with a 330,000-barrel carrying capacity. From a shipbuilding perspective, they are nearly identical to the fourteen product tankers we delivered between 2007 and 2013, with the exception of extra steel weight to meet new regulations and some builder-friendly design changes (e.g., fewer panels and more standardized plates). From a shipping perspective, they are over 20% more fuel efficient. Some have said that we can "build them in our sleep." I would more modestly say that we have high confidence in delivering on our promises.

We were pleased to win the Matson contract for two 3,600 teu containerships – they will be the largest containerships ever built for the Jones Act and will allow us to regain our containershipbuilding stride with a returning customer. Compared to product tankers, they have more propulsion power, tighter tolerances and more curvature, but also require less high-spec painting and less outfitting. A key advantage is the long design time we have before production start. This allows us to work through design issues extensively before steel cutting, to support on-time equipment deliveries and high-quality work packages. Design determines most of the score in shipbuilding and we could not ask for a better start.

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

In 2013, we delivered an EBITDA of \$30.1 million, 70% higher than our previous record. AKPS's total cash position stood at \$88.8 million at year-end, with only \$5.6 million in interest-bearing debt. The higher EBITDA was generated mainly by strong performance on Hull 018 and increased progress on the SeaRiver project.

2014 PLAN TO WIN

How are we going to realize additional shareholder value from here? Tim Cook, who is currently Apple's CEO and whose father worked as a shipyard supervisor, has referenced Apple's organizational thinking by saying "we're simpletons." Borrowing that mantra, I'll answer the above question with the following three points: (1) deliver on customer commitments, (2) secure open slots as product tankers, and (3) maximize value of shipping assets.

1. Deliver on Customer Commitments

Without exactly revealing trade secrets, I can say that delivering high-quality ships, on time and on budget, is the commercial lifeblood of our organization. Offering the lowest-cost tonnage on a predictable basis also creates opportunities for AKPS to generate non-traditional, value-enhancing deals. Historically, delivering as promised has been the exception rather than the rule in the Jones Act, but this is changing and we take pride in leading the 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, procurement and planning activity for Matson throughout the year. This is higher activity levels than ever before, but our organization is ready to take on what comes its way.

2. Secure Open Slots as Product Tankers

In 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 to do based on expected returns on invested capital. Although the investment was considered on a stand-alone basis, the valueaccretive opportunity originated from AKPS being the leading builder of product tankers in the Jones Act. Many would be content with "just" building the ships, but we like to think we have a 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 expertise as technical operator and trust their long-term approach to serving customers. I sleep well at night knowing Crowley is working hard to maximize the value of our investment.

This brings me to our open slots, Hulls 025-028. We see multiple options that are attractive; varying in partner type, charter strategy and ownership percentage for AKPS. We are currently pursuing a number of opportunities, all of which retain a significant portion of shipping exposure by investing capital in a joint venture. We are working with several interested parties and expect to have an agreement in place during 2014.

3. Maximize Value of Shipping Assets

At the risk of sounding trite, I dare say that we have transformed as a company over the past 18 months and no longer resemble the company we once were. We now have a backlog exceeding \$1 billion, an organization capable of handling considerable parallel activity, a record strong financial position, and more robust access to capital markets.

As part of the transformation, we have built a sizable base of shipping assets consisting of a two-vessel profit sharing agreement, four JV vessels with Crowley and expectantly four more JV vessels with a third party (some have started to call us a shipping company with a shipyard). A key question is therefore how to maximize their long-term value? Our base assumption is to keep them "as is," ownership-wise and financing-wise, allowing our CFO to cash growing checks over the coming years to the benefit of shareholders. However, better long-term homes may exist for these assets and we intend to explore all options.

As an example of a potential value-enhancing possibility, it may be beneficial to include these assets in a Master Limited Partnership (MLP) after delivery. MLPs have received media attention lately due to their increased usage and many inherent benefits, including lower after-tax cost of capital than most corporations. The assessment is still in its early stages, but rest assured that we will consider the right alternatives in cooperation with our partners to maximize the value of our shipping assets.

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Dividend payments will restart in 2014, picking up where we left off six years ago. Our commitment is to pay \$0.25 per share per quarter starting in Q2 2014, and we're expecting to grow payouts over time. AKPS's long-term dividend target will be set when both the investment amount for Hulls 025-028 is clarified and funding plans are finalized. We currently have an attractive commitment through the PIDC Welcome Fund loan program for a five-year term-loan with a fixed 2.75% interest rate that will be used to fund a portion of the Crowley JV investment. We have the possibility to leverage further, but we will consider the cost of capital, risk and flexibility, while taking into consideration such factors as our anticipated investment needs, operational profile and targeted shareholder distributions, when determining AKPS's optimal capital structure.

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The current boom in Jones Act shipping will inevitably normalize, but strong tailwinds continue to blow without signs of easing anytime soon. We have believed in this market since engaging in two "spec" product tankers in 2011 (when many thought we were crazy), and we continue to believe in the fundamentals of the market. The increasing production of U.S. shale oil is a gamechanger and to the extent it continues without radical land-based infrastructure 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 a flexible, cost-efficient and environmentally-friendly way of moving crude, which is why tankers will be an essential mode of transportation for decades to come. Furthermore, ship technology continues to progress, increasing fuel efficiency and further improving the relative economics of moving oil by ships.

Crude export policy is a wild-card that has received increased media attention lately. Predicting what will happen is not easy given the political nature of the issue, but few expect an overnight shift in policy. Foreigners often question why the United States maintains regulations from the 1970's limiting crude exports, but they sometimes underestimate this country's determination to do what it thinks is right for its consumers, despite criticism of undermining policies of free trade (the Jones Act is another example, which remains steadfast). Although many oil companies are lobbying hard for change, it seems the public is concerned about the potential negative effects of exporting U.S. oil on gas prices, domestic jobs, and national energy security. The debate continues, but we are not holding our breath.

Independent of national crude export policy, it is only reasonable to expect time-charter rates to normalize in the future. I do not have a specific prediction to offer (it would be wrong), but we are

"There are many stakeholders who have been instrumental in the transformation – first and foremost the men and women of AKPS with their 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 assumed reasonable rates in the medium term in our own analysis. If today's levels continue, then that is only a positive variance.

SURVIVING TO THRIVING

AKPS has gone from merely "surviving" in 2011, when many considered us down for the count, to having a robust platform for "thriving," where we are playing a meaningful role in the revitalization of the country's energy infrastructure. There are many stakeholders who have been instrumental in the transformation – first and foremost the men and women of AKPS with their passion for building high-quality ships, but also our customers, 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, the time feels right to move on from Philadelphia as the company embarks on a new era and I look to other roles within the Aker Group. I have savored every moment of the three-year journey – pouring all my energy into the CEO role while earning an MBA on the side and, of course, enjoying Philadelphia. On April 9, I expect to become Executive Chairman of the Board and Steinar Nerbovik to become Managing Director. Steinar has been the SVP Operations over the past year and is the right person for AKPS – he has strong personal values, and the skills, experience and leadership to elevate the company to new heights and realize the full "thriving" potential of the organization. I intend to be full-time in Philadelphia out the year and upon my departure, I will revert to Chairman with customary responsibilities. In the meantime, I have slots to sell and Steinar has ships to deliver.

There are many things I could have done better, but overall, I feel good about my contributions to the company. I am frequently asked about the stock price that is up over 4,000% since I became CEO and why I do not own shares myself. The plan at the outset was for me to buy 10% of the company, but this was cancelled out of related-party concerns and a potential triggering of a mandatory offer for all outstanding shares, given my relationship to Aker's principal shareholder. I likely could have handled the issue with a bit of effort, but I was 100% focused on doing the best possible job as CEO, not building a large personal bank account. The personal gain would have been approximately \$30 million.

I have not lost a second of sleep over the \$30 million – as Paul McCartney of The Beatles said, "material possessions are all very well, but they won't buy me what I really want." Seeing businesses win and creating long-term value for owners, in addition to being a responsible custodian of the "shareholder's wallet," is what gives me a kick. You have my word that I will (a) focus on long-term value creation, (b) communicate reliably and transparently, (c) treat all owners fairly, and (d) allocate capital in a shareholder friendly manner. Shareholders are the ones who should be wheeling out barrels of cash, not CEOs. But do not get any ideas…I would still like a salary.

In closing, I would like to express my appreciation for all who have contributed to making AKPS such a great company, with an exciting future. Jim Miller, who is passing the Chairman baton to me, deserves a special thanks – he has provided leadership over many years and has served as a mentor for me personally, for which I am grateful. AKPS would not be the company it is today without his personal engagement through thick and thin. Thank you.

This shipyard has been tested over its lifetime, but from those challenges has emerged a workforce that knows the value of persistence, believes failure is not an option, and is thus better equipped to face any issues head-on. We have proven this time and again, and that is what makes AKPS unlike any other shipyard.

We are in the middle of an energy revolution and it is exhilarating to play a role in the development of a viable national transportation network. I appreciate the support and look forward to giving my all for shareholders in a new role.

Kristian Rokke President and CEO Philadelphia, March 19, 2014

Board of Directors' report 2013

Aker Philadelphia Shipyard ASA and its subsidiaries (referred to herein as "AKPS" or the "Company") is a leading shipbuilder in the U.S. Jones Act market.

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

In August 2013, APSI signed shipbuilding contracts with Crowley for the construction of four 50,000 dwt product tankers with deliveries in 2015 and 2016 (Hulls 021-024). These vessels will be part of a joint venture between 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 two 3,600 teu containerships with deliveries in 2018 (Hulls 029 and 030). These vessels will be the largest containerships ever built for the Jones Act market and will be utilized in Matson's service from the U.S. West Coast to Hawaii.

As of 31 December 2013, the project to construct two aframax tankers (Hulls 019 and 020) for SeaRiver Maritime, 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 Alaskan North 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 of USD 138.0 million from 2012, and earnings before interest, taxes, depreciation, and amortization (EBITDA) of USD 30.1 million, compared to EBITDA of USD 17.9 million in 2012. The increase in revenues and EBITDA is driven by increased production activities on the SeaRiver project.

Converto Capital Fund AS, an investment fund controlled by Aker ASA, is the majority shareholder in Aker Philadelphia Shipyard ASA.

Activities

The main entities in the Aker Philadelphia Shipyard ASA Group are the Norwegian holding company, AKPS, and the U.S. operating subsidiary, APSI, a leading U.S. commercial shipyard. AKPS is located in Oslo, Norway, while APSI is located in Philadelphia, Pennsylvania, USA.

As of 31 December 2013, APSI's workforce consisted of 1,130 people, with a breakdown of 581 direct employees and 549 subcontracted personnel.

AKPS's business strategy for APSI is to build merchant vessels for operation in the U.S. Jones Act market and to opportunistically participate in the economics of those vessels in operation. The Company is currently building the two aframax vessels for SeaRiver and has profit sharing agreements in place for two product tankers (Hulls 017 and 018) with Crowley and a joint venture for the operation and chartering of four additional product tankers (Hulls 021-024) also with Crowley. Construction started on Hull 021 in January 2014.

Cost efficient and cost competitive construction of new vessels is critical for the success of AKPS's business model. There are several factors that position AKPS to capitalize on this market: a stateof-the-art shipyard with modern equipment; strong order backlog exceeding USD 1 billion with delivery dates through 2018; access to global shipbuilding and design expertise with Hyundai Mipo Dockyard, Samsung Heavy Industries and KOMAC; and a solid track record as evidenced by the delivery of four container vessels to Matson, twelve product tankers to American Shipping Company ASA ("AMSC") and Overseas Shipholding Group, Inc. ("OSG") and two product tankers to Crowley.

The Jones Act market

The U.S. Jones Act generally restricts the marine transportation of cargo and passengers between points in the United States to vessels built in the United States, registered under the U.S. flag, manned by predominately U.S. crews, and 75% owned and controlled by U.S. citizens. The ability of the Company to win contracts is in part dependent on its unique ability to construct vessels that are eligible for U.S. Jones Act trades, and the Jones Act requirement for

construction of the vessels in the United States limits competition for future contracts.

The Master Agreement, Shipyard Lease and Authorization Agreement with PSDC

APSI currently operates its shipyard under a 99-year lease with PSDC, a governmentsponsored non-profit corporation. A Master Agreement, a Shipyard Lease and an Authorization Agreement govern APSI's relationship with PSDC and the various governmental parties that have contributed to the establishment of the Shipyard.

Under the Master Agreement, the governmental parties have provided approximately USD 438 million for the renovation and modernization of the facility and training of the workforce. APSI was required to make certain qualified infrastructure investments totaling USD 135 million, which have been fully satisfied. APSI was also required to match government funding for certain training costs totaling USD 50 million, which has been fulfilled.

Under the Shipyard Lease, PSDC has the right to recapture the Shipyard if APSI fails to maintain 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-process projects and a one-time, limited cure right which allows APSI to restore the lease to a 5-year term under certain circumstances. With the current business plan, the Company considers it unlikely that this termination event will be triggered as long as there is ongoing shipbuilding activity at the Shipyard.

Pursuant to the Authorization Agreement, PSDC purchased certain shipyard assets from APSI for a purchase price of USD 42 million, payable in two equal tranches, with funds provided by the Commonwealth of Pennsylvania. APSI is leasing back those same assets from PSDC subject to the terms of the Shipyard Lease and the Authorization Agreement. APSI used the sale proceeds, in combination with construction period financing with private lenders and its own available funds, to construct Hulls 017 and 018. Upon the delivery of Hull 018 to Crowley in January 2013, the Authorization Agreement (excluding the lease of shipyard assets described above) was terminated.

Strategy

AKPS will, through its unique partnerships and experience obtained during construction of the series of product tankers, strive to be the most efficient shipyard in the U.S. Jones Act market for production of merchant vessels. AKPS intends to leverage its significant backlog and visibility into 2018 to drive improvement in all aspects of its business. AKPS will continue to monitor and evaluate how to derive the maximum benefit from its competitive advantage and market share and invest in the vessels it constructs when it creates additional value. If production capacity is available, APSI will also pursue fabrication opportunities outside of traditional shipbuilding where its core competencies in steel fabrication, heavy lifting, and project management are advantageous.

Key events 2013

On 30 January 2013, APSI delivered Hull 018, the Florida, to Crowley. Compensation for this vessel was in the form of a fixed purchase price of USD 90 million and a variable component based on the vessel's financial performance over the life of the vessel. This delivery completed the series of fourteen product tankers that APSI began in 2005. In conjunction with the sale and delivery of Hull 018 to Crowley, APSI's USD 80 million construction loan from Caterpillar Financial Services was terminated and APSI's USD 30 million construction loan from Aker ASA was repaid. In addition, because Hulls 017 and 018 were completed before their agreed-upon deadlines, APSI

was discharged of its contingent obligation under the Authorization Agreement to pay liquidated damages to PSDC of up to USD 70 million.

