Bear Report 21032008

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Project Bear
Financial and Tax Due Diligence
Strictly Private and Confidential 12 March 2008
Transaction Services
FLC West Holding S.a.r.l. 15, Boulevard Roosevelt L-2450 Luxemburg 12 March 2008 Dear Sirs, In accordance with your instructions as confirmed in our contrac t 365/01/08/TS dated 17 January 2008 (the Contract - Appendix 1), we report on current operations of: AY Group in Ukraine (represented by the company Aker Yards Ukraine Holding AS (the Company) and its subsidiaries Aker Yards Ukraine BV, Aker Yards Design CJSC, Okean BV, Damen Shipyard Okean OJSC); and AY Group in Germany (represented by the company Aker MTW Werft GmbH and its subsidiaries Aker Warnemnde Operations GmbH, Aker Warnemnde Real Estate GmbH, Aker MTW Grundstcksverwaltung GmbH, Arctic Personaldienstleistung GmbH and Warnow Design GmbH).
PricewaterhouseCoopers Russia B.V. Kosmodamianskaya Nab. 52, Bld. 5 115054 Moscow Russia Telephone +7 (495) 967 6000 Facsimile +7 (495) 967 6001 www.pwc.ru Doug Miller Partner E mail: doug.r.miller@ru.pwc.com Telephone: +7 495 967 6301 Mobile: +7 905 543 0917 Fax: +7 495 967 6016 Dmitry Rembovsky Director E mail: dmitry.rembovsky@ru.pwc.com Telephone: +7 495 232 5736 Mobile: +7 903 961 2011 Fax: +7 495 967 6016 Matthias Buehler Senior Manager E mail: matthias.buehler@de.pwc.com Telephone: +49 69 9585 5886 Mobile: +49 151 167 63 978 Fax: +49 69 9585 956325
The companies listed above are referred to together as the Group. This report has been prepared for the purposes of the proposed acquisition by FLC West Holding S.a.r.l. from Aker Yards Holding AS (the Vendors) of a 70% stake in the Company that at the completion date will own directly or indirectly the legal entities listed above (refer to page 6) (the Transaction). We draw your attention to important comments regarding the scope and process of our work, set out immediately after Table of contents. You may not make copies of this report available to other person s except as described in the Contract, and subject to the conditions described therein. We will not accept any dut y of care (whether in contract, tort (including negligence) or otherwise) to any person other than you, except under the arrangements described in the Contract. Yours faithfully
Table of contents
Page 1 Executive Summary 1.1 Business overview 1.2 Key deal issues Financial 1.3 Key deal issues Tax 2 Group overview 2.1 Business overview 2.2 Standalone issues 2.3 Quality of earnings analysis 2.4 Pro forma combined financial statements 2.5 Working capital and net debt 2.6 Management and Staff 3 Historical trading 3.1 Germany 3.2 Ukraine 3.3 Past budgeting accuracy 1 3 7 21 33 34 44 51 55 58 63 67 69 77 84
Table of Contents
Page 4 Business Plan 4.1 Business Plan Germany 4.2 Business Plan Ukraine 5 Net assets 5.1 Germany 5.2 Ukraine 6 7 Cash flows Taxation 7.1 Taxation Ukraine 7.2 Taxation Germany 7.3 Taxation Netherlands 7.4 Taxation Norway Appendices 1 2 Contract Group Overview 2.1 Business Overview 172 188 189 93 104 119 127 128 131 135 137 138 148 158 166
Table of Contents
Page 2.2 Pro forma combined financial statements Germany 2.3 Pro forma combined financial statements Ukraine 2.4 Working Capital and Net Debt - Ukraine 2.5 Other Matters 3 4 Past Budgeting accuracy Business Plan 4.1 Business Plan - Germany 5 6 Key outstanding information Glossary 201
209
214 219 225 234 235 242 246
Summary of important due diligence process and information matters

Access to information We primarily obtained information from: The documents included in the physical dataroom from 14 January 2008 through to 29 February 2008; including answers provided to our questions asked in Question Log; In addition, we were provided with management comments and explanations: during several management presentations and meetings in Oslo (Norway); during a meeting with local management of DSO in Odessa (Ukraine) on 24 January 2008. Various conference calls with German, Ukrainian and AY Group headquarters management. Overall, available information provided a basis to analyse the significant drivers and issues of the business. However, we have not yet received certain important information as detailed in Appendix 5. Our work was impacted by delays caused by the way dataroom proc ess was organised. Answers generated in the Q&A process and other important documents were delivered with significant delays. In general, no documents besides the final Business Plan were provided in electronic versions which negatively affected efficiency of our work. In addition, shortly before finalising our report we received some individual documents in electronic form. We draw to your attention that the level of comfort that can be gained from a dataroom due diligence within a limited time frame may be significantly less than that which could be obtained with no limitations on access to the target and their management. As a consequence, it is possible that, despite our best efforts, some issues relevant to your decisions a) may not be identified or b) may be identified but not addressed due to the absence of relevant information or c) may be identified but mis-analysed. Access to management According to Term sheet signed between Aker Yards Holding AS and FLC West Holding S.a.r.l. our access to management was limited to interviews and management presentations generally conducted by the Vendors upon our request and were attended and minuted by their legal advisors Wikborg Rein & Co., Oslo. Such restrictions comprise a common practice in the dataroom situation. According to AY Group management our access to management was limited to prevent leakage of information that may impact AY ASA shares listed at Oslo stock exchange.

Access to auditors We also had telephone discussions with the Group's auditors, Ernst & Young (E&Y), on 7 March 2008 (E&Y Ukraine) and 10 March 2008 (E&Y Germany) and discussed the audit of the Group reporting packages for 2006 and 2007. We have not reviewed their respective working papers. Historically, the Group entities have been and are functioning as a part of a AY Group, and produces a substantial amount of financial information for internal and external reporting requirements. We understand that the Group entities reporting systems cannot be readily mapped to the Groups standalone operating structure which forms the basis of the projections. Accordingly, it can be difficult to obtain robust explanations of the Group at a business unit level and compare the historical performance with budgeted performance. The information provided to us including management comments and explanations has allowed us to gain insight and understanding into some of the more significant risks, trends, and issues. It should be noted however that we have been provided with different sets of financial statements (local management accounts, audited financial statements of individual companies, Business Plan) which could not be readily reconciled to each other and therefore limited our ability to analyse certain aspects in depth. Furthermore, the Business Plan has been reworked during our dataroom phase and we have not been provided with details of the initial Business Plan.
Clarity of information

Significant scope matters Management did not provide any detailed assumptions underlying the Business Plan. A full reconciliation of segmental trading to the management accounts is also outstanding. The due diligence process is slowed down by the way the dataroom is organised, information is provided to us and questions and answers are handled by the Vendors side. We point out that the scope of our work did not include: The legal compliance of the Group; The external marketplace (market size), segmentation, growth trends, the competitive environment (key competitors, market shares) and the Groups strategic positioning strategies; The appropriateness or sufficiency of the Groups insurance arrangements; Any environmental exposures of the Group or the adequacy of the Groups system for identifying and controlling such exposures; The nature and adequacy of the Groups pension arrangements; and Operational due diligence.

PFI (Prospective financial information) Management's prospective financial information (PFI) as prepared and presented to us is identified as managements PFI. Management's PFI was prepared by management of the Group to reflect their assessment of the most likely future outcome. Management made the assumptions, gathered the information and processed the data. We did not assist in the preparation of management's PFI. Management has full responsibility for the judgements involved in, and results of, its PFI preparation process. In our report we have included tables, the sole purpose of which is to assist your evaluation of management's PFI by illustrating the potential ramifications, individually and in aggregate, of our review of the assumptions made by management and the accounting treatments used by management in preparing the PFI. The presentation of the results of our review constitutes neither a restatement of management's PFI nor the preparation of alternative PFI (since such restatement or alternative PFI can only be made by management). The extent to which management's PFI is subsequently amended by any or all of the potential adjustments we have identified, is a matter for decision by you, and solely your responsibility. Because events and circumstances frequently do not occur as expected, there will usually be differences between predicted and actual results, and those differences may be material. We take no responsibility for the achievement of predicted results. We understand that the latest PFI (Business Plan) has been prepared in several stages: local management of German and Ukrainian operations provided Group headquarters with business plans developed on detailed assumptions; PFI (Business Plan) was amended and developed by headquarters management whereas local management was not aware of all reasons for those adjustments. We also understand that only high level assumptions were used by the management for FY08-FY12 Business Plan.
There are three main sources of financial information on the Groups business and those have been used in this report
Source Key features Used in the report for Comments
Audited financial statements
Local GAAP: Clean audit opinions for FY05 and FY06; FY07 not received yet. (Audited by Ernst & Young) No audited IFRS financial statements for individual Group companies Different models for Germany and Ukraine Business Plan contains only profit and loss statements to EBT level from FY08 to FY12 with 3 years of historical figures (FY05-FY07)
Pro forma analysis Balance sheet analysis Reconciliation to management accounts
Some reconciliation items on a line-by-line item basis are still outstanding EBITDA and equity could be reconciled
Business Plan
Projections and future strategy Vessel type analysis Reconciliation to management accounts and audit reports
Financial models do not contain a detailed description of the underlying assumptions High level assumptions were made available in presentation but could not always be linked to Business Plan Consolidated Group P&L was not provided Due to reclassification and netting we could not reconcile all line items in the income statements and balance sheets Since bottom line results could be reconciled we consider the provided management accounts as a reliable source although some analysis was limited
Project analysis Order backlog Project revenues and results Cash flow analyses (also derived from Business Plan)
Management accounts
Prepared monthly by local management in accordance with IFRS Contains profit and loss statement and balance sheet (only at quarter end) Project reconciliation
Important note on sources of information for AY Ukraine

Historically, AYU did not prepare the consolidated financial statements for AY Ukraine Holding. However, for the purposes of the Transaction the management prepared consolidated financial statements of AY Ukraine Holding for FY06 and FY07. These consolidated statements, which they stated are prepared in accordance with IFRS, have not and will not be audited, and will be attached to SPA as Schedules 1B and 1C. These financial statements, that include AY Ukraine Holding AS, AYDU B.V., Okean B.V., DSO, AUDU, were prepared as follows: individual statements of each company were added together, the intercompany balances and operations were eliminated, certain consolidation and top-level adjustments were made (elimination of investments, recognition of goodwill, recognition of Production Royalty liability to Damen). There are several sources of financial information provided in the dataroom in respect of AYU used for our analysis: Statutory accounts of DSO and AYDU prepared in accordance with Ukrainian GAAP, Quarterly internal reports of DSO prepared in accordance with IFRS for the purposes of AY Group reporting. The Internal reports comprise Balance Sheet, Income Statement and breakdowns of certain major items. It should be noted that we have not been provided with Group reporting packages of DSO under IFRS. Balance Sheet and Income Statement of AYDU extracted from Group reporting packages.
We used Internal reports as the main source of financial information about DSO position and operations. Our analysis was performed at the following levels: Net debt at consolidated AY Ukraine Holding level, Balance Sheet, Working capital at DSO and AYDU combined level, Trading results at DSO and AYDU combined level.
Summary exchange rates

Ukrainian Hryvnia (UAH) for 1 EUR Closing exchange rate Average exchange rate
Source: National Bank of Ukraine, www.bank.gov.ua
FY05 5.97 6.39
FY06 6.65 6.34
FY07 7.42 6.92
The Internal reports were prepared in Ukrainian Hryvnia (UAH) for your convenience we provide opposite the information on the exchange rates used to convert UAH into EUR. Closing and average exchange rates were applied to balance sheet and income statement amount respectively.
Section 1 Executive Summary
Section 1 - Executive Summary
The Group consists of two state-of-the-art German shipyards and one Ukrainian shipyard with a total revenue of 786m and an EBITDA margin of 1.1% in FY07
1
The Groupt consists of two German and one Ukrainian shipyards with total steel capacity of some 130,000 t/p.a. and with approximately 5,000 employees
2
The three yards account for approximately 88% of the Merchant Vessel business segment of Aker Yards ASA
3
The two German shipyards have stateof-the-art facilities modernized in the 1990s
4
Significant profitability increase projected from FY08 due to change in product mix for higher value added vessels such as Arctic-line, Iceclass, Ro-Pax and LNG vessels
12
Certain tax warranties and indemnities are included in the draft SPA upon results of tax due diligence
in m illions
Group - Total Revenues and EBITDA development 10% 951 786

800
5
963 8.1% 7.1% 5.0% 9.1% 9% 935 8% 7% 6% 5% 4% 3% 2%
1,200 1,000
CAGR FY07-12
3.5%
847 755 6.8%
Historical profitability of German yards has been low, reflecting the intense competition for container vessels from Asian shipyards
588
600 400 200
514 3.2% 1.2% 7.0

FY06 Act
11
The Groups EBITDA projected in the Business Plan is sensitive to potential changes in direct material and fabrication costs
6
59%
16.6
FY05 Act
1.1% 8.5
FY07 Act
51.0
FY08 Plan
42.7
FY09 Plan EBITDA
67.2
FY10 Plan
77.8
FY11 Plan
85.1
1% 0%
FY12 Plan
Total Revenues
EBITDA-margin
Current orderbook: Germany: 15 vessels with contract value of 1.48bn until FY10 Ukraine: 71m until FY09
Source: Business Plan version 6.02.2008
10
Significant operating efficiency improvements are projected for AYU, such as decrease of fabrication hours per ton steel by 35%
9
Actual profitability of Ukrainian operations is unclear as most projects are inter-company
German shipyards function quite independently. Aker Yards ASA charged AYG 2.8m and DSO 1m of group charges in FY07
Ongoing and post deal access to LNG (on exclusive basis in respect of CIS countries) and Ice-class technologies within AY Group
Section 1.1 Business overview
Section 1.1 - Business overview
The Group consists of three shipyards operating in Merchant vessel segment (1/2)
The Group
Chemical tanker Ro-pax Arctic container vessel General cargo Container vessel MPV*
The Group is a part of Merchant Vessel segment of AY Group, one of the worlds largest shipbuilders and the largest one in Europe. In FY06, the Merchant Vessel segment delivered 22 vessels, of which 13 were delivered by two German shipyards of the Group (FY05: 10). In FY07, 15 vessels were delivered. Main products of the Group consist of container vessels and arctic vessels. The orderbook also includes RoRo/Ropax vessels. The Group will have approximately 5,000 employees. AYG has state-of-the-art production facilities and historically concentrated on construction and fabrication of small- and middle-class container vessels with capacities between 1,700TEU and 2,700TEU. AYG current orderbook consists of 15 vessels (and one section) at a total contract value of approximately 1.48bn.
Aker Yards Germany Aker Yards Warnemnde

Einar Brnlund
Aker Yards Ukraine Damen Shipyards Ukraine

Torben Levinsen
Aker Yards Wismar

Einar Brnlund
Employees: Area: Building dock: Dock shop: Crane capacity: Building capacity: Steel capacity:
1,302 560,000m 340 x 67 x 13.4m 395 x 155 x 72m up to 1000t up to 300,000dwt 55,000t/p.a.
986 850,000m 320 x 54 x 10.7m 165 x 125 x 47m up to 700t up to 200,000dwt 55,000t/p.a.
2,675 1,300,000m 365 x 40 x 14m 140 x 21m (Floating dock) 2 x 320t 20,000t/p.a.
Subsidiaries
Warnow design
Aker Yards Design Ukraine
* Multi Purpose Vessels For further details on production facilities and company history please see Appendix. Source: Management presentation; DR Ref. 16.7.2
The Group
DSO produces complete vessels and hulls as well as modules and sections. The construction is carried out at two main producing lines. Most of the sales are made to Damen Group and AY Group entities. The only external client is the Ukrainian shipping firm Ukrrichflot. AYU orderbook consists of 5 vessels and 10 sections with a contract value of 71m. Warnow Design and Aker Yards Design Ukraine provide engineering and design services for the shipyards.

Einar Brnlund

Torben Levinsen
Aker Yards Wismar

Einar Brnlund
Subsidiaries
Warnow design
For the Purpose of the Transaction German Entities will be consolidated under AY Ukraine Holding
Aker Yards Holding AS
30%
FLC West Holding S.a.r.l.

70%
Aker Yards Ukraine Holding AS (to be renamed)
Warnow Design GmbH
Aker Yards Design Ukraine BV
Okean BV
AY SC-1 BV
AY AC-1 BV
AY SC-2 BV
AY AC-2 BV
Aker MTW Werft GmbH Aker Warnemnde Real Estate GmbH Aker Warnemnde Operations GmbH Aker MTW Grundstcksverwaltung GmbH Arctic Personaldienstleistung GmbH (49%)
Aker Yards Design Ukraine CJSC

Source: Management reports
Formed only due to legal reasons

Damen Shipyards Okean OJSC
Currently, Aker MTW Werft in Wismar and Aker Warnem nde Real Estate, Rostock as well as Aker Warnemnde Operations belong to German division (AYG) of the Norwegian shipbuilding company Aker Yards ASA, Oslo. For the purposes of the Transaction Aker MTW and Warnow Design will be transferred to AY Ukraine Holding. The operational parts of AYG are Aker MTW Werft GmbH in Wismar and Aker Warnemnde Operations GmbH in Warnemnde. Plant and property for Aker MTW Werft, Wismar is held by Aker MTW Grundstcksverwaltung GmbH. In case of Aker Warnemnde Operations, Aker Warnemnde Real Estate GmbH owns the assets, which are rented for over 25 years (to expire on 23 April 2009). Arctic Personaldienstleistung GmbH provides fabrication personnel to the operative entities.
6
During 2000 2006, DSO was owned by the Dutch shipbuilding group Damen. In the middle of 2006, 50.01% shares in Okean B.V. were acquired by AY Group via AY Ukraine Holding AS. The remaining 49.99% stake in Okean B.V., was transferred to AY Group in February 2008.
Aker Yards Ukraine Holding AS has established four legal entities AY SC-1 BV, AY AC-1 BV, AY SC-2 BV and AY AC-2 BV for legal purposes only. Each of the four entities holds one share of Damen Shipyards Okean OJSC. Aker Yards Design Ukraine performs engineering and design tasks for DSO and other yards in the AY Group (AY Floro and AMTW).
If not otherwise stated, the entities own 100% of the subsidiaries. 1 share
Section 1.2 Key deal issues Financial
Section 1.2 - Key deal issues Financial
Business Plan
Issue
The Business Plan provided to us appears very optimistic, particularly considering historical performance and historical forecasting accuracy
Commentary
The latest Business Plan was provided on 6 February 2008. The Business Plan does not contain detailed description of the assumptions underlying the projected results. High level assumptions were made available in a presentation but could not always be linked to Business Plan. Combined EBITDA margin of 1.1% (Germany : 2.0%, Ukraine 7.4%) in FY07 is projected to increase significantly to 9.1% (Germany: 9.3%, Ukraine 8.3%) in FY12 (Hockey-stick effect). Due diligence comfort regarding revenue projections can be obtained to a certain extent from existing contracts in the order backlog for the years until FY10. However, we identified significant man hours and material overruns in the past that may adversely impact achievability of budgeted profitability. The strategy for the Group, as stated by management, is based on changes in the product mix (i.e. production of more complex vessels with higher margins). It should be noted that the Group does not have a track record for building most of the new vessels types over last three years, though, according to the management the Group has principal technologies for construction of these vessels. In addition, the Group will need to establish the necessary customer relationships in these areas. In order to build up and increase the client base and market presence, management has started marketing and sales initiatives, which have to be implemented and enhanced after acquisition of the Group. Significant profits are expected in FY08 from the construction of the Iceclass vessels from the current Orderbook ( 32.4m project result means contribution to EBIT). The main profit contribution is projected to result from 5 RoPax vessels and 6 Ice-class vessels delivered FY09 onwards. Management stated at the end of February 2008 that they are still optimistic to achieve the budget for FY08, however we have not been provided with any details to support the statement.
Analysis
Group - Revenue by Country
1200 1000 800 600
76.6 56.5 55.8 532.6 709.7
75.4
128.6
194.2
214.8
207.8
400 200 0 FY05 Act FY06 Act
679.7
717.9
756.4
748.7
727.1
457.0
FY07 Act
FY08 Plan
FY09 Plan
FY10 Plan
FY11 Plan
FY12 Plan
Total Revenues Germany
Total Revenues Ukraine
Group Total Sales : Booked vs. New Sales

1,200 1,000 800 600 400 200 -
22 330 884 728

FY08 Plan
960 FY11 Plan New Sales Bear
931 FY12 Plan
512 63
FY09 Plan Orderbook Bear FY10 Plan
Group - EBITDA Margin Development

10% 8.0% 8% 6.0% 6% 4.4% 4% 2.1% 3.2% 2% 1.2% 2.0% 1.1% -0.3% -2% 5.0% 6.8% 7.7% 7.1% 6.9% 8.9% 8.1% 7.8% 9.3% 9.1% 8.3%
0%
-4% -6% -6.0% -8% -7.9% -10% FY05 Act FY06 Act -7.4% -4.8%
FY07 Act
FY08 Plan
FY09 Plan EBITDA-margin
FY10 Plan EBITDA-margin Group
FY11 Plan
FY12 Plan
EBITDA-margin Germany
Sensitivity analysis Impact on earnings by changes in operating costs

Issue
Sensitivity analysis illustrates significant impact of changes in direct material and fabrication costs on EBITDA
Commentary
The graph presented opposite demonstrates a high sensitivity of EBITDA regarding market driven changes in direct material costs or process driven overruns in fabrication costs. The combined effect on earnings (market and process driven) is illustrated in the adjacent table. For further information we refer to the detailed analysis in the report. In order to illustrate these impacts on the underlying earnings we calculated two scenario cases (market driven and process driven) based on the assumptions for the deviation of the main operating cost positions. The assumptions were derived from the historical budget accuracy analysis AYG and applied to the combined Group numbers in our analysis.
Analysis
Sensitivity analysis - EBITDA comparison to mgmt. Case
in millions EBITDA as per Bus iness Plan (Mgmt. case) Cash Flow approximation as per BP* EBITDA - optimistic case
EBITDA change to mgmt. case
FY08 Plan 51.0 66.3

30.0%
FY09 Plan 42.7 60.0

40.4%
FY10 Plan 67.2 86.6

28.8%
FY11 Plan 77.8 97.3

25.0%
FY12 Plan 85.1 103.4

21.6%
EBITDA - pes simistic case

33.1
22.8
44.3
54.4
64.0
-24.8%
-35.1% -46.7%
-34.2% -30.2%
Sensitivity EBITDA - comparison to mgmt.case

120.0 100.0 80.0 60.0 40.0 20.0 FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan
in millions
EBITDA - Management case
EBITDA - Opimistic case
EBITDA - Pessimistic case
Source: Business Plan version 6.02.2008, PwC Analysis
Historical trading Germany

Issue
The historical profitability in Germany has been rather low
Commentary
The historical profitability in Germany has been rather low, reflecting the low margins earned mainly on container vessels (38 container vessels were delivered between FY05 and FY07). Even though the increase in revenues from FY05 to FY07 has been significant (+55%), the reported EBITDA decreased from 20m in FY05 to 14.2m in FY07, which is mainly caused by strong increase of direct material and other direct costs (FY05 63.3%, FY07 70.2% of sales revenues). We understand from the management comments that the decrease of the profitability was partly due to a general situation in shipbuilding industry affected by fast rising steel and equipment prices. FY06 was mainly influenced by the growth of sales revenues of 16.5% to 532m. Major cost components increased proportionally with the exception of overhead cost. These costs were mainly affected by the recognition of provisions for the early retirement scheme ( 11.3m, considered a one-off-item). In FY07, the Business Plan shows sales revenues from projects of 689m. However, total operating costs (without depreciation) of 696m exceeded project revenues. This is mainly due to the increase in material and fabrication costs for the container vessels CS1700 and CS2100 as a result of design errors by design divisions. Other revenues of 21m allowed AYG to achieve positive EBITDA of 14m.
Analysis
EBIT DA Br id ge F Y 05-F Y06 (rep or ted )
120
in m il lions
100 80 60 40 20 0 FY05 20.0
75.6
( 50.9)
(16.2) (17.1) 11.4
Total revenues
Direct Fabr ication Overheads Material and and Design other costs costs
FY06
EBITDA Bridge FY06 - FY07 (reported)

200 180 160 140 120 100 80 60 40 20 0 156.2 20. 9
in mi lli ons
(143 .7)
11.4
FY06 Di rect material and ot her c ost s sales revenues other revenues
(21.0)
Fabriact i on and design costs
(9.6)
Overheads
14.2
FY07
10
Historical trading Ukraine

Issue
Historical trading Ukraine
Commentary
Based on information provided in the dataroom, it was not possible to understand the actual profitability of the Ukrainian shipyard mainly because most of the projects are inter-company. The majority of such projects were loss-making, while as represented by management of DSO, the prices fixed for such projects are on arms length principle. We requested, but were not provided with the figures representing profit generated by AY Group outside Ukraine that relate to Ukrainian contracts. In addition, all projects carried out for Ukrrichflot, the only external customer of DSO, during FY05-FY07 were unprofitable (with negative EBIT). In FY07, DSO increased considerably the sales as new orders from AY Group were received. However, the EBITDA is still negative due to increased overheads (one of the major components reinvoiced AY Group charges increased by 2.4m).
Analysis
EBITDA Bridge FY05-06 (reported)
2
i n mil li ons
4.4
0 -2 -4 -6 -8
FY05 Total sales Direct materials Fabrication and design costs
(2.1) (3.1) (0.7) (4.7)