On 8 August 2013, APSI signed shipbuilding contracts with Crowley for the construction of four 50,000 dwt product tankers (Hulls 021-024) with a total contract value of approximately USD 490 million. These vessels will be part of a joint venture between Crowley, APSI and certain of their affiliates for the operation and chartering of product tankers. Definitive documentation for the joint venture was signed on 6 November 2013. After the vessels are delivered, Crowley and APSI will share in the economics of the operation and chartering of the vessels throughout their useful lives. APSI expects to hold an investment of approximately USD 115 million in the APSI-Crowley partnership after delivery of the fourth vessel.

On 6 November 2013, APSI signed shipbuilding contracts with Matson for two 3,600 teu containerships with deliveries in 2018 (Hull 029 and 030) and a total value of USD 418 million. These vessels will be the largest containerships ever built for the Jones Act market and will be utilized in Matson's service from the U.S. West Coast to Hawaii.

During Q4 2013, APSI signed commitment letters with Caterpillar Financial Services for a loan facility of USD 120 million for the construction of Hulls 021-024 and PIDC Regional Center for a secured term loan of up to USD 60 million. The company expects to sign definitive documentation for these two commitments in Q1 2014.

As of 31 December 2013, the project to construct two aframax tankers (Hulls 019 and 020) for SeaRiver was approximately 71% complete. Both vessels are scheduled for delivery in 2014. These tankers are intended to be used to transport Alaskan North Slope crude oil from Prince William Sound, Alaska to the U.S. West Coast.

Review of the annual accounts

AKPS prepares and presents its accounts according to International Financial Reporting Standards (IFRS) as adopted by the European Union.

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

In accordance with IFRS, AKPS is recognizing the two aframax tanker order for SeaRiver as one single project. As such, revenue and expense for these tankers have been recognized on a total project basis. As of 31 December 2013, AKPS was approximately 71% complete with the project.

Order backlog

APSI's order backlog was USD 1,017.7 million, including customerprovided materials of approximately USD 11.9 million, as of 31 December 2013. At the end of the year, the order backlog was comprised of remaining work to be performed on the two aframax tankers to be built for SeaRiver, four product tankers for delivery to Crowley and two container vessels to be built for Matson. The net backlog increase of USD 679.0 million from 2012 is due to the firm contracts entered into with Crowley and Matson which were partially offset by continued progress made on the SeaRiver project.

Profit and loss accounts

In 2013, AKPS had revenues of USD 279.0 million compared to USD 141.0 million in 2012. Revenues are typically recognized according to the percentage of completion method when firm contracts are in place, based primarily on the scope of completed work compared to estimated overall project scope. The recognized revenues in 2013 primarily represent revenues related to the sale of Hull 018 to Crowley in Q1 and progress on the aframax tankers being built for SeaRiver. The recognized revenues in 2012 primarily relate to the sale of Hull 017 to Crowley and progress on the aframax tankers being built for SeaRiver.

AKPS's operating profit before interest, taxes, depreciation, and amortization (EBITDA) was USD 30.1 million in 2013 compared to USD 17.9 million in 2012. These figures correspond to EBITDA margins of 10.8% and 12.7%, respectively.

Depreciation and amortization expense was USD 6.9 million in 2013 and USD 1.8 million in 2012. The increase in 2013 depreciation expense is due to a large portion of 2012 depreciation expense being capitalized into work-in-process for the vessels being built for AKPS's own account. AKPS's operating profit before interest and taxes (EBIT) was USD 23.2 million in 2013, compared to EBIT of USD 16.1 million in 2012.

Net financial items were positive USD 0.2 million in 2013, compared to negative USD 0.3 million in 2012. Net financial items in 2013 were primarily driven by higher interest income on cash balances, interest income on the profit share receivable from Hulls 017 and 018 and lower net interest expense as compared to 2012.

Income tax expense for 2013 was USD 7.8 million, compared to income tax expense of USD 6.3 million in 2012.

In 2013, AKPS's net income was USD 15.6 million and its basic and diluted earnings per share was USD 1.53. The corresponding figures for 2012 were net income of USD 9.5 million and basic and diluted earnings per share of USD 0.93.

The increase in revenues, EBITDA and net income year over year was driven by significantly more shipbuilding progress on the SeaRiver aframax vessels in 2013. The Company sold and delivered Hulls 017 and 018 to Crowley in August 2012 and January 2013, respectively, at substantially the same revenue and profit.

AKPS's research and development is primarily related to two areas. The most important area is the development of APSI's building methodology and working methods to ensure that APSI takes maximum benefit of the learning curve and produces each grand block and each vessel more efficiently than the previous. There is also work related to the development of new vessels, but APSI will not develop its own designs for other vessel types, but rather identify and license existing best in class designs and cooperate with the owners of such designs to make such modifications as are necessary for its customers.

Cash flow

The Company's cash flow from operations is very dynamic, as it in part depends on payment for construction and delivery settlement for the vessels sold to external customers. Total net cash flow from operating activities in 2013 was USD 49.2 million compared to total net cash flow from operating activities of USD 61.9 million in 2012. As noted previously, the significant changes year-to-year are caused by the timing of ship deliveries and the level of completion on vessels.

Net cash flow used in investment activities was USD 4.9 million in 2013 and USD 9.8 million in 2012. These expenditures were primarily for infrastructure improvements and equipment replacements.

Net cash flow used in financing activities was USD 33.8 million in 2013 and USD 12.7 million in 2012. The changes are caused primarily by the repayment of the USD 30.0 million construction loan from Aker ASA (referred to herein as the "Aker ASA loan") in 2013 and repayment of the USD 20.0 million loan by PIDC Regional Center, LP XV through the Welcome Fund loan program (referred to herein as the "Welcome Fund loan") in 2012.

Statement of financial position and liquidity

As of 31 December 2013, AKPS had cash and cash equivalents of USD 68.8 million. The corresponding figure for 2012 was USD 58.3 million. The increase was primarily driven by the sale and delivery of Hull 018 to Crowley in January 2013 and milestone payments made by SeaRiver in accordance with the shipbuilding contracts for Hulls 019 and 020. At year-end 2013, AKPS's net working capital was USD 48.6 million, compared to USD 27.0 million at 31 December 2012.

Current assets as of 31 December 2013 are mainly comprised of cash and cash equivalents of USD 68.8 million and prepayments and other receivables of USD 35.3 while current assets as of 31 December 2012 were mainly comprised of cash and cash equivalents of USD 58.3 million, work-in-process of USD 67.7 million and prepayments and other receivables of USD 20.5 million. The decrease in current assets is primarily due to the change in work-in-process which occurred in conjunction with the sale and delivery of Hull 018 to Crowley in Q1 2013. Non-current assets as of 31 December 2013 of USD 83.2 million are property, plant and equipment, restricted cash, deferred tax assets and other non-current assets. As of 31 December 2012 noncurrent assets totaled USD 83.8 million and consisted of property, plant and equipment, restricted cash, deferred tax assets and other non-current assets.

Current liabilities as of 31 December 2013 of USD 55.5 million are mostly related to trade payables, accrued liabilities, customer advances, net and current provisions (warranties). The corresponding figure for 2012 was USD 119.5 million. The decrease is primarily driven by a decrease in customer advances, net and a decrease in interest bearing short-term debt which was due to repayment of the Aker ASA loan. Interest-bearing debt decreased to USD 5.6 million at 31 December 2013 compared to USD 39.4 million as of 31 December 2012. This decrease was attributable to the repayment of the Aker ASA loan and continued amortization on the other loans.

At year-end 2013, total equity was USD 113.9 million and the equity ratio was 61% of total assets. Corresponding figures for 2012 were USD 98.4 million and 43% respectively. The increase in equity was caused by the current year's profit.

The Board deems that the Company as of 31 December 2013 is financially sound and has an appropriate financing structure. The Company's financial position was further strengthened after year-end with a successful private placement.

Risks Market risks

The overall market risk is related to the Jones Act. Interest groups have lobbied the U.S. Congress in the past to repeal or modify the Jones Act, but market experts believe that significant changes to the legislation are unlikely. Repeal of or significant changes to the Jones Act could, among other things, increase competition from foreign (non-U.S.) shipbuilders with lower costs or require increased use of higher priced domestic content, and as a result reduce the demand for U.S. built vessels. In order to address this risk, the Company has continuous engagement with local, state and federal government officials.

AKPS is also exposed to market risk related to imbalance between supply and demand for vessels in the Jones Act market, which may result in a reduction of vessel prices and/or delay in new projects. AKPS faces risks, including early termination of its facility lease at the end of its current backlog, if it is unable to secure new orders and/or financing for Hulls 025-028, which are planned to be built as product tankers, or projects beyond the Matson project (i.e., Hulls 029 and 030).

Operational risks

AKPS faces risks related to construction of vessels. The Shipyard's ability to meet budgets and schedules may be adversely affected by many factors, including changes in productivity, shortages of materials, equipment and labor and changes in the availability and pricing of key vendors for design and procurement. The Shipyard's operations also depend on stable supplier networks. The Company furthermore faces risks related to the construction of new classes of vessels, as the adaption to new classes may be challenging due to the strict and sometimes unfamiliar requirements of such vessels. These challenges sometimes tend to impact quality, timely delivery and cost efficiencies. In order to address these risks, the Company has entered into contracts with design and procurement partners for the SeaRiver project (i.e., Hulls 019 and 020) and the Crowley project (i.e., Hulls 021- 024). The Company has also entered into a contract with a design and engineering consultant for the Matson project (i.e., Hulls 029 and 030).

The Company depends on unionized labor for construction of vessels. Work stoppages or other labor disturbances could have a material adverse effect on the Company's business, results of operations and financial condition. In order to mitigate this risk, the Company and Unions have signed a collective bargaining agreement, which is effective until February 2015. The collective bargaining agreement includes a no-strike clause.

The Company further depends upon a 99-year lease agreement for the shipyard facility and the future operations of the yard will accordingly be dependent upon the Company fulfilling its obligations under this

lease agreement. For more details regarding this lease, see "The Master Agreement, Shipyard Lease and Authorization Agreement with PSDC" on pages 12-13.

The Company's operations are subject to the usual hazards inherent in shipbuilding, such as the risk of equipment failure and work accidents. These hazards can cause personal injury and loss of life, business interruption, property and equipment damage, pollution and environmental damage. The Company continues to implement its Health, Safety and Environment (HSE) management system and provide training to its workforce to mitigate these risks. The Company's policy of covering these risks through contractual limitations of liability and indemnities and through insurance may not always be effective, and customers and subcontractors may not have adequate financial resources to meet their indemnity obligations to the Company.

The Company's operations are subject to numerous national, international, state and local environmental, health and safety laws, regulations, treaties and conventions, including, inter alia, those controlling the permitted and unpermitted discharge of

materials into the environment, requiring removal and cleanup of environmental contamination, establishing certification, licensing, health and safety, labor and training standards, or otherwise relating to the protection of human health and the environment. Sanctions for failure to company with these requirements, which may be applied retroactively, may include: administrative, civil and criminal liabilities, revocation of permits to conduct business and corrective action orders, including orders to investigate and clean up contamination.

After Hulls 021-024 are delivered and in service, the Company will be exposed to additional risks due to its continued ownership interests in the companies that will own, charter and operate the vessels under the Crowley joint venture. These risks include, but are not limited to, fluctuations in the market value of the vessels, damage or loss of the vessels, inadequacy of insurance to cover such damages and losses, reductions in charter revenue, non-compliance with environmental laws and regulations, unexpected drydock costs, increases in operating costs and capital expenses as the

vessels age, and repeal or significant changes to the Jones Act. By partnering with Crowley, a first class operator, AKPS has sought to mitigate these risks.

Financial risks

AKPS's activities expose it to a variety of financial risks: market risk (including commodity pricing risk, currency risk, and price risk), credit risk, and cash flow interest-rate risk. AKPS's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on AKPS's financial performance. AKPS uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out under policies and protocols approved by the Board of Directors. The Board of Directors provides principles for overall financial risk management as well as policies covering specific areas such as foreign exchange risk, interest-rate risk, credit risk, use of derivative financial instruments and nonderivative financial instruments.

The Company is exposed to changes in prices of steel and other materials. The Company attempts to mitigate its exposure with respect to steel and other material price escalation. SeaRiver bears the risk of steel and other material price escalation on Hulls 019 and 020. APSI and Crowley share the risk of steel price escalation on Hulls 021-024 through the joint venture structure. Matson bears the risk of steel price escalation on Hulls 029 and 030.

The Company is subject to exchange rate risk. There is minimal foreign exchange exposure for Hulls 019 and 020. In order to mitigate exposure to exchange rate risk for other vessels, the Company has begun securing foreign exchange forward contracts for Hulls 021-024 and the Company will continue to follow its foreign exchange policy with respect to Hulls 029-030.

AKPS operates in business areas that are capital intensive. The Company is dependent upon having access to construction financing facilities and other loans and debt facilities to the extent its own cash flow from operations and milestone payments from customers are insufficient to fund its operations and capital expenditures. In turn, AKPS must secure and maintain sufficient equity capital to support construction financing facilities.

AKPS regularly monitors the financial health of its construction financing lenders as well as the financial health of the financial institutions which it uses for cash management services and in which it makes deposits and other investments.

Through construction financing, the Company is exposed to fluctuations in interest rates. There is no construction financing for the SeaRiver project (i.e., Hulls 019 and 020) or the Matson project (i.e., Hulls 029 and 030), as these contracts will be fully funded by customer milestone payments.

The credit risk of ship owners and lessors is evaluated upon contract signing. Typically, ship owners have financing approvals in place before contracts are entered into. At the completion of a vessel, transfer of ownership takes place upon settlement. Should a ship owner fail to pay, the Company may attempt to dispose of the vessel in the open-market to recover AKPS's construction costs.

The Company accrues an estimate for future warranty claims on its outstanding projects. Thus far the claims have been in line with the reserve amounts. In order to mitigate the risk of warranty claims exceeding warranty provisions, the Company has secured back-to-back warranties for most major components on the vessels.

The Company accepted a profit sharing component as part of the compensation for the sale of Hulls 017 and 018 to Crowley in August 2012 and January 2013, respectively. Profit sharing is to occur based on the performance of each vessel over its life and could be less than projected. In order to monitor this risk, the Company built in certain third party reporting to validate profit sharing calculations as well as active review of projections and actual costs. Additionally, there is no sharing in losses going forward if the vessels do not perform.

The Company is exposed to risks related to the take-out financing upon delivery of Hulls 021-024. The actual amount of APSI's investment in the joint venture with Crowley will depend in part on the net amount of this take-out financing. In addition, APSI cannot draw under its construction loan facility for Hulls 021-024 until this take-out financing is obtained. As part of the joint venture efforts, APSI and Crowley are currently working together to secure this financing on favorable terms.

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 issue price of NOK 165 per share. The private placement was approved at an extraordinary general meeting on 7 February 2014 and trading of the new shares commenced on 10 February 2014. The Board intends to carry out a subsequent offering in order to offer shares to existing shareholders that did not participate in the private placement in March 2014.

The Company announced on 20 January 2014 that the commitment it had received from a group of private lenders for a secured term loan of 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 the expiration of this commitment.

On 24 February 2014, APSI prepaid in full the remaining balance of approximately USD 4.0 million under its loans by the Pennsylvania Industrial Development Authority (PIDA) and PIDC Local Development Corporation (PIDC), without premium or penalty, and the mortgages and all other liens securing such loans were released.

The going concern assumption

In view of AKPS's current financial position and backlog, the Board confirms that the 2013 annual accounts have been prepared based on the assumption of a going concern.

Parent company accounts and allocation of income for the year

The income/(loss) account of Aker Philadelphia Shipyard ASA shows income for the year 2013 of USD 2.0 million. The Board of

Directors proposes that the income for the year 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 parent company has approximately USD 68 million of equity which could be distributed to shareholders by the Board in accordance with the Company's dividend policy. Based on the equity level of the parent company, the Board intends to begin paying dividends during Q2 2014.

The parent company's only assets are cash, the investment in subsidiary (APSI), and the profit sharing interests in Hulls 017 and 018. See note 9 of the parent company accounts for details regarding the profit sharing interests.

Corporate social responsibility

Maintaining a healthy and safe workplace and being friendly to the environment is an important part of AKPS's strategy. AKPS develops policies to comply with or exceed all federal, state and local requirements. All of the Company's employees are located in Philadelphia, Pennsylvania in the United States of America. Compliance with environmental regulations is assured by establishing operating procedures for best management practices and is executed through management and supervision. The Company believes that being a good corporate citizen is good business. The Company organizes a toy collection drive and a food donation event each year in addition to targeted contributions to various charitable organizations.

AKPS seeks to be an attractive employer and maintains a human relations policy that is open and fair. AKPS is committed to providing equal employment opportunity to all employees and applicants 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 protected status. Diversity strengthens AKPS's overall capacity and skills. In support of this diversity, APSI currently maintains an approximately 33% minority workforce.

The maritime industry has traditionally been male-dominated. The entire industry faces the challenge of increasing the proportion of female employees. The Company has taken some affirmative steps to address this challenge. For example, the Company encourages female applicants and has seen increased interest among potential female employees to pursue a career with the Company. To further this goal, the Company participates in available government programs that encourage women in manufacturing and has recruited at schools and training programs with more women. The Company has also continued to train supervisors, managers and employees in our Equal Employment Opportunity (EEO) Policy.

At year-end 2013, 4% of the workforce was women. While there were no women in AKPS senior management, women held key positions such as Project Cost Controller, Payroll/Benefits Supervisor and PR/Communications Specialist. In addition, two of the five members of the Board of Directors are women.

The Company is committed to maintaining a work environment that is free of discrimination, harassment and hostilities. In keeping with this commitment, AKPS maintains a strict Harassment Free Environment Policy and does not tolerate unlawful harassment of employees by anyone.

AKPS believes all people share the same fundamental human rights. The Company follows legal and responsible sourcing practices and expects its suppliers to uphold the same standards. In 2013, the Company did not have a formal policy regarding human rights as its sole operating company is located in the United States, which has extensive human rights laws in place. The Company monitors its supply chain for potential human rights issues through periodic site visits.

At the operating subsidiary in Philadelphia, worker's rights are protected by federal, state, and local laws. In addition, approximately three quarters of the company's employees are members of the Philadelphia Metal Trades Council ("PMTC") union and are covered under the collective bargaining agreement between the PMTC and the Company. This agreement is effective until January 2015.

Under this collective bargaining agreement, union employees are granted vacation and personal time, and the shipyard is shut down during the week of Fourth of July holiday and in between Christmas and New Year's holidays. In addition, union employees may take up to 10 unpaid days within a 24 month period. Traditional sick days are not part of the collective bargaining agreement. Non-union employees accrue sick time on a monthly basis and may maintain a balance of up to 200 hours. During 2013, approximately 170 non-union employees used 4,085 hours of sick time, representing 1% of total non-union work hours. Comparably, in 2012, 153 non-union employees used 3,248 hours of sick time, also representing approximately 1% of the total non-union work hours.

At AKPS, HSE responsibility is not just a priority but is a core value and influences all decisions and actions. The Union-Management Safety and Environmental Board reviews the various HSE programs, and makes recommendations on policies and procedures. The HSE system includes safety training of employees and subcontractors, safety inspections, industrial health and wellness programs, drug testing, emergency response and environmental programs. The Company expects to implement new initiatives to continuously improve its HSE mindset during 2014.

In 2013, the frequency of lost-time incidents (incidents resulting in absence from 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 of 2,343,632 hours worked by AKPS employees and subcontractors in 2013, compared with 1,840,341 hours worked by AKPS employees and subcontractors in 2012. AKPS had 11 lost time incidents in 2013. The most serious incident to occur during 2013 involved a limb being caught in a pinch point. The most common injuries were bruises and contusions followed by sprains and strains and eye injuries. AKPS continues to work proactively to further improve safety and reduce the number of incidents at the Shipyard. For example, in 2013 APSI introduced a new pre-task planning tool, backed by a new HSE campaign, titled "Invest another minute," which aimed to make safety personal by encouraging employees to invest the time needed to protect their futures and loved ones. With these initiatives and additional training opportunities, the Company continues to believe that improvements will be made.

In 2014, the Shipyard will continue to improve its in-house systems and procedures for exchanging knowledge gained from past accidents and potentially hazardous events. The Company is also working with outside parties to obtain and implement best practices to develop a zero incident culture.

AKPS takes its environmental responsibilities seriously beginning with the vessel design. The Company uses the latest IMO requirements as guidance for environmental protection and efficiency during the design and production process. The industrial nature of the Company's activities requires the use of significant amounts of energy, both electrical and gas, as well as the release of particulate and VOC emissions. During 2013 the Company used approximately 26.5 MW of electricity and approximately 388,400 ccf of natural gas. Its VOC emissions were 62.5 tons for the reporting period ending in 2013. The Company had no reported discharges into

the surrounding waterways. AKPS aims to comply with or exceed applicable environmental laws, rules, and regulations. Environmental status reporting is an integral part of the Company's reporting system, on par with reporting on financial matters and operations. This commitment extends to evaluating and adopting environmentally beneficial improvements in production processes, alternative materials, and services. AKPS promotes open communication on environmental issues with employees, neighbors, public authorities, and other interested parties and has implemented a system through which employees can make observations and suggestions about AKPS's environmental performance.

In 2013, APSI generated approximately 1,300 tons of waste and recycled approximately 2,100 tons of steel. APSI has expanded its program to gather and sort waste to promote environmentally responsible handling, disposal, and recovery of any residual value and during 2013 instituted a program to environmentally dispose of aerosol cans.

A basic principle of ethical business conduct requires that each employee of the Company support positively, both on and off the job, the Company's business activities. One important way we satisfy this responsibility is to ensure that our business dealings are never influenced by – or even appear to be influenced by – our own personal interests. The Company has zero tolerance for corruption and maintains a strict Conflict of Interests policy, which is reflected in its employee handbook, as well as its Terms and Conditions to outside suppliers.

In support of the above initiatives and policies, AKPS maintains a formal policy for the disclosure of wrongful conduct and protection from retaliation (the Company's "Whistleblower Policy"). This policy is available to all employees and is administered by the Vice President of Human Resources. In 2013, there were no cases reported. In 2014, the Company will make efforts to revisit the policy and reintroduce it to employees, as well as simplify the process to anonymously report violations.

Organization

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

Corporate governance

AKPS's corporate governance policy exists to ensure an appropriate division of roles among the Company's owners, Board of Directors and Executive Management. Such a separation of roles ensures that goals and strategies are prepared, that adopted corporate strategies are implemented, and that the results achieved are subject to verification and follow-up. Applying these principles also contributes to satisfactory group-wide monitoring and verification of activities. An appropriate division of responsibilities and satisfactory controls will contribute to the greatest possible value creation over time, to the benefit of shareholders and other interest groups. AKPS's Board of Directors adopted its corporate governance guidelines in 2008. AKPS's corporate governance guidelines are presented in greater detail on pages 52-55 of this annual report.

Outlook

Aker Philadelphia Shipyard has built a strong foundation for its future through both its reputation for delivery on its promises and the efficient and innovative organization that has been developed. The Company's large backlog provides an excellent platform for operational improvement and a formal improvement program, E330, has been introduced to the organization. The Company's shipping assets, consisting of the existing profit sharing interests in Hulls 017 and 018 and the future economic interests in the Crowley joint venture for Hulls 021-024, provide a mechanism for AKPS to receive returns on the ownership, chartering and operation of the vessels it builds, in addition to returns on traditional shipbuilding activities. These shipping assets will be managed with an opportunistic ownership strategy to maximize their value.

The contracts with SeaRiver for Hulls 019 and 020 and Crowley for Hulls 021-024 secure AKPS's backlog through Q2 2016. The containerships under contract with Matson (Hulls 029 and 030) are scheduled for delivery in 2018. The Company's order backlog for these three projects exceeds USD 1 billion at 31 December 2013. All financing required for the Company's firm backlog has been arranged.

Key focus areas for 2014 will be the successful completion of the SeaRiver aframax program and the efficient start to the new series of product tankers. The Company expects to build Hulls 025-028 as product tankers with deliveries in 2016 and 2017. AKPS remains confident in the product tanker market and is currently working with several interested parties to enter into definitive shipbuilding contracts for the four product tankers and agreements for joint ownership in the vessels. In addition, AKPS continues to pursue prospects for new construction projects in all areas of the Jones Act market but specifically looks to expand on its experience in tankers and containerships.

AKPS remains committed to providing the Jones Act market with the most cost efficient and environmentally friendly merchant vessels possible and believes that it will be the supplier of choice when vessels are ordered.

Board Chairman

Oslo, Norway 26 February 2014 Board of Directors Aker Philadelphia Shipyard ASA

James H. Miller Amy Humphreys Elin Karfjell

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

Directors' responsibility statement

Today, the Board of Directors and the Chief Executive Officer reviewed and approved the Board of Directors' report and the consolidated and separate annual financial statements for Aker Philadelphia Shipyard ASA, as of and for the year ending 31 December 2013 (annual report 2013).

The Aker Philadelphia Shipyard ASA consolidated financial statements have been prepared in accordance with IFRS, as adopted by the European Union, and additional disclosure requirements in the Norwegian Accounting Act, and that should be used as of 31 December 2013. The separate financial statements for Aker Philadelphia Shipyard ASA have been prepared in accordance with the Norwegian Accounting Act and Norwegian Accounting Standards as of 31 December 2013. The Board of Directors' report for AKPS and the parent company is in accordance with the requirements in the Norwegian Accounting Act and Norwegian accounting standard no. 16, as of 31 December 2013.

To the best of our knowledge:

• The consolidated and separate annual financial statements for 2013 have been prepared in accordance with applicable accounting standards

Oslo, Norway 26 February 2014 Board of Directors Aker Philadelphia Shipyard ASA

James H. Miller Amy Humphreys Elin Karfjell

• • The consolidated and separate annual financial statements give a true and fair view of the assets, liabilities, financial position and profit as a whole as of 31 December 2013 for AKPS and the parent company
• • The Board of Directors' report for AKPS and the parent company includes a true and fair review of:
• The development and performance of the business and the position of AKPS and the parent company
• The principal risks and uncertainties AKPS and the parent company face

Board Chairman

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

Aker Philadelphia Shipyard ASA Consolidated Income Statement

Amounts in USD thousands (except shares and per share amounts)	Note	2013	2012
Operating revenues		279 025	141 040
Cost 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	17 874
Depreciation	6	(6 919)	(1 813)
Operating income		23 196	16 061
Financial income	4	1 084	981
Financial expenses	4	(871)	(1 303)
Income before tax		23 409	15 739
Income tax expense	5	(7 814)	(6 263)
Net income for the year *		15 595	9 476
Average number of shares	12	10 165 305	10 165 305
Basic earnings per share (USD)	12	1.53	0.93
Diluted earnings per share (USD)	12	1.53	0.93

Aker Philadelphia Shipyard ASA

Consolidated Statement of Comprehensive Income

Amounts in USD thousands	2013	2012
Net income for the year	15 595	9 476
Other 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.

Consolidated Statement of Financial Position as of 31 December

Amounts in USD thousands	Note	2013	2012
ASSETS
Property, plant and equipment	6	54 824 20 003	56 986
Restricted cash	11		20 001
Deferred tax assets	5	2 976 5 380	3 553
Other non-current assets Total non-current assets	7	83 183	3 300 83 840
Work-in-process	8	-	67 718
Prepayments and other receivables	9	32 051	19 294
Income tax receivable		3 287	1 154
Cash and cash equivalents	10	68 775	58 333
Total current assets		104 113	146 499
Total assets		187 296	230 339
EQUITY AND LIABILITIES Paid in capital Other equity	13	70 995 42 950	70 995 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	5 565
Other long-term liabilities	15	7 030	5 980
Deferred tax liabilities	5	7 896	902
Total non-current liabilities		17 796	12 447
Interest-bearing short-term debt	14, 16	2 695	33 839
Trade payables and accrued liabilities	19	18 293	22 809
Customer advances, net	8	33 821	60 057
Other 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

Oslo, Norway 26 February 2014 Board of Directors Aker Philadelphia Shipyard ASA

Board Chairman

James H. Miller Amy Humphreys Elin Karfjell

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

Aker Philadelphia Shipyard ASA 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
Balance at 31 December 2012	18 709	52 286	27 355	98 350
Net income for the year 2013	-	-	15 595	15 595
Balance at 31 December 2013	18 709	52 286	42 950	113 945

Consolidated Cash Flow Statement

Amounts in USD thousands	Note	2013	2012
Income before tax		23 409	15 739
Unrealized foreign exchange gain	4	(57)	(431)
Depreciation	6	6 919	1 813
Write-off of assets/assets-under-construction	6	-	723
Net financial (income)/expense	4	(303)	989
(Increase)/decrease in:
Work-in-process	8	67 718	7 574
Other 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)	60 057
Other 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	-	17 408
Repayment of interest-bearing long-term debt	14	(2 695)	(12 315)
Proceeds from interest-bearing short-term debt	14	-	32 190
Repayment 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	39 420
Cash and cash equivalents as of 1 January		58 333	18 913
Cash and cash equivalents as of 31 December	10	68 775	58 333

Aker Philadelphia Shipyard ASA Notes to the accounts

Note 1: Accounting principles

STATEMENT OF COMPLIANCE

The consolidated financial statements of Aker Philadelphia Shipyard ASA and its subsidiaries (AKPS or the Company) have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union in effect at each financial reporting period.