Other project costs
2 (4.2)
Overheads
FY06
EBITDA Bridge FY06-FY07 (reported)

20 15
in mill io ns
20.8
10 5 0 -5 -10 (4.2)
FY06 Total sales Direct materials
3.8 (14.4) (3.5) (7.8)

Fabrication and design costs Other project costs Ov erheads
(5.3)
FY07
11
Quality of earnings
Issue
Quality of earnings: FY07 combined EBITDA for nonrecurring items was 5.7m lower than reported
Commentary
Germany Management of AYG provided us with certain one-off and nonoperating items for FY05-FY07. We concur with proposed adjustments by management. As a result, reported EBITDA has been adjusted as follows: Reported EBITDA in FY05 and FY07 has been adjusted downwards due to income considered to be one-off or nonoperating by management. This income mainly relates to the reversal of accruals and allowances. Reported EBITDA in FY06 has been negatively affected mainly by the recognition of a provision for early retirement.
Analysis
Quality of Earnings
in millions AYG EBITDA as reported Total management adjustments Adjusted EBITDA
% of Sales EBITDA Adjusted EBITDA
FY05 Act 20.0 (3.0) 17.0

4.4% 3.7%
FY06 Act 11.4 8.8 20.2

2.1% 3.8%
FY07 Act 14.2 (5.0) 9.2

2.0% 1.3%
Ukraine
AYU EBITDA as reported Total management adjustments Adjusted EBITDA

(3.1) (3.1)
(4.2) (3.7) (7.9)
(5.3) (0.7) (6.0)
Reported EBITDA was adjusted for one-off and non-recurring items result in lower EBITDA. As mentioned earlier, there is a potential upside, should EBITDA be adjusted for profits generated outside Ukraine.
-5.4% -7.2% -5.4% -13.5%
-7.1% -8.0%
Group EBITDA Group Total management adjustments

Adjusted EBITDA % of Sales EBITDA Adjusted EBITDA
16.9 (3.0) 13.9
7.2 5.1 12.3
8.9 (5.7) 3.2
3.3% 2.7%
1.2% 2.1%
1.1% 0.4%
Source: DR Ref. 17.11.3.1, 17.11.3.2, 17.11.3.3, 3.1.2.2.1-3; 32.72, 68.1223, PwC Analysis
12
Historical forecasting accuracy

Issue
The Group historical budgeting has been inaccurate
Commentary
The historical budgeting appears to be inaccurate, largely as a result of failure to predict and/or hedge against changes of steel and equipment prices and frequent underestimation of fabrication cost/time, and the actual results in FY05-FY07 (adjusted as detailed on previous page) were significantly below the budget with an exception of AYG in FY05. The outperformance of the budget in FY05 for AYG by 19.2% is partly attributable to one-off and non-operating items of 3.0m. In FY06 and FY07, the budgets for AYG have been clearly missed. The actual and especially the adjusted EBITDA for FY07 are significantly below the budget. We suppose that historical inaccuracy may impact achievability of AYGs projections going forward. The remaining deviation between adjusted and budgeted results of AYG is mainly caused by over recovery of costs in FY05 ( 3.6m) and under recovery of costs in FY06 ( -7.4m) and FY07 ( -11.8m). In FY07 the budget overrun mainly related to CS 2100 vessels ( 8m) affected EBITDA negatively. AYGs management stated that additional crosschecking methodologies have been introduced in the design process. AYU management did not provide us with detailed explanations of variations but major factors impacting underperformance in FY07 were: increase of raw materials costs exceeded the growth of revenues, salaries costs have increased significantly as result of salaries rises. AY Group costs were recharged to DSO in full.
Analysis
EBITDA AYG - Past Budgeting Accuracy
in millions Actual Adjusted EBITDA Budget Variance
in % of adjusted EBITDA Variance
FY05 20.0 17.0 13.7 3.3
FY06 11.4 20.2 26.7 (6.5)
FY07 14.2 9.2 31.6 (22.4)
19.2% -32.0% -242.9%
Source: DR Ref. 31.35 - 31.36, 68.1222 (replaces 31.37); 31.35 - 31.36, 68.1222, Business Plan version 6.02.208, PwC Analysis
EBITDA - Past Budgeting Accuracy

in millions Actual Adjusted EBITDA Budget Variance in % of adjusted EBITDA Variance
Source: DR, PwC Analysis
FY05 (3.1) (3.1) 1.0 (4.1)
FY06 (4.2) (7.9) 4.8 (12.7)
FY07 (5.3) (6.1) 7.0 (13.1)
131%
161%
215%
13
AYG orderbook and profitability of individual vessel types

Issue
Orderbook AYG contains 15 vessels with a contract value of 1,482m as at 31 December 2007
Commentary
The current AYG orderbook contains contract values of 1,482m as at 31 December 2007. Container vessels still show the highest share of the current order backlog ( 719m). In FY07, 15 ships were delivered (contract volume 584m) and one contract for 6 CS2800 container vessels (contract volume 257m) was acquired. Financing for 4 of these vessels (150m) has not been secured by the customer as of the end of February 2008. The current orderbook contains vessels that will be delivered by Q1 FY10. The projected revenues (fabrication capacities) are covered by the current orderbook - 96% (99%) for FY08, 61% (67%) for FY09 and 7% (6%) for FY10. In addition we were informed by management that on 20 February 2008, a contract for 2 Arctic Line vessels with Royal Arctic Line, with a contract volume of 82m was signed. The tender was included in the project hotlist and therefore is reflected in Business Plan. Container vessels, the main source of revenue in the periods under review, generally generated low or negative project margins (i.e. between +3.3% for CS2700 (26 vessels) and -5.6% for CS2100 (5 vessels)). According to management, negative results for CS2100 vessels were mainly caused by steel weight overruns and a significantly higher number of building pieces with higher fabrication costs. For some vessels, competition-aid subsidies had been granted until Q1FY05 (Last payments will be received in FY08). Project results without these subsidies would convert to negative figures for CS2500 and CS2700. However, management stated that the customers were aware of these subsidies and, therefore considered them in price negotiations. The contracted RoPax and CS650 vessels show higher contract volumes and profitabilities and mark the change in product mix.
14
Analysis
Order backlog as at Dec 31, 2007 Contract values (1,482 M )
1.3% 22.4%
48.5%
27.7%
Container ships
RoPax
Ice-class
Hulls/ ships's sections
Source: DR Ref. 3.1.2.2.1-3, Business Plan version 6.02.2008
Profitability of individual vessel types
Project Results (based on Project Reports FY05-FY07)

15% 10% 5% 0% -5% -10%
CS1700 CS2100 CS2500 CS2700 CS2800 CS650 RoPax
number of ships analysed 14 5 6 26 6 4 2
w ith subsidies
w ithout subsidies
Source: Project Calculations, PwC Analysis
Potential projects under negotiation (project hotlist)

Issue
Current AYG project hotlist shows a volume of 2,189m as at January 2008
Commentary
RoRo, Arctic Line and Special vessels contribute 81% to the total volume of 2,189m. According to management, approximately 26% of the hotlist projects are considered to be Priority 1 ( 564m) and are expected to be contracted in the near future. AYG project hotlist reflects its effort to enter into new market segments. Container vessel comprise only some 12% of the total hotlist volume but are not in the focus.
Analysis
AYG: Project Hotlist as at Dec 31, 2007 by vessel types

Total approx. value = 2,189 M
15% 12%
16%
32%
7%
18%
Container
Arctic line
RoPax
RoRo
Gas
Special
15
Standalone issues
Issue
Standalone issues are not clearly identified
Commentary
As a part of larger AY Group the Groups entities received some support from headquarters and other companies of AY Group. We were provided with current Management Services Agreements and a schedule summarising the effects on earnings, had the Group operated on a standalone basis for historical and future periods (FY08FY10). For AYU, we were only provided with historical information for FY05-07. Additionally management submitted shortly before finalising our report a detailed table of current group charges FY07 and a nonquantified opinion on the future development of these cost positions. However, we were not able to reconcile the total amount to the information for the group charges provided for AYG and AYU in the dataroom (unreconciled difference of 0.4m). From our discussions with the local management of the Group we understand that they are actually not aware of the reason for the reconciling differences to the information in the dataroom. In addition, management stated that other intercompany relationships with AY Group might exist that are not documented and therefore, current management may not be aware of them. According to management associated costs should not be material. Besides the Management services Agreement, the guarantees provided by the AY Group have to be replaced in the future.
Analysis
We recommend to include a provision in the final SPA to limit additional costs that may occur after transaction and to disclose a full list of related parties to the Group and amounts involved for FY06 and FY07 as a separate schedule to the SPA. We further recommend to require the Vendors to make respective representations in relation to the completeness of this information.
Stand alone - Group charges

3.0
2.8 2.1 1.6 0.4
2.8 2.4
2.7
i n mi l li ons
2.5 2.0 1.5 1.0 0.5 FY05 Act
2.5
0.3
FY06 Act
FY07 Act
FY08 Plan
FY09 Plan
FY10 Plan
Germany
Ukraine
Source: DR Ref. 46.505, 24.4.2, Question Log FDD No. 85, PwC Analysis
16
Net debt definition

Issue
Net debt definition
Commentary
Based on Net Debt definition included in the latest draft SPA net debt totalled 16.2m as at 31 December 2007, resulting in a purchase price adjustment of 11.3m. However, the Vendors calculation does not include provisions for early retirement of 17.4m and for jubilee 1.0m that are recorded in the Vendors financial statements and represent actual future cash outflows similar to debt. We think that these amounts should be included in the net debt calculation, thereby increasing net debt balance as at 31 December 2007 by 18.4m and the respective component of price adjustment by 12.9m. In addition, in the latest draft SPA, the Vendors proposed to convert inter-company loans of Aker Yards Ukraine Holding totalling ca. ( 63.4m) into equity (price adjustment impact of 44.3m). While the net impact of this transaction is neutral, it may affect timing of cash flows and financing arrangements. We understand that legal aspects of those transactions are addressed in the course of your legal due diligence.
Analysis
Net debt - Group
in millions Germany Cash and Cash equivalents Interest -bearing short-term debt Provisions for pensions Net debt reported Ukraine Cash and Cash equivalents Loan payable to AY Group Loan payables to Damen Shipyards Cargo Vessel B.V. Long-term debt to Damen Group Interest-bearing short-term debt, internal Interest accured to AY Group Provisions for pensions Net debt reported Total reported Net debt Adjustments: Non current provisions Total adjusted Net debt Price adjustment (at 70%) Conversion of debt (at 70%) Price Adjustment 31. Dec FY07
98.1 (32.9) (0.3) 64.8 3.5 (41.5) (0.4) (20.0) (18.0) (1.8) (2.8) (81.0) (16.2) (18.4) (34.6) (24.2) 44.3 20.1
Source: SPA Schedule 12A.
17
Working capital definition

Issue
Working capital definition
Commentary
Management did not provide us with the definition of working capital other than current asset less current liabilities and with respective assumptions on benchmarking that are used for budgeting/control over working capital. For the purposes of SPA, price adjustments for the following definition are currently being discussed with the Vendors: Net Working Capital is defined as current assets excluding Cash less current liabilities excluding Indebtedness, as exemplified in SPA Schedule 12A. Current assets and current liabilities are classified according to IAS 1.57 and 1.60. For the classification the following principles are emphasized: realizing in the entitys normal operating cycle held for trading expected realization within 12 months* In addition, we suggest VAT balance relating to Ukrainian operations be excluded from working capital definition. The reason for the exclusion of this balance is that DSO currently cannot recover VAT in the normal course of operations due to on-going tax disputes and audits, which resulted in significant balance accumulated as of 31 December 2007 of 9.7m (net of provision of 1.1m). Management cannot estimate when this balance may be repaid while in January-February FY08 around 1m of this balance was received from Ukrainian budget (and another 1m became recoverable). We understand that a specific warranty in relation to recoverability of this balance is included in the draft SPA.
Analysis
Working Capital- Group
in millions Germany Total interest free short-term receivables, extern Total interest free short-term receivables, internal Interest-bearing short-term receivables, external Total interest-free current liabilities, external Total interest-free current liabilities, internal Net working capital Germany Ukraine Total interest free short-term receivables, extern Total interest free short-term receivables, internal Interest-bearing short-term receivables, external Total interest-free current liabilities, external Total interest-free current liabilities, internal Interest payable (Ukraine) Net working capital Ukraine Total Net Working Capital Adjustments (at 70%): Price Adjustment Total price adjustment 31. Dec FY07 218.6 1.3 1.0 (252.7) (4.1) (35.9) 49.3 5.3 (35.4) (5.9) (1.8) 11.4 (24.5) (17.1) (17.1)
Source: SPA Schedule 12A.
*excluding assets relating to fixed assets, capital expenditure and investments, to the extent such fixed assets, capital expenditure or investments presented in the Balance Sheet as of 31 December 2007
Source: SPA 28.02.2008
18
Subsequent events not included in the Business Plan and significant difference between cash flow approximation and Vendors valuation
Issue
Difference between cash flow approximation and Vendors valuation
Commentary
Business Plan presented in the dataroom does not include cash flow forecast. Shortly before finalising our report, management provided us with their updated cash flow approximation. The calculation was produced using EBITDA taken from Business Plan, revised capex projections provided by management and taxes calculated by applying a German tax rate of 30% and Ukrainian tax rate of 25% to forecast EBT as per Business Plan. For the purpose of the cash flow approximation management assumed a working capital level of 35m for the Group, which changes in line with the revenue projections. This definition of working capital definition is different to working capital stated in the respective SPA Schedule 12 and information could not reconcile to historical data provided in the dataroom. Management stated that the assumed working capital for the cash flow projection is more representative expression of the WC amount that the Group needs in the ordinary course of business. The resulting cash flow estimates are considerably lower than the initial valuation presented by the Vendor during the discussions of the Term sheet that may result in decrease of the purchase price in the SPA. Before finalising this report, management of AYG informed us that in early FY08 7 FTEs involved in specific LNG R&D activities of AYG will be transferred to a German subsidiary of AY Technology AS, Oslo. Management also stated that the LNG technology under consideration will most probably not be used by AYG in future and that other LNG technology and will be used for the ships included in the Business Plan (see comment opposite).
Analysis
Group Combined Cash Flow Approximation
in millions EBITDA Combined - Capital Expenditures +/- Working Capital change - Tax CF approximation CF as per vendor valuation Variance FY07 Act FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan
8.5 51.0 42.7 67.2 77.8 85.1 (19.6) (16.7) (13.4) (13.0) (13.0) (13.0) 1.3 (5.1) (5.9) (1.0) 1.4 (2.2) (14.1) (10.6) (16.3) (19.3) (21.5) (13.3) 21.6 13.6 32.1 44.6 51.9 28.1 20.3 37.4 50.0 56.2 (6.5) (6.7) (5.3) (5.4) (4.3)
Subsequent events which are not included in the Business Plan
We understand this matter has been covered by the LNG Technology Cooperation Agreement entered into by Aker Yards Technology AS and FLC West Holding S.a.r.l. The Agreement grants to FLC West Holding S.a.r.l. the exclusivity in respect of CIS countries.
19
Recoverability of input VAT, Konverse-invest claim, contingent liability and possible dispute in respect of the plot of land
Issue
Recoverability of input VAT
Commentary
As of 31 December 2007 DSO has accumulated the VAT receivable balance of 10.8m. We understand that since 3Q07 DSO has experienced significant difficulties with recovery of VAT from Ukrainian budget. We were informed by management that in FY08 DSO received from tax authorities around 1.0m. Management cannot estimate when DSO will be able to recover the remaining amount. There is an old dispute involving a promissory note issued by DSO. We understand that this dispute was settled, as provided by the settlement agreement between Damen Group and AY Group on 26 February 2008 (see details in Section 2.7).
Recommendation
We understand that a specific warranty in relation to recoverability of this balance is included in SPA.
Konverse-invest claim
We recommend you to analyse this issue in the course of your legal due diligence. We also recommend you to include in SPA specific warranty in relation to this dispute.
Contingent liabilities
AYG has taken over surety for a couple of loans of Lubmin with a total nominal amount of 17.0m.
We understand that specific warranties in respect of sureties provided to third parties are included in the draft SPA.
Possible dispute in respect of the plot of land
According to information provided in the dataroom, there is possibility of a dispute with Nikolaev city municipality regarding the plot of land acquired from the municipality in 2005. No documents have been provided in the dataroom in relation to this matter.
We understand that this issue has been addressed in the course of your legal due diligence. We also recommend to include respective warranties and representations in the SPA.
20
Section 1.3 Key deal issues Tax
Section 1.3 - Key deal issues Tax
Summary of Key tax issues (1 of 2)

Tax risk summary for FY05 - FY07
in millions Country Ukraine Issue Tax risks VAT recovery VAT receivable in the amount of EUR 10,522K may not be fully recoverable by DSO during the next 12 months 10.5 Corresponding warranty for 90% of the outstanding amount is provided in the current SPA draft Description High Medium Low SPA/deal recommendation
Potential withdrawal of tax privilege DSO may lose its right for the tax privilege available for Ukrainian shipbuilding entities available for shipbuilding companies Deduction of engineering and design Deduction of engineering and design expenses and recovery of the respective input VAT expenses may be challenged due to the lack of documentary support
n/a
n/a
n/a
0.1
If considered material, consider asking for specific tax indemnity; alternatively you should seek ways to mitigate the risk (eg getting additional documentation from AYDU) post signing/closing Corresponding warranty is included into the current SPA draft Corresponding warranty is included into the current SPA draft Corresponding warranty is included into the current SPA draft
In case DSO is not able to prove that methodology applied did not lead to underestimation of CPT, additional CPT liabilities may be assessed Econically unjustified expenses Transfer pricing Subtotal Germany Tax risks Tax losses Tax grouping Witholding tax in respect of royalty payments Improper tax treatment of interest income Transfer pricing Subtotal Netherlands Tax risks Deduction of interest expenses Revaluation of receivable from DSO Subtotal Norway Tax risks Tax residency of Dutch subsidiaries in Norway Dutch subsidiaries may be viewed as creating tax residency in Norway and, thus, be subject to taxation in Norway Interest expenses deducted by Okean BV in respect of a loan from Aker Yard Holding AS could be challenged based on the Dutch anti-base erosion rules Revaluation of the receivable from DSO (currently valued at zero) may entail adverse tax consequences for Okean BV AMTW had significant tax losses as of the end of FY07, which are expected to be lost in case of change of ownership Due to failure to observe formal legislation requirements the tax authorities could challenge tax grouping Additional withholding tax may be assessed due to failure to withhold taxes from royalty payments in 2007 Improper tax treatment of interest income may entail additional tax assessments Prices charged under cross border intra-group transactions could be subject to transfer pricing scrutiny Deduction of expenses incurred by DSO under loss-making contracts and recovery of the respective input VAT may be challenged as economically unjustified Application of transfer pricing rules to intra group transactions may trigger additional CPT and VAT obligations for DSO and AYDU
1)
1.4 1)
8.2 81.8
1)
n/a 3.0 0.2 1)
12.0 n/a 2)
90.1 n/a 1)
Corresponding warranty is included into the current SPA draft If considered material, consider asking specific tax indemnity If considered material, consider asking specific tax indemnity
1)
3.2 0.3
2)
2)
2)
If considered material, consider asking specific tax indemnity Corresponding warranty is included into the current SPA draft
0.3
2)
2)
2)
If considered material, consider asking specific tax indemnity; additional effort to ensure proper tax residency of Group companies post signing/closing is required
Subtotal TOTAL
1) 2)
3.5
12.0
90.1
A detailed transfer pricing analysis / benchmarking study is required in order to quantify and assess this risk Additional analysis is required to quantify and assess this risk
(continued on the next page)
22
Summary of Key tax issues (2 of 2)
(continued from the previous page)
Other potential tax risk areas

Country Netherlands Application of tax treaty benefits may be challenged Issue Description
1)
SPA/deal recommendation
Application of the tax treaty benefits between the Netherlands and Additional effort to ensure proper tax Norway and between the Netherlands and Ukraine may be challenged residency of Group companies post by Norwegian and Ukrainian tax authorities signing/closing is required
Transparency of Ukrainian Ukrainian subsidiaries of Aker Yards Ukraine Holding AS could be Verify that AYDU and DSO do not qualify subidiaries for Dutch tax subject to taxation in the Netherlands based on the transparency rules as partnership for Dutch tax purpose purposes Potential assessment of VAT liabilities Norway Joint liability for tax risks of Aker Yards Ukraine Holding AS could potentially be held liable for VAT a VAT group risks of other Norvegian companies due to its registration as a part of the VAT group 1) Additional information is required to quantify and assess these risk areas Corresponding warranty is included into the current SPA draft Additional VAT liabilities may potentially be assessed on the amount of Corresponding warranty is included into income received from the sale of vessels by Okean BV the current SPA draft
23
Key deal issues Taxation (1 of 9)

Issue
Tax issue Ukraine Recoverability of VAT receivable
Commentary
As of the end of FY07 DSO reported VAT receivable of 10.5m, which may not be fully recoverable from the budget within the next 12 months.
Conclusion / Recommendation
Corresponding warranty for 90% of the outstanding amount is provided in the current SPA draft.
Tax issue Ukraine Potential withdrawal of tax privileges for shipbuilding companies from DSO
Potentially, there is a risk that DSOs may lose its right to enjoy tax privilege (allowing to defer taxation of advance payments received under the ship building contracts, while postponing deduction of respective expenses until the acts acceptance in respect of ships are signed) on the basis that it was in a lossmaking position for more than 3 quarters. Additionally, challenge by the tax authorities of methodology applied by DSO may cause tax risks in respect of past periods (please see below).
Tax issue Ukraine Deduction of expenses incurred by DSO under lossmaking contracts
Deduction of expenses incurred by DSO under loss-making contracts and recovery of the respective input VAT may be challenged as economically unjustified. The estimated risk amount is 81.8m. We assess the risk as low.
Corresponding warranty is included into the current SPA draft
24

Issue
Tax issue Ukraine (continued) Deduction of engineering and design expenses / VAT recovery Tax issue Ukraine Improper methodology of tax base calculation (DSO)
Commentary
Deduction of engineering and design expenses and recovery of the respective input VAT may be challenged due to the lack of documentary support. We estimate the risk as 0.1m. We assess this risk as medium.
If considered material, consider asking for specific tax indemnity; alternatively you should seek ways to mitigate the risk (e.g. getting additional documentation from AYDU) post signing/closing
In its tax returns for FY05-FY07 DSO included in the taxable base all expenses incurred in respective periods, while the amount of expenses, related to contracts under which advances were deferred, were added back to tax base above the line as increase of WIP (rather than reducing expenses). This methodology may be interpreted as not being fully in line with the rules prescribed in legislation, although if properly applied, is unlikely to lead to underestimation of the tax base. According to management, methodology, applied by DSO, should not result in underestimation of CPT. However, we cannot exclude that the tax authorities may challenge its application and, in case DSO will not be able to prove that the reflection of respective expenses in its tax returns did not result in reduction of the taxable base, the additional CPT liabilities may be assessed. The level of the risk is assessed as medium in the amount of 1.4m for general and administrative expenses not allocated to WIP and low in the amount of 8.2m for expenses allocated to WIP.
25

Issue
Tax issue Ukraine (continued) Transfer-pricing issue
Commentary
Should the tax authorities check the prices applied between DSO / AYDU and the Groups companies (especially, noting that DSO and AYDU were in a loss making positions) and conclude they are not at the arms length level, they may adjust tax base of DSO and AYDU based on relevant fair market prices. A special transfer pricing analysis / benchmarking study is required to quantify and assess this risk.
Tax issue Germany Tax losses available for carry forward at AMTW are to be lost Tax issue Germany Tax grouping between AMTW and its subsidiaries AWO, AWRE and AMTWG may be challenged
Corporation and trade tax losses (in the amounts of 36.9m and 38.8m respectively) available for carry forward at AMTW as of the end of FY07 are to be lost due to change in the direct or indirect shareholder.
Tax grouping between AMTW and its subsidiaries AWO, AWRE and AMTWG may be challenged by the tax authorities due to failure to observe formal legislation requirements. As such, additional corporation and trade tax liabilities in total amount of 3.0m may be assessed. The risk is high.
26

Issue
Tax issue Germany Withholding tax in respect of royalty payments
Commentary
Additional withholding tax and solidarity charge obligations in the amount of 0.2m may be assessed due to failure to withhold taxes from royalty payments in FY07. We assess the risk as high .
If considered material, consider asking specific tax indemnity
Tax issue Germany Improper tax treatment of interest income
Improper tax treatment of interest income may entail additional tax assessments. We have no information to quantify the amount at risk. The risk is assessed as medium.
Tax issue Germany Additional liabilities may be assessed due to application of transfer pricing rules
German tax authorities can scrutinize prices charged by/to German companies on intra-group transactions and, in case the conclude that these prices are not at arms length, they may adjust prices applying transfer pricing rules and assess additional corporation tax, trade tax and dividend withholding tax liabilities. A special transfer pricing analysis and benchmarking study is required to quantify and assess this risk.
27