These accounts have been approved for issue by the Board of Directors on 26 February 2014.

BACKGROUND AND BASIS FOR PREPARATION

Aker Philadelphia Shipyard ASA was formed on 16 October 2007 to be the holding company of Aker Philadelphia Shipyard, Inc. (APSI or the Shipyard) which owns and operates a shipyard located in Philadelphia, Pennsylvania, USA.

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

AKPS is domiciled in Oslo, Norway. APSI is domiciled in the Commonwealth of Pennsylvania, USA. The two subsidiaries of APSI are domiciled in the state of Delaware, USA.

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

The consolidated financial statements are presented in USD (thousands), except when indicated otherwise.

USE OF ESTIMATES

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts in the financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

Critical accounting estimates and assumptions are as follows:

Revenue and Cost Recognition

AKPS uses the percentage of completion method for accounting for construction contracts. The use of the percentage of completion method requires AKPS to estimate the stage of completion of contract activity at each statement of financial position date and estimate the ultimate outcome of costs and profit on contracts. Revenue recognition and cost estimates depend upon variables such as steel prices, labor costs and availability, and other production inputs. AKPS must also evaluate and estimate the outcome of variation orders, contract claims and

requests from customers to modify contractual terms which can involve complex negotiations with customers. Generally, estimates are subject to a greater level of uncertainty when a vessel design is new to AKPS than if a vessel is being constructed later in a series.

As Hulls 017 and 018 had no third party customers upon construction start, AKPS did not recognize revenue using the percentage of completion method for these vessels. Instead, revenue was recognized upon the sale and delivery of the related vessels to a third party which occurred in August 2012 and January 2013, respectively.

AKPS has variable revenues which include a profit sharing component from the sales of Hull 017 and Hull 018 to Crowley Tankers LLC (Crowley). The key factors in estimating future cash flows at the time of revenue recognition include determining the days of vessel operation in revenue generating activities, estimating vessel operating expenditures and determining the appropriate discount rate. The rates to be paid by Crowley's customers are not a significant component of the estimation process because AKPS has determined that the criteria for recognizing profit sharing revenue are not met until Crowley has a signed charter agreement with a customer at which time the rates are known. Any subsequent changes to the estimates on which recorded revenues are based will be treated as adjustments to revenue in the applicable periods.

Estimates of the Fair Value of its Cash Generating Unit

AKPS has concluded that it has only one cash generating unit and must determine the fair value of its cash generating unit in order to perform impairment tests of its long-lived assets. In future years AKPS may have additional cash generating units based on the joint venture with Crowley (see note 24). Determining the fair value of the cash generating unit that includes AKPS's activities is subject to uncertainty and requires estimates of the recoverable amount which is the higher of the fair value less costs to sell and value in use. The estimated recoverable amount is determined based upon the present value of the future cash flows of the cash generating unit. Generally, there will be uncertainties regarding the timing and amount of cash flows for various reasons, including the costs of production and demand in the U.S. Jones Act shipping market. In addition, AKPS must determine an appropriate interest rate to discount expected future cash flows.

Deferred Income Taxes

Deferred income tax assets are recognized when it is probable that they will be realized. Determining probability requires AKPS to estimate the sources of future taxable income from operations, including profit sharing agreements and reversing taxable temporary differences. Determining these amounts is subject to uncertainty and is based primarily upon historical earnings, reversals of taxable temporary differences and expected earnings due to contracts in progress and contract backlog. The recognition of deferred tax assets is primarily applicable to Norway where AKPS has a net deferred tax asset position.

Accruals/Provisions

AKPS has various accruals/provisions which require management to make estimates. Management uses all available facts and circumstances when determining these estimates including historical experiences as well as input from outside advisors.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revision affects that period or in the period of revision and future periods if the revision affects both current and future periods.

AKPS ACCOUNTING AND CONSOLIDATION PRINCIPLES

Subsidiaries

The consolidated financial statements include the financial statements of the parent company, Aker Philadelphia Shipyard ASA, and its subsidiaries. A subsidiary is an entity in which Aker Philadelphia Shipyard ASA has the power to control and govern the operating and financial policies.

All intercompany balances and transactions are eliminated in consolidation.

Foreign currency translation and transactions Functional Currency

Items included in the financial statements of each entity in AKPS are initially recorded in the entity's functional currency, i.e. the currency that best reflects the economic substance of the underlying events and circumstances relevant to that subsidiary.

The consolidated financial statements are presented in United States dollars (USD), rounded to the nearest thousand, which is the reporting currency for the consolidated accounts and the functional currencies for all the entities within AKPS.

Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities in foreign currencies are translated into the functional currency at the exchange rates in effect on the statement of financial position date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated income statement. Foreign exchange differences arising in respect of operating items are included in operating profit in the consolidated income statement, and those arising in respect of financial assets and liabilities are recorded net as a financial item.

PROPERTY, PLANT AND EQUIPMENT General

Property, plant and equipment acquired by AKPS companies is stated at cost at the date of acquisition. Depreciation is calculated on a straight-line basis and adjusted for impairment charges, if any. The carrying value of the property, plant and equipment on the statement of financial position represents the cost net of government grants and subsidies received (if applicable) less accumulated depreciation and any impairment charges. Cost includes expenditures that are directly attributable to the asset. The cost of selfconstructed assets includes the costs of material and direct labor, and any other costs directly attributable to bringing the asset to working condition for its intended use. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalized during the period of time that is required to complete and prepare the asset for its intended use.

Land is not depreciated, but other property, plant, and equipment in use are depreciated on a straight-line basis. Expected useful lives of longlived assets are reviewed annually and, where they differ significantly from previous estimates, depreciation periods are changed accordingly.

Ordinary repairs and maintenance costs are charged to the consolidated income statement during the financial period in which they are incurred. The cost of improvements is included in the asset's carrying amount when it is probable that AKPS will derive future economic benefits in excess of the originally assessed standard of performance of the existing asset. Improvements are depreciated over the useful lives of the related assets.

Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount and are included in operating profit. Assets to be disposed of are reported at the lower of the carrying amount and the fair value less selling costs.

Component Cost Accounting

The Company allocates the amount initially recognized in respect of an item of property, plant and equipment to its significant components and depreciates separately each such component part over its useful life.

IMPAIRMENT OF LONG-LIVED ASSETS

Property, plant and equipment and other noncurrent assets are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of 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, mainly independent, cash flows. An impairment loss is the amount by which the carrying amount of the assets exceeds the recoverable amount. The recoverable amount is the higher of the asset's net selling price and its value in use. The value in use is determined by discounted cash flows and fair market value is based on recent third party appraisals.

A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount, however not to an extent higher than the carrying amount that would have been determined had no impairment loss been recognized in prior years.

LEASES

Leases of property, plant and equipment, where AKPS has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability. Finance charges are charged to interest expense. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset or the lease term.

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases net of any incentives received from the lessor is charged to the consolidated income statement on a straight-line basis over the period of the lease when annual installments vary.

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

CONSTRUCTION CONTRACTS

AKPS's business activities mainly involve deliveries of vessels under contract to customers. Revenue related to construction contracts for customers is recognized using the percentage of completion method, based primarily on the scope of completed work compared to estimated overall project scope at the statement of financial position date. The stage of completion is assessed by reference to production hours incurred to total estimated production hours. As soon as the outcome of the construction contract can be estimated reliably, contract revenue and expenses are recognized in the consolidated income statement in proportion to the degree of completion of the contract.

If the final outcome of a contract cannot be estimated reliably, contract revenue is recognized only to the extent costs incurred are expected to be recovered. Any projected losses on future work done under existing contracts are expensed and classified as accrued costs/ provisions in the statement of financial position under accrued liabilities. Losses on contracts are recognized in full when identified. Recognized contract profit includes profit derived from change orders and disputed amounts when, in management's assessment, realization is probable and reasonable estimates can be made.

Project costs include costs directly related to the specific contract and indirect costs attributable to the contract. Interest expense is included in project costs to the extent there are qualifying assets, which normally occurs when customer payments lag behind construction progress.

To the extent AKPS's procurement activities result in it acting as an agent for its customer, the related costs and revenues are presented net within revenue. This situation typically occurs when certain materials are paid for and supplied by the customer directly.

Project revenue is classified as operating revenues in the consolidated income statement. Vessels-under-construction receivable is classified as a current asset in the statement of financial position. Advances from customers are deducted from the value of vessels-underconstruction receivable of the contract involved or, to the extent they exceed this value, recorded as customer advances, net. Customer advances, net that exceed contract offsets would be classified as current liabilities.

Variable or contingent revenues are also classified as operating revenues in the consolidated income statement and are recognized under applicable standards when estimable.

VESSEL CONSTRUCTION FOR UNSPECIFIED CUSTOMERS

Vessels which do not have a contractual buyer at the start of construction and are being built with the expectation of identifying a customer during the construction phase are capitalized into workin-process. When the vessel is completed and sold both revenue and cost are recognized. If conditions indicate that the ultimate sales price will be below the estimated cost of the vessel, AKPS determines the estimated sales price and records an impairment charge as appropriate. The accumulated costs for vessels-underconstruction receivables for unspecified customers are included in work-in-process.

GOVERNMENT GRANTS AND SUPPORT

Government grants and support are recognized at their fair value where there is reasonable assurance that amounts will be received and conditions have been met. In some cases, recognition occurs over a period of time as restrictions lapse or as conditions are met. Grants and support related to capital expenditures or construction of assets for AKPS's account are recognized as a reduction of the related asset cost. For assets held for use, this results in a lower depreciation charge over the useful life of the asset. Grants related to specific programs or projects are recognized as reductions in expense over the period in which work that relates to the grant or support is performed.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash on hand, demand deposits with banks and other short-term highly liquid investments with original maturities of three months or less.

INTEREST-BEARING LIABILITIES

All loans and borrowings are initially recognized at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.

After initial recognition, interest-bearing borrowings are subsequently measured at amortized cost using the effective interest method; any difference between proceeds (net of transaction costs) and the redemption value is recognized in the consolidated income statement over the period the interest bearing liabilities are outstanding. Amortized cost is calculated by taking into account any issuance costs, and any discount or premium.

Gains and losses are recognized in net profit or loss when the liabilities are derecognized or impaired, as well as through the amortization process.

INCOME TAXES

Current Income Taxes

Income taxes receivable and payable for the current period are measured at the amount expected to be recovered or paid to the taxation authorities. The tax rates and tax laws as used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date.

Deferred Income Taxes

Deferred income tax is provided, using the asset/ liability method, on all temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, except upon initial recognition of an asset or a liability that does not impact income.

Deferred income tax assets are recognized for all deductible temporary differences, and carry-forward of unused tax losses and credits, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax losses and credits can be utilized. The carrying amount of deferred income tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. The expected utilization of tax losses are not discounted when calculating the deferred tax asset.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date.

PENSION OBLIGATIONS

AKPS has a pension plan that covers its nonunion employees whereby contributions are paid to a qualifying pension plan. The Company's union employees are participants in a union selected pension plan. Although the Union Plan is a defined benefit pension plan, because the union does not provide information on the Company's employees and their share of the pension assets and obligations, the plan is accounted for in accordance with the requirements of a defined contribution plan. Under defined contribution pension plans, contributions are charged to the consolidated income statement in the period to which the contributions relate.

PROVISIONS

A provision is recognized when AKPS has a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each statement of financial position date and adjusted to reflect the current estimate.

The amount of the provision is the present value of the risk adjusted expenditures expected to be required to settle the obligation, determined using the estimated risk free interest rate as the discount rate. Where discounting is used, the carrying amount of provision increases in each period and is recognized as interest expense.

FINANCIAL RISK MANAGEMENT

AKPS's activities expose it to a variety of financial risks: market risk (including commodity pricing risk, currency risk, and price risk), credit risk, and cash-flow interest-rate risk. AKPS's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on AKPS's financial performance. AKPS uses derivative financial instruments to hedge certain risk exposures.

Risk-management is carried out under policies approved by the Board of Directors. The Board of Directors provides principles for overall financial risk management as well as policies covering specific areas such as foreign exchange risk, interest-rate risk, credit risk, and use of derivative financial instruments and nonderivative financial instruments.

Credit Risk

Due to the nature of AKPS's operations, revenues and related receivables are typically concentrated amongst a few customers. As of 31 December 2013, AKPS has three customers: SeaRiver Maritime, Inc. (SeaRiver), Crowley Tankers, LLC (Crowley) and Matson Navigation Company (Matson). AKPS continually evaluates the credit risk associated with customers and manages this risk by requiring payment for substantially the entire contractual amount prior to delivering a vessel, including milestone payments upon completion of specified milestones.

Interest Rate Risk

AKPS is exposed to fluctuations in interest rates for its variable interest rate debt related to construction financing.

Foreign Exchange Risk

AKPS is exposed to foreign currency risk for purchases made in currencies other than the U.S. dollar which primarily relates to materials, supplies and costs related to the services of expatriate workers purchased from Korea, Norway and other countries in Europe. AKPS attempts to mitigate this risk through its foreign exchange hedging program or passing this risk onto its end customers by having them purchase certain materials directly in foreign currency.

Commodity Price Risk

AKPS is exposed to commodity price risk on the steel that it procures in the shipbuilding process. AKPS attempts to mitigate this risk by attempting to pass this risk on to its end customers by having them purchase materials directly or by capping the increase in pricing to be paid by AKPS.

Capital Management Risk

AKPS's objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, while maintaining an optimal capital structure to minimize the cost of capital. To meet these capital structure objectives, AKPS will review annually with its Board any proposed dividends as well as any needs to raise additional equity for future business opportunities or to reduce debt. Based on the low level of debt, recent equity offering (see note 26) and significant backlog secured, AKPS plans to begin paying dividends quarterly beginning with the second quarter of 2014.

Funding/Investment Risk

The challenging global economy has placed existing and future financing sources at risk. AKPS regularly monitors the financial condition of its construction financing lenders. Additionally, AKPS monitors the financial condition of the financial institutions which it uses for cash management services and in which it makes deposits and other investments. AKPS responds to changes in conditions affecting its financing sources and deposit relationships as situations warrant.

Liquidity Risk

Liquidity risk is the risk that AKPS will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial assets. AKPS's approach to managing liquidity is to ensure, to the extent possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to AKPS's reputation. AKPS attempts to mitigate this risk through project financing, progress payments from its customers, and material supplied and paid directly by its customers.

Accounting for Derivative Financial Instruments and Hedging Activities

Derivative financial instruments are recognized initially and in subsequent periods on the statement of financial position at fair value with the resulting gains and losses included in the consolidated income statement.

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

Estimates of the fair value for foreign currency contracts are obtained from a third party. The fair value of derivative long-term financial liabilities is disclosed in note 21 regarding financial instruments.

RELATED PARTY TRANSACTIONS

The Company's policy is that all transactions, agreements and business activities with related parties are conducted on an arm's length basis according to ordinary business terms and conditions.

SEGMENT INFORMATION

AKPS has one business segment which is building vessels for the U.S. Jones Act market.

BASIC AND DILUTED EARNINGS PER SHARE

The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders using the weighted average number of shares outstanding during the year. The calculation of diluted earnings per share is consistent with the calculation of basic earnings per share while giving effect to all potential dilutive ordinary shares that were outstanding during the period. AKPS currently has no potentially dilutive shares outstanding.

EVENTS AFTER 31 DECEMBER 2013

A distinction is made between events both favorable and unfavorable that provide evidence of conditions that existed at the statement of financial position date (adjusting events) and those that are indicative of conditions that arose after the statement of financial position date (nonadjusting events). Financial statements will only be adjusted to reflect adjusting events and not non-adjusting events (although there are disclosure requirements for such events).

NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

IFRS 13, Fair Value Measurement was effective 1 January 2013. IFRS 13 replaces the fair value guidance contained in individual IFRS with a single source of fair value measurement guidance including a "fair value hierarchy". The standard also requires additional disclosures that enable users to assess the methods and inputs used to develop fair value measurements. The adoption of IFRS 13 did not result in material impact on the consolidated financial statements.

There have not been any new IFRS standards or interpretations issued after the completion of the annual consolidated financial statements for the year ended 31 December 2013 that have a significant impact on AKPS's financial reporting.

IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and the amendments to IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures must be adopted effective 1 January 2014. Given the nature of the Company's structure and investment activities, the adoption of these standards and amendments are not expected to have a material impact 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	34 347
Social security contributions	3 908	3 246
Pension costs (note 17)	1 339	1 016
Other expenses	7 921	6 884
Total gross expense	53 739	45 493
Expenses related to vessel construction	(51 451)	(43 063)
Wages and other personnel expenses, net	2 288	2 430
Average number of employees Number of employees at year-end	580 581	515 545

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

Note 3: Other operating expenses

Other operating expenses consist of:

Amounts in USD thousands	2013	2012
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 and are included in other operating expenses. Such fees totaled USD 213 thousand for 2013 and USD 250 thousand for 2012. Non-attest fees were USD 20 thousand and USD 16 thousand in 2013 and 2012, respectively.

Note 4: Financial income and financial expenses

Amounts in USD thousands	2013	2012
Interest income	1 027	314
Gain on foreign currency forward contracts	57	431
Foreign exchange gain, net	-	236
Financial income	1 084	981
Interest expense	(774)	(3 085)
Interest capitalized on construction contracts	50	1 782
Foreign 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. In 2013, the foreign exchange loss, net is attributable to certain cash balances which were held in Norwegian Kroner and the gain on foreign currency forward contracts is attributable to mark-to-market of foreign exchange forward contracts in Korean Won. In 2012, the foreign exchange gain, net was attributable to certain cash balances which were held in Norwegian Kroner and Korean Won and the gain on foreign currency forward contracts was attributable to mark-to-market of foreign exchange forward contracts in Korean Won.

Note 5: Taxes

Income tax expense/(benefit)

Recognized in the income statement

Amounts in USD thousands	2013	2012
Current tax expense/(benefit):
Current year – U.S.	242	9 720
Current year – Norway	-	-
Total current tax expense	242	9 720
Deferred tax expense/(benefit):
Origination and reversal of temporary differences – U.S.	6 995	96
Origination 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:

Amounts in USD thousands	2013	2012
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	4 407
Effect of differences between nominal Norwegian tax rate and U.S. federal, state and city tax rate	2 023	1 850
Expenses not deductible for tax purposes	55	88
Income not subject to tax	(756)	-
Other differences	(63)	(82)
Total income tax expense/(benefit) in the income statement	7 814	6 263

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 and city tax rate, and income that was not taxable in Norway.

Deferred tax assets and liabilities

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities, and when the deferred income taxes relate to the same fiscal authority, which through 31 December 2013 for AKPS was primarily the U.S., the Commonwealth of Pennsylvania and the City of Philadelphia.

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

Amounts in USD thousands	2013	2012
Deferred tax assets U.S. tax jurisdiction	3 629	8 942
Deferred 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:

Amounts in USD thousands	2013	2012
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 thousands	Property, 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.

Note 6: Property, plant and equipment

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

Amounts in USD thousands	Machinery and vehicles	Buildings	Land improvements	Assets-under construction	Total
Cost at 1 January 2013	35 211	52 858	18 172	2 756	108 997
Purchases	-	-	-	4 953	4 953
Transfers	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	-	52 011
Depreciation	3 937	2 417	761	-	7 115
Write-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 agreements recorded in the statement of financial position (see note 16 and note 23):	3 483	12 664	9 997	-	26 144
Depreciation period Depreciation method	3-12 years Straight-line	7-30 years Straight-line	20 years Straight-line

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

Amounts in USD thousands	Machinery and vehicles	Buildings	Land improvements	Assets-under construction	Total
Cost at 1 January 2012	29 688	50 747	18 172	2 081	100 688
Purchases	1 493	-	-	8 351	9 844
Transfers	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	-	45 838
Depreciation	3 870	2 355	760	-	6 985
Write-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 Depreciation method	3-12 years Straight-line	7-30 years Straight-line	20 years Straight-line

Leased plant and machinery

The Company leases production equipment and land improvements under a number of finance lease agreements. At the end of each of the leases, the Company 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 equipment

At 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 to secure loans (see notes 14 and 26).

Property, plant and equipment under construction

Assets-under-construction primarily relate to upgrades in facilities and equipment.

Depreciation

AKPS's normal practice is to present its annual depreciation expense on a separate line item in its consolidated income statement when it is building vessels 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 construction, 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 capitalized depreciation from the current and prior periods.

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

Amounts in USD thousands	2013	2012
Depreciation of property, plant and equipment in current year	7,115	6,985
Amount capitalized as vessel cost of Hulls 017 and 018	(196)	(5,172)
Net depreciation expense	6,919	1,813

Determination of recoverable amounts/fair value

Due to the market and company specific developments including operating results and backlog, no impairment indicators were identified in 2013 for property, plant and equipment.

Sale leaseback

The 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 the assets' 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	3 051
Prepaid lease payments and deposits	210	209
Interest-bearing receivable	10	40
Other 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 the long-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 our customers: SeaRiver, Crowley and Matson. The order backlog consists of future revenues plus certain materials (approximately USD 11.9 million) to be supplied by SeaRiver and is subject to adjustments based on change orders as defined in the construction contracts. The materials to be supplied by SeaRiver will not be recognized as future revenues by AKPS.

The backlog on long-term contracts is as follows:

Amounts in USD thousands	Order backlog	Order intake	Order backlog	Order intake	Order backlog
	31 Dec. 2013	2013	31 Dec. 2012	2012	31 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	233 359
Less 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 milestone payments 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 to Hull 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 the sale and delivery of Hull 017 to Crowley on 30 August 2012.

Because AKPS has no obligation towards Crowley with respect to Hulls 017 and 018 after delivery other than standard warranty, it recognizes all variable revenue when the amount can be measured reliably and it is probable that it will receive the economic benefits associated with the transaction. AKPS has determined that these criteria are met once Crowley has executed a firm charter agreement with a third party because at this stage the estimated rates and charter duration can be determined within an appropriate range. The profit sharing agreement with Crowley covers the entire useful lives of the vessels which could extend over 25 years. As a result, profit sharing revenue may be recognized several times over multiple years. Based on the existing three-year firm 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 was recognized 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 construction of Hulls 019-024.

Note 9: Prepayments and other receivables

Prepayments and other receivables consist of the following items:

Amounts in USD thousands	31 Dec. 2013	31 Dec. 2012
Trade receivable	21 091	15 431
Prepayments to suppliers/other	8 354	3 051
Short-term portion of profit sharing receivable	2 606	350
Other 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:

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

Amounts in USD thousands	31 Dec. 2013	31 Dec. 2012
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 be released in stages after delivery of the second vessel (Hull 020) as defined in the escrow agreement.

Note 12: Earnings per share

Basic and diluted

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

Amounts in USD thousands (except shares and per share data)	2013	2012
Income attributable to equity holders of the Company Weighted average number of ordinary shares in issue	15 595 10 165 305	9 476 10 165 305
Basic and diluted earnings per share (USD)	1.53	0.93

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 an exchange 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 to interest rate and foreign currency risk, see note 21.

Amounts in USD thousands		31 Dec. 2013	31 Dec. 2012
Interest-bearing long-term debt:
PIDA/PIDC loans		1 932	4 427
Finance 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	2 403
Finance lease liabilities		200	190
Aker 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 as of 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 first lien 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 or decrease 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 a secured 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 second lien 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 joint venture with Crowley. The commitment letter provides further that the loan will have a fixed interest rate of 2.75% through maturity. The funds are anticipated 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 available 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 facilities

As 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 drawn amount 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
Amounts in USD thousands	31 Dec. 2013	31 Dec. 2012
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 due from APSI over three years (2011-2013). The full deferred amount is due in 2017. The Company has discounted the deferred payments and is imputing interest expense over the deferral period.

Note 16: Operating and finance lease liabilities

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

Amounts in USD thousands	31 Dec. 2013	31 Dec. 2012
Less than one year	251	236
Between 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 thousands	Payments 2013	Interest 2013	Principal 2013	Payments 2012	Interest 2012	Principal 2012
Less than one year	255	55	200	256	66	190
Between one and five years	1 044	106	938	1 022	153	869
Greater 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 payments are subject to an annual revision based on PSDC's operating expenses. The Company has options to renew the lease for three consecutive periods of 20 years 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 be terminated 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:

Amounts in USD thousands	31 Dec. 2013	31 Dec. 2012
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 certain employee contributions plus a discretionary percentage of salaries. In addition, the Company's union employees are participants in a multi-employer union selected pension plan (Union Plan). The Company contributes a fixed amount per hour worked to the Union Plan. If the Company were to terminate its relationship with the Union Plan, the Company could be statutorily liable for a termination liability calculated at the termination date. The termination liability at 31 December 2013 was USD 3.9 million. Currently, the Company has no plans to terminate this relationship. Thus, no termination liability has been recognized in the financial statements. The Company estimates that it will contribute approximately USD 1.1 million to the Union Plan in 2014. The Company'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 Amounts in USD thousands 31 Dec. 2013 31 Dec. 2012 Current balance as of 1 January 2 837 2 620 Provisions made during the period 300 300 Provisions 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.

Note 19: Trade payables and accrued liabilities

Trade payables and accrued liabilities comprise the following items:

Amounts in USD thousands	31 Dec. 2013	31 Dec. 2012
Trade payables	5 878	4 329
Ship material and subcontracting accruals	5 457	7 483
Employee-related cost accruals	4 466	4 338
Overhead and capital projects accruals	2 492	5 771
Deferred 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:

Amounts in USD thousands	31 Dec. 2013	31 Dec. 2012
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, and restricted 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 to hedge exposure to fluctuations in foreign exchange rates for business purposes.

Credit risk

The carrying amount of financial assets represents the maximum credit exposure. At 31 December 2013 and 2012, respectively, the maximum exposure to credit risk is as follows:

Amounts in USD thousands	31 Dec. 2013	31 Dec. 2012
Cash and cash equivalents	68 775	58 333
Restricted cash	20 003	20 001
Trade receivable	21 091	15 431
Profit sharing receivable	7 213	3 401
Interest-bearing receivable	10	40
Total	117 092	97 206

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

Liquidity risk:

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

	31 December 2013
Amounts in USD thousands	Book value	Contractual cash flow	Less than 6 months	6-12 months	1-2 years	2-5 years	More than 5 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 value	Contractual cash flow	Less than 6 months	6-12 months	1-2 years	2-5 years	More than 5 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 risk

AKPS 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 hedge accounting is not applied are recognized in the income statement. Both the changes in fair value of the forward contracts and the foreign exchange gains and 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 economic hedges of monetary assets and liabilities in foreign currencies at 31 December 2013 was USD 57 thousand recognized in current assets.

Exposure to currency risk

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

	2013			2012
Amounts in USD thousands	Euro	KRW	NOK	Euro	KRW	NOK
Gross balance sheet exposure
Trade payables (-)	(311)	-	-	(67)	(366)	-
Cash	-	-	1 272	-	-	1 876
Gross balance sheet exposure	(311)	-	1 272	(67)	(366)	1 876
Estimated 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 analysis

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

Exposure to interest rate risk

It 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 decrease AKPS's income before tax by USD 490 thousand for 2012. None of AKPS's financial assets and liabilities are measured at fair value.

Fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Amounts in USD thousands	Carrying amount 2013	Fair value 2013	Fair value hierarchy level 2013	Carrying amount 2012	Fair value 2012	Fair value hierarchy level 2012
Profit sharing receivable	7 213	7 213	3	3 401	3 401	3
Interest-bearing receivable	10	10	2	40	40	2
Secured loans (gross)	(4 427)	(4 129)	2	(6 830)	(6 220)	2
Finance lease liabilities	(1 138)	(978)	2	(1 328)	(1 112)	2
Forward 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 discounted at a market rate of 5.0% for 2013 and 5.0% for 2012.

Financial instruments measured at fair value

The 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 between significant unobservable inputs and fair value measurement
Profit sharing receivable	Discounted cash flows: The valuation model considers the present value of the expected pay	Forecasted annual revenue growth rate (2013: 2.5%);	The estimated fair value would increase/(decrease) if:
	ments based on firm charters in place, discounted using a risk adjusted dis count rate.	forecasted operating expenses growth rate (2013: 2.5%);	the annual revenue growth rate were higher/(lower);
		risk adjusted discount rate (2013: 10%).	the annual operating expenses growth rate were lower/(higher);
			the risk adjusted discount rate were lower/(higher).
Forward exchange contracts	Market comparison technique: The fair values are based on banker quotes. Similar contracts are traded in an active market and the quotes reflect	Not applicable.	Not applicable.

Reconciliation of Level 3 fair values

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

Amounts in USD thousands	2013	2012
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	111
Cash payment received	(32)	-
Profit sharing receivable at end of year	7 213	3 401

the actual transactions in similar

instruments.

There were no transfers from Level 3 in 2013.