Issue
Tax issue Netherlands Corporate profits tax obligations may potentially arise from the application of anti base erosion rules
Commentary
Okean BV has taken up a loan of 6.4m from Aker Yards Holding AS to grant a loan to Damen Shipyards Okean OJSC. No interest was charged by Okean BV, while interest expenses were deducted in full. The tax authorities may take the position that the loan to Damen Shipyards Okean OJSC should be considered as effectively financing loss and should therefore be re-qualified as (informal) equity, since the Ukraine company is not a profitable position. As a result, the interest expenses on the loan payable to Aker Yards Holding AS should not be deductible based on the anti-base erosion rules. We estimate the exposure to be 0.3m. The risk is assessed as high.
28

Issue
Tax issue Netherlands (continued) Corporate profits tax liabilities may potentially be assessed if the amount of receivable is more than zero
Commentary
Okean BV has acquired its interest in DSO from a third party. Upon the acquisition, the vendor had a receivable from DSO in the amount of 26.0m. This receivable was assigned to Okean BV for free (as DSO was a loss-making entity, this receivable was deemed to have zero fair value at the moment of sale). Thus, Okean posted zero in its books as initial value of this receivable. Respectively, Okean BV does not charge any interest to DSO in respect of this outstanding debt. For Dutch tax purposes, Okean BV is required to report its loan receivable at the lower of nominal value and market value on an annual basis. Okean BV should be able to demonstrate that the market value of the receivable is nil. If Okean BV cannot demonstrate this, the Dutch tax authorities may take the position that the receivable should be revalued at a higher amount (the nominal value of 26.0m at the most) and for which additional taxable income should be recognized by Okean BV. Additionally, Okean BV would be required to report an arms length interest to DSO in respect of this debt. Additional analysis is required to determine the fair market value of the loan receivable and whether this will entail adverse tax consequences for the companies.
29 4

Issue
Tax issue Netherlands (continued) Potential nonapplication of the double tax treaty
Commentary
According to management, Aker Yard Design BV, Okean BV, Damen Okean SC-1 BV and Damen Okean SC-2 BV are managed by individuals who live outside of the Netherlands. For tax treaty purposes, companies should be effectively managed and controlled in the Netherlands in order to qualify as a Dutch tax resident. Even though the Dutch tax authorities would consider these companies to be tax residents, there potentially could be the risk that the foreign tax authorities (e.g. Ukraine and Norway) could take the position that Aker Yard Design BV, Okean BV, Damen Okean SC-1 BV, Damen Okean SC-2 BV are not effectively managed and controlled in the Netherlands and therefore the relevant tax treaty with the Netherlands should not apply. Additional information is necessary to determine whether the companies used any double tax treaty benefits which may be challenged by the tax authorities in this basis.
Additional effort to ensure proper tax residency of Group companies post signing/closing is required
30

Issue
Tax issue Netherlands (continued) VAT may potentially be assessed on the amount of income received from the sale of vessels
Commentary
Okean BV purchased a vessel produced by Shipyards Okean OJSC and subsequently sold it to a third party. We are not aware as to whether Okean BV charged output VAT on the amount of income received from the sale of this vessel. We are not aware where the factual supply of the vessel took place, to whom and whether the above mentioned vessel was dispatched to or from the Netherlands. In case the vessel was dispatched from the Netherlands, the tax authorities may assess Okean BV with additional VAT obligations. Additional information is necessary to determine whether this risk actually exists.
Tax issue Netherlands Transparency of Ukrainian subsidiaries for Dutch tax purposes
For Dutch corporate income tax purposes, foreign companies are considered as an entity (opaque) or a partnership (transparent), provided certain conditions apply. In case AYDU and DSO qualify as a partnership, their income/loss would be included in the Dutch tax base creating additional taxable income / loss. Additional analysis is required to determine whether this risk actually exists.
Verify that AYDU and DSO do not qualify as partnership for Dutch tax purpose
31

Issue
Tax issue Norway Creation of permanent establishment by Dutch companies in Norway
Commentary
We understand that Okean BV, Damen Okean SC-1 BV and Damen Okean SC-2 BV are being managed by Norwegian individuals and thus could be deemed as tax residents in Norway regardless of place of their incorporation. If so, the profits of the respective Dutch companies would be taxable in Norway, as Norwegian tax resident companies are taxable to Norway on their world wide profits. A detailed analysis is required to quantify the risk amount. However, if the Dutch companies did not generate significant profits, any Norwegian taxes are not likely to be substantial. The risk is assessed as high.
If considered material, consider asking specific tax indemnity; additional effort to ensure proper tax residency of Group companies post signing/closing is required
Tax issue Norway Joint liability for tax risks of a VAT group
We understand that Aker Yards Ukraine Holding AS is registered as a part of a VAT group with other Norwegian companies of the group. According to Norwegian law, the participants of the VAT group may be held jointly liable for VAT obligations. Thus, in case other participants have unsettled VAT liabilities, Aker Yards Ukraine Holding AS may be held liable for such liabilities. A detailed analysis of other companies of VAT group is necessary to determine whether such risk can actually materialize.
32
Section 2 Group overview
Section 2.1 Business overview
The Group
The Group is a part of Merchant Vessel segment of AY Group, one of the worlds largest shipbuilders and the largest one in Europe. In FY06, the Merchant Vessel segment delivered 22 vessels, of which 13 were delivered by two German shipyards of the Group (FY05: 10). In FY07, 15 vessels were delivered. Main products of the Group consist of container vessels and arctic vessels. The orderbook also includes RoRo/Ropax vessels. The Group will have approximately 5,000 employees. AYG has state-of-the-art production facilities and historically concentrated on construction and fabrication of small- and middle-class container vessels with capacities between 1,700TEU and 2,700TEU. AYG current orderbook consists of 15 vessels (and one section) at a total contract value of approximately 1.48bn.

Einar Brnlund

Torben Levinsen
Aker Yards Wismar

Einar Brnlund
Subsidiaries
Warnow design
35
The Group
DSO produces complete vessels and hulls as well as modules and sections. The construction is carried out at two main producing lines. Most of the sales are made to Damen Group and AY Group entities. The only external client is the Ukrainian shipping firm Ukrrichflot. AYU orderbook consists of 5 vessels and 10 sections with a contract value of 71m. Warnow Design and Aker Yards Design Ukraine provide engineering and design services for the shipyards.

Einar Brnlund

Torben Levinsen
Aker Yards Wismar

Einar Brnlund
Subsidiaries
Warnow design
36
For the Purpose of the Transaction German Entities will be consolidated under AY Ukraine Holding
Aker Yards Holding AS
30%
FLC West Holding S.a.r.l.

70%
Aker Yards Ukraine Holding AS (to be renamed)
Warnow Design GmbH
Aker Yards Design Ukraine BV
Okean BV
AY SC-1 BV
AY AC-1 BV
AY SC-2 BV
AY AC-2 BV
Aker MTW Werft GmbH Aker Warnemnde Real Estate GmbH Aker Warnemnde Operations GmbH Aker MTW Grundstcksverwaltung GmbH Arctic Personaldienstleistung GmbH (49%)
Aker Yards Design Ukraine CJSC

Source: Management reports
Formed only due to legal reasons

Damen Shipyards Okean OJSC
Currently, Aker MTW Werft in Wismar and Aker Warnem nde Real Estate, Rostock as well as Aker Warnemnde Operations belong to German division (AYG) of the Norwegian shipbuilding company Aker Yards ASA, Oslo. For the purposes of the Transaction Aker MTW and Warnow Design will be transferred to AY Ukraine Holding. The operational parts of AYG are Aker MTW Werft GmbH in Wismar and Aker Warnemnde Operations GmbH in Warnemnde. Plant and property for Aker MTW Werft, Wismar is held by Aker MTW Grundstcksverwaltung GmbH. In case of Aker Warnemnde Operations, Aker Warnemnde Real Estate GmbH owns the assets, which are rented for over 25 years (to expire on 23 April 2009). Arctic Personaldienstleistung GmbH provides fabrication personnel to the operative entities.
37
During 2000 2006, DSO was owned by the Dutch shipbuilding group Damen. In the middle of 2006, 50.01% shares in Okean B.V. were acquired by AY Group via AY Ukraine Holding AS. The remaining 49.99% stake in Okean B.V., was transferred to AY Group in February 2008.
Aker Yards Ukraine Holding AS has established four legal entities AY SC-1 BV, AY AC-1 BV, AY SC-2 BV and AY AC-2 BV for legal purposes only. Each of the four entities holds one share of Damen Shipyards Okean OJSC. Aker Yards Design Ukraine performs engineering and design tasks for DSO and other yards in AY Group (AY Floro and AMTW).
If not otherwise stated, the entities own 100% of the subsidiaries. 1 share
Market overview of shipbuilding industry: worldwide and Russian markets

Based on information available from public sources (R.S. Platou), the shipbuilding industry currently experiences a very strong general growth driven by demand and evidenced by increased volumes and prices. In FY07, the demand for new ship significantly exceeded the delivery capacity and, as a result, newshipbuilding prices are expected to continue the upward trend. As an illustration of favourable market trend, the charts presented on this page demonstrate the upward price dynamics for container ships and tankers, which constitute a notable part of the Groups projected portfolio. The shipbuilding industry capacity has been increasing: in FY07, the yards delivered 15% more tonnage in CGT (compensated growth tons) terms than a year before. Orderbook has increased by over 50% in FY07. We understand from your shipbuilding and shipping management team that it considers the growth potential in the Russian market as a major driver for the Group business going forward. This growth is mainly attributable to the perspective development of oil and gas fields at Russian Arctic and Far East sea shelf. As indicated in the Strategy of shipbuilding industry development till 2020 and further adopted by the Russian Ministry of industry and energy, about 90 specialized transport vessel of ice-class, 140 auxiliary vessels, 12 icebreakers will be needed by FY30 for the transportation of oil and gas from Russian sea shelf. In addition, about 35 drilling rigs will be needed by FY15. In total, the volume of civil shipbuilding market in Russia is estimated at $22b by FY15. We understand from you that due to situation on the Russian shipbuilding market you expect the Group to be able to get the significant share of those orders. We understand that currently you are negotiating the placement of future orders at the Groups shipyards with various Russian clients. However, in spite of certain progress in this process we understand from you that no committed sales are expected before signing of SPA scheduled at the end of March 2008.
38 Source: www.platou.com
Management has evaluated the current strategic positioning of AYG: advanced vessels and small series/tailor made production are existing strengths, whereas currently the relationships to customers are seen in weaker positions - except with container ships.
AYG: Current strategic positioning (evaluation by management)
Advanced vessels
Small series, tailor made
Track record
Customer relationship
Container Arctic RoRo / RoPax Special vessels LNG (ice-class) Drilling rigs Cruise ships
Source: DR 29.74
significant strength/ position

39
no strength/position
Top 20 customers
Group's Top 20 Customers: Contract value, profit margin (%) & number of ships ordered by customer (Period FY05FY10 as of orderbook) Norilsk Nickel ordered all Stena Rederi 15.0% four ice-class vessels, contracted which are currently in the the two Orderbook RoPax vessels Norilsk Nickel
10.0%
Stena Rederi Laeisz

Profit margin
5.0%
Future prospects might be weaker as customer is currently facing financial problems
Genesis (Section) Thien & Heyenga Rehder Hartmann Winter

50 150 250 350 450 550 650
Knig & Cie
0.0% (50)
Schulte AY Finland
-5.0%
NDRG
Schoeller
MAB Lubmin
NSB
-10.0%
Contract value in millions

Source: dataroom information Comment: For more detailed and further information please refer to the Appendix.
Laeisz ordered 6 container vessels CS2800 in FY07. Financing still need to be secured for 4 of these vessels ( 150m)
40
Additional steel capacity through a contract with Lubmin block factory to secure additional vessel orders
Lubmin is a block factory situated in north-east Germany, close to the shipyards of Wismar and Warnemnde. AYG and Lubmin signed a contract effective 1 August 2006 concerning the assembly of ship sections. The initially agreed fixed phase runs from 1 July 2007 to 30 June 2009. For the fixed delivery period, AYG is committed to call the contract volume of 48,000t (24,000t p.a.) completed weight of the vessel parts. The contracted yearly volume will be in 12 parts (vessel sections up to 2,000t per section) and the guarantee for each delivered section starts with the date of acceptance until 13 months after delivery of the ship to the shipping company (maximum 18 months after date of acceptance). Fixed prices ( 0.92 per kilogram) were agreed for the sections, which are subject to a quarterly review. In case of additional services, the hourly wage rate of 36.5 per hour will apply. After the mentioned period, AYG has the right to prolong the period (running 01 July 2009 to 30 June 2014) for an option premium of 20k per year and to call for 12,000t yearly. AYG has to deliver complete detailed construction plans and is responsible for equipment material. AYG is expected to put a permanent/temporary building supervision in place. If AYG does not reach minimum contract volume, it has to pay a contract penalty. In case AYG does not call for any steel, the penalty would amount to 1.0m p.a.
Capabilities: 30,000t of steel capacity Maximum unit weight up to 700t Open water access (7m depth) 3 x 125t cranes Hydraulic lifting capacity of 600t
Workshop dimensions: Length 430 metres Width 34.5 metres Height 30 metres
Source: DR Ref. 8.11.2.2, Management presentation
41
Contingent liabilities derive from the business relation with Lubmin. Liquidated damages of maximum 1.0m out of a frame purchase agreement and the obligations as surety of loans taken by Lubmin amount to 16.7m as at 31 December 2007
AYG: Off-balance sheet obligations as of 31. Dec FY07
Type of obligation Frame purchase agreement beneficiary MAB Modul- und Anlagenbau Lubmin Effective Date Aug 1, 2006 Expiry Date June 30, 2009 (plus option until 6 June 30, 2014) June 30, 2015 at the latest Amount of obligation max. 1.5m 1.0m for each year in which the minimum quantity of 24,000 t steel sections is not ordered from MAB Full production cost of sections manufactured by MAB, at least 95% of accumulated loan obligations of MAB (100% as of Dec 31, 2007: 16.7m)
AYG has partnered with Lubmin in order to secure additional steel working capacity.
Put option agreement for Bank syndicate sections produced by MAB (Deutsche Bank, which are assigned as security Dresdner Bank, IKB) for loans taken by Lubmin
Source: DR Ref. 8.11.2.2, 18.28.2.2
Dec 21, 2006
MAB Modul- und Anlagenbau Lubmin GmbH: Loans secured by AYG

Bank Credit ( in millions) Deutsche Bank 4.8 3.8 2.8 2.2 3.5 Term of credit Closing balance credit 31. Dec FY07 31. Dec FY08 31. Dec FY09 ( in millions) ( in millions) (in millions) 4.6 3.7 2.8 2.2 3.4 3.9 3.8 2.4 2.2 2.9 3.3
AYG has taken over surety for a couple of loans of Lubmin with a total nominal amount of 17.0m. As we understand special warranties in respect of the sureties given to third parties are included in draft SPA.
12/2006 - 12/2009 12/2006 - 12/2014 12/2006 - 12/2009 12/2006 - 09/2014
Dresdner Bank
2.0
Industriekreditbank
2. 4
Total Lubmin
17.0
16.7
15.2
7.7
Source: DR Ref. 4.1.1.21, 50.692
42
Settlement agreement with Damen Group was signed in Feb FY08

In FY06, AY Group acquired 50.01% shares in Okean B.V. (mother company of DSO) and 100% of shares in Juliet SDEU B.V. (former name of AYDU B.V.) from Damen Group. As represented by the management of AY Group, the completion of the acquisition of the remaining shares in Okean B.V. by AY Group was pending subject to Damen Group settlement of certain disputes and claims involving DSO. The SPA between AY Group and Damen Group included several provisions regarding the relations between the two parties after the acquisition: the completion of projects for Damen Group started by DSO before acquisition; the completion of a new vessel 7403; the establishment of escrow account in connection with Konverse-Invest dispute risks; the payment of Production Royalty by DSO to Damen Group. AY Ukraine Holding AS: remaining balance of royalty payable of 20m. In February FY08, AY Group and Damen Group concluded a settlement agreement, including the following major provisions: the remaining 49.99% shares in Okean B.V. were transferred to AY Group; the dispute regarding the Konverse-Invest is settled as Damen Group obtained the Promissory Notes that are the subject of this dispute; AY Group will pay to Damen the total amount of 3.8m to settle the claims from Damen Group to AY Group (arising under the following SPA clauses: Assumption of project debt, Reduction of project debt, Damen employees, Damen Projects, Revised Delivery Schedule, Konverse Invest Dispute, VAT, SDEU loan); The claims in respect of the construction of the vessel 7403 are settled (with final settlements to be made as provided by the agreement); AY Group will assume AY Ukraine Holding liability to Production Royalty by issuing a bank guarantee to Damen Group in the amount of 21.4m less the amount of Production Royalty paid (some 20.0m at FY07). We understand that the relationships between Damen Group and AY Group have been analysed by your legal advisors. We also understand that the current draft SPA includes the warranties covering prior relationships with Damen Group.
As at 31 Dec FY07, AY Ukraine Holding Group had the following balances due to Damen Group: Okean B.V.: debt of 17.9m representing the financing of the construction of vessel 7403 (with corresponding amount recorded as projects under construction on Okean B.V. balance sheet). AYDU: loan of 0.4m, AY Ukraine Holding AS: debt of 3.5m relating to outstanding VAT receivable in DSO balance sheet at the moment of acquisition in FY06; this balance was repayable upon receipt of respective VAT amounts from Ukrainian budget.
43
Section 2.2 Standalone issues
Section 2.2 - Standalone issues
AYG has been benefiting from inter-company services provided by Aker Yards ASA that may result in certain separation issues
In the course of our due diligence, we identified the following areas or contracts relating to inter-company service agreements that have to be considered on a standalone basis: Management Services Agreement Software application licences Financial assistance (e.g. guarantee) provided by AY ASA
Management also provided us with a detailed summary table for the management fees for FY07 which amount to 4.2m in total as disclosed in the before mentioned table. However we were not able to reconcile this amount to the information for the group charges for FY07 provided for AYG and AYU in the dataroom (in total 5.6m), excluding charges from AYG to AYU of 3.8m. From our discussions with the Group we understand that the local management can not explain the reasons for these unreconciled differences. Therefore we focus our analysis of the relevant standalone issues in the following pages on the information provided in the dataroom. We recommend to include a provision in the final SPA to limit additional costs that may occur after transaction and to disclose a full list of related parties to the Group and amounts involved for FY06 and FY07 as a separate schedule to the SPA. We further recommend to require the Vendors to make respective representations in relation to the completeness of this information.
Management stated that further inter-company relationships might exist that are not documented and therefore current management may not be aware of them. According to discussions with management in the Q&A process, we understand that there might be several undocumented intercompany relationships with other AY Group entities and management stated that they might not be aware of all provided services and associated costs linked to these respective services.
Comment: for further information on Software and IT issues please refer to Appendix
45
Management of AY ASA provided their view of management fees on a stand-alone basis. However we were not able to reconcile the current costs to the respective DR information for the German and Ukrainian yards. Current costs illustrated in the table do
Management fees
Service Current Situation
not reconcile with the data provided for the German and Ukrainian yards in the dataroom.
Future Situation
Current cost ( in m)
Future Cost
HR
Yards with self-contained HR functions, AYG will be given overall development responsibility. Yards with autonomous IT functions. AYG IT function will be IT given overall coordinating role. Maintenance of SW procurement leverage through link to AY Group Finance Yards with autonomous accounting and finance functions. Strengthened controlling at yard level, reconcilation to NewCo level. AYG with special responsibility for securing local project financing. Board/ Management Board and Group management involvement through regular Board and Group management involvement through regular and irregular meetings and irregular meetings Mark et and information Yards with local info departments working on both internal Importance of centralised external information may not and external info requirements, IR and external information diminish in NewCo context services at HQ HSE Yards with autonomous HSE functions, guidelines and Yards with autonomous HSE functions, guidelines and follow follow up from central HSE function up from central HSE function Procurement Procurement leverage through Group and Business Area co- Continuation of procurement leverage through link to AY ordination, local procurement at yards Group, local procurement at yards Legal Yards procure local legal services with the addition of Yards procure local legal services with the addition of support support from central legal function from central legal function Sales & Mark eting Centralised M & S management and market analysis Centralised M & S management and market analysis General management Centralised general management Centralised general management with the addition of CFO, accounting and controlling resources Sub-total # II; Royalties 0,15% of revenue for intangible services Sub-total Grand total excluding royalties Total managment fees including royalties
Group charges AYG as disclosed in DR Group charges for AYU as disclosed in DR (excluding AYG charges) Target group charges as disclosed in DR Reconciling difference to total management fees including royalties
Limited Group HR function providing services/guidelines. Yards with self-contained HR functions. Yards with autonomous IT functions, Group IT function with limited coordination role and responsibility for Group SW licence procurement Yards with autonomous accounting and finance functions, some controlling and full reconcilation at Group level. Group also supporting in securing local project financing
0.20 0.17
Neutral Neutral
0.08
Neutral
0.17 0.11
Neutral Neutral
0.07 0.15 0.05 1.03 0.97 3.01
Neutral Neutral Neutral Neutral Increase
Revenue 2007 781.09
1.17 3.01 4.18

2.8 1.0 3.8 0.4
Zero
Source: Management Presentation 28.02.2008, DR Ref. 46.505, Original Request List Ref. 24.4.2, Question Log FDD No. 85
46
Management Services Agreement: AY ASA charges its subsidiaries for services provided according to their revenue contribution with the accumulated cost plus a 5% mark-up
Management Services Agreement The Management Services Agreement is effective from 1 January 2006 and was entered by and between companies within AY Group. The purpose of the agreement is to allocate the costs of certain management services rendered by Aker Yards ASA to the subsidiaries as shown in the chart opposite. AY ASA Norway performs these services for the different entities and shipyards and the accumulated costs are allocated to the respective entities with a mark-up. AY ASA allocates the costs mainly based on the entities share of the AY Group revenue (absorption rate based on percentage of AY Group revenue). The charges are planned on a yearly basis at the beginning of the year and then revised at the end of the year. Management stated that all provided services are in accordance with arms length principles. Costs subject to the mark-up are personnel costs, direct costs and overheads except pocket expenses. Out of pocket expenses will be allocated to the recipient without any mark-up. The mark-up is 5% and is charged to the subsidiaries according to the allocation key. For the pricing method, the cost plus method is used.
Overview Services Agreement

AY ASA Norway
AY ASA provides services under agreement dated 1 January 2006
Services provided to entities:

Human resources Information technology Financial Legal Market and information Procurement and production planning Board/management Health, safety and environmental AY ASA charges subsidiaries with actual cost + 5% markup
Entities
47
AY Group charges according to dataroom information contain Royalties of 1.1m in FY07. Management stated that this charge ceases after completion of the transaction.
AYG Stand alone - Group charges
3.0 2.5 2.0 1.5 1.0 0.5 -
Management Services Agreement (continued)

2.4 2.7 2.5
2.8 2.1 1.6
in m illions
For AY Germany, Vendors provided information regarding management services in the dataroom. For FY07, management stated that 0.9m of the total amount of AY Group charges, as disclosed in the pie chart opposite, was charged with respect to the Management Services Agreement and 0.4m to cover remuneration for management at the Merchant Vessel business unit (e.g. sales and marketing). The remaining 1.5m stem from a royalty fee included in the actual cost base of 1.1m, 0.3m resulting from IT charges and 0.1m of travel expenses. Software application licences
FY05 Act
FY06 Act
FY07 Act
FY08 Plan
FY09 Plan
FY10 Plan
Source: DR Ref. 46.505, Request List Ref. 24.4.2, Question Log F DD No. 85
AYG: Breakdown of group charges FY07 0.1m , 3% 0.3m , 11% 0.4m , 14% 0.9m , 33%
Management informed us that some of the software licences (e.g. Microsoft) were purchased centrally by the Norwegian mother company and further distributed to the Group entities for utilisation. Regarding these software licences we understand that a final conclusion on the terms to continue with the rental agreement, or how to transfer the licence rights to AYG, has not been reached so far (please refer to the Appendix for a schedule regarding the software in use).
1.1m , 39%
Management fee Royalty fee BA Merchant costs IT-charge Travel expenses
Source: DR Ref. 80.1586
Comment: for further information on Software and IT issues please refer to Appendix
48
Foreign management of DSO receives remuneration through management fees paid to AY Germany
The adjacent table presents a breakdown of intra-Group services provided to AY Ukraine by AY Germany and AY ASA, included in Holding costs line in the profit and loss statement. The consulting services of AY Germany represent the reinvoiced costs of consulting firm A.T.Kearney. We have not been provided with details of the management services actually provided by AY Germany and AY ASA. Part of the costs covered by management fees are the salaries of foreign workers of DSO, whose labour contracts have been concluded with AY Germany. According to Mr. Shamray, DSO CFO, these costs may be significantly reduced after the Group operates independently of the AY however we have not been provided with further details.
AYU Stand alone - Group charges