Sensitivity analysis

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

	2013	2012
Effect 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

In accordance with its treasury policy, AKPS does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify 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 a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The categories are described below:

Level 1. Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have the ability 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 or indirectly 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 in non-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 the overall fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset 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	Position	Number of shares held
Jim Miller	Board Chairman	20 000
Elin Karfjell	Board Member	1 200
Jeffrey Theisen	Chief Financial Officer	500
Steinar Nerbovik	Senior Vice President	1 000
Scott Clapham	Senior Vice President	1 000
Sanjay 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

		Remuneration
Name	Position	(NOK)	(USD)
Jim Miller	Board Chairman	312 000	51 360
Elin Karfjell	Board Member	208 000	34 240
Amy Humphreys	Board Member	208 000	34 240
Thorhild Widvey	Board Member	104 000	17 120
Audun Stensvold	Deputy Board Chairman	208 000	34 240
Manuel 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 Widvey resigned from the Board of Directors in October 2013.

Remuneration to the audit committee

The audit committee of AKPS is comprised of Elin Karfjell (Chairperson) and Audun Stensvold. Remuneration for the Chairperson is NOK 42,000 (USD 6,917) and for each member is NOK 32,000 (USD 5,268).

Remuneration to the nomination committee

The nomination committee of Aker Philadelphia Shipyard ASA has the following members: Leif-Arne Langoy, Kjetil Kristiansen and Gerhard Heiberg. Remuneration 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 Team

The basis of the remuneration of the President and CEO and Members of the Executive Team has been developed in order to create a performance-based system. 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 variable pay program which was implemented in 2007. This variable pay program is based on the achievement of financial and personal performance targets and leadership performance in accordance with the Company's values.

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 achievement of defined short-term and long-term results such as financial targets (profit and working capital) and personal targets (project targets, development 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% of base 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 practices standard employment contracts and standard terms and conditions regarding notice period and severance pay for the President and CEO and members 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 USD			Base salary	Variable pay	Pension contribution	Other benefits	Total remuneration	Severance 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 USD			Base salary	Variable pay	Pension contribution	Other benefits	Total remuneration	Severance 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 Agreement dated 15 December 2010 and effective as of 18 February 2011 (the Authorization Agreement). Pursuant to the Authorization Agreement, PSDC purchased 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 June 2012, respectively, with funds provided by the Commonwealth of Pennsylvania. APSI is leasing back those same assets from PSDC subject to the terms of its shipyard lease and the Authorization Agreement. APSI used the sale proceeds in combination with construction period financing with private lenders and its own available funds, to construct Hulls 017 and 018. Upon the delivery of Hull 018 to Crowley in January 2013, the Authorization Agreement (excluding the lease of shipyard assets described above) was terminated. For accounting purposes the transaction is accounted for as a sale leaseback and no adjustments were made to the net accounting value of the assets at closing and the gross proceeds were proportionately recognized as a reduction of vessel 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 to maintain 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-process projects 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 construction 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 grants

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

Other commitments and contingencies

APSI is required to pay a common area maintenance charge each month of approximately USD 34 thousand, subject to escalation, through the term of its shipyard 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 and Use 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 3.6 million per year, commencing in 2003. In connection with the PSDC agreement (see note 23), 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.

Legal matters

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

Joint venture

On 6 November 2013, APSI executed definitive agreements for a joint venture with Crowley Maritime Corporation and certain of its affiliates ("CMC") related to the ownership, operation and chartering of four product tankers. The vessels will be delivered in 2015 and 2016 and Crowley will maintain control over the 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 all four 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 net amount 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 joint venture. 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 will be 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 of AKPS 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% of the total outstanding shares of Aker ASA as of 31 December 2013. AKPS believes that related party transactions are made on terms equivalent to those that prevail in arm's length transactions.

Transactions

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

Amounts in USD thousands	Expenses 2013	Expenses 2012	Payables 31 Dec. 2013
Aker ASA	338	76	-
Aker US Services LLC (formerly Resource Group International)	60	60	-

Concentrations

Operating revenues are detailed below:

Amounts in USD thousands	Revenue 2013	Revenue 2012
Crowley	93 267	93 290
SeaRiver	185 742	47 625

Agreements

APSI has agreed to reimburse Aker ASA for certain support and assistance provided by Aker ASA to APSI in connection with the SeaRiver project. Related expenses 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 for the construction financing for Hulls 017 and 018. This guarantee was released in conjunction with the sale and delivery of Hull 018 to Crowley on 31 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 Agreement described 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 issue price of NOK 165 per share. The private placement was approved at an extraordinary general meeting on 7 February 2014 and trading of the new shares commenced on 10 February 2014. The Board intends to carry out a subsequent offering in order to offer shares to existing shareholders that did not participate 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 loan of 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 Development Authority (PIDA) and the remaining balance of USD 1.2 million under a USD 10 million loan from PIDC Local Development Corporation (PIDC), without premium or penalty, and the mortgages and all other liens securing such loans were released.

Income Statement

Note	2013	2012
		76
		(552)
2	2 000	-
		(476)
		200
	(407)	(72)
	699	316
	(136)	-
	1 630	(32)
4	410	-
	2 040	(32)
		(32)
5	(2 040)	32
	-	-
	2	85 (611) 1 474 - 2 040

Statement of Financial Position as of 31 December

Amounts in USD thousands	Note	2013	2012
ASSETS
Shares in subsidiary	3	67 000	67 000
Deferred 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	350
Other current assets		36	34
Cash and cash equivalents	6	17 527	10 181
Total current assets		20 169	10 565
Total assets		101 689	93 306
EQUITY AND LIABILITIES
Share capital		18 709	18 709
Share premium reserve		52 286	52 286
Total paid in capital		70 995	70 995
Other 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

Oslo, Norway 26 February 2014 Board of Directors Aker Philadelphia Shipyard ASA

James H. Miller Amy Humphreys Elin Karfjell Board Chairman

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

Cash Flow Statement

Amounts in USD thousands	2013	2012
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	-	10 000
Cash 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

Aker Philadelphia Shipyard ASA Notes to the accounts

Note 1: Basis for preparation

The accounts of Aker Philadelphia Shipyard ASA (AKPS or the Company) are presented in conformity with Norwegian legislation and generally accepted accounting principles in Norway. The Company's functional and reporting currency is the U.S. dollar (USD), except when indicated otherwise.

Subsidiaries

Subsidiaries are presented on a historical cost basis in the parent company accounts. The investment is valued at historical cost for the shares unless impairment write-downs have been deemed necessary. The shares are written down to fair value if the impairment is not of a temporary nature and is necessitated by generally accepted accounting principles. Writedowns are reversed when the basis for the writedown no longer exists.

Dividends and other payments are taken to income in the year they are accrued in the subsidiary. If dividends exceed retained earnings after the purchase, the excess represents repayment of invested capital and the payments are deducted from the invested value in the Company's statement of financial position.

Classification and valuation of statement of financial position items

Current assets and current liabilities include items that have less than one year to maturity, and other items that are deemed operational working capital. Other items are classified as non-current assets/non-current liabilities.

Current assets are valued at the lower of historical cost and fair value. Current liabilities are valued at their nominal historical value at the time the liability arises.

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

The profit sharing assets were recorded at fair value at the purchase date in 2012 and interest will accrete based on the firm charters in place. Annual payments received will be applied against the assets plus accreted interest. The Company will review the actual results of the profit sharing assets compared to its forecasts and adjust the profit sharing assets accordingly. The Company evaluates the potential impairment to these assets using a discounted cash flow method taking into account the historical and future vessel performances.

Tax

Tax expense in the income statement comprises both current payable taxes and the change in deferred tax. Payable tax is calculated on the basis of the profit for the period in Norwegian Kroner (NOK). Deferred tax at 31 December 2013 is calculated using a 27% income tax rate utilizing the difference that exists between book values and tax values and the net operating losses

that can be carried forward at the statement of financial position date. Tax-increasing and taxreducing temporary differences that are reversing or can reverse in the same period are offset against each other. Net tax assets are shown in the statement of financial position to the extent it is probable that these assets can be utilized.

To the extent a group contribution is not shown in the income statement, the tax effect is taken directly against the investment item in the statement of financial position.

Cash flow statement

The cash flow statement is shown using the indirect method. Cash and cash equivalents comprises cash, bank deposits and other shortterm liquid placements.

Use of estimates

Preparation of financial statements in conformity with generally accepted accounting principles in Norway requires management to make estimates and assumptions that affect the income statement, the reported amounts of assets and liabilities and also the disclosure of contingent assets and liabilities on the statement of financial position date.

Contingent losses that are probable and quantifiable are expensed when they are identified.

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 USD 15,389 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 USD 197,240 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 obligation was discharged.

Note 3: Shares in subsidiary

This item comprises the following as of 31 December 2013:

Amounts in USD thousands	Ownership and voting rights (%)	Business address	Historical cost	Book value
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	11 355
Equity 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 has occurred 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 the change in deferred taxes.

Amounts in USD thousands	2013	2012
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:
Amounts in USD thousands	2013	2012
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:
Amounts in USD thousands	2013	2012
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 -

Note 5: Total equity

Changes in equity are:

Amounts in USD thousands	Share	Share	Total paid in	Other	Total
	capital	premium	capital	equity	equity
Equity as of 1 January 2013	18 709	52 286	70 995	14 071	85 066
Net 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)

Shareholder	Number of shares held	Ownership (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 APSI Shipholding 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 2015 and 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.

Note 9: Related party transactions/guarantees

The Company has made the following guarantees:

Description	Beneficiary	Amount (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 contracts with Matson Navigation Company.

AKPS has service agreements with Aker ASA and its affiliates which provide certain specified consulting, accounting, tax, financial and administrative services. AKPS also has a secondment agreement with Aker ASA which establishes a framework for the mutual secondment of personnel between their respective organizations. All payables under these agreements are paid within the normal course of business. Total expenses incurred under this agreement 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 interest is 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 February 2014.

On 20 September 2012, AKPS purchased the variable component of the purchase price (profit sharing interests) from the sale of Hulls 017 and 018 from Shipholding 17 and Shipholding 18, which are wholly-owned indirect subsidiaries. The purchase price, which was based on third party appraisals of each profit share interest, was paid in cash of USD 5.0 million to both Shipholding 17 and Shipholding 18 and demand promissory notes (notes) of USD 3.06 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 is 4.25% 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 in accordance 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 receive annual 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 place with 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 the year-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 issue price of NOK 165 per share. The private placement was approved at an extraordinary general meeting on 7 February 2014 and trading of the new shares commenced on 10 February 2014. The Board intends to carry out a subsequent offering in order to offer shares to existing shareholders that did not participate in the private placement in March 2014.

	Offices in:
KPMS AS, a Norwegian member firm of the KPMS network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.	Oslo Alta Arancis Bergen Bode husbrush Finnsner Grimatad	Haugesund Knarvik Kristiansand Larvik Mo i Rana Melde Varvik Rarce	Stavances Stard Sasaurrat DOMTHING ansbe
Statusutorisarte revisorer - mediemmer av Den norske Revisoriorening	Klarmar

Good dialogue

Aker Philadelphia Shipyard ASA (referenced to herein as "AKPS" or the "Company") is committed to maintaining an open and direct dialogue with its shareholders, potential investors, analysts, brokers, and the financial community in general.

The timely release of information to the market that could affect the Company's share price helps ensure that Aker Philadelphia Shipyard ASA's share price reflects its underlying value.

Aker Philadelphia Shipyard's goal is that the Company's shareholders will, over time, receive competitive returns on their investments through a combination of dividends and share price growth. On 26 February 2014, the Company's Board of Directors adopted the following dividend policy:

"The Company's objective is to provide its shareholders with a competitive return on its shares over time based on the Company's earnings. The Company aims to pay a quarterly dividend of USD 0.25 per share, beginning with the second quarter of 2014, with intentions of increasing the amount over time. Any payment of dividends will be considered in conjunction with the Company's financial position, debt covenants, capital requirements, market prospects and potential strengthening of the Company's financial structure."

The Company did not pay a dividend in 2013.

Recent changes to the Norwegian Public Limited Liability Companies Act allow for the Board of Directors to pay dividends on the basis of an authorization from the general meeting. The Board of Directors will therefore propose to the annual general meeting in 2014 that the Board of Directors is granted an authorization to pay dividends based on the Company's annual accounts for 2013, valid up to the Company's annual general meeting in 2015. Such authorization will facilitate payments of dividends by the Board of Directors on a quarterly basis, in accordance with the Company's dividend policy.

Shares and share capital

As of 31 December 2013, Aker Philadelphia Shipyard ASA has 10,165,305 ordinary shares; each share has a par value of NOK 10 (see note 5 to the parent company's 2013 accounts). As of 31 December 2013, the Company had 621 shareholders, of whom 21.5% were non-Norwegian shareholders.

Aker Philadelphia Shipyard has a single share class. Each share is entitled to one 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 listing

Aker Philadelphia Shipyard ASA was listed on Oslo Axess on 17 December 2007 (ticker: AKPS). Aker Philadelphia Shipyard's shares are registered in the Norwegian Central Securities Depository; the shares have the securities registration number ISIN NO 0010395577. DNB Bank ASA is the Company's registrar.

Majority shareholder

Aker Philadelphia Shipyard ASA's majority shareholder is Converto Capital Fund AS, an investment fund controlled by Aker ASA. Companies that are part of Aker are legally and financially independent units. Converto Capital Fund AS exercises active ownership as part of systematic efforts to create value for all Aker Philadelphia Shipyard shareholders.

From time to time, agreements are entered into between two or more Aker companies. The Boards of Directors and other parties involved in the decisionmaking processes related to such agreements are all critically aware of the need to handle such matters in the best interests of the involved companies, in accordance with good corporate governance practice. If needed, external, independent opinions are sought.

Current Board authorizations

As of 31 December 2013, Aker Philadelphia Shipyard ASA has no Board authorizations to issue or buy back shares. Please see "Board authorizations" on page 52.

Stock option plans

As of 31 December 2013, Aker Philadelphia Shipyard ASA has no options program.

Investor relations

Aker Philadelphia Shipyard ASA seeks to maintain an open and direct dialogue with shareholders, financial analysts, and the financial market in general.

All Aker Philadelphia Shipyard press releases and investor relations (IR) publications, including archived material, are available at the Company's website: www.akerphiladelphia.com. This online resource includes the Company's quarterly and annual reports, prospectuses, articles of association, financial calendar, and its Investor Relations and Corporate Governance policies, along with other information.

Shareholders can contact the Company at ir@akerphiladelphia.com.

Electronic interim and annual reports

Aker Philadelphia Shipyard ASA encourages its shareholders to subscribe to the electronic version of the Company's annual reports. Annual reports are published on the Company's website at the same time as they are made available via website release by the Oslo Stock Exchange/Oslo Axess: www.newsweb.no (ticker: AKPS). Subscribers to this service receive annual reports in PDF format by email.

Share capital development over the past three years

Date	Change in share capital	Share capital (in NOK)	Number of shares	Par value (in NOK)
Change in 2011
31 December 2011	-	101 653 050	10 165 305	10.00
Change in 2012
31 December 2012	-	101 653 050	10 165 305	10.00
Change in 2013
31 December 2013	-	101 653 050	10 165 305	10.00

Quarterly reports, which are generally only distributed electronically, are available from the Company's website and other sources. Shareholders who are unable to receive the electronic version of interim and annual reports, may subscribe to the printed version by contacting Aker Philadelphia Shipyard's investor relations staff.

Nomination committee

The Company's nomination committee has the following members: Leif-Arne Langoy, Gerhard Heiberg and Kjetil Kristiansen.

Shareholders who wish to contact Aker Philadelphia Shipyard's nomination committee may do so using the following address:

Nomination Committee of Aker Philadelphia Shipyard ASA Postboks 1423 Vika NO-0115 Oslo, Norway

Annual shareholders' meeting

Aker Philadelphia Shipyard ASA's annual shareholders' meeting is normally held in March or early April. Written notification is sent to all shareholders individually or to shareholders' nominee. To vote at shareholders' meetings, shareholders (or their duly authorized representatives) must either be physically present or must vote by proxy.

2013 share data

The Company's total market capitalization as of 31 December 2013 was NOK 1422 million. During 2013, a total of 11,242,542 Aker Philadelphia Shipyard ASA shares traded, corresponding to 1.1 times the Company's freely tradable stock. The shares traded on 240 trading days in 2013.

Twenty largest shareholders

(as of 31 December 2013)

Shareholder	Number of shares held	Ownership (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)

Nationality	Number of shares held	Ownership (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 owned	Number of shareholders	Percent 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 2013

2013 share data

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

Corporate governance

Aker Philadelphia Shipyard ASA aims to create maximum value for its shareholders over time. Good corporate governance will help to reduce risk and ensure sustainable value creation.

In line with the Accounting Act §3-3, section b and the Norwegian Code of Practice for Corporate Governance, which was last amended in 2012, the Board has reviewed and updated the Company's principles for corporate governance. The principles also apply to Aker Philadelphia Shipyard ASA's subsidiaries when relevant. The Board's statement of corporate governance is included in the annual report. The following presents Aker Philadelphia Shipyard ASA's current practice regarding each of the recommendations contained in the Code of Practice. Any deviations from the recommendations are explained under the item in question.

Purpose

Aker Philadelphia Shipyard ASA's Corporate Governance principles ensure an appropriate division of roles and responsibilities among the Company's owners, its Board of Directors, and its Executive Management, and that business activities are subject to satisfactory control. The appropriate division of roles and satisfactory control contribute to the greatest possible value creation over time, to the benefit of owners and other stakeholders.

Values and ethical guidelines

The Board has adopted corporate values and ethical guidelines. Aker Philadelphia Shipyard ASA's corporate values are presented on page 6 of this annual report. These values consist of the following "CORE" principles: Caring, One shipyard, Responsible and Efficient. AKPS works to promote a sustainable and responsible company that is driven by good results and the demands for social responsibility.

Business

Aker Philadelphia Shipyard ASA's business purpose clause in the articles of association is as follows:

"The Company's business is to own and manage industry and other related business related to building of ships, capital management and other operations for the group, including participating in or acquiring other business."

The function of the business purpose clause is to ensure that shareholders have control of the business and its risk profile, without limiting the Board or management's ability to carry out strategic and financially viable decisions within the defined purpose. AKPS's goals and main strategies are presented in the Board of Directors' report. The Company's vision is "to be – and be recognized as – America's leading commercial shipyard that delivers on its commitments, every time," and its supporting strategies for 2014 are to deliver on customer commitments, secure open slots as product tankers and maximize value of its shipping assets.

Equity and dividends Equity

AKPS's equity as of 31 December 2013 amounted to USD 113.9 million, which corresponds to an equity ratio of 61% of total assets. Aker Philadelphia Shipyard ASA regards the Company's current equity structure as appropriate and adapted to its objectives, strategy, and risk profile.

Dividends

Aker Philadelphia Shipyard ASA's dividend policy is included in the section "Shares and shareholder matters" (see page 50). As stated in that policy:

"The Company's objective is to provide its shareholders with a competitive return on its shares over time based on the Company's earnings. The Company aims to pay a quarterly dividend of USD 0.25 per share, beginning with the second quarter of 2014, with intentions of increasing the amount over time. Any payment of dividends will be considered in conjunction

with the Company's financial position, debt covenants, capital requirements, market prospects and potential strengthening of the Company's financial structure."

Board authorizations

It is the intention that the Board's proposals for future Board authorizations to issue shares and to undertake share buybacks are to be limited to defined purposes and to be valid only until the next annual shareholders' meeting.

The Board currently has no authorizations to issue shares or undertake share buybacks other than an authorization to increase share capital by up to NOK 3,370,000 in connection with a subsequent offering of shares, valid up to the Company's annual general meeting in 2014. The Board will propose to the annual general meeting in 2014 that the Board is granted an authorization for payment of dividends, an authorization to increase the share capital and an authorization to purchase own shares.

Equal treatment of shareholders and transactions with close associates

The Company has a single class of shares, and all shares carry the same rights in the Company. Equal treatment of all shareholders is crucial. If existing shareholders' pre-emptive rights are proposed waived upon an increase in share capital, the Board will justify the waiver. The Board will also publicly disclose such justification in a stock exchange announcement issued in connection with such increase in share capital. Transactions in own (treasury) shares are executed on the Oslo Stock Exchange or by other means at the listed price.

If there are material transactions between the Company and a shareholder, Board member, member of Executive Management, or a party closely related to any of the aforementioned, the Board shall ensure that independent valuations are available.

Aker Philadelphia Shipyard ASA has prepared guidelines designed to ensure that members of the Board of Directors and Executive Management notify the Board of any direct or indirect stake they may have in agreements entered into by AKPS.

See additional information on transactions with related parties in note 25 to the consolidated accounts. As of 31 December 2013, 71.2% of the shares in Aker Philadelphia Shipyard ASA are owned by Converto Capital Fund AS, an investment fund controlled by Aker ASA. For further details on the relationship between Aker Philadelphia Shipyard ASA and Aker ASA, see note 25 to the consolidated accounts.

Freely negotiable shares

Aker Philadelphia Shipyard ASA's shares are freely negotiable. No restrictions on transferability are found in the Company's articles of association/incorporation.

Annual shareholders' meetings

The Board of Directors encourages shareholders to participate in shareholders' meetings. It is the Company's priority to hold the annual shareholders' meeting as early as possible after the year-end, ordinarily in March or early April. Notice of shareholders' meetings are sent physically by post and comprehensive supporting information, including the recommendations of the nomination committee, is made available for the shareholders on the Company's home page, in each case not later than 21 days prior to the annual shareholders' meeting. The Board seeks to ensure that the resolutions and supporting information are sufficiently detailed and comprehensive to enable the shareholders to form a view on all matters to be considered at the meeting. The deadline for shareholders to register to the shareholders' meetings is set as close to the date of the meeting as possible. Shareholders who are unable to attend the meeting in person may vote by proxy, and normally the proxy may be given to the chairman of the meeting or any other person appointed by the chairman. Both on the attendance and proxy form and the notice of meeting, all procedures for registration are thoroughly explained. In addition, information on how to propose a resolution to the items on the agenda at the annual general meeting will be included in the notice.

Pursuant to Aker Philadelphia Shipyard ASA's articles of association, the Chairman of the Board, or any other person appointed by the Chairman, chairs the shareholders' meetings. Although the Code of Practice recommends an independent chair for annual general meetings, it is the view of the Company that the procedure followed by the Company provides efficient and well prepared general meetings and is in the interests of the shareholders. The Board of Directors and the person chairing the meeting make appropriate arrangements for the general meeting to vote separately on each candidate nominated for election to the Company's corporate bodies. To the extent possible, the General Manager, nomination committee leader and auditor attend annual shareholders' meetings. If the General Manager is absent from an annual shareholders' meeting for valid reasons, then the General Manager may appoint a deputy to attend in his or her place.

In its work, the nomination committee emphasizes composing a board that works as a team, and that the Board members' experience and qualifications support each other. The shareholders' meeting is invited to vote for each nominee up for election.

Minutes of shareholders' meetings are published as soon as practically possible on the Oslo Stock Exchange, www.newsweb.no (ticker: AKPS) and on the Company's home page www.akerphiladelphia.com, under the heading "Media Center".

Nomination committee

Aker Philadelphia Shipyard ASA has a nomination committee, as set forth in Section 7 of the Company's articles of association. Pursuant to the articles of association, the nomination committee is to comprise no fewer than three members. Each member is normally elected for a two-year period. The composition of the nomination committee reflects the interests of the shareholders, and the nomination committee members' independence from Aker Philadelphia Shipyard ASA's Board and Executive Management. Nomination committee members and Chairman are elected by the Company's annual shareholders' meeting, which also determines remuneration payable to committee members.

Pursuant to Aker Philadelphia Shipyard ASA's articles of association, the nomination committee recommends candidates for members of the Board of Directors. The nomination committee also makes recommendations as to remuneration of Board members. The nomination committee will

justify its recommendation and such justification will address the criteria specified in Section 8 of the Code of Practice on the composition of the Board of Directors.

Aker Philadelphia Shipyard ASA's nomination committee comprises the following members:

• Leif Arne Langoy, Chairman (2013- 2015)
• Gerhard Heiberg (2013-2015)
• Kjetil Kristiansen (2013-2015)

None of the members of the nomination committee is a member of the Board of Directors. Neither the General Manager nor any other senior executive is a member of the nomination committee.

The general meeting has stipulated guidelines for the duties of the nomination committee.

Board composition and independence

The Company does not have a corporate assembly because Aker Philadelphia Shipyard ASA, excluding its subsidiaries, has fewer than 200 employees.

Pursuant to Section 4 of the Company's articles of association, the Board comprises between three and seven members. The Board is currently comprised of a total of five members. The Board had been comprised of a total of six members, but Thorhild Widvey resigned from the Board in October 2013, creating a vacancy that has not been filled. The Company's shareholders elect the Chairman of the Board at the annual shareholders' meeting. The Board may elect its own Deputy Board Chairman. Board members are elected for a period of two years.

The composition of the Board of Directors is designed to ensure that it can operate independently of any special interests and function effectively as a collegiate body. A majority of the shareholder-elected Board members are independent of the Company's Executive Management and its significant business associates. The Board of Directors does not include any executive personnel. Since the shareholders' meeting in 2011, Manuel Stamatakis has served as a Board member. Mr. Stamatakis is also the Chairman of the Philadelphia Shipyard Development Corporation (PSDC), the Company's landlord and a party to the Master Agreement and the Authorization Agreement. For more information regarding these agreements, see page 39 of the

annual report. Further, three of the five shareholder-elected Board members are independent of the Company's main shareholder, Aker ASA. Currently, two of the Board members are not independent of Aker ASA. Jim Miller is Executive Vice President E&C Americas of Kvaerner, a portfolio company of Aker ASA. Audun Stensvold is Financial Investment Director of Aker ASA.

The current composition of the Board, as well as the Board members' expertise, capabilities, and experience, are presented on pages 56-57 of this annual report. The shareholder-elected Board members represent a combination of expertise, capabilities, and experience from various businesses and industries in both the private and public sectors.

The Board members' shareholdings are presented in note 22 to the consolidated accounts. The Company encourages the Board members to invest in the Company shares.

Two of the shareholder-elected Board members are up for election. AKPS will provide the relevant information regarding such Board members in accordance with the Code of Practice guidelines at the annual general meeting.

The work of the Board of Directors

The Board of Aker Philadelphia Shipyard ASA annually adopts a plan for its work, emphasizing goals, strategies, and implementation. The plan also recognizes the Company's corporate social responsibility. Also, the Board has adopted instructions that regulate areas of responsibility, tasks, and division of roles of the Board, Board Chairman, and President and CEO/General Manager. These instructions feature rules governing Board schedules, rules for notice and chairing of Board meetings, decision-making rules, the President and CEO's/General Manager's duty and right to disclose information to the Board, professional secrecy, impartiality, and other issues.

In order to ensure a more independent consideration of matters of a material character in which the Board Chairman is, or has been, personally involved, the Board's consideration of such matters are chaired by the Deputy Board Chairman, if there is one serving at the time, or some other member of the Board in the absence of a Deputy Board Chairman.

The Board of Aker Philadelphia Shipyard ASA established an audit committee in 2010. The audit committee consists of two members, Elin Karfjell (Chairperson) and Audun Stensvold. Both members are independent from operations of the Company. As discussed above, Mr. Stensvold is linked to the Company's main shareholder.

The Board of Aker Philadelphia Shipyard established a tendering committee in 2012 to review tenders for new business. The tendering committee consists of two members, Jim Miller (Chairman) and Amy Humphreys. Both members are independent from operations of the Company. As discussed above, Mr. Miller is linked to the Company's main shareholder.

Aker Philadelphia Shipyard ASA does not have any other active Board committees at this time. In particular, the Company does not have a remuneration committee because all members of the Board are independent of the Company's executive personnel.

The Board evaluates its own performance and expertise once a year.

Risk management and internal control

The Board is to ensure that the Company maintains solid in-house control practices and protocols and appropriate risk management systems tailored to the Company's business activities. These practices and systems encompass the Company's corporate values, ethical guidelines and guidelines for corporate social responsibility. The Company's policy regarding corporate social responsibility is set forth on pages 16-17 of this annual report. The Board annually reviews the Company's most important risk areas and internal control systems and procedures, and these risk areas are mentioned in the Board of Directors' report. Through the use of a risk matrix and log, the Board also monitors the key risks related to the Company's business goals and assesses those risks, taking into account mitigating actions, on a quarterly basis. The issue is further described in notes 1 and 21 to the consolidated accounts.

Audit committee

The audit committee has reviewed the Company's internal reporting systems, internal control and risk management and had dialogue with the Company's auditor. The audit committee has also considered the auditor's independence.

AKPS's financial policies ensure followup of financial risk. Key targets are identified by the Board and management to ensure timely follow-up of currency exposure, interest rate exposure and compliance with covenants.

The Company has prepared an authorization matrix and approval procedures for costs included in the governing documents.

Financial statement close process

The Company has implemented Aker ASA's accounting and reporting handbook which contains requirements and procedures for the preparation of both the quarterly and annual reporting. The reporting is done quarterly through AKPS's reporting and consolidation system. Consolidation and control over the financial statement close process is the CFO's responsibility. Financial results and cash development are analyzed and compared to the budget by the CEO and CFO and reported to the Board monthly.

Remuneration of the Board of Directors

Board remuneration reflects the Board's responsibility, expertise, time spent, and the complexity of the business. Remuneration does not depend on Aker Philadelphia Shipyard ASA's financial performance and the Company does not grant share options to members of its Board. Board members and companies with whom they are associated are not to take on special tasks for the Company beyond their Board appointments unless such assignments are disclosed to the full Board and the remuneration for such additional duties is approved by the Board.