FY05 Act 0.3 0.3 0.3 FY06 Act 0.2 0.2 0.3 0.3 0.4 FY07 Act 0.7 0.8 0.3 1.8 0.3 0.3 0.1 0.2 1.0 2.8
in millions Description Damen Group not analysed Total Damen Group AY Germany Management fees Consulting costs Travel and other costs Total AY Germany AY ASA Management fees Building insurance Invoice for Schevchenko Didkovdky Share of costs for BA Merchant Vessel Total AY ASA Total
Source: DR.Ref. Add.doc. 1486
49
After completion of the transaction AYG needs to replace financial support from AY ASA and maintain its own treasury functions.
AYG: AY ASA bonds for AMTW as at 31. Dec FY07
Type of bond Company Utilisation Expiry Date Credit line per 31. Dec FY07
( in millions) ( in millions)
Financial assistance provided by AY ASA Norway Management stated that in order to avoid cash collateralisation, during last 18 months AY ASA secured financial guarantees of AY Germany. We understand from management that in future, there is no intention to offer backing or cash collaterals on a standalone basis. The interest cost charged to AY Germany with AY ASA guarantee is priced at EURIBOR plus 0.7% mark-up and without at EURIBOR plus 1%. On a standalone basis, the markup of 1% appears to be realistic according to management. The adjacent table illustrates the overall utilisation of AY ASA bonds for AYG as per 31 December FY07. The individual line items were reconciled to AYGs total bonding facilities as at 31 December FY07. Management stated that bonding facilities do not exist of behalf of AWO. We would like to point out that the volumes of this way of financial support for AYG could significantly change for the new investor after completion of the Transaction.
Letter of support Coface Kreditversicherung AG 20/01/2009 Letter of support Zrich Versicherung AG Letter of support SEB Bank AG Performance Dresdner Bank AG, KfW, guarantee NordLB (syndicate) Letter of support R+V Versicherung AG Atradius N.V.
Source: Dr. Ref. 4.1.1.2.1, 38.263
80.0 40.0 24.6 25.0 22.5 20.0 212.1
79.7 32.5 24.6 18.1 14.1 8.2 177.1
22/04/2009 20/01/2009 04/06/2009 10/07/2008 14/03/2008
50
Section 2.3 Quality of earnings analysis
Section 2.3 - Quality of earnings analysis
Reported historical earnings are distorted by several non-recurring one-off items
Quality of Earnings AYG

FY05 Act 457.0 20.0 FY06 Act 532.6 11.4 FY07 Act 709.7 14.2
in millions Sales EBITDA as reported Management adjustments Reversal of provisions and allowances Buildup of provisions Recognition of one-off provisions Subsidies and innovation aids Lawsuits Gain on sale of fixed assets Liquidation proceeds other items Total management adjustments Adjusted EBITDA
Source: DR Ref. 3.1.2.2.1-3; 32.72, 68.1223
The analysis presented below summarises different categories of management normalisation adjustments. It should be emphasised that a QoE analysis is not governed by any formal standards/guidance and is judgemental in nature. Consequently, different parties may assess or interpret the adjustments included or excluded from the analysis differently. AY Germany: Management adjustments decrease reported EBITDA by: - 3.0m for FY05, mainly due to a reversal of accruals for potential losses ( 1.4m) at AWO; and - 5.0m for FY07, mainly due to income from subsidies for construction of innovative ships ( 2m) and from settlement of a pending lawsuit ( 1.9m). Earnings in FY06 have been negatively affected mainly by the recognition of a provision for early retirement ( 11.3m). - German legislation restricted federal support for early retirement contracts effective from 31 December 2006. 203 additional early retirement agreements were concluded in December 2006, taking the total to 324 agreements, which equals 14% of the workforce. - If positions of early retired employees are eventually restaffed, the company will receive partial reimbursements by the German employment centre for the costs incurred. Thus, other income of 1m was realised in FY07. We concur with management adjustments and identified no further one-off or non-operating items.
52
(4.5) 3.0 0.1 (0.6) (0.2) (0.9) (3.0) 17.0

4.4% 3.7%
(3.0) 2.9 13.5 (3.9) (0.2) (0.5) 8.8 20.2

2.1% 3.8%
(2.9) 2.5 (2.0) (1.9) (0.8) (5.0) 9.2

2.0% 1.3%
Impact of transactions with related parties on reported EBITDA is not quantified (1/2)
Quality of Earnings AYU

in millions Sales per IFRS accounts EBITDA as reported Management adjustments Debt restructuring income Accrual of provision for scrapped FA Release of provision for scrapped FA Release of provision for KI claim Total management adjustments Profit on sales to final customers Services provided by related parties Adjusted EBITDA
% of Sales EBITDA Adjusted EBITDA n/a - not available Source: Internal reports, DR Ref. 17.3.3.1-17.3.3.12
FY05 Act 57.4 (3.1)
FY06 Act 58.4 (4.2)
FY07 Act 74.8 (5.3)
AY Ukraine: The reported EBITDA figures were derived from internal reports (DSO) and extracts from Group reporting package (AYDU) prepared in accordance with IFRS. Debt restructuring income represents the income from write-off of accounts payable to Damen after the acquisition of DSO by AY Group. Accrual/Release of provision for scrapped fixed assets is not operative by nature. Release of provision for Konverse-Invest claim relates to a dispute involving a promissory note issued by DSO. There is a protection clause with respect to this claim in SPA between Damen Group and AY Group. We have not been provided with any further details about the nature and status of this claim. The release of this provision should be eliminated for normalisation purposes as one off items.
n/a n/a (3.1)
(3.7) 0.8 (0.8) (3.7) n/a n/a (7.9)
(0.7) (0.7) n/a n/a (6.1)
-5.3% -5.3%
-7.1% -13.5%
-7.1% -8.1%
53
Impact of transactions with related parties on reported EBITDA is not quantified (2/2)
Quality of Earnings AYU

in millions Sales per IFRS accounts EBITDA as reported Management adjustments Debt restructuring income Accrual of provision for scrapped FA Release of provision for scrapped FA Release of provision for KI claim Total management adjustments Profit on sales to final customers Services provided by related parties Adjusted EBITDA
% of Sales EBITDA Adjusted EBITDA n/a - not available Source: Internal reports, DR Ref. 17.3.3.1-17.3.3.12
FY05 Act 57.4 (3.1)
FY06 Act 58.4 (4.2)
FY07 Act 74.8 (5.3)
In addition, the following potential adjustments were identified where no sufficient information was available to quantify an EBITDA impact: Profit on sales to final customers realised by other AY Group entities on projects performed for them by DSO should be added to DSO results. Services provided by related parties could be rendered on bases different from arms length principles. Therefore the respective adjustment may be required.
n/a n/a (3.1)
(3.7) 0.8 (0.8) (3.7) n/a n/a (7.9)
(0.7) (0.7) n/a n/a (6.1)
-5.3% -5.3%
-7.1% -13.5%
-7.1% -8.1%
54
Section 2.4 Pro forma combined financial statements
Section 2.4 - Pro forma combined financial statements
Consolidated financial statements of AYG

Balance Sheet AYG Consolidated
in millions Property, plant and equipment Other intangible assets Deferred tax assets Long-term investments Interest-bearing long-term receivables, internal Non-current assets Accounts receivables, external Advance payments to suppliers Projects under construction Other short-term current assets, external, interest free Short-term interest free investments Firm commitments asset (hedge accounting) Short-term current assets, internal, interest free Raw materials Cash and cash equivalents Interest-bearing short-term receivables, external Interest-bearing short-term receivables, internal CURRENT ASSETS TOTAL ASSETS Total Equity Deferred tax liability Pension liabilities Non current provisions TOTAL NON CURRENT LIABILITIES Interest-bearing short-term debt, internal Advances from customers Construction loans VAT, tax witholding from employees and other deductions Accounts payable, external Other incurred, unpaid cost Firm commitments liability (hedge accounting) Other interest-free short-term liabilities, external Income tax payable Current provisions Current other interest-free short-term payables, internal TOTAL CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES 31. Dec FY06 66.1 0.6 10.4 0.4 77.4 4.9 67.1 219.8 13.4 1.5 2.2 0.4 9.4 153.5 20.0 492.2 569.6 97.6 0.4 20.5 20.9 381.0 5.4 7.0 37.2 10.9 0.0 4.4 1.4 2.7 1.2 451.1 569.6 31.Dec FY07 68.1 0.5 5.4 0.5 0.8 75.3 5.3 38.9 136.2 17.4 1.5 1.7 1.3 17.5 98.1 1.0 318.9 394.2 85.8 0.3 18.4 18.7 187.0 32.9 8.3 40.3 12.0 0.2 2.7 0.7 1.6 4.1 289.7 394.2
Income Statement AYG Consolidated

in millions Turnover Other operating revenue Operating revenues Cost of raw materials, purchased goods and services Personnel expenses Guarantee commissions Hired services Material and administration cost Other operating expenses Allocated group expenses (royalty) Internal guarantee commissions Ordinary operating expenses EBITDA (before non-recurring items) Ordinary Depreciation Goodwill and intangibles amortization Restructuring cost (non-recurring) Operating Profit Financial income Financial expenses Net financial items Profit before tax Tax expense Profit for the period
Source: DR Ref. Ref. 59.1038, 59.1040, PwC Analysis
FY06 525.3 7.3 532.7 (351.5) (105.4) (2.2) (12.5) (13.9) (22.6) (1.9) (0.1) (510.2) 22.5 (7.0) (0.6) (11.3) 3.6 4.0 (3.3) 0.8 4.4 5.6 9.9
FY07 689.0 21.4 710.3 (510.6) (119.9) (1.8) (15.0) (14.0) (32.4) (2.3) (0.0) (696.0) 14.4 (7.6) (0.5) 6.2 1.9 (0.6) 1.2 7.4 (5.8) 1.7
The adjacent income statement set up in the full cost structure do not reconcile on a line-by-line-basis to the income statement set up in the sales cost structure due to reclassification and netting. However the results could be reconciled.
Comment: for consolidating Balances and Income statement please refer to Appendix
Source: DR Ref. Ref. 59.1038-1040, 75.1382, 59.1040 PwC Analysis
56
Section 2.4 - Pro forma combined financial statements
Consolidated financial statements of AY Ukraine Holding
Balance Sheet AYU Consolidated

in millions Property, plant and equipment Intangible assets Goodwill in subsidiaries Deferred tax assets Non-current assets Accounts receivables, external Advance payment to suppliers Projects under construction Other short -term current assets, external, interest-free Short-term current assets, internal, interest -free Short-term current assets, related parties, interest-free Raw materials Interest-free short-term receivables, internal Cash and bank deposits Total current assets Total assets Total equity Other long-term liabilities, external, interest -bearing Interest-bearing long-term debt, internal Pension liabilities Total non-current liabilities Interest-bearing short-term debt, external Advances from customers Construction loans VAT, tax withholding from employees and other deductions Accounts payable, external Incurred, unpaid interest Other interest free short-term liabilities, external Income tax payable Current provisions Other interest free short-term payables, internal Current liabilities, related parties, interest-free Interest-free current liabilities, internal Total current liabilities Total Equity and liabilities 31. Dec FY06 19.2 0.2 30.2 0.1 49.7 0.1 2.5 0.1 5.4 0.1 3.5 4.2 0.5 16.4 66.0 (2.8) 19.9 17.3 2.7 39.9 0.1 15.3 31. Dec FY07 18.6 0.5 30.6 0.1 49.8 0.0 2.1 28.8 10.0 1.1 7.3 5.3 3.5 58.1 107.8 (16.2) 20.4 41.5 2.8 64.6 0.1 16.0 18.0 0.5 14.2 (0.1) 4.5 0.4 5.9 59.5 107.8
Income Statement AYU Consolidated

in millions External sales Internal sales Turnover Other operating revenue Operating revenues Cost of raw materials, purchased goods and services Wages and other personnel expenses Provision for bad debt Hired services and consultants related to production Material and administration cost Sub-deliveries costs Other operating expenses Allocated group expenses Ordinary operating expenses EBITDA Ordinary depreciation EBITA Goodwill and intangibles amortization Write-downs and impairment loss Operating profit Gain on exchange realized Gain on exchange unrealized Interest expenses, external Interest expenses, internal Loss on exchange realized Loss on exchange unrealized Profit before tax Taxes payable Change in deferred taxes Tax on Group contribution Profit for the period FY06* 23.8 0.9 24.6 0.5 25.2 (11.7) (6.2) 0.3 (5.0) (2.8) (0.4) (0.7) (0.1) (26.6) (1.5) (1.2) (2.6) (0.1) 0.1 (2.6) (0.1) (0.3) (0.4) (0.5) (3.8) (0.1) 0.1 (3.9) FY07 18.0 56.7 74.6 1.6 76.3 (47.2) (16.9) (0.0) (4.5) (3.2) (0.5) (9.5) (0.3) (82.1) (5.8) (3.0) (8.8) (8.8) 0.1 0.4 (0.3) (1.2) (0.4) (6.5) (16.8) 0.1 (0.1) 0.1 (16.7)
0.4 4.9 5.0 0.1 1.7 1.3 0.1 29.0 66.0
Comment: for consolidating Balances and Income statement please refer to Appendix Source: Management Statements of Aker Yards Ukraine Group 2006 and 2007
*The figures are presented for post-acquisition period: August-December 2006
57
Section 2.5 Working capital and net debt
Section 2.5 - Working capital and net debt
AYG reported negative working capital mainly due to prepayment arrangements with the customers
AYG Working Capital - FY05 to FY07
in millions Total interest free short-term receivables, extern Total interest free short-term receivables, internal Interest-bearing short-term receivables, external Interest-bearing short-term receivables, internal Total interest-free current liabilities, external Total interest-free current liabilities, internal Net working capital (as reported)
Source: DR Ref. 59.1040, 61.1102, 61.1105
Dec FY05 Dec FY06 Dec FY07 Act Act Act 217.2 0.1 47.0 0.2 (295.8) (0.3) (31.6) 318.3 0.4 20.0 (444.5) (1.2) (107.0) 218.6 1.3 1.0 (252.7) (4.1) (35.9)
The adjacent table shows working capital as per managements definition. As we were not provided with comparable figures on a quarterly basis, the table is based on PwCs working capital definition. Managements working capital mainly consists of total interest-free, short-term receivables and current liabilities. The former basically includes advance payments made ( 38.9m in FY07), projects under construction ( 136.2m in FY07) and raw materials ( 17.5m in FY07). Current liabilities predominantly comprise advance payments received ( 187.0m in FY07) and, to a lesser extent, accounts payable ( 40.3m in FY07).
59
Adjusted net debt is ca. 18.7m lower, mainly due to early retirement provisions
Net debt - AYG

31. Dec FY07 Act 98.1 (32.9) (0.3) 64.9
The adjacent table shows net debt reported as per managements definition and adjusted by PwC for pension and other long-term, employee-related provisions. Net debt primarily includes cash and cash equivalents partly offset by interest-bearing short-term debt and non-current provisions. Cash and cash equivalents amount to 98.1m as at 31 December 2007, of which 90.2m is held in escrow accounts. Interest-bearing short-term debt basically comprises construction loans granted by banks. Provision for pensions includes those for former managing directors, whereas non-current provisions comprise early retirement and jubilee accruals for all employees to be considered. The provisions for early retirement relates to regulation that allows to work part-time (50% of normal hours) from the age of 55, while receiving 82% of their former income. The duration is usually four years. If a position of a employee that took part in the early retirement programme is subsequently filled with an unemployed or apprentice the company can get a partial reimbursement from the state. The provision of employee jubilee represents a plan for long service awards set up by Aker MTW Werft and Aker Warnemnde Operations for their employees.
in millions Cash and Cash equivalents Interest -bearing short-term debt Provisions for pensions Net debt reported Non current provisions Early retirement fulfillment shortfall blue collar Early retirement increase (acc. to tariff agreement) Employee jubilee Non current provisions Net debt adjusted
Source: DR Ref. 59.1040, 61.1102, 61.1105
(16.1) (1.2) (1.0) (18.4) 46.5
60
Delayed VAT recovery may create the need for additional financing
Quarterly working capital variations - DSO
12.0 10.0 8.0
9.7 9.5 6.0 5.3 4.2 3.6 2.6 0.2 (1.9) (4.3) (4.5) (6.2) (9.3) (3.7) (6.0) (6.2) (7.5) (10.0) (11.0) (11.9) (12.6) (13.3) (9.5) (10.4) (11.1) (6.2) (6.9) (6.6) 2.6 3.0 4.5 4.3 3.4 2.5 0.9 5.9
The adjacent graph presents the quarterly fluctuations of DSOs working capital over FY05 - FY07. Due to the long-term character of shipbuilding contracts, the working capital is generally not subject to any seasonal variations and in Q305 Q207 was fluctuated around negative 6m. According to management, the working capital was negative due to prepayments from customers, received to finance the subsequent stages of construction (All shipbuilding contracts provide for contract price to be paid in several instalments during the period of contract execution). From Q307, working capital started increasing mainly due to delays in VAT recovery and, as a result, accumulated significant VAT receivable balance of 9.7m (net of provision), some 1m out of which has been repaid in earlier FY08 (and another 1m became recoverable). This growth was partially compensated by increase in trade accounts payable. Normalised working capital was calculated excluding nonoperation balances, in particular pension liability and interCompany loans. In addition, we believe that balances related to non-trading activities (e.g. administration of fixed assets) should be excluded from net working capital.
6.0 4.0 2.0
in millions
(2.0) (4.0) (6.0) (8.0) (10.0) (12.0) (14.0) (16.0) VAT
Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407
(3.2) (3.8) (6.2)
Working capital reported
Working capital normalized
Source: Internal reports, DR Ref. 17.3.3.1-17.3.3.12, PwC Analysis
Comment: for further details please refer to Appendix
61
Net debt at FY07 mainly comprised intra group loans to AY Group and balances payable to Damen Group
Net Debt - AYU Consolidated
31. Dec FY07 Act 3.5 (41.5) (0.4) (20.0) (18.0) (1.8) (2.8) (81.0)
in millions Cash and Cash equivalents Loan payable to AY Group Loan payables to Damen Shipyards Cargo Vessel B.V. Long-term debt to Damen Group Construction loans Interest accrued to AY Group Provision for pensions Net debt reported
The adjacent table presents the calculation of net debt prepared by management of AY Group inclusive of adjustments we have identified in the course of our work. Loan payable to AY Group comprises loans of 15.3m and 26.2m received from Aker Yards ASA ( 26.2m being received through joint bank account arrangement" consisting of AY ASA, AY Holding, AY France Holding and AY Ukraine Holding. The loan bears the interest rate of EURIBOR plus 3% p.a. and matures as specified by the lender with an obligatory 20-day notice. Loan payable to Damen Shipyards Cargo Vessel B.V. bears the interest rate of 3.2% and matures at 6 June 2011. Long-term debt to Damen Group of 20m represents the Production Royalty liability in accordance with the SPA between Damen Group and AY Group. The Royalty depends upon quantity of steel processed and is payable annually till FY12 inclusive. If more than 50% share in DSO are sold to a third party, the Royalty (lump sum less payments already made) becomes payable immediately. According to the settlement agreement between Damen Group, Aker Yards Ukraine Holding AS and AY ASA, this liability has been assigned to AY ASA. We have not been provided with figures and calculations relating to this liability.
Source: Aker Yards Ukraine Holding Group Closing Balance
Construction loans are related to the financing received by Okean B.V. from Damen Group for construction of a vessel. We have not been provided with any details in respect of this balance.
Comment: for consolidating Balances and Income statement please refer to Appendix
62
Section 2.6 Management and Staff
Section 2.6 - Management and Staff
Management team
Tom Einertsen, President
Bachelor of Science degree in Engineering Technology from University of Houston Extensive project management experience from Oil and Gas industry, Aker Kvrner, Statoil, Shell Oil Company With AY Group since 2003 in several management positions: SVP Group Sourcing, SVP Group Business Development President, Merchant Vessels since September 2007
Thore Eilertsen, Business Imp.

M.Sc. Mech. Eng., Norwegian Institute of Technology MBA, IMD, Lausanne, Switzerland Project management positions within Shell International and Norsk Hydro Extensive management consulting experience as partner in PA Consulting Group Investment Director: private equity firm, Stormbull AS SVP, Business Improvement in AY since 2005
Trond Hellum, Controlling

M.Sc. Production Management Narvik Technology Institute, MBA Bod Institute of Management, Master of Management - BI, Oslo Various management positions within material planning, administration and controlling in ABB Site manager and MD of two fish processing companies VP, Business Controlling in AY from 2006
Holding
German Management
Einar Brnlund, President

M.Sc. Marine Engineering & Naval Architecture from Norwegian Institute of Technology MBA from IESE, Barcelona, Spain Various positions within Statoil and Ikoss GmbH Extensive consulting experience from AT Kearney GmbH Participated in restructuring of Warnem nde shipyard in early 90s and merger of Wismar and Warnemnde in 2002 COO in AYG 2006 and President from 2007
Stefan Suberlich, CFO

MBA from Berlin University of Technology Financial controlling and M&A experience from Comparex and Linde AG Headed the M&A department of Deutsche Bahn Cargo AG Director of Finance, Controlling, Law & IT of Scandlines AG SVP, Finance & Administration in AYG since 2003
Dr. Patrick Rautaheimo, R&D

M.Sc. Technical Physics and Dr. Tech. Applied Thermodynamics Work on fluid dynamics at Helsinki University of Technology With AYF since 2000 working within R&D and deck outfitting, ending up as Head of Naval Architecture Currently working as VP, Engineering in AYG
Ukraine Management
Torben Levinsen, President

Bachelor, National Economic Institute of Business & Administration, Copenhagen Extensive auditing experience from KPMG Senior finance positions at Ginge Kerr, Unitor, Novenco and Atlas Stord General management experience as President of Atlas Stord President of AYU since 2006
Alexander Shamray, CFO

Master degree in Finance 28 years old More than two years with DSO Eight years of relevant experience
Prof. Dr. Yuriy Zhukov, Director

Master degree in Finance From January 2003 to date, he has been serving as Director of Aker Yards Design Ukraine LLC 56 years old with 32 years of professional experience From 1975 to date, Mr. Zhukov has held positions at USMTU (Ukrainian State Maritime Technical University) first as an engineer, and then as the Head of the Marine Instrumentation Department Currently serving the institute as a professor
Source: Management presentation, DR Ref. 2.2, 25.2.2.3.1
Comment: for more detailed information on on management and personnel please refer to Appendix
64
AYG employees profile illustrates high age and length of service
Total number of employees per Entity

Number of employees as end of year FY04 Act FY05 Act 1,317 1,039 17 50 21 2,444
187.3 42.2
Distribution of employees per function

FY06 Act 1,349 1,029 86 54 20 2,538
209.9 41.5
FY07 CAGR Act FY05-07 1,373 1,036 109 57 20 2,595

273.7 46.2
2.1 % -0.1 % 1 53.2% 6.8% -2.4% 3.0%
4% 5% 14% 4%
Aker MTW Werft GmbH 1,325 Aker Warnemnde Operations 1,034 Arctic Peronaldienstleitung Warnow Design 47 Aker MTW Grundstcksverw. gesellschaft 21 Total number of employees 2,427
Revenue per employee in thousands Costs per employee in thousands
73%
Manufacturing (blue collar)

20.9% 4.6%
Administration (w hite collar) Employees construction
Employees (w hite collar) Trainees
A k e r M T W W e rft G m b H
Fluctuation
25 44 22 46 10 20 30 40 50
W a g e d e m p l o y e e s le n g t h o f s e r v ic e W a g e d e m p lo y e e s a g e S a la r i e d e m p lo y e e s l e n g t o f s e r v ic e S a la r i e d e m p lo y e e s a g e
7% 6% 5% 4% 3% 2%
5.2%
5.0%
6.2%
2.8%
2.9%
2.6%
A k e r W a r n e m n d e O p e r a t io n s G m b H
W a g e d e m p lo y e e s le n g t h o f s e r v ic e W a g e d e m p lo y e e s a g e S a la r ie d e m p lo y e e s le n g t h o f s e r v ic e S a la r ie d e m p lo y e e s a g e 10 20
26 44 30 50 30 40 50 60
1% 0% FY05 Act
FY06 Act salaried employees
FY07 Act w aged employees
A v e r a g e a g e a n d le n g th o f s e r v ic e o f e m p lo y e e s in y e a r s - s t a t u s F Y 0 7
Source: DR Ref. 30.1, DR Ref. 74.1359, PwC Analysis
65
DSO experienced significant turnover in all employee categories
AYU: Personnel expenses

in millions Salaries and wages Social security Total direct personnel Salaries and wages Social security Total indirect personnel Total salaries and wages Total social security Pension liability Personnel costs AYDU Unreconciled difference Total FY05 Act n/a n/a n/a n/a n/a n/a 8.2 3.4 0.3 11.8 FY06 Act 5.9 n/a n/a 3.8 n/a n/a 9.8 3.8 0.4 0.2 0.1 14.3 FY07 Act 6.5 2.5 9.0 4.8 1.8 6.7 11.3 4.4 0.4 0.5 16.5 Change Change FY06/FY05 FY07/FY06 0% 20% 12% 0% -26% 21% 10% 27% 0% 15% 16% -8% 181% 16%
Compared to AY German shipyards, DSO has considerably more employees, while the production capacity is less by several times. According to management of DSO, this is partly due to a lower level of automation of DSO shipyards. In FY05-FY07, DSO headcount decreased by 15% (465 employees). Meanwhile, DSO still has excessive indirect personnel workers as well as heads and specialists (for example, 74 employees in the finance department). Management is currently considering the option of continuing with indirect staff reduction. The rotation of direct workers is rather significant, which is explained by a difficult situation in the Ukrainian labour market. To retain people, DSO had to increase salaries, which explains the growth of personnel expense in FY06-FY07. As result of the above measures, the rotation of direct workers in FY07 started to slow down. However, it is still quite high. The AUDU headcount increased from 47 in FY05 to 72 in FY07 following an increase of activity. 90% of employees are engineers.
n/a - split between direct and indirect costs was not provided Source: DR Ref.856, 1526-1527
Employee turnover - DSO