Additional information on remuneration paid to Board members for 2013 is presented in note 22 to the consolidated accounts.

Remuneration of Executive Management

The Board has adopted guidelines for remuneration of Executive Management in accordance with the Norwegian Public Limited Company Act (Allmennaksjeloven § 6-16a). Salary and other remuneration of the President and CEO of Aker Philadelphia Shipyard ASA are determined in a Board of Directors' meeting. The basis of remuneration of Executive Management has been developed in order to create a performance-based system. The system of reward is designed to contribute to the achievement of good financial results and increase in shareholder value.

Aker Philadelphia Shipyard ASA does not have stock option plans or other such share award programs for employees. Further information on remuneration for 2013 for members of Aker Philadelphia Shipyard ASA's Executive Management is presented in note 22 to the consolidated accounts. AKPS's guidelines for remuneration to Executive Management are discussed on pages 38-39 of this annual report and will be presented to the shareholders at the annual shareholders' meeting. The maximum size of any payment under the existing performance-related remuneration program to any executive is linked to the size of the executive's base salary.

Information and communications

Aker Philadelphia Shipyard ASA's reporting of financial and other information is based on openness and on equal treatment of shareholders, the financial community, and other interested parties.

The long-term purpose of Aker Philadelphia Shipyard ASA's investor relations activities is to ensure the Company's access to capital at competitive terms and to ensure shareholders' correct pricing of shares. These goals are to be accomplished through correct and timely distribution of information that can affect the Company's share price; the Company is also to comply with current rules and market practices, including the requirement of equal treatment.

All stock exchange notifications and press releases are made available on the Company's home page www.akerphiladelphia.com; stock exchange notices are also available from www.newsweb.no. All information that is distributed to shareholders is simultaneously published on Aker Philadelphia Shipyard ASA's home page.

The Company's financial calendar is found on the inside front cover of this annual report.

The Company's investor relations staff is responsible for maintaining regular contact with the Company's shareholders, potential investors, analysts and other financial market stakeholders. The Board is

regularly informed about the Company's investor relations activities. For more information regarding the Company's guidelines for reporting of financial and other information, see pages 50-51.

Takeovers

The Company has not produced special principles for how it will act in the event of a takeover bid. However, if a takeover bid occurred the Board would follow the overriding principle of equal treatment for all shareholders. The Board will not take steps to prevent or obstruct a take-over bid for the Company's business or shares, nor use share issue authorizations or other measures to hinder the progress of the bid, without such actions being approved by a shareholders' meeting after the take-over offer has become public knowledge.

The Company will not enter into any agreement with a bidder that acts to limit the Company's ability to arrange other bids for the Company's business or shares unless it is self-evident that such an agreement is in the common interest of the Company and its shareholders. This provision shall also apply to any agreement on the payment of financial compensation to the bidder if the bid does not proceed. Any financial compensation will be limited to the costs the bidder has incurred in making the bid.

Agreements entered into between the Company and a bidder that are material to the market's evaluation of the bid will be announced to the public no later than at the same time as the disclosure that the bid has been made is published.

Upon the issuance of an offer for the Company's shares, the Board will make a statement to the shareholders that provides an assessment of the bid, the Board's recommendations, and reasons for these recommendations. If the Board cannot recommend the shareholders whether they should or should not accept the bid, the Board will explain the reasons for this. The Board's statement on the offer will make it clear whether the views expressed are unanimous, and if this is not the case it will explain the basis on which specific members of the Board have excluded themselves from the Board's statement.

For each instance, an assessment will be made as to the necessity of bringing in independent expertise and obtaining a third party valuation. If a third party valuation is obtained, such valuation will include an explanation, and the Board will aim at recording such valuation in its statement. It may be necessary to obtain a valuation from an independent expert where a competing bid is made and the bidder either is the main shareholder or has a connection to the Board members or executive personnel.

Transactions that have the effect of sale of the Company or a major component of it are to be decided on by shareholders at a shareholders' meeting.

Auditor

The auditor makes an annual presentation to the Board of a plan for the auditing work for the year. Further, the auditor has provided the Board with a written confirmation that the requirement of independence is met.

The auditor participates in the Board meeting that deals with the annual accounts, and the auditor has reviewed the companies' internal control with the Board. At these meetings, the auditor reviews any material changes to the Company's accounting principles, comments on any material estimated accounting figures and reports all matters on which there have been disagreement between the auditor and the Company's executive personnel. Once a year a meeting is held between the auditor and the Board, at which no representatives of Executive Management are present. In addition to the presentations to the full Board, the auditor is present at all audit committee meetings which occur throughout the year and presents both its preliminary and final audit findings to the committee during such meetings.

Guidelines have been established for Executive Management's use of auditors for services other than auditing. Auditors are to provide the Board with an annual overview of services other than auditing that have been supplied to the Company.

Remuneration for auditors is presented in note 3 to the consolidated accounts and note 2 to the parent company accounts, detailed in auditing and other services. In addition, these details are presented at the annual general meeting.

Presentation of the Board of Directors

Jim Miller Board Chairman

Jim Miller (b. 1955) is Executive Vice President of E&C Americas at Kvaerner. Prior to that, Mr. Miller served as President and CEO of Aker Philadelphia Shipyard from June 2008 to April 2011. Before coming to the shipyard, Mr. Miller was President of Aker Solutions Process & Construction (P&C) Americas, where he was responsible for financial operations of seven business units which generated approximately 8-9 billion NOK in revenues per year. During his tenure, Aker Solutions P&C Americas became a leading provider of global engineering 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 the top three largest employers of the union construction trades. Mr. Miller graduated from the University of Edinboro in Pennsylvania with a BA. Mr. Miller is a U.S. citizen. As of 1 February 2014, Mr. Miller holds 20,000 shares in the company and has no stock options. He has been elected for the period 2013-2015.

Amy Humphreys Board Member

Amy Humphreys (b.1966) is President and CEO of Icicle Seafoods, Inc. Icicle's core business is the processing and marketing of seafood including salmon, pollock, crab, halibut, cod and herring in fisheries throughout Alaska, with both on-shore and floating processing facilities. Icicle also owns the largest United States salmon farming company located in the Pacific Northwest. Prior to joining Icicle Seafoods, Ms. Humphreys served as CFO of North Star Petroleum Group, the Petroleum Division of Saltchuk Resources including five fuel distribution 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 Saltchuk Resources. From 1996 to 2006, Ms. Humphreys held various leading positions in her 10 year tenure with American 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, has managed companies in the oil industry within an environment subject to OPA 90 regulation. Ms. Humphreys holds a Master of Business Administration (MBA), with honors, from University of Washington, is a Certified Public Accountant (CPA) and holds a Bachelor of Arts (BA) in Accounting and Finance, magna cum laude, from University of Puget Sound. Ms. Humphreys is a U.S. citizen. As of 1 February 2014, Ms. Humphreys holds zero shares in the company and has no stock options. She has been elected for the period 2012-2014.

Elin Karfjell Board Member

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

Manuel Stamatakis Board Member

Manuel Stamatakis (b. 1949) is president and chief executive officer of Capital Management Enterprises, a financial services and employee benefit consulting company. He served as one of the lead negotiators for Governor Tom Ridge's efforts to bring Kvaerner (now Aker Philadelphia Shipyard) to Philadelphia in order to operate a world-class shipbuilding facility at the Philadelphia Naval Shipyard. Mr. Stamatakis serves as the Chairman of the Philadelphia Shipyard Development Corporation (PSDC) and also serves on several other boards 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. Stamatakis also devotes his time and resources to several charitable activities in the Philadelphia region. Mr. Stamatakis achieved a Bachelor of Science degree in Industrial Engineering in 1969 from the Pennsylvania State University and an honorary doctorate from Drexel University in 2005. Mr. Stamatakis is a U.S. citizen. As of 1 February 2014, Mr. Stamatakis holds zero shares in the company and has no stock options. He has been elected for the period 2013-2015.

Audun Stensvold Deputy Board Chairman

Audun Stensvold (b. 1972) holds the position of Investment Director for Aker ASA. Previously, he was CFO and Investment Director for Converto Capital Management, which is the investment advisor for Aker Philadelphia Shipyard'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 was i.a. involved in the initial stock exchange listing of Aker Philadelphia Shipyard (then named Aker American Shipping ASA) and later follow-up of Aker's ownership in the yard. Before joining Aker, Mr. Stensvold worked as a strategy and finance consultant for Selmer, and as a financial analyst for DnB NOR. Mr. Stensvold holds an 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 the company and has no stock options. He has been elected for the period 2012-2014.

Presentation of the Management Team

Kristian Røkke President and CEO

Mr. Røkke (b. 1983) joined Aker Philadelphia Shipyard in 2007. Mr. Røkke has held various roles, including SVP Operations and Senior Shop Manager. Mr. Røkke has experience from offshore service and shipbuilding from several companies in the Aker group. Mr. Røkke is a Board Member of TRG Holding AS which owns 66.7% of Aker ASA. Mr. Røkke is currently completing his MBA at The Wharton School and has also studied economics and mathematics at Colby College, London School of Economics, and Political Science at the Norwegian School 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 Theisen Chief Financial Officer

Jeffrey Theisen (b. 1968) joined APSI in May 2007. Mr. Theisen has over 20 years of experience in financial and strategic planning, organizational leadership, budgeting and cost management, including seven years with Arthur Andersen. Prior to joining APSI, Mr. Theisen served as Chief Financial Officer for The Regulus Group, a market leader in transaction and information processing services to financial institutions and commercial endusers. Mr. Theisen holds a Bachelor of Science in Accounting from Villanova University and is a certified public accountant (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 Fadnes Vice 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 has worked in Converto Capital Management and Ernst & Young. Mr. Fadnes holds an MSc in Business and Economics from the Norwegian School of Economics and Business Administration (NHH) and an MSc in Professional Accountancy from the Norwegian School of Management (BI). Mr. Fadnes is a State Authorized Public Accountant in Norway. Mr. Fadnes lives in Oslo, Norway. As of 1 February 2014, Mr. Fadnes holds zero shares in the company and has no stock options.

Scott Clapham

Senior Vice President Projects and Business Improvements

Scott Clapham (b. 1974) has been with Aker Philadelphia Shipyard since its inception in 1998. Mr. Clapham provided 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 in Naval Architecture and Marine Engineering from the University of Michigan. Mr. Clapham lives in Fort Washington, PA, USA. Mr. Clapham is a U.S. citizen. As of 1 February 2014, Mr. Clapham holds 1,000 shares in the company and has no stock options.

Steinar Nerbøvik Senior Vice President Operations

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

Robert Fitzpatrick Vice President Production

Robert Fitzpatrick (b. 1964) joined Aker Philadelphia Shipyard in April 2001 and had held numerous key positions including Prefabrication Manager and Senior Production Manager before being promoted to VP Production in January 2007. Prior to coming to the shipyard, Mr. Fitzpatrick amassed 20 years of experience in industrial manufacturing including 12 years as a production manager responsible for the fabrication of naval circuit breakers and switchgear. Mr. Fitzpatrick holds a Bachelor of Science in Mechanical Engineering from Spring Garden College in Philadelphia, PA, USA. Mr. Fitzpatrick lives in Burlington, NJ, USA. Mr. Fitzpatrick is a U.S. citizen. As of 1 February 2014, Mr. Fitzpatrick holds zero shares in the company and has no stock options.

Michael Giantomaso Vice President Human Resources

Michael Giantomaso (b. 1966) joined Aker Philadelphia Shipyard as Human Resources Manager in May 1998 and was the shipyard's first locally hired manager. Mr. Giantomaso was promoted to VP in August 2001. He has over 20 years of human resources experience in the manufacturing and health care fields. Mr. Giantomaso holds 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 Deshmuk Vice President Purchasing

Sanjay Deshmuk (b. 1952) joined Aker Philadelphia Shipyard in 2000 and held several positions such as Design Manager, 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 30 years of experience in Engineering, Project Management and Procurement. Mr. Deshmuk has a Master of Business Administration (MBA) from Drexel University and holds a Bachelor of Engineering in Naval Architecture and Marine Engineering from the Indian Institute of Technology in India. Mr. Deshmuk lives in Somerdale, NJ, USA. Mr. Deshmuk is a U.S. citizen. As of 1 February 2014, Mr. Deshmuk holds 1,000 shares in the company and has no stock options.

Dean Grabelle

General Counsel

Dean Grabelle (b. 1970) was appointed General Counsel at Aker Philadelphia Shipyard in May 2008. Prior to joining 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 and acquisitions, business counseling, lending, private equity and corporate finance. Mr. Grabelle graduated from Duke University with a Bachelor of Arts in Economics and Public Policy Studies. He also holds a Juris Doctor from 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.

Disclaimer

This annual report includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets 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 Aker Philadelphia Shipyard Group's businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time. Although Aker Philadelphia Shipyard ASA believes that its expectations and the information in this annual report were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this annual report. Neither Aker Philadelphia Shipyard ASA nor any other company within the Aker Philadelphia Shipyard Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the annual report, and neither Aker Philadelphia Shipyard ASA, any other company within the Aker Philadelphia Shipyard Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the annual report.

Aker Philadelphia Shipyard ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the 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. Aker Philadelphia 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 useful purpose is served by identifying any particular Aker Philadelphia Shipyard company.

Aker Philadelphia Shipyard ASA

Fjordalleen 16, Postboks 1423 Vika, NO-0115 Oslo, Norway Tel: + 47 24 13 00 00, Fax: + 47 24 13 01 01

Aker Philadelphia Shipyard, Inc.

2100 Kitty Hawk Avenue Philadelphia, PA 19112 USA Tel: +1 (215) 875 2600, Fax: +1 (215) 875 2700

website: www.akerphiladelphia.com email: info@akerphiladelphia.com

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The annual reports of Aker Philadelphia Shipyard ASA are available via the Internet: www. akerphiladelphia.com. Alternatively, Aker Philadelphia Shipyard ASA encourages its shareholders to subscribe to the company's annual reports via the electronic delivery system of the Norwegian Central Securities Depository (VPS). Please note that VPS services (VPS lnvestortjenester) are designed primarily for Norwegian shareholders. Subscribers to this service receive annual reports in PDF format by email. VPS distribution takes place at the same time as distribution of the printed version of Aker Philadelphia Shipyard's annual report to shareholders who have requested it.

Electronic distribution is the fastest channel for accessing company information; it is also cost-effective and environmentally friendly.

Photos/illustrations: All photos courtesy of Aker Philadelphia Shipyard, Inc. and Charles Cerrone Photography

Layout/production: RR Donnelley

Annual report 2013

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