FY05 number of employees Direct workers Indirect workers Students Heads and specialists Total headcount Hired Terminated %* 629 55 116 94 894 722 233 37 220 1,212
38% 35% 25% 36%
FY06 Year end headcount Hired Terminated 1,788 491 28 767 3,074 408 69 154 62 693 660 54 113 97 924
%*
37% 11% 13% 37%
FY07 Year end headcount Hired Terminated %* 1,602 503 2 736 2,843 358 93 4 34 490 494 31% 70 14% 2 156 21% 724 25%
Year end headcount 1,473 521 1 614 2,609
* Percentage of terminated employees to employees at the beginning of each period
66
Section 3 Historical trading
Section 3 - Historical trading
Group applies percentage of completion method (POC-Method) for accounting of shipbuilding contracts
Revenue recognition Management reporting (in accordance with IFRS) applies the percentage of completion (POC) method according to IAS 11 for projects in progress. IAS 11 requires management to estimate the stage of completion of each contract activity at the balance sheet date and also estimate the outcome of a contract. The POC is based primarily on contract costs incurred to date, compared to estimated overall contract costs. Consequently, revenue recognition depends on variables such as development in steel prices, cost of other factor inputs, extent of calculated contingencies, developments in projects and the shipyard capacity. The scope of variation order and acceptance of claims may affect revenue estimates. Uncertainties about revenue estimates will also be affected by the companys previous experience from similar construction projects. Thus, there are generally greater uncertainties related to construction of new vessel types compared with construction of sister vessels. Any projected losses on future work done under existing contracts are expensed and classified as accrued costs/provisions in the balance sheet under short-term liabilities. Losses on contracts are recognised in full when identified.
Source: Company Reports
Inventory valuation/work in progress In accordance with IAS 2, the Groups general principle is to directly allocate as much costs as possible directly to the projects. Costs that relate directly to a specific contract include site labour costs, cost of materials used, cost of design and technical assistance that is directly related to the contract, estimated costs of rectification and guarantee work and financial expenses related to the projects (building loan) netted against financial income on projects (advance payments). The project costs also include direct overhead costs such as project management, maintenance, insurance, cost of design and technical assistance indirectly related to a specific contract, costs of preparation and processing of a construction personnel payroll, purchases related to the project, invoicing of the project and depreciation.
68
Section 3.1 Germany
Section 3.1 - Germany
Between FY05 and FY07, AYG showed strong sales growth (CAGR 22.8%) leading to sales revenues of 689m in FY07, while EBITDA fell from 20m to 14m reflecting the low profitability of the container vessels (1/2)
AYG: Income Statement
in millions Net sales revenues Other revenues Total Revenues Direct material and other direct costs Fabrication Design Project finance costs Subtotal direct costs Overhead costs Total Operating Costs EBITDA Depreciation EBIT Financial income Financial expenses Net financial result EBT
KPIs As a % of total Net Sales Revenues Total Operating Costs EBITDA-margin EBIT-margin Direct material and other direct costs Fabrication costs Design/Engineering costs Overhead costs
FY05 Act 457.0
FY06 Act 532.6
FY07 Act 688.8 20.9 709.7 (483.8) (111.7) (20.7) 0.2 (616.0) (79.6) (695.5) 14.2 (8.1) 6.1 1.8 (0.6) 1.2 7.3
CAGR 05-07
22.8% 24.6% 29.4% 1 4.2% 48.2%
457.0 532.6 (289.1) (340.0) (85.7) (99.6) (9.4) (11.7) n.a. n.a. (384.2) (451.3) (52.8) (69.9) (437.0) (521.2) 20.0 11.4 (7.5) (7.6) 12.5 3.8 1.1 0.8 (0.6) (0.4) 0.5 0.4 13.0 4.2
The increase in sales revenues from FY05 to FY07 mainly reflects the bigger size and contract volumes of the ships produced as well as the optimized workflow in AYG shipyards. Contract prices are generally based on the calculation for the individual projects but are also influenced by the competition from Asian ship yards, especi ally for container vessels. Within that period, AYG almost exclusively produced and delivered container vessels with capacities between 1,700 and 2,700 TEU as well as some ship sections, e.g. the fore part section for an iceclass vessel for Norilsk Nickel in FY05 which is stated to be identical to the now ordered ships by Norilsk Nickel. The number of delivered ships increased from 10 in FY05 to 13 in FY06 and 15 in FY07. We understand from management that 9.5m of underrecovery in the overhead costs in FY07 are to be reclassified to fabrication costs increasing the latter to 121.2m.
26.6% 22.7% 26.2% -1 5.9% 3.9% -30.4% 28.2% -1 .8% 56.8% -25.2%
95.6% 4.4% 2.7% 63.3% 18.8% 2.1% 11.6%
97.9% 2.1% 0.7% 63.8% 18.7% 2.2% 13.1%
101.0% 2.1% 0.9% 70.2% 16.2% 3.0% 11.6%
In FY07, sales revenues of 689m include 11.7m of revenue from sections which have been reclassified from other revenues in comparison to AYGs Business Plan (Version 6.02.2008).
Source: Business Plan version 6.02.2008, 77.1472, PwC Analysis
70
Between FY05 and FY07, AYG showed strong sales growth (CAGR 22.8%) leading to sales revenues of 689m in FY07, while EBITDA fell from 20m to 14m reflecting the low profitability of the container vessels (2/2)
in millions Net sales revenues Other revenues Total Revenues Direct material and other direct costs Fabrication Design Project finance costs Subtotal direct costs Overhead costs Total Operating Costs EBITDA Depreciation EBIT Financial income Financial expenses Net financial result EBT
KPIs As a % of total Net Sales Revenues Total Operating Costs EBITDA-margin EBIT-margin Direct material and other direct costs Fabrication costs Design/Engineering costs Overhead costs
Between FY05 and FY07, direct costs increased stronger (CAGR of

FY05 Act 457.0 FY06 Act 532.6 FY07 Act 688.8 20.9 709.7 (483.8) (111.7) (20.7) 0.2 (616.0) (79.6) (695.5) 14.2 (8.1) 6.1 1.8 (0.6) 1.2 7.3 CAGR 05-07
22.8% 24.6% 29.4% 1 4.2% 48.2%
457.0 532.6 (289.1) (340.0) (85.7) (99.6) (9.4) (11.7) n.a. n.a. (384.2) (451.3) (52.8) (69.9) (437.0) (521.2) 20.0 11.4 (7.5) (7.6) 12.5 3.8 1.1 0.8 (0.6) (0.4) 0.5 0.4 13.0 4.2
22.7% 26.2%
26.6% -1 5.9% 3.9% -30.4% 28.2% -1 .8% 56.8% -25.2%
26.6%) than the sales revenues (CAGR 22.8%). The direct material and other direct costs and the design costs (own and subcontracted) show CAGR of 29.8% and 48.2% respectively. According to management, these were mainly caused by design errors for CS1700 and CS2100 vessels which resulted in higher steel weights, more parts and man-hours as well as by the price increases in steel and engineering services. As a reaction to that development, AYG has started implementing additional design cross checking methodologies and steel price gliding clauses in their sales contracts. 14.2% and CAGR 18.9% after reclassification of overhead cost (see above)). Management stated that this mainly is influenced by hig her volumes of work performed by subcontractors which normally are less expensive than the own workforce and by some initiatives of management in order to improve productivity on the shop floor.
Fabrication costs increased slightly lower than the revenues (CAGR
Project finance costs comprise the financial income and expenses that
are directly related to projects. The positive amount in FY07 reflects the more favourable situation of advance payments received from customers as a result of the contractual agreements.
95.6% 4.4% 2.7% 63.3% 18.8% 2.1% 11.6%
97.9% 2.1% 0.7% 63.8% 18.7% 2.2% 13.1%
101.0% 2.1% 0.9% 70.2% 16.2% 3.0% 11.6%
In FY07, adjusted overhead costs of 70.1m (assuming the mentioned

reclassification of 9.5m to fabrication) almost maintained the level of FY06. With an adjusted ratio of 10.2% to sales revenues, the overhead cost rate fell back below the one of FY05 with 11.6%. Total operating costs in FY07 exceeded sales revenues by 6.7m. Other revenues of 21m are the driver for a positive EBITDA of 14m and comprise amongst other items release of provisions ( 2.9m), income of AWRE ( 2.9m), innovation aid RoPax ( 2.0m), and Aida settlement ( 1.9).
71
Gross margin and order contribution increased slightly over the last two years. Overall profitability in FY06 decreased due to one-off overhead costs
In FY07, sales revenues increased significantly due to the production of larger vessels at higher prices and the improved throughput in the German shipyards.
177.1 180 160 140
in millions
EBITDA Bridge FY05-FY07 (reported)
200
Increase in material and other direct project costs in FY07 equals 92.1% of the increase in sales revenues in FY07. Thus, the material and other cost ratio of 63.8% in FY06 was exceeded significantly, also due to cost increases of CS2100 vessels as a result of design errors.
120 100 80 60 40 20 0 FY05 20 75.6
We understand that the main increase is due to early retirement ( 11.3)
Variation does not consider reclassification of 9.5m underrecovery from overhead to fabrication cost.
(50.9) (16.2) 11.4 (17.1) Total revenues Direct material Fabrication and and other costs design costs Overheads FY06 Driver Total revenues Direct material Fabrication and and other costs design costs (143.7) (21) (9.6) Overheads FY07 14.2
72
AYGs order backlog as 31. Dec FY07 comprised 25 vessels with an order volume of 1.5bn and forecasted project profits of 70m. Based on the POC-method, revenues of 250m and profits of 7.4m were already realised as at 31 December 2007
AYG: Order backlog as at 31. Dec FY07
1,482.1 M 19.8 332.3 35.1 410.6 69.6 M 1.1
Customer Orderbook as of Dec. CustomerSplit Split of Orderbook as of 31. Dec2007 FY07

NSB Rehder 3% 5% Winter 9% Knig & Cie 15%
21.7
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
other 1%
2 RoPax vessels
Stena Rederi 28%
4 Ice-class vessels
Norilsk Nickel 22%
719.4 11.7 Current contract values Container ships RoPax Expected profits on contracts Ice-class Hulls/ ships' sections
Laeisz 17%
Source: DR Ref 3.1.2.2.1-3, Business Plan v 6/2/8
AYG: Order backlog as at 31. Dec. FY07 Expected profit realisation in Business Plan m 42.9 50.0 40.0 30.0 16.4 20.0 7.3 10.0 FY07Act FY08Plan FY09Plan
Financing for 4 of the 6 container vessels CS2800 which were ordered in FY07 still need to be secured by the customer until end of February 2008 ( 150m). The profit realisation from FY08 to FY10 is based on the Business Plan figures which do not reconcile completely to the figures of management reporting (Business Plan: 1.2m lower). It should be noted that in FY08 92% of projected EBIT is secured (FY09: 47%; FY10: 4%) by current order backlog
1.8
FY10Plan
73
AYG will benefit until FY10 from the high order intakes in FY05 and FY06 which include the Ice-class vessels for Norilsk Nickel and the RoPax ferries for Stena
Order backlog from FY05 to FY07

2.000 1.800 1.600 1.400 1.200 1.000 800 600 400 200 0
In FY05, orders for 29 container ships were acquired. The last of these vessels will be delivered in July 2008.
747.7 1,776 1,523.2
13 of 19 container ships of the order backlog are scheduled for delivery in FY08
in millions
1,063.9
290.4
1,482.1
817.3
(584.3) (494.9)
(358.0) 1 Jan. FY05 Deliveries Order intake 31 Dec. FY 05 Deliveries Order intake 31 Dec. FY06 Deliveries Order intake 31 Dec. FY07
Number of ships: 22
(10)
29
41
(13)
34
(15)
25
Source: dataroom information, Business Plan version 6.02.2008
Order backlog, order intake and deliveries are based on contract values of the ships (including change orders and subsidies, if any) and do not represent revenues which are realised in the periods of delivery or realisable revenues after the respective FY(E). The period of order intakes is reconciled to the statutory audited financial statements.
74
Warranty provisions have decreased considerably by 1.0m in FY07. The total maximum of contractually agreed liquidated damages amounts to 148m. However management is not aware of disputes with customers.
AYG: Development of warranty provisions in FY07

3 2.5
in millions
2.6
Includes reversal of 0.7m for 9 CS2700 vessels which were delivered in FY06
1.6 1.6
AYG: Potential liquidated damages in orderbook as of 31. Dec FY07 - total 148m
15.8m
2 1.5 1 0.5 0 provisions as at 1. Jan FY07 used cancelled (1.8) (0.8)
32.0m
Total amount equals 10% of total contract value of Orderbook as at 31. Dec FY07
100.4m
added provisions as at 31. Dec FY07
Source: DR Ref. 35.90 (7.4.2), PwC Analysis
Container
RoPax
Ice-class
AYG: Development of warranty provisions in FY07

in millions CS2700 CS2100 CS1700 CS2500 Other No. of ships 24 4 5 11 9 Provisions 31. Dec FY07 0.7 0.5 0.3 0.0 0.1 Remarks
In general , the contracts include clauses for liquidated damages in relation to delivery date, speed, consumption of fuel and performance in TEU. We understand that in the period under review no liquidated damages become due to a material extent.
Guarantee period of 12 months not yet finished Guarantee period of 12 months not yet finished Guarantee period of 12 months not yet finished Forthcoming invoices for agency costs includes repair of oar and additional guarantee for main engine ( 35k) and forthcoming invoices for rescission of guarantees ( 44 k)
Total
53
1.6
Warranty provisions of 0.1m concerning vessels delivered before FY07 are included.
Source: DR Ref. 35.90 (7.4.2), PwC Analysis
75
As at 31 December 2007, the WIP is 251m or 16.9% of the order backlog which almost completely incurred in FY07. Advance payments received on orders amount to 301m.
AYG: Order backlog and work-in-progress as at 31. Dec FY07
Current contract values 719.4 410.6 332.3 19.8 1,482.1 Revenues recognised YTDDec07 207.3 5.9 28.7 8.5 250.3 WIP gross 207.3 5.8 28.9 8.6 250.6 Advance payments received 84.1 62.3 147.6 7.4 301.4 WIP assets 135.0 1.2 136.2 WIP liabilities (11.8) (56.4) (118.7) (187.0)
207.3m , 83%
AYG: WIP gross as at 31. Dec FY07

28.9m , 12% 5.8m , 2% 8.6m , 3%
in millions Container ships RoPax Ice-class Hulls/ ships's sections Orders on hand 31. Dec
AYG: Order backlog and work-in-progress as at 31. Dec FY07 - detail

in millions ID Ship Type 140 CS 2700 Container 145 CS 1700 Container 146 CS 2100 Container 149 CS 1700 Container 150 CS 1700 Container 152 CS 2700 Container 153 CS 1700 Container 147 CS 1700 Container 155 CS 1700 Container 148 CS 1700 Container 156 CS 650 Ice-class 157 CS 2700 Container 151 CS 1700 Container 154 CS 1700 Container 158 CS 650 Ice-class 160 CS 650 Ice-class 161 CS 650 Ice-class 159 RoPax 55 RoPax 164 RoPax 55 RoPax 162 CS 2800 Container 163 CS 2800 Container 165 CS 2800 Container 166 CS 2800 Container 168 CS 2800 Container 169 CS 2800 Container 423 Sec. Gen. Other Orders on hand 31. Dec FY07 Expected Current delivery contract dates values 18/01/2008 43.4 28/01/2008 31.7 14/03/2008 39.9 28/02/2008 31.6 17/04/2008 31.8 29/04/2008 43.6 28/05/2008 33.5 22/04/2008 32.5 10/07/2008 33.5 04/06/2008 32.5 31/07/2008 82.6 28/07/2008 43.8 24/07/2008 32.5 29/08/2008 32.5 30/10/2008 82.6 28/11/2008 82.6 20/01/2009 84.5 08/01/2010 205.3 07/07/2010 205.3 03/08/2009 42.8 06/11/2009 42.8 05/10/2010 42.8 23/02/2010 42.8 15/04/2010 42.8 08/06/2010 42.8 28/03/2008 19.8 1,482.1 Revenues recognised YTD Dec 07 40.8 29.5 33.4 27.1 22.2 27.3 13.9 0.3 4.5 0.2 21.5 3.7 2.6 1.8 4.4 1.6 1.2 3.4 2.5 0.0 8.5 250.3 WIP gross 40.8 29.5 33.4 27.0 22.2 27.3 13.9 0.3 4.5 0.2 22.1 3.7 2.6 1.8 4.4 1.4 1.0 3.4 2.5 8.6 250.6 Advance payments received 8.6 9.4 7.5 9.4 9.4 8.6 6.6 1.6 6.6 1.6 49.2 8.6 4.8 1.6 49.2 24.6 24.6 41.1 21.1 7.4 301.4 WIP WIP
Container ships
RoPax
Ice-class
Hulls/ ships's sections
assets liabilities 32.2 20.1 25.9 17.7 12.9 18.7 7.3 (1.3) (2.1) (1.4) (27.2) (4.8) (2.2) 0.2 (44.8) (23.2) (23.6) (37.8) (18.7) 1.2 136.2 (187.0)
AYG: Advance payments received as of 31. Dec FY07

218.1m, 12%
Total amount in escrow accounts is 90.2m as at 31. Dec FY07 and includes guaranteed advance payments ( 2.0m) and also interest on deposits for early retirement plan ( 3.7)
81.0m, 5%
Total contract value amounts to 1,482m
1,264.0m, 83%
Remaining Contract value (net of advance payments received) Advance payments received Advance payments received in escrow
In general the contracts include advance payments to be made by the customers on order signing and along the production period. The amounts range between 20% and 90% of the agreed contract prices.
Source: DR Ref. 3.1.2.2.1 -3, Business Plan version 6.02.2008
76
Source: DR Ref. 32.72, 18.27.2.1 * Reconciling difference between advance payments from project report to adjacent table of 2.3m due to payments not secured by guarantees.
Section 3.2 Ukraine
Section 3.2 - Ukraine
Negative EBITDA is reported in each analysed period by AY Ukraine mainly due to pricing of inter-company transactions
Income Statement - DSO and AYDU
in millions Sales Other operating income Raw materials and consumables Personnel expenses Other production costs General expenses Provisions Holding costs Other operating expenses EBITDA
As a % of sales: Raw materials and consumables Other production costs Personnel expenses General expenses EBITDA 59% 19% 21% 5% -5% 52% 30% 25% 5% -7% 57% 19% 23% 4% -13%
FY06 58.4 4.5 (29.9) (14.3) (17.3) (3.0) (0.7) (0.4) (1.4) (4.2) FY07 74.8 (4.2) (41.6) (16.5) (14.3) (3.2) 1.0 (5.1) (0.7) (9.8) Change Change FY06/FY05 FY07/FY06 2% 585% -11% 21% 58% 13% 118% 51% -17% 35% 28% -193% 39% 15% -17% 8% -235% 1100% -52% 136%
FY05 57.4 0.7 (33.4) (11.8) (10.9) (2.6) (0.3) (0.3) (1.7) (3.1)
In the adjacent table, we present the combined profit and loss statements of DSO and AYDU. The profit and loss statement of DSO is obtained from internal reports prepared in accordance with IFRS. The profit and loss statement of AYDU has been provided in the AY Group reporting package format. It should be noted that sales in the table are different from those included in historical data for the Business Plan, while EBITDA is broadly the same. The explanations of these differences are still outstanding. The sales significantly increased in FY07 following new orders from AY Group. Other operating income realised in FY06 was mainly represented by 3.7m income from write-off of accounts payable to Damen Group and was adjusted for the purpose of EBITDA normalisation. Raw materials and consumables expenses were lower in FY06 compared to FY05 and FY07. According to management, this was due to the fact that significant portion of material expenses and respective revenues, related to FY06 deliveries was recognized in FY05 in accordance with DSO accounting policy. Personnel expenses increased between FY05 and FY07 following the general increase of salaries in Ukraine. In FY07, DSO decided to significantly increase the salaries of direct workers in order to retain people.
Source: Internal reports, Datatoom Index 17.3.3.1-17.3.3.12, Add.doc.742-754, Add.doc 847, 848, 850
78
Sales are predominantly intra-group to other entities of AY Group
Breakdown of sales by customers

in millions Ukrrechflot Total external customers Damen Group Total related parties Aker Tulcea (Romania) Aker Braila (Romania) Aker Floro Okean B.V. Aker MTW Wertf Total intragroup Others* Total FY05 Act 20.0 20.0 34.0 34.0 3.4 57.4 %
35% 35% 59% 59% 0% 0% 0% 0% 0% 0% 6% 100%
FY06 Act % 26.2 45% 26.2 45% 18.3 31% 18.3 31% 1.5 3% 0.0 0% 1.9 3% 6.6 11% 0% 10.0 17% 3.8 7% 58.4 100%
FY07 Act % 12.4 17% 12.4 17% 1.7 2% 1.7 2% 1.7 2% 19.9 27% 22.9 31% 3.4 5% 9.9 13% 57.8 77% 2.9 4% 74.8 100%
The sales to Damen Group have decreased as a result of DSOs acquisition by AY Group in FY06. The contract for the construction of one vessel 7403 for Damen Group was concluded with Okean B.V. We have neither been provided with the original contract between Damen Group and Okean B.V nor with explanations as to why Okean B.V. was chosen as a contracted party for this project. It should be noted that in FY07 DSO generated the majority of its revenue from section production under the contracts with other entities of AY Group. Sales do not comprise the operations with shipbuilding materials received directly from the customers (so-called buyer supply). Such transactions are excluded both from revenues and costs in FY05-FY07 IFRS financial statements (Buyer supply is stable at 5.4m through FY05FY07).
*non shipbuilding revenues (repairs, design, etc.) Source: Internal reports, DR Ref. 17.3.3.1-17.3.3.12, 742-754
Sales by types of projects

80%
73% 59% 51% 35% 6%

FY05 Act FY05 Act Complete vessels Modules Others
60% 40% 20% 0%
42% 23% 7%
FY06 Act
4%
Source: Internal reports, DR Ref. 17.3.3.1-17.3.3.12, 742-754
79
AYU - Other production costs
Other production costs

in millions Co-makers Repairs and maintenance Subcontractors Gas, energy Low value items Others Total
Source: DR Ref. 856, 1328-1330
FY05 Act 3.8 1.5 3.4 1.4 0.8 0.1 10.9 FY06 Act 8.8 1.3 3.8 2.3 1.0 0.1 17.3 FY07 Act 4.8 2.4 4.4 2.0 2.1 0.1 15.8 Change Change FY06/FY05 FY07/FY06 131% -14% 11% 65% 34% -12% 58% -45% 82% 16% -11% 99% 19% -9%
Co-makers category includes painting work (6070% of the total), electrical works and other outfitting works outsourced to external providers. The share of such works is higher for complete vessels projects. The explanations of co-makers costs variations during FY05-FY07 are still outstanding. According to management of DSO, the repairs and maintenance costs increased in FY07 following the change of owner. Damen Group was not intensively investing in infrastructure maintenance. According to management of DSO, though the production and the energy prices increased in FY07, the gas and energy expenses remained stable due to energy-saving measures taken by DSO. Similar to repairs and maintenance, low value items comprising small equipment, work clothes, etc. increased in FY07 after such expenses were approved by AY Group.
General expenses
in millions Other personnel expenses Guard services Taxes on premises Bank commission Telecommunication Advisors costs Repair and maintenance of premises Others Total
Source: DR Ref. 856, 1328-1330
FY05 Act 0.6 0.4 0.1 0.2 0.2 0.1 0.1 0.8 2.6 FY06 Act 0.8 0.5 0.2 0.2 0.2 0.4 0.1 0.6 3.0 FY07 Act 0.6 0.5 0.3 0.2 0.2 0.2 0.2 0.9 3.1 Change Change FY06/FY05 FY07/FY06 35% -23% 8% 0% 91% 35% 21% 16% -7% 13% 210% -57% -34% 74% -30% 57% 13% 4%
80
AYU: Summary Movements in WIP and revenue for FY07
Projects data 31 Dec. FY07

Balance Sheet at 31 Dec. FY07 WIP (excl.BS)
6,263 2,739 12,304 4,179 6,077 4,357 1,625 13 7 4,927 4,912 4,666 52,069 481 52,550
Income Statement for FY07 Installments received

(5,287) (1,158) (4,426) (3,452) (8,816) (7,928) (4,914) (1,464) (160) (160) (6,002) (5,536) (2,431) (51,735) (639) (52,373)
in thousands
Customer
Type
section section section section section vessel section vessel vessel section section section section section section vessel vessel vessel vessel vessel vessel vessel section section section
Code
9656 9657 9658 9659 9660 7401 9149 7402 7403 250 9128 9129 150 151 152 9124 9125 9126 9127 9130 9131 9132 9133 9134 9135
WIP Provision
(1,043) (1,251) (471) (917) (279) (286) (142) (443) (372) (5,204) (5,204)
WIP Net
5,220 1,488 12,304 3,708 5,160 4,357 1,346 (273) (135) 4,485 4,540 4,666 46,866 481 47,347
Revenue
610 350 406 476 445 8,820 4,255 9,001 9,400 7,184 7,282 7,291 7,379 62,900 1,586 1,352 65,838
Movement WIP NET

(418) (142) (38) (8,595) (1,420) (7,530) (6,025) 5,725 1,670 13,233 3,658 5,984 4,675 (6,953) (5,329) (3,293) (2,846) 1,685 13 8 4,925 4,966 5,028 8,981 8,981
NET REVENUE
192 208 368 476 445 225 2,835 1,471 3,375 5,725 1,670 13,233 3,658 5,984 4,675 231 1,953 3,998 4,533 1,685 13 8 4,925 4,966 5,028 71,881 1,586 1,352 74,819
Aker Tulcea sections AY Tulcea (Romania) Aker Tulcea sections AY Tulcea (Romania) Aker Tulcea sections AY Tulcea (Romania) Aker Tulcea sections AY Tulcea (Romania) Aker Tulcea sections AY Tulcea (Romania) Geared Combigreighter 12.000 Dw t Damen Group Aker Floro fore part chemical tanker AY Floro (Norw ay) Geared Combigreighter 12.000 Dw t Damen Group Geared Combigreighter 12.000 Dw t Okean B.V. Aftship part of chemical tanker T150 AY Floro (Norw ay) Hull for a Platform Supply Vessel AY Braila (Romania) Hull for the tanker 15000 DWT Bramax AY Braila (Romania) Aker Floro forepart chemical tanker T150 AY Floro (Norw ay) Hull of chemical tanker T151 AY Floro (Norw ay) Hull of chemical tanker T152 AY Floro (Norw ay) Sea river Ukrrechflot Ukrshipbuilding Sea river Ukrrechflot Ukrshipbuilding Sea river Ukrrechflot Ukrshipbuilding Sea river Ukrrechflot Ukrshipbuilding Sea river 6,300 dw t complete Ukrshipbuilding Sea river 6,300 dw t complete Ukrshipbuilding Sea river 6,300 dw t complete Ukrshipbuilding CS1700 Container ship Forepart Aker MTW Werft GmbH CS1700 Container ship Forepart Aker MTW Werft GmbH Hull for the tanker 15000 DWT Bramax AY Braila (Romania) Total shuipbuilding Other - DSO Other - AYDU Total Source: Internal reports, Datatoom Index 17.3.3.1-17.3.3.12
81

8,944 7,836 6,269 7,236 5,545 3,427 2,962 435 148 1,478 360 40 7 4 44,690 328 81 45,099

(8,686) (8,253) (7,632) (6,858) (6,040) (4,322) (4,371) (619) (287) (2,234) (2,140) (3,235) (222) (54,899) 146 (54,754)
in thousands
Sea river complete vessel 900 TEU hull Volharding Sea river complete vessel Aker Tulcea sections 900 TEU hull Volharding Tug supplier hull DSGorinchem Sea river complete vessel Sea river complete vessel 900 TEU hull Volharding Geared Combigreighter 12.000 Dw t Geared Combigreighter 12.000 Dw t Geared Combigreighter 12.000 Dw t Geared Combigreighter 12.000 Dw t Sea river complete vessel Sea river complete vessel Sea river complete vessel Sea river complete vessel Aker Tulcea sections Aker Tulcea sections Aker Floro fore part chemical tanker Aker Floro fore part chemical tanker Aker Floro fore part chemical tanker Aker Tulcea sections Aker Braila Aker Braila Total shuipbuilding Other - DSO Other - AYDU Total
Customer
Ukrshipbuilding Damen Group Ukrshipbuilding AY Tulcea (Romania) Damen Group Damen Group Ukrshipbuilding Ukrshipbuilding Damen Group Damen Group Damen Group Damen Group Okean B.V. Ukrshipbuilding Ukrshipbuilding Ukrshipbuilding Ukrshipbuilding AY Tulcea (Romania) AY Tulcea (Romania) AY Floro (Norw ay) AY Floro (Norw ay) AY Floro (Norw ay) AY Tulcea (Romania) AY Braila (Romania) AY Braila (Romania)
Type
vessel section vessel section vessel section vessel vessel section vessel vessel vessel vessel section section section section section section section section section section section section
Code
9119 9121 9123 545 9122 552001 9117 9118 9120 9836 7401 7402 7403 9124 9125 9126 9127 9656 9657 9149 9150 250 9658 9128 9129
WIP Provision WIP Net

(798) (797) (732) (365) (363) (418) (503) (994) (318) (5,289) (5,289) 8,145 7,039 5,538 6,871 5,182 3,009 2,458 435 148 1,478 360 40 (988) (314) 39,401 328 81 39,810
Revenue
6,279 11,280 7,863 847 11,113 1,283 6,423 6,343 7,309 7,979 66,719 3,388 594 70,700
Movement WIP NET

(3,169) (6,579) (2,402) (6,496) (2,113) (7,106) (5,382) (7,138) (7,234) 4,377 4,561 6,576 5,734 4,888 3,585 3,098 456 155 1,550 378 41 7 4 (12,209) (32) (12,241)
NET REVENUE
3,110 4,700 5,461 847 4,616 (830) (683) 961 171 745 4,377 4,561 6,576 5,734 4,888 3,585 3,098 456 155 1,550 378 41 7 4 54,509 3,356 594 58,459
Source: Internal reports, Datatoom Index 17.3.3.1-17.3.3.12
82

2,244 7,546 5,716 3,366 7,580 6,987 6,899 7,682 5,314 3,885 2,551 1,970 986 11 9 62,746 399 63,145

(1,150) (6,821) (6,388) (5,473) (7,208) (10,205) (8,911) (7,854) (5,661) (5,717) (4,050) (2,822) (1,523) (73,784) (73,784)
in thousands
Damen AHT complete Damen TEU 900 hull Damen TEU 900 hull Damen TEU 900 hull Sea river complete vessel 6.300 dw t Tug supplier hull DSGorinchem Sea river complete vessel 6.300 dw t Sea river complete vessel 6.300 dw t Sea river complete vessel 6.300 dw t 900 TEU hull Volharding 900 TEU hull Volharding 900 TEU hull Volharding Geared Combigreighter 12.000 Dw t Geared Combigreighter 12.000 Dw t Geared Combigreighter 12.000 Dw t Sea river complete vessel 6.300 dw t Sea river complete vessel 6.300 dw t Sea river complete vessel 6.300 dw t Sea river complete vessel 6.300 dw t Sea river complete vessel 6.300 dw t Total shuipbuilding Other - DSO Other - AYDU Total
Customer
Damen Group Damen Group Damen Group Damen Group Ukrshipbuilding Damen Group Ukrshipbuilding Ukrshipbuilding Ukrshipbuilding Damen Group Damen Group Damen Group Damen Group Damen Group Damen Group Ukrshipbuilding Ukrshipbuilding Ukrshipbuilding Ukrshipbuilding Ukrshipbuilding
Type
vessel section section section vessel section vessel vessel vessel section section section vessel vessel vessel vessel vessel vessel vessel vessel
Code
552002 9113 9114 9115 9116 552001 9117 9118 9119 9120 9121 9122 9836 7401 7402 9123 9124 9125 9126 9127
WIP Provision
(1,143) (1,463) (1,389) (1,380) (404) (194) (964) (6,938) (6,938)
WIP Net
1,100 6,083 4,327 1,986 7,177 6,793 6,899 6,718 5,314 3,885 2,551 1,970 986 11 9 55,809 399 56,208
Revenue
2,134 6,983 7,113 6,725 6,428 29,382 2,426 661 32,470
Movement WIP NET

(2,836) (6,015) (5,133) (4,279) (2,910) 87 4,890 4,169 2,282 3,264 5,162 6,442 5,726 4,965 3,630 2,384 1,841 921 10 8 24,605 350 24,955
NET REVENUE
(701) 968 1,980 2,446 3,517 87 4,890 4,169 2,282 3,264 5,162 6,442 5,726 4,965 3,630 2,384 1,841 921 10 8 53,987 2,777 661 57,425
Source: Internal reports, Datatoom Index 17.3.3.1-17.3.3.12
83
Section 3.3 Past budgeting accuracy
Section 3.3 - Past budgeting accuracy
In FY06 and FY07, AYGs budgeting appears inaccurate. EBITDA, EBIT and EBT were significantly lower than planned.
AYG: Past Budgeting Accuracy - FY05 to FY07

in millions Sales Other operating income Total output Cost of materials Personnel expenses Other operating expenses EBITDA Depreciation EBIT Net financial result EBT FY05 Act 441.6 15.4 457.0 (287.1) (104.7) (45.2) 20.0 (7.4) 12.6 0.5 13.1 FY05 Variance Bud Act to Bud 413.8 6.2 420.0 (257.3) (101.0) (48.0) 13.7 (7.5) 6.2 0.0 6.2 27.8 9.2 36.9 (29.8) (3.7) 2.8 6.3 0.1 6.4 0.5 6.8
% 6.7% 147.2% 8.8% 11.6% 3.7% (5.9%) 45.5% (1.3%) 102.3% -109.2%
FY06 Act 525.3 4.0 529.3 (350.7) (106.2) (61.0) 11.4 (7.6) 3.8 0.4 4.2
FY06 Variance Bud Act to Bud 562.1 1.4 563.5 (374.5) (107.2) (55.2) 26.7 (7.8) 18.9 18.9 (36.8) 2.6 (34.2) 23.8 1.0 (5.8) (15.3) 0.2 (15.1) 0.4 (14.7)
% (6.5%) 179.6% (6.1%) (6.3%) (0.9%) 10.5% (57.3%) (2.3%) (79.9%) -(77.6%)
FY07 Act 695.9 11.1 707.0 (513.2) (117.2) (62.5) 14.2 (8.1) 6.1 1.2 7.3
FY07 Variance Bud Act to Bud 750.2 4.4 754.6 (538.3) (121.6) (63.2) 31.6 (8.3) 23.2 23.2 (54.3) 6.6 (47.7) 25.1 4.4 0.7 (17.4) 0.2 (17.1) 1.2 (15.9)
% (7.2%) 149.4% (6.3%) (4.7%) (3.6%) (1.2%) (55.1%) (2.8%) (73.8%) -(68.6%)
Source: DR Ref. 31.35-31.36, 68.1222, 77.1472
FY05 was characterised by sales revenues and other operating income which exceeded the budget by a total of 8.8%. The additional income of 36.9m resulted in an additional contribution to EBITDA of 6.2m or 16.7% of the additional income. Since one-off items were 3.0m in FY05, the conversion rate of marginal income appears rather high. In FY06 and FY07, the actual EBITDAs are significantly below the budgets. The reasons were that sales stayed 6.5% and 7.2% respectively below the budgeted figures and simultaneously, the expense items were generally closer to the budgets.
85
Recognition of a provision for early retirement ( 11.3m) in FY06 as a result of changes in legal regulations, under recovery of cost s in FY06 ( -7.4m) and FY07 ( -11.8m) as well as the budget overrun mainly related to design errors concerning the CS 2100 vessels ( 8m) negatively affected the EBITDA of these periods. Management stated that they have implemented appropriate changes to the processes and the accounting basis in order to prevent such effects in the future. The historical inaccuracy may impact achievability of AYGs projections going forward.
CS 1700 The negative deviation of 1.1m from contracted budget is mainly driven by higher part complexity and increased fabrication hours as a consequence of design errors.
Project budgeting accuracy - CS 1700
2,500
The number in the vessel type name in general refers to the nominal load in TEU.
732.4
The increase in revenues is due to change orders related to additional cranes for the vessels.
2,000
in thousands
1,500 1,250.7 (494.7)
As a result of design errors, the CS 1700 vessel type had building pieces than originally planned leading to additional fabrication hours. Management stated that they implemented additional cross-checking methodologies in the design department in co-operation with Germanischer Lloyd in order to avoid such design errors in the future.
1,000
Indirect costs are almost solely driven by higher overhead costs. Overheads are allocated to a project based on fabrication hours. The overrun in overhead costs reflects the additional fabrication works performed.
500
The extra cranes and design errors resulted in higher material package costs.
(1,040.0) (12.6) (235.5) 200.3
0 Project result contracted budget Revenue Direct material Fabrication Remaining direct cost Indirect costs Project result - latest estimate
Comment: The figures in the bridge above displays an average by vessel type calculated by adding up the values per line item and dividing them by the number of ships (14) in that vessel category. The projects included contain all vessels delivered since FY05 as well as vessels in the current order backlog. For mo re detailed and further information please refer to the Appendix. Source: DR Ref. 32.72
86
The CS 2100 average performance is extremely poor and shows a negative project result, again mainly driven by increased fabrication hours and higher part complexity as a consequence of design errors
2,000 426.8 1,500 1,095.6 1,000
Especially the CS 2100 suffered from design errors leading to a longer building complexity and higher fabrication works (35% more building pieces)
(986.4)
The increase is again driven by the correlation between fabrication hours and allocated overhead costs.
500
in thousands
-500
-1,000
-1,500
Analogue to the CS 1700 series, the additional crane demand caused higher change orders. Increase due to steel price escalation clause is not included yet.
-2,000
Besides the installation of additional cranes, steel price increase and the design errors resulted in higher material cost
278.0
(2,355.2) (679.4) (2,220.6) Project result - latest estimate
-2,500 Project result contracted budget Revenue Direct material Fabrication Remaining direct costs Indirect costs
Comment: The figures in the bridge above displays an average by vessel type calculated by adding up the values per line item and dividing them by the number of ships (5) in that vessel category. The projects included were contracted with one customer in FY05. Delivery of 4 vessels took place in FY07. The last vessel will be delivered in March FY08. For more detailed and further information please refer to the Appendix. Source: DR Ref. 32.72
87
The CS 2500 production was strongly influenced by the increase in the steel price, which doubled during the production of this vessel type between FY04 and FY06, according to management
2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 (145.7) 200 0 Project result contracted budget Revenue Direct material Fabrication Remaining direct costs Indirect costs Project result - latest estimate (1545.8) 391.8 407.6 971 791
The CS 2500 contracts in general did not include a steel price gliding clause. As the steel price strongly increased during the production of this vessel type, management could negotiate a price increase of 1.8m for the last two vessels only. The last ship of this vessel type was delivered in April 2006. Management stated that steel for this vessel type accounted for more than the current 22% of the total direct material package. Management also explained that higher steel procurement costs could not be passed on to the customer on a 100% basis. Remaining direct costs are positively influenced by lower finance cost ( 239k) and reversal of contingencies included in tender calculation ( 226k)
in thousands
(54.7)
Comment: The figures in the bridge above displays an average by vessel type calculated by adding up the values per line item and dividing them by the number of ships (6) in that vessel category. For more detailed and further information please refer to the Appendix. Source: DR Ref. 32.72
88
The CS2700 series is the most produced vessel in the period under consideration (23 vessels delivered). The rise in steel prices could only partially be passed on to some customers by means of steel price gliding clauses
Project budgeting accuracy - CS2700
2,500
The increase is driven by the rise of steel prices. Management was able to establish a steel price gliding clause in some of the newer contracts.
2,000
357.5
1,556.8
in thousands
Remaining direct costs are positively influenced by lower finance costs ( 299k) and reversal of contingencies included in tender calculations ( 363k)
545.1 (40.3) 1,312.9
1,500
1,000 (933)
500
The unfavourable steel price development is reflected in increased procurement costs leading to higher direct material packages.
(173.2)
0 Project result contracted budget Revenue Direct material Fabrication Remaining direct costs Indirect costs Project result - latest estimate
Comment: The figures in the bridge above displays an average by vessel type calculated by adding up the values per line item and dividing them by the number of ships (26) in that vessel category. The projects included contain all vessels delivered since FY05 as well as vessels in the current order backlog. The last 3 vessels are expected to be delivered in FY08. For more detailed and further information please refer to the Appendix. Source: DR Ref. 32.72
89
Ice-class Management expects that the average project result will be 60% higher than original contract calculation with contingencies as key factor. The 4 vessels are said to be copies of a vessel delivered in FY05.
Project budgeting accuracy - Ice class
10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Project result contracted budget Revenue Direct material
The increase is mainly driven by one change order of 2.5m due to additional cranes
1,062.8 5,513.0 (710.8)
In the tender calculation, contingencies were intentionally higher due to negotiation tactics with labour unions. Management stated that remaining contingencies ( 35m each) after reversal still reflect a conservative approach. Change order related cost increases
3,179.8
Deliveries of the 4 vessels are scheduled between July FY08 and January FY09
250.8 8,772.3
in thousands
612.0 (708.5)
Material cost increase, based on contracted material packages. No steel price gliding clauses were agreed.
(426.8)
Fabrication expenses start at a deviation of 1.1m and are projected to decrease to 0.6m due to efficiency gains, which appears ambitious based on past project results.
Fabrication Design Remaining direct cost Contingency Indirect costs Project result latest estimate
Comment: The figures in the bridge above displays an average by vessel type calculated by adding up the values per line item and dividing them by the number of ships (4) in that vessel category. For more detailed and further information please refer to the Appendix. Source: DR Ref. 32.72
90
The RoPax vessels are the biggest projects measured in order value in the recent years. Ability to secure the current cost estimation is a key factor to realise the expected margin.
Project budgeting accuracy - RoPax
20,000 18,000 16,000 14,000 12,000.0
in thousands
The additional fittings result in higher direct material expenses. Management stated that they will subcontract a portion of fabrication hours for cost reasons. However, this will expectedly not compensate for incurred price increases. Remaining direct costs are positively influenced by lower finance cost ( 546k) and lower other direct costs ( 610).
5,505.0
12,000 10,000 8,000 6,000 4,000 2,000 0 Project result contracted budget Revenue
(4,514.0)
1,156.0
10,836.5 (596.5)
(2,276.5)
(437.5)
Management stated that change orders are daily business resulting in 5.5m additional order volume for each of the two vessels. Steel price adaptations are not considered and are postponed until delivery.
Deliveries of the 2 vessels are scheduled for Jan FY10 and July FY10.
Fabrication Design Remaining direct cost Indirect costs Project result - latest estimate
Direct material
The figures in the bridge above displays an average by vessel type calculated by adding up the values per line item and dividing them by the number of ships (2) in that vessel category. For more detailed and further information please refer to the Appendix. Source: DR Ref. 32.72
91
Historically, DSO reported negative EBITDA while positive EBITDA was budgeted
DSO - Past budgeting accuracy FY07

25 20
in m illions
12.8
15 10 5 0 -5 -10
EBITDA Budget Revenue Raw materials Personnel costs Other production costs Holding costs
We present opposite the analysis of variances between budgeted and actual results for FY07. The detailed tables with budgeted and actual figures for FY05-FY07 are presented in Appendix 3. We should note that DSO does not prepare formalised reports on deviation analysis between the budgeted and the actual data. Historically, DSOs actual results significantly deviated from the budgeted figures. In FY07, DSO received negative EBITDA of 5.7m while positive EBITDA of 7.0m was budgeted. FY07 was the first full year when DSO was part of AY Group. Therefore, we have focused our analysis of budgeting accuracy on FY07 because process in FY05-FY07 when DSO was part of Damen Group could be different. In FY07, both actual revenues and costs were higher than the budgeted, and increase in raw materials costs exceeded growth in revenue. The increase of cost of salaries by 2.4m is explained by significant salary increases made in order to retain the employees. Holding costs comprising inter-company expenses increased because FY07 was the first full year within AY Group, and all expenses incurred by AY Group for DSO were fully re-charged to DSO. We have not been provided with detailed comments in respect of variances between actual performance and budget.
7.0 (14.0) (2.4) (3.6) (2.5) (3.0)

Other costs

(5.7)
EBITDA Actual
Source: DR Ref. 17.3.3.1-17.3.3.12, 203
92
Section 4 Business Plan
Section 4 - Business Plan
Business Plan: Overview and included strategy
General planning assumptions

On 6 February 2008, management provided us with the latest Business Plan which is presented in the following pages. The Business Plan consists of two individual Plans: One for the German operations and one for the Ukrainian shipyard. Management provided only financial information at the profit and loss statement level. As we were not provided with balance sheets and cash flow calculations for the two operations, our analysis is actually limited to the respective profit and loss statements. Further, we need to point out that we were not provided with a detailed description of the basic assumptions which form the basis of the two Plans. Some high level assumptions as well as the key strategies and measures for the Business Plan for Germany were introduced in a separate management presentation. A very short description of the assumptions which form the basis of the Business Plan for Ukraine was included in the management presentation for AY Ukraine. No detailed descriptions have been provided.
Main vessels contained in Business Plan

The main products of the Group planned in the Business Plan are container vessels, chemical and product tankers, arctic vessels, Ro-Pax (Roll-on/Roll-off passenger ships) and general cargo vessels. The other products range from dry cargo vessels, juice carrier vessels, Roro (Roll-on/Roll-off cargo vessels), car carriers, reefers, drilling rigs, offshore construction vessels and passenger vessels to LNG tankers. According to the Business Plan, there is a shift in the product mix to more specialised vessels such as Arctic LNG, Iceclass ships, Ro-Pax and a significant increase in offshore construction. The Groups strategy is to become the worlds leading provider of Arctic solutions and partner for complex vessels. According to management, high quality, innovative solutions, advanced technologies and track record of timely delivery are the key strengths of AYG.
94
We have aggregated the individual Plans for AYG and AYU. Inter-company revenues and costs are still included but we understand that on group level the impact is immaterial*.
Group: Combined Income Statement
in millions Net sales merchant vessels Other revenues Total Revenues Direct material and other direct costs Fabrication Design Subtotal direct costs Overhead costs Total Operating Costs EBITDA Depreciation EBIT Financial income Financial expenses Net financial result Extraordinary gains/losses EBT
KPIs As a % of total Revenues: EBITDA-margin Group Total Operating Costs Direct material and other direct costs Fabrication costs Engineering costs Overhead costs 3.2% 96.8% 63.5% 19.2% 1.8% 12.3% 1.2% 98.8% 64.1% 19.4% 2.0% 13.3% 1.1% 98.9% 67.6% 16.5% 2.6% 12.2% 6.8% 93.2% 61.7% 17.5% 2.5% 11.4% 5.0% 95.0% 66.2% 16.2% 2.3% 10.0% 7.1% 92.9% 66.1% 15.1% 3.0% 9.1% 8.1% 91.9% 64.6% 15.3% 3.3% 9.0% 9.1% 90.9% 63.6% 16.0% 2.0% 9.3%
-42.3% 1 .1 % 3.2% -7.1 % 1 9.8% -0.5% 7.7% -0.6% 0.8% -2.2% -5.1 % -4.8%
FY05 FY05 Act
FY06 FY06 Act 583.7 4.7 588.4 (377.1) (114.4) (11.7) (503.2) (78.2) (581.4) 7.0 (10.4) (3.4) 0.8 (2.6) (1.8) (2.0) (7.2)
FY07 Act 760.2 26.1 786.3 (531.7) (130.0) (20.7) (682.2) (95.7) (777.8) 8.5 (11.0) (2.5) 1.8 (3.9) (2.1) (5.5) (10.1)
FY08 FY08 Plan 707.1 48.0 755.1 (465.7) (132.0) (18.8) (618.1) (86.0) (704.1) 51.0 (11.5) 39.5 0.7 (0.3) 0.4 39.9
FY09 FY09 Plan 840.1 6.4 846.5 (560.4) (137.0) (19.2) (719.4) (84.4) (803.8) 42.7 (11.5) 31.2 0.7 (0.3) 0.4 31.6
FY10 FY10 Plan 944.5 6.1 950.6 (628.5) (144.0) (28.1) (797.0) (86.4) (883.4) 67.2 (11.5) 55.7 0.6 (0.3) 0.4 56.1
FY11 FY11 Plan 957.5 6.0 963.5 (622.2) (147.0) (32.0) (799.3) (86.4) (885.6) 77.8 (11.5) 66.3 0.7 (0.2) 0.5 66.8
FY12 FY12 Plan 928.6 6.4 934.9 (595.0) (149.4) (18.9) (762.5) (87.4) (849.8) 85.1 (11.5) 73.6 0.7 (0.2) 0.5 74.0
CAGR 05-07
22.0% 205.4% 23.7% 27.7% 1 4.9% 48.2% 25.4% 23.1 % 25.1 % -28.6% 2.3%
CAGR 08-12
7.0% -39.6% 5.5% 6.3% 3.2% 0.1 % 5.4% 0.4% 4.8% 1 3.6% 0.0% 1 6.8%
510.7 2.8 513.5 (326.0) (98.4) (9.4) (433.8) (63.1) (496.9) 16.6 (10.5) 6.1 1.1 (2.3) (1.2) 5.1 10.0
28.2% 29.9% 31 .3%
-1 .9% -1 2.7% 5.8%
1 6.7%
Shortly before finalization of the report management provided us with information regarding intercompany revenues. Management stated that 10.4m of inter-company revenues for FY07 and 3.3m intercompany revenues in FY08 relate to two CS 1700 fore ships that are delivered FY08 from Ukraine to Germany. AYU suffered a loss of -0.9m in FY07 from this transaction. Due to materiality reason we did not cons olidate the revenues and associated costs. Total revenues and direct material are therefore overstated by 1% in FY07 while EBITDA is not affected by this inter-company transaction.
95
Management projects strong increase in profitability over the Business Plan period
Growth of planned EBITDA margin for both countries are in contrast to past results "Hockey stick"
Group - Total Revenues and EBITDA development

Decrease in profit despite gains in revenue due to low profitability in Germany and losses in Ukraine
1,200 1,000 800
10% 951 963 8.1% 7.1% 9.1% 9% 935 8% 7% 6% 5.0% 5% 4% 3% 2%
786 588
847 755 6.8%
in millions
600 400 200
514 3.2%
16.6
FY05 Act
1.2% 7.0
FY06 Act
1.1% 8.5
FY07 Act/FC Total Revenues
51.0
FY08 Plan
42.7
FY09 Plan EBITDA
67.2
FY10 Plan
77.8
FY11 Plan
85.1
1% 0%
FY12 Plan
EBITDA-margin
96
Business Plan projects strong development for the Ukrainian operations

Group - Revenue by Country
1200 1000 800 600
194.2 214.8
76.6 56.5 55.8 709.7 457.0 532.6
75.4
128.6
207.8
The Ukrainian Business Plan provides for a three-fold sales growth over FY08FY12, while only 10% of FY09 sales are supported by customer contracts. Revenue growth for Germany beyond FY09 mainly reflects anticipated shift in vessel types. As only a few vessels have been contracted for the period beyond FY10, significant marketing efforts will be required to meet the projections.
679.7 717.9 756.4 748.7 727.1
400 200 0 FY05 Act FY06 Act
FY07 Act
FY08 Plan
FY09 Plan
FY10 Plan
FY11 Plan
FY12 Plan
Total Revenues Germany
Total Revenues Ukraine
Group - EBITDA Contribution per Country

100 80 60 40 20 0 -20
15.0 54.6 20.0 (3.4)

FY05 Act
19.2 58.6
FY11 Plan
17.2
67.9
43.1 (0.4)
FY09 Plan
52.2
FY10 Plan
11.4 (4.4)
FY06 Act
14.2 (5.7)
FY07 Act
FY08 Plan
(3.6)
Growth in EBITDA is mainly driven by a shift in product mix for higher value added vessels, assumed in the Business Plan. Ukrainian EBITDA is projected to increase to 15m in FY10 compared to FY09.
FY12 Plan
EBITDA Germnay
EBITDA Ukraine
97
Group margin development according Business Plan assumptions is ambitious. Especially the Ukrainian plan shows a very strong margin increase.
G roup - EBITDA M a rgin De ve lo pm e nt
10% 8.0% 8% 6.0% 6% 4.4% 4% 2.1% 2% 0% -2% -4% -6% -6.0% -8% -7.9% -10% FY 05 A ct FY 06 A ct -7.4% -4.8% 3.2% 2.0% 5.0% 6.8% 7.7% 7.1% 6.9% 8.9% 8.1% 7.8% 9.3% 9.1% 8.3%
1.2%
1.1% -0.3%
Ukraine Margin projected to increase to 8.9% in FY11, outperforming the German operations mainly due to switch from production of sections to complete vessels.
FY 09 Plan EBITDA -margin Ukraine FY 10 Plan EBITDA -margin Group FY 11 Plan FY 12 Plan
FY 07 A ct EBITDA -margin Germany
FY 08 Plan
AYG Margin Development

10% 9% 8% 7% 6% 5%4.4% 4% 3% 2% 1% 2.1% 2.7% 0.7% FY06 Act 0.9% FY07 Act FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan 2.0% EBITDA-m argin Germ any EBIT-m argin Germ any 6.9% 5.8% 4.9% 8.0% 6.9% 6.0% 6.8% 8.2% 7.8% 9.3%
AYU - Margin Development

15% 10% 5% -0.3% 0% -6.0% -5% -10% -11.3% -15% FY05 Act -7.9% -12.9% -11.2% FY06 Act FY07 Act -7.4% -3.0% -9.4% FY08 Plan EBITDA-m argin Ukraine FY09 Plan FY10 Plan E BIT-margin Ukraine FY11 P lan FY12 P lan -4.8% 5.9% 7.7% 8.9% 8.3%
7.3%
6.6%
0% FY05 Act
98
Orderbook covers mainly FY08 and to a large extent FY09

Group Total Sales : Booked vs. New Sales
1,200 1,000 800 600 400 200 -
Current orderbook covers FY08/09 and a small part of FY10.

22 728
FY08 Plan
330 884 512 63

FY09 Plan Orderbook Bear FY10 Plan
960 FY11 Plan New Sales Bear
931 FY12 Plan
Projected revenues beyond FY10 are based on growth assumptions for the new portfolio mix. Current orderbook is dominated by orders received at the German shipyards.
Total Sales AYG: Booked vs. New sales

800 600 400 200 FY08 Plan FY09 Plan
German orderbook covers almost 91.6% of booked sales in FY08 and the major part with 97.5% in FY09. Projected new sales relate to 33 vessels with accumulated sales of 2.4bn. 14 container ships contribute 578m (24.3%).
745 FY11 Plan
8 214 667 689 499 63

FY10 Plan
723 FY12 Plan
Sales revenues are projected to decrease in FY10-FY12 with CAGR of -2%.
Orderbook Germany
New Sales Germany
Total Sales AYU: Booked vs. New Sales

225 175 125 75 25 (25) 194 14 61 FY08 Plan 116 13 FY09 Plan FY10 Plan FY11 Plan New Sales Ukraine FY12 Plan 215 208
Ukraine part of orderbook amounts to 8.4% for FY08 (of the total orderbook).
Orderbook Ukraine
99
The sensitivity analysis for the group is based on assumptions derived from the historical budget accuracy analysis which is founded on the individual project reports for AYG.
Group assumptions for sensitivity analysis - Deviation budget/actual for all vessels*
Budget Latest status estimate 50.8 (30.3) (8.1) (0.8) (4.9) 50.9 (31.0) (8.4) (0.9) (5.0)
in % (= assum ption for pessim istic Diff case) Assum ption for optim istic case
in millions Revenue Direct material Fabrication Design Overhead

As % of Revenue
The calculation of the two scenario cases (market driven and process driven) in our sensitivity analysis is based on the assumptions for the deviation of certain cost positions as shown in the adjacent table. The assumptions are derived from the budget accuracy analysis AYG which covers all vessel types excluding the types 1700 and 2100 (deselected due to extraordinary high deviation from budget, deviation is not expected to occur in the future). The assumptions were applied to the combined group. For simplification purposes and to better illustrate the sensitivity in our analysis we assume no change in Revenues by varying the input parameter for the different cost positions.
0.1 (0.7) (0.3) (0.1) (0.1)
2.1% 3.1% 14.7% 1.5%
-2.1% -2.5% -5.0% -1.5%
Direct material Fabrication Design Overhead
-59.7% -16.0% -1.5% -9.8%
-60.9% -16.4% -1.7% -9.9%
-1.1% -0.5% -0.2% -0.1%
* excluding vessel types 1700 and 2100
According to the adjacent calculation the input parameter for

the downside cases (market driven and process driven) are based on the difference between budget status and latest estimate calculated over all vessel types included in the analysis. As these deviations are based on the internal project reports of the Group we consider this input data as most suitable for determination of the sensitivities in the downside cases.
Source: DR Ref. 32.72, PwC Analysis
Input rates for calculation of upside case in dependence of the rates used for the downside case with exception of the rates for Fabrication and Design.
For the upside cases we applied the same growth rates

(with opposite prefix) as in the downside cases for the cost positions Direct material and Overhead. For Fabrication and Design we reduced the input rates as disclosed in the adjacent table. These adjustments reflect the assumption, that we do not anticipate a potential for reduction in fabrication and design cost beyond -2.5%/-5.0% to be realistic in the analysis.
100
Aggregated cases (market and process driven combined) illustrate the overall sensitivity of group EBITDA and Cash Flow on major changes of the cost positions, mainly dominated by direct material costs and fabrication costs.
Group sensitivity analysis - Aggregated optimistic case*
FY08 Plan 66.3
30.0%
Group sensitivity analysis - Aggregated pessimistic case*

FY11 Plan 97.3 FY12 Plan 103.4
21.6%
in millions EBITDA calc. bas ed on case assumptions

EBITDA change to mgmt. Case
FY09 Plan 60.0

40.4%
FY10 Plan 86.6

28.8%
in millions EBITDA calc. based on case assumptions

FY08 Plan 33.1 8.5
FY09 Plan 22.8 (1.3)
FY10 Plan 44.3 15.8

-50.8%
FY11 Plan 54.4 27.9
FY12 Plan 64.0 37.0
25.0%
-35.1% -46.7% -34.2%
-30.2% -24.8%
Cash Flow after taxes calculated

Cash Flow change to mgmt. case
32.8
51.8%
26.4
94.8%
45.8
42.9%
58.4
31.1%
65.0
25.1%

-60.7% -109.5%
-37.4% -28.8%
FY09 EBITDA and Cash Flow show the highest sensitivity on variation of the input parameter
FY09 Cash Flow reduction in comparison to management case exceeds 100% in the aggregated downside case
Aggregated downside case Cash Flow calculated significantly undercuts Cash Flow approximation based on Business Plan and initial Cash Flow provided in the vendors valuation
Sensitivity analysis - EBITDA comparison to mgmt. case

120.0 100.0 80.0 60.0 40.0 20.0 FY08 Plan EBITDA managment case FY09 Plan FY10 Plan FY11 Plan FY12 Plan
Sensitivity analysis - Cash Flow comparison

80.0
in millions
in millions
60.0 40.0 20.0 (20.0) FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan
EBITDA - Upside case
EBITDA - Dow nside case
Cash Flow as per vendor valuation Cash Flow approximation as per Business Plan Cash Flow - Upside case Cash Flow - Dow nside case
Source: DR Ref. 32.72, Business Plan version 6.02.2008, PwC Analysis * Aggregation of the market and process driven cases
101
Market driven variation of direct material cost has significant impact on EBITDA and Cash Flow due to their high share of total operating costs
Key financials combined group - Management case
FY08 Plan 51.0 28.1 FY09 Plan 42.7 20.3 FY10 Plan 67.2 37.4 FY11 Plan 77.8 50.0 FY12 Plan 85.1 56.2
in millions EBITDA as per Business Plan (Management case) Cash Flow approximation based on Business Plan
With a portion of more than 65% of the Revenues according to Business Plan direct material costs have a significant impact on the result
Assumption for market driven case (optimistic)

Deviation in cost*
Direct material costs
FY08 Plan
-2.1%
FY09 Plan
-2.1%
FY10 Plan
-2.1%
FY11 Plan
-2.1%
FY12 Plan
-2.1%
Market driven fluctuations of the main cost components (e.g. steel price change)*
Assumption for market driven case (pessimistic)

Deviation in cost*
FY08 Plan
2.1%
FY09 Plan
2.1%
FY10 Plan
2.1%
FY11 Plan
2.1%
FY12 Plan
2.1%
Significant reduction of EBITDA and Cash Flow in FY09 is due to the high share of direct material cost
Sensitivity analysis - Market driven case (upside)

Sensitivity analysis - Market driven case (pessimistic)

FY10 Plan 80.3
19.4%
FY08 Plan 60.8

19.1%
FY09 Plan 54.3

27.2%
FY11 Plan 90.8

16.6%
FY12 Plan 97.5

14.5%

FY08 Plan 41.3

-19.1%
FY09 Plan 31.1

-27.2%
FY10 Plan 54.2 22.8
FY11 Plan 64.9 35.4
FY12 Plan 72.7

-14.5%
-19.4% -16.6%

28.7
32.7%
22.2
63.6%
41.3
29.0%
53.8
20.6%
60.7
16.9%

14.5
-32.7%
4.9
-63.6%
43.1
-16.9%
-29.0% -20.6%
Sensitivity analysis - Market driven case (optimistic)

75.0% 55.0% 35.0% 15.0% -5.0%
-2.1% -2.1% -2.1% -2.1% -2.1%
Sensitivity analysis - Market driven case (pessimistic)

15.0% -5.0% -25.0% -45.0% -65.0% EBITDA change to mgmt. case Increase of Direct material costs in % Cash Flow change to mgmt. case
Variation of Direct material cost illustrates highsensitivity of EBITDA and Cash Flow
2.1%
2.1%
2.1%
2.1%
2.1%
FY08 Plan
FY09 Plan
FY10 Plan
FY11 Plan
FY12 Plan
FY08 Plan
FY09 Plan
FY10 Plan
FY11 Plan
FY12 Plan
EBITDA change to mgmt. case Decrease of Direct material costs in %
Source: DR Ref. 32.72, Business Plan version 6.02.2008, PwC Analysis
102
* Perceivable cost increases which could be covered through pri ce increase and therefore higher revenues are not considered in the sensitivity analysis
Overrun in fabrication costs leads to significant decrease of EBITDA and Cash Flow whereas changes in design costs have a minor effect on earnings
Key financials combined group - Management case
in millions EBITDA as per Business Plan (Management case) Cash Flow approximation based on Business Plan FY08 Plan 51.0 28.1 FY09 Plan 42.7 20.3 FY10 Plan 67.2 37.4 FY11 Plan 77.8 50.0 FY12 Plan 85.1 56.2
Process driven changes of production cost and overhead (e.g. overrun in fabrication and design as occurred in the past)
FY11 Plan
3.1% 14.7% 1.5%
Assumption for process driven case (opimistic)

Deviation in cost*
Fabrication costs Design costs Overhead costs
Assumption for process driven case (pessimistic)

Deviation in cost*
Fabrication costs Design costs Overhead costs
FY08 Plan
-2.5% -5.0% -1.5%
FY09 Plan
-2.5% -5.0% -1.5%
FY10 Plan
-2.5% -5.0% -1.5%
FY11 Plan
-2.5% -5.0% -1.5%
FY12 Plan
-2.5% -5.0% -1.5%
FY08 Plan
3.1% 14.7% 1.5%
FY09 Plan
3.1% 14.7% 1.5%
FY10 Plan
3.1% 14.7% 1.5%
FY12 Plan
3.1% 14.7% 1.5%
Budget overrun in fabrication costs have significant impact on EBITDA and Cash Flow
Sensitivity analysis - Process driven case (optimistic)

FY08 Plan 56.5

9.8%
FY09 Plan 48.4

11.7%
FY10 Plan 73.5

8.6%
FY11 Plan 84.4

7.8%
FY12 Plan 91.1

6.6%
Sensitivity analysis - Process driven case (pessimistic)

FY08 Plan 42.9 15.6
FY09 Plan 34.4 7.4
FY10 Plan 57.3

-17.3%
FY11 Plan 67.3

-15.7%
FY12 Plan 76.4

-11.4%
-19.0% -24.3%

25.7
19.0%
17.8
31.1%
36.5
13.9%
49.2
10.4%
56.2
8.2%

25.1
-21.8%
37.1
-16.7%
45.8
-11.9%
-27.9% -45.8%
Sensitivity analysis - process driven case (optimistic)

35.0% 25.0% 15.0% 5.0% -5.0%
Sensitivity analysis - process driven case (pessimistic)

30.0% 10.0% -10.0% -30.0%
15% 3% 2% 15% 3% 2% 15% 3% 2% 15% 3% 2% 15% 3% 2%
FY08 Plan
FY09 Plan
FY10 Plan
FY11 Plan
FY12 Plan
-3% -2% -5%
-3% -2% -5%
-3% -2% -5%
-3% -2% -5%
-3% -2% -5%
FY08 Plan
FY09 Plan
FY10 Plan
FY11 Plan
FY12 Plan
-50.0%
EBITDA change to mgmt. Case Increase of Fabrication costs in %
Cash Flow change to mgmt. case Increase of Design costs in %
EBITDA change to mgmt. Case Decrease of Fabrication costs in % Decrease of Overhead costs in %
Cash Flow change to mgmt. case Decrease of Design costs in %
Increase of Overhead costs in %
Source: DR Ref. 32.72, Business Plan version 6.02.2008, PwC Analysis
Due to higher share of costs compared to total revenues as planned per Business Plan FY09 result shows the highest sensitivity
103
Section 4.1 Business Plan Germany
Section 4.1 - Business Plan Germany
German Business Plan projects significant increase in EBITDA compared to historical results. This projection is mainly based on the shift in product mix
in millions Net sales revenues Other revenues Total Revenues Direct material and other direct costs Fabrication Design Project finance costs Material improve. & efficiency Subtotal direct costs Overhead costs Total Operating Costs EBITDA Depreciation EBIT Financial income Financial expenses Net financial result EBT
KPIs As a % of total Revenues Total Operating Costs EBITDA-margin Direct material and other direct costs Fabrication costs Design/Engineering costs Overhead costs
FY07 11.7m for Genesis sections and Lubmin barge were reclassified from other revenue to Sales revenues
FY05 Act 457.0 FY06 Act 532.6 FY07 Act 688.8 20.9 709.7 (483.8) (111.7) (20.7) 0.2 (616.0) (79.6) (695.5) 14.2 (8.1) 6.1 1.8 (0.6) 1.2 7.3 FY08 Plan 674.9 4.8 679.7 (424.3) (114.3) (16.8) (1.5) (557.0) (68.1) (625.1) 54.6 (8.0) 46.6 0.7 (0.3) 0.4 47.0 FY09 Plan 713.5 4.4 717.9 (471.4) (117.2) (16.5) (8.2) 5.3 (607.9) (66.9) (674.8) 43.1 (8.0) 35.1 0.7 (0.3) 0.4 35.5 FY10 Plan 752.3 4.1 756.4 (492.2) (120.9) (25.3) (7.4) 11.0 (634.8) (69.4) (704.2) 52.2 (8.0) 44.2 0.6 (0.3) 0.4 44.6 FY11 Plan 744.7 4.0 748.7 (470.8) (121.7) (29.1) (8.1) 10.1 (619.7) (70.4) (690.0) 58.6 (8.0) 50.6 0.7 (0.2) 0.5 51.1 FY12 Plan 723.2 4.0 727.1 (450.9) (122.0) (15.8) (8.7) 9.5 (587.9) (71.4) (659.2) 67.9 (8.0) 59.9 0.7 (0.2) 0.5 60.3 CAGR CAGR CAGR 05-07 07-09 08-12
22.8% 0.0% 24.6% 29.4% 1 4.2% 48.2% 1 .8% -54.3% 0.6% -1 .3% 2.4% -1 0.6% 1 .7% -4.6% 1 .7% 1 .5% 1 .7% -1 .6% 53.8%
457.0 532.6 (289.1) (340.0) (85.7) (99.6) (9.4) (11.7)
No planning assumption for overhead costs available. Latest reconciliation show reclassification of 9.5 m from overhead to fabrication costs (DR Ref. 77.1472)
(384.2) (451.3) (52.8) (69.9) (437.0) (521.2) 20.0 11.4 (7.5) (7.6) 12.5 3.8 1.1 0.8 (0.6) (0.4) 0.5 0.4 13.0 4.2
26.6% 22.7% 26.2% -1 5.9% 3.9% -30.4% 28.2% -1 .8% 56.8% -25.2%
-0.7% -8.3% -1 .5% 74.5% -0.6% 1 40.8% -38.9% -27.9% -44.8% 1 20.7%
1 .4% 1 .2% 1 .3% 5.6% 0.0% 6.5% -1 .9% -1 2.7% 5.8% 6.5%
EBITDA driven by large Norilsk Nickel order (4 ships in total, 3 delivered to customer in FY08) Management assumes to be on Plan for FY08, which is almost completely determined by processing the orderbook as of 31 December 2007
95.6% 4.4% 63.3% 18.8% 2.1% 11.6%
97.9% 2.1% 63.8% 18.7% 2.2% 13.1%
98.0% 2.0% 68.2% 15.7% 2.9% 11.2%
92.0% 8.0% 62.4% 16.8% 2.5% 10.0%
94.0% 6.0% 65.7% 16.3% 2.3% 9.3%
93.1% 6.9% 65.1% 16.0% 3.3% 9.2%
92.2% 7.8% 62.9% 16.3% 3.9% 9.4%
90.7% 9.3% 62.0% 16.8% 2.2% 9.8%
FY12 result is mainly driven by the vessel type Rockdumper. Two ships are planned to be delivered to the customer in that year.
105
Assumptions for Business Plan Germany General overview

Business Plan assumptions
Category
FY05 Act FY06 Act
Key financials
FY07 Act FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 CAGR CAGR CAGR Plan 05-07 07-09 08-12
Explanation
PwC Comment
Rating
Overall sales grow th projected below historical levels but shift to different product mix. Total Revenues
457.0 532.6 709.7 679.7 717.9 756.4 748.7 727.1 24.6% 0.6% 1.7%
AYG has no recent track record to build most of the new vessel types over last three years. Plan appears challenging but w e understand that AYG has the required technical capabilities and the state-of-the-art facilities to build such ships. Significant drop especially for FY08 appears challenging even though management stated that the latest forecast confirms position. Achievability of fabrication costs projected may be challenging due to historical budgeting inaccuracy and lack of experience in building the new vessel types over the last three years.

% ot total rev enues
(289.1)
(340.0)
(483.8)
(424.3)
(471.4)
(492.2)
(470.8)
(450.9) 29.4%
-1.3%
1.5%
Plan assumes major decrease in direct material costs for FY08 and beyond FY11
63%
64%
68%
62%
66%
65%
63%
62%
Fabrication costs
(85.7)
(99.6)
(111.7)
(114.3)
(117.2)
(120.9)
(121.7)
(122.0) 14.2%
2.4%
1.7%
Income sta te me nt
Fabrication costs are projected below historical levels despite the product mix shift. Latest reconciliation show reclassification need from overhead to fabrication in FY07 (underrecovery 9.5m) Fluctuation in design hours and cost is caused by planned order intake. Internal design capabilities w ill be strengthened moderately.
19%
19%
16%
17%
16%
16%
16%
17%
Design costs
(9.4)
(11.7)
(20.7)
(16.8)
(16.5)
(25.3)
(29.1)
(15.8) 48.2% -10.6%
-1.6%
Relation betw een subcontracted and ow n design hours is beyond 100% betw een FY07 and FY11. Advanced level of coordination betw een ow n and subcontracted design w ill be necessary. No planning assumption for overhead cost available. Relative reduction compared to total revenues might be challenging in view of future stand alone situation. Depreciation is not linked to Capex in Business Plan but the difference to the latest Capex figures is rather small. Material cost reduction seems challenging as metal prices are expected to increase further. Improvement of fabrication efficency seems feasible.
2%
2%
3%
2%
2%
3%
4%
2%
Overhead costs
(52.8)
(69.9)
(79.6)
(68.1)
(66.9)
(69.4)
(70.4)
(71.4) 22.7%
-8.3%
1.2%
Taking into account the reclassification in FY07 mentioned above, overhead costs remain quite constant in absolute terms. Depreciation fixed at 8m per year
12% (7.5) 2%
13% (7.6) 1%
11% (8.1) 1%
10% (8.0) 1%
9% (8.0) 1%
9% (8.0) 1%
9% (8.0) 1%
10% (8.0) 1% 3.9% -0.6% 0.0%
Depreciation
Material cost reduction, improved fabrication efficiency

5.3
11.0
10.1
9.5
In FY12, material cost reduction is calculated w ith the max. of 2%, fabrication efficency w ith a max. of 3.3% (each cp. to FY07).
0%
0%
0%
0%
-1%
-1%
-1%
-1%
Higher risk (Vulnerability) Medium Risk (Challenging) Low Risk (Realistic) Upside
106
Management presented the headlines of AYGs initiatives and action plans under the new strategy (full cost reduction potential after FY08 up to 15.5m). The maximum savings included in the Business Plan (11.0m in FY10) are lower and may therefore indicate upside potential.
Strategy AYG to become the world's leading provider of sea transportation solutions for Arctic waters Become a preferred partner for complex vessels Major financial goals Marketing and Sales initiatives Growth: Maintain current revenue level Profitability: Achieve a stable EBITDA of 7-9 % Selected measures already taken: * M&S centralised and increased in staff (3 senior sales managers, 1 market analyst) * Concept design resources allocated to and managed by M&S Selected measures to be taken in FY08: * Increase capabilities for innovative designs, improve cost estimation capability (process) * Evaluate organisation of estimation responsibilities * Establish relationship with key players in segments Key actions for cost reduction in progress, full potential up to 15.5 (to cost base FY07) Procurement: Estimated savings p.a. FY09+ upto 10.0m e.g. LCC sourcing of steel plates, engineering from India, implementation of global key supplier management Production: Estimated savings p.a. FY09+ upto 4.5m e.g. optimisation of manufacturing processes / lean manufacturing, implementation of continuous improvement mindset, scope of work (make/buy) Design: Estimated savings p.a. FY09+ upto 1.0m e.g. design quality offensive, knowledge and competence development, design network management, modularisation
In the Business Plan, the savings comprise material cost reductions and fabrication efficiency increases In total, they amount to 5.3m (FY09), 11.0m (FY10), 10.1m (FY11) and 9.5m (FY12).
Management did not point out how the measures presented here are linked with the cost savings as included in the Business Plan.
Management did not provide us with further details. We understand that most of the measures have not been implemented so far.
Source: DR 29.74 107
Management provided us with basic calculations for the new projects included in the German part of the Business Plan. The calculations for CS2800, RoPax and Ice-class are based on current projects under consideration of recent cost developments.
AYG: New projects calculation parameters for Business Model
Order backlog in millions Sales revenues Direct material Fabrication Design Other direct cost Project finance costs Contingencies Overhead costs Depreciation Total costs Project result
in % of revenue
CS2800 42.8 (27.7) (7.1) (0.8) (1.3) (0.5) (0.4) (4.3) (0.5) (42.5) 0.3
0.6%
RoPax Ice-class 205.3 (120.3) (31.7) (7.7) (7.4) (1.5) (4.4) (18.6) (2.9) (194.5) 10.8
5.3%
CS2800 42.3 (27.7) (6.9) (0.8) (1.3) (0.5) (0.4) (4.2) (0.6) (42.2) 0.636
1.5%
Arctic Line 41.9 (25.7) (6.3) (1.7) (1.0) (0.1) (0.8) (3.7) (0.5) (39.8) 2.136
5.1%
RoPax 205.3 (120.3) (30.9) (7.2) (6.9) (1.5) (4.8) (18.0) (2.8) (192.5) 12.768
6.2%
Business Plan IceRoRo class 82.2 (43.7) (13.4) (1.5) (3.6) (0.8) (4.0) (8.2) (1.0) (76.2) 6.009
7.3%
Arctic LNG 215.0 (122.7) (36.6) (8.7) (10.4) (2.9) (3.0) (24.9) (3.5) (212.7) 2.281
1.1%
RockSections dumper 165.7 (72.9) (25.1) (11.9) (12.0) (3.0) (10.0) (15.5) (2.0) (152.4) 13.270
8.0%
83.1 (44.3) (12.9) (1.9) (3.7) 1.0 (3.5) (7.9) (1.0) (74.3) 8.8
10.6%
96.0 (53.0) (17.4) (2.2) (3.0) (1.0) (0.8) (12.0) (1.7) (91.0) 4.990
5.2%
16.8 (1.0) (8.6) (0.6) (0.1) (0.1) (4.7) (0.6) (15.7) 1.130
6.7%
Total fabrication hours khours Total design hours khours
247.5 18.4
1,110.6 182.8
463.6 39.8
245.0 18.4
223.4 40.7
1,080.0 178.0
477.0 36.3
604.0 53.0
1,224.8 210.0
870.4 285.0
291.0 15.0
Marked figures corrected in comparison with original Business Plan provided after discussion with management dated 20 February 2008 Learning curve in design and fabrication from current projects is reflected in the expected increase of project results for CS2800 and RoPax. The decrease in the results for CS650 vessels recognises the currently produced vessels being copies of a ship delivered in FY05 by AY Finland.
Project results are calculated on a full cost basis (including depreciation). Project results are reflected in the EBIT of the periodic income statements.
108
Revenue development in Business Plan is mainly driven by projected change in product mix. Management anticipates strong business for new vessel types over Plan period
AYG: Sales Revenues - per vessel types

in millions Container vessel Arctic line RoPax Ice-class RoRo Arctic LNG Rockdumper Hulls/ ships's sections Total sales revenues FY08 Plan 242.0 8.4 116.4 296.2 12.0 674.9 FY09 Plan 284.0 58.7 346.9 7.2 16.8 713.5 FY10 Plan 242.6 16.8 239.2 164.4 89.3 752.3 FY11 Plan 184.0 41.9 174.5 131.5 47.0 165.7 744.7 FY12 Plan 134.0 143.7 148.0 55.7 43.0 198.8 723.2
Sustainable decrease in fabrication of container ships
Change in product mix, Business Plan projects strong revenue increase for the selected product lines New vessels (not backed by current Orderbook) Mixed in FY09 - 252m container ships and 240m Ice-class backed by Orderbook, in FY10 14m of container vessels backed by Orderbook, 49m backed by Orderbook for RoPax 100% backed by Orderbook
AYG: Sales Revenues per ship types

in millions
800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 FY08 Plan Container vessel RoRo FY09 Plan Arctic line Arctic LNG FY10 Plan RoPax Rockdumper FY11 Plan Ice-class Hulls/ ships's sections FY12 Plan
675
714
752
745
723
Comment: For more detailed and further information on order backlog and WIP please refer to the Appendix.
109
Corresponding direct material cost projected to decrease over Business Plan period due to change in cost structure and efficiency gains
AYG: Direct material costs - per vessel types
in millions Container vessel Arctic Line Ro-pax Roro Ice-class Arctic LNG Rockdumper Sections Subtotal direct material costs Material cost reductions Total direct material costs
As percentage of net sales rev.
FY08 Plan 164.2 5.5 72.0 180.3 2.3 424.3 424.3

62.9%
FY09 Plan 200.9 38.4 224.0 7.0 1.1 471.4 (4.4) 467.0
65.4%
FY10 Plan 166.7 11.0 159.0 52.8 102.7 492.2 (9.0) 483.2
64.2%
FY11 Plan 126.2 27.4 112.3 27.8 82.2 95.0 470.8 (7.1) 463.8
62.3%
FY12 Plan 91.9 92.5 32.9 92.5 27.2 113.9 450.9 (5.5) 445.4
61.6%
Material cost reductions represent improvement measures projected by management that are not allocated to individual vessel types in the Business Plan.
AYG: Direct material costs per ship types

in millions
600.0 500.0 400.0 300.0 200.0 100.0 (100.0) FY07 FC FY08 Plan Container ships Roro Rockdumper FY09 Plan Arctic Line Ice-class Sections FY10 Plan Ro-pax Arctic LNG Material cost reductions FY11 Plan FY12 Plan
Sustainable decrease in total direct material costs due to change in product mix and projected efficiency gains.
484
424
467
483
464
445
Comment: For more detailed and further information on results per vessel type please refer to the Appendix.
110
The Business Plan assumes significant order intake for the new products after FY08. We understand from the management that the Group will focus on sales and marketing initiatives
Includes 3 RoPax ferries and 2 Ice-class vessels Order intake in FY09 contributes 48% to order backlog as at 31. Dec FY09 Order backlog from FY07 to FY12Plan
2.000 1.800 1.600 1.400 1.200 1.000 800 600 400 200 0 860.4 1482.1 392.4 871.4 422.2
Includes 3 RoPax ferries, 2 Ice-class vessels and 2 Rockdumpers
in millions
(665.3)
(293.7) (1164.6)
(434.1)
208.5
505.7
(1173.6) 1. Jan FY08 Deliveries FY08 Order intake FY08 Deliveries FY09 Order intake FY09 Deliveries FY10 Order intake FY10 Deliveries FY11 Order intake FY11 Deliveries FY12 Order intake 31. Dec FY12 FY12
Number of ships: 25
(14)
(6)
12
(14)
(8)
(11)
For the purpose of an order backlog analysis and due to missing information in the Business Plan, order intake is assumed to occur in the period of the commencement of the design works. Order backlog, order intake and deliveries are based on contractual values of the ships (including change orders and subsidies, if any) and do not represent revenues which are realised in the periods of delivery or realisable revenues after the respective FY(E).
111
Container vessels were the main products in the last years generating project results in relation to sales revenues of 1.4% on average with a maximum of 3.3% for CS2700 and a minimum of -5.6% for CS2100
AYG: Profitability of Container ships
The analysis is based on 71 container ships which were delivered by AYG since FY05 or are in the Orderbook or are being planned 5 1 39.8 6 0 26 3 39.5 20 42.8 6 71 19
38.7
10.0%
45.0
14 9
40.0
8.0%
35.3
35.0
32.4
6.0%
30.0
4.0%
in millions
3.3%
25.0 2.0%
0.6%
20.0
1.2%
1.2%
1.4%
0.0%
15.0
-2.0%
10.0
-4.0%
5.0
-5.6%
-6.0%
CS1700 CS2100 CS2500 Revenue (avg.) CS2700 Project margin CS2800 CS (avg.)
-8.0%
Number of analysed ships Number of ships in order backlog
Comment: For more detailed and further information on results per vessel type please refer to the Appendix. Source: Business Plan version 6.02.2008, PwC Analysis
4 CS2100 vessels were delivered in FY07. 1 vessel will be delivered in early FY08
112
The vessel types included in the Business Plan show distinctively higher project profits than container vessels for both relative and absolute profits
AYG: Profitability of ships
71
250.0
3 3
5 5
205.3
10 6
8.6%
2 2
1 1
215.0
3 3
10.0% 9.0%
14
200.0
8.0% 165.7
8.0% 7.0% 6.0%
in millions
150.0
5.8% 5.1% 5.2% 96.0 82.5
5.0% 4.0% 3.0%
100.0
50.0
38.7 1.4%
41.9 1.1%
2.0% 1.0% 0.0%
Container Arctic line RoPax Revenue (avg.) Ice-class RoRo Arctic LNG Rockdumper
Number of analysed ships Thereof from Business Plan

Project margin (avg.)
For Arctic LNG, the calculation in the Business Plan was rectified. The design costs were increased by 6.2m due to an incorrect underlying calculation. However, the vessel price was not increased but could be expected reflecting the current strategy towards higher value-added vessels. Since only one Arctic LNG vessel included in the Business Plan with fabrication start in FY12 (poc-share 20% in FY12) this potential adjustment would not be material.
113
Average contract price of vessels in the order backlog has been increasing continuously from FY05 to FY12, reflecting the change in strategy towards higher value vessels
Decrease in volume and vessels in FY07 and FY08 due to low realised and planned order intake Last planning period does not record intense order intake. Reasonable for planning purposes
60
AYG: Order backlog and no. of ships
2,000 1,800
1,194
1,600
50
41
1,400
1,483 34 392
1,471
40
in millions
1,200 1,000
1,776
800 600 400 200 FY05 Act FY06 Act
25 22 1,482 16 817 582 17 13 506
30
1,523
20
10
4 FY11 Plan
FY12 Plan
FY07 FC Contracted orders
FY08 Plan
FY09 Plan
FY10 Plan Number of ships on hand
New orders in Business Plan
Average price calculation: Order backlog ( ) divided by number of ships)

114
No. of ships
Project result per vessel type in Business Plan illustrates the anticipated shift in product mix during the Business Plan period
AYG: Project result per vessel type - Overview
in millions Sales Revenues Container Ships Arctic Line RoPax Ice-class RoRo Arctic LNG Rockdumper Other Total sales revenues Project Result Container Ships Arctic Line RoPax Ice-class RoRo Arctic LNG Rockdumper Other Total project result As percentage of Sales Revenues Container Ships Arctic Line RoPax Ice-class RoRo Arctic LNG Rockdumper Other Project result Reconciliation to EBIT Business Plan Other revenues EBIT as stated in Business Plan FY08 Plan 242.0 8.4 116.4 296.2 12.0 674.9 6.0 (0.3) 3.6 32.4 0.2 41.8
2.5% -3.4% 3.1% 10.9% n.a. n.a. n.a. 2.0% 6.2%
FY09 Plan 284.0 58.7 346.9 7.2 16.8 713.5 4.2 6.2 21.3 (1.6) (1.0) 1.6 30.7
1.5% 10.6% 6.2% -21.7% n.a. n.a. n.a. 9.6% 4.3%
FY10 Plan 242.6 16.8 239.2 164.4 89.3 752.3 7.9 0.8 19.0 14.5 7.9 (10.1) 40.1
3.3% 5.0% 7.9% 8.8% 8.9% n.a. n.a. n.a. 5.3%
FY11 Plan 184.0 41.9 174.5 131.5 47.0 165.7 744.7 5.5 3.6 12.0 9.8 3.8 (2.5) 14.5 46.7
3.0% 8.5% 6.9% 7.5% 8.1% n.a. 8.8% n.a. 6.3%
FY12 Plan 134.0 143.7 148.0 55.7 43.0 198.8 723.2 3.3 11.4 11.3 5.4 1.0 23.5 55.9
2.5% n.a. 7.9% 7.7% 9.7% 2.2% 11.8% n.a. 7.7%
Sustained decrease in sales revenues from container vessel business over Plan period, Respective increase of sales revenues projected for the product groups RoPax, Ice-class and Rockdumper.
Project result shows the shift in the anticipated product mix over the Plan horizon. Management anticipates significant increase of the project results backed mainly by the vessel types RoPax, Arctic Line and Rockdumper.
Project results are calculated on a full cost basis (including depreciation). Project results are reflected in the EBIT of the periodic income statements. Differences to EBIT result from contributions of other revenues in those years.
Deviations to project result in the underlying project calculations result from bottom -up planning of design and fabrication, from periodic allocation of overheads as well as from allocation of material cost reduction and fabrication efficiency improvement.
4.8 46.6
4.4 35.1
4.1 44.3
4.0 50.6
4.0 59.9
115
The business result of the German operations reflects managements anticipated shift in product mix to more profitable vessel types
Business Result AYG - Profitability
EBITDA growth is mainly driven by the projected decrease of the major cost components. Business Plan recognises improvements for material costs and efficiency gains in fabrication.
800
756 710 680 718 25 21
749
80
727
70
700
600
Revenue and costs in m
533 457 9 53 86 12 70 -
70 73
17 68 55 93
17 67 94
29 70 59 98
69 96 52
68 16 71 100
60
400
43
40
300
30
484
200
424 20 289 340 14 11
471
492
471
451
20
100
10
FY05 FY06 Act Act Direct material and other direct costs FY07 FY08 FC Plan Fabrication costs FY09 Plan Overhead costs FY10 FY11 Plan Plan Design/Engineering costs FY12 Plan EBITDA
Total Revenue
116
EBITDA in m
500
50
Management revised capex plan shortly before finalisation of the report. The revised capex plan is significantly lower than the one initially presented and reflects the planned capex more realistic according to management (1/2)
AYG: Investments Plan FY08 to FY11
in thousands Carryover on maintenance items Carryover on productivity items Carryover on capacity items Carryovers Buildings Machinery and equipment Welding equipment Tools Hardware Software Low value goods Storage areas Miscellaneous other Other Replacements Continuous improvements program Hardware Software Productivity Machinery and equipment Capacity New investments Total revised capex
Depreciation Depreciation as a % of capex
FY05 Act
FY06 Act
FY07 Act 3,236 1,300 800 450 590 400 1,770
FY08 Plan 1,400 437 1,837 583 2,815 900 700 330 250 600 480 3,260 6,658 500 130 390 1,020 135 135 1,155 9,650
(8,000) -82.9%
FY09 Plan 1,400 3,640 1,100 700 410 270 600 260 3,340 8,380 500 130 390 1,020 1,020 9,400
(8,000) -85.1%
FY10 Plan 1,100 3,640 1,100 700 410 435 600 260 3,505 8,245 500 110 145 755 755 9,000
(8,000) -88.9%
FY11 Plan 1,100 3,640 1,100 700 360 290 600 160 3,210 7,950 500 130 335 965 85 85 1,050 9,000
(8,000) -88.9%
Total FY08-FY11 1,400 437 1,837 4,183 13,735 4,200 2,800 1,510 1,245 2,400 480 680 13,315 31,233 2,000 500 1,260 3,760 220 220 3,980 37,050
The adjacent table displays the actual capital expenditure figures from the dataroom for the years FY05 and FY07, whereas FY08 to FY11 display managements budgeted figures before approval by AYGs supervisory board. Management provided us on 6th March 2008 with a revised capex plan. According to management, capital budgets are usually planned three years in advance, whereby the next FY is projected in more detail. The budgeting process is carried out in two steps. German management sends its capex proposal to AY Groups finance department, which consolidates all applications and apportions then a share calculated on the global budget. We understand from discussion with the Vendor that in practice usually local management sends an overstated capex proposal as part of its budgeting policy to the Group, in order to strengthen bargaining position in the budgeting process. The Group cuts it back according to the available global budget. Due to our inquiries management provided us on 27th of February with a revised Plan for the total capex amount which reflects the anticipated cut back on group level. The revised capex figures are lower by 8.6m (FY08), 1.9m (FY09), 2.3m (FY10), 2.3m (FY11) an reflects the realistic capital expenditures according to management.
1 1,943
522 1,075
2,249 4,193
2,239 3,836
5,310 8,546 3,560 3,560 3,560 12,106

(8,099) -66.9%
1,625 5,818
(7,500) -128.9%
3,966 7,802
(7,600) -97.4%
no data available
Comment: In further calculations for FY12 the capex is assumed to be in the tune of FY11 Source: DR Ref. 16.11.2.3, 16.11.2.4 Management Presentation 27.02.2008, PwC Analysis
117
Management revised Capex Plan shortly before finalisation of the report. The revised capex plan is significantly lower than the one initially presented and reflects the planned capex more realistic according to management (2/2)
AYG: Investments Plan FY08 to FY11
in thousands Carryover on maintenance items Carryover on productivity items Carryover on capacity items Carryovers FY05 Act FY06 Act FY07 Act 3,236 1,300 800 450 590 400 1,770 2,249 4,193 2,239 3,836 5,310 8,546 3,560 3,560 3,560 12,106
(8,099) -66.9%
FY08 Plan 1,400 437 1,837 583 2,815 900 700 330 250 600 480 3,260 6,658 500 130 390 1,020 135 135 1,155 9,650
(8,000) -82.9%
FY09 Plan 1,400 3,640 1,100 700 410 270 600 260 3,340 8,380 500 130 390 1,020 1,020 9,400
(8,000) -85.1%
FY10 Plan 1,100 3,640 1,100 700 410 435 600 260 3,505 8,245 500 110 145 755 755 9,000
(8,000) -88.9%
FY11 Plan 1,100 3,640 1,100 700 360 290 600 160 3,210 7,950 500 130 335 965 85 85 1,050 9,000
(8,000) -88.9%
1 1,943
522 1,075
Based on different capex plans we received during the dataroom phase, we were able to identify some main areas which were Total subject to cut back: In that, the budget for buildings was reduced by FY08-FY11 about 40%, a planned investment for FY08 in a new micro panel 1,400 line was discarded as well as other replacements and the 437 continuous investment programme were reduced by 1.0m p.a in 1,837 total.
4,183 13,735 4,200 2,800 1,510 1,245 2,400 480 680 13,315 31,233 2,000 500 1,260 3,760 220 220 3,980 37,050
Buildings Machinery and equipment Welding equipment Tools Hardware Software Low value goods Storage areas Miscellaneous other Other Replacements Continuous improvements program Hardware Software Productivity Machinery and equipment Capacity New investments Total revised capex
Depreciation Depreciation as a % of capex
Please note that we have not been provided with a breakdown of historical capex and analysis therefore was limited. The capex budget includes 1.3m for refurbishment of the design
teams drawing floor which needs to be reconstructed due to an

extension of the design team. Management acknowledges a reduction of the costs which were down 0.5m from the initial plan. Other replacement expenditures include 1.0m in storage areas for a steel plate system in FY07 in order to increase efficiency in fabrication.
describes a lump sum, but does not contain a specific activity.
The 0.5m investment in the continuous improvement programmes The capacity investment in machinery and equipment of ca. 3.6m which increases the steel utilisation by 60% and will be adequate for the next 10 years.
1,625 5,818
(7,500) -128.9%
3,966 7,802
(7,600) -97.4%
in FY07 represents a new cutting technology in Warnemnde,
no data available
Source: DR Ref. 16.11.2.3, 16.11.2.4, PwC Analysis
We understand that you will discuss with the Vendors and management capex requirements and respected projections going forward in the course of your technical review.
FY08s machinery and equipment foresaw an investment of 5.0m in a new micropanel line in the initial capex plan. In the current plan the investment has not been included. Management does the timing of this investment not consider critical as they do not except productivity improvement.
118
Section 4.2 Business Plan Ukraine
Section 4.2 - Business Plan Ukraine
Business Plan IS Ukraine

AYU: Income Statement
in millions Net sales new merchant vessels* Other revenues * External revenues AYDU after 2007 Total Revenue Ukraine Direct materials Capacity Reduction due to flexibility on unused capacity Fabrication Direct engineering Subtotal direct costs Other project costs Fixed costs Total operating costs EBITDA Ukraine Depreciation EBIT Financial incomes Financial expenses Net financial expense Net income before extraordinary Extraordinary gains/losses EBT
KPIs As a % of total Revenues: Total Operating Costs EBITDA-margin EBIT-margin Direct material and other direct costs Fabrication costs Engineering costs Overhead costs
FY05 Act 53.7 2.8 56.5 (33.1) (12.7) (12.7) (45.8) (3.8) (10.3) (59.9) (3.4) (3.0) (6.4) (1.7) (1.7) (8.1) 5.1 (3.0)
FY06 Act 51.1 4.7 55.8 (28.6) (14.8) (14.8) (43.4) (8.5) (8.3) (60.2) (4.4) (2.8) (7.2) (2.2) (2.2) (9.4) (2.0) (11.4)
FY07 Act 71.4 5.2 76.6 (43.2) (18.3) (18.3) (61.5) (4.7) (16.1) (82.3) (5.7) (2.9) (8.6) (3.3) (3.3) (11.9) (5.5) (17.4)
FY08 Plan 32.2 41.3 1.9 75.4 (39.8) (18.9) 1.2 (17.7) (2.0) (59.5) (1.6) (17.9) (79.0) (3.6) (3.5) (7.1) (7.1) (7.1)
FY09 Plan 126.6 2.0 128.6 (81.4) (21.1) 1.3 (19.8) (2.7) (103.9) (7.6) (17.5) (129.0) (0.4) (3.5) (3.9) (3.9) (3.9)
FY10 Plan 192.2 2.0 194.2 (130.3) (23.3) 0.2 (23.1) (2.8) (156.2) (6.0) (17.0) (179.2) 15.0 (3.5) 11.5 11.5 11.5
FY11 Plan 212.8 2.0 214.8 (144.7) (25.3) (25.3) (2.9) (172.9) (6.7) (16.0) (195.6) 19.2 (3.5) 15.7 15.7 15.7
FY12 Plan 205.4 2.4 207.8 (137.8) (27.7) 0.3 (27.4) (3.1) (168.3) (6.3) (16.0) (190.6) 17.2 (3.5) 13.7 13.7 13.7
CAGR 05-07
1 5.3% 36.3%
CAGR 08-12
58.9%
6.0% 1 6.4% 1 4.2% 20.0% 28.8% 36.4% 1 0.0%
20.0%
1 1 .5% 1 1 .6%
1 5.9% 1 1 .2% 25.0% 1 7.2% 29.5% -1 .7% 1 5.9%
29.7% 40.9% -2.8% 24.6% -9.5%
39.3% 39.3% 21 .2%
1 40.8%
106.0% -6.0% -11.3% 65.3% 22.5% 0.0% 18.2%
107.9% -7.9% -12.9% 66.5% 26.5% 0.0% 14.9%
107.4% -7.4% -11.2% 62.5% 23.9% 0.0% 21.0%
104.8% -4.8% -9.4% 54.9% 23.5% 2.7% 23.7%
100.3% -0.3% -3.0% 69.2% 15.4% 2.1% 13.6%
92.3% 7.7% 5.9% 70.2% 11.9% 1.4% 8.8%
91.1% 8.9% 7.3% 70.5% 11.8% 1.4% 7.4%
91.7% 8.3% 6.6% 69.3% 13.2% 1.5% 7.7%
* Revenue from sections projects in FY05-FY07 is partly included in "Net sales new merchant vessels" line. However, it FY08 and FY09 sections projects are included un "Other revenue" line. Source: Business Plan version 6.02.2008, PwC Analysis
120
Business Plan assumptions Ukraine

Category
FY05 Act
Key financials
FY06 FY07 Act Act FY08 FY09 Plan Plan FY10 Plan FY11 Plan FY12 CAGR CAGR CAGR Plan 05-07 07-09 08-12
Explanation
PwC Comment
Rating
Total Revenue
56.5
55.8
76.6
75.4
128.6
194.2
214.8
207.8
16.4%
29.6%
28.8%
The sales grow th is forecased at maximum capacity of 35,000 tons achieved starting from FY10 w ith 2% annual sales price increase.The product range w ill mainly include compelete, long-series vessels. The prices w ill be at market level. Direct material costs are impacted by tw o factors: (1) 1%-2% economy (noncompound) as a result of improvement of relations w ith suppliers, (2) 2% grow th (compound) starting from FY10 in line w ith projected increase of sales prices. Fabrication costs w ill increase by 9-12% p.a. compound in line w ith inflation. Number of hours w ill remain stable as the productivity w ill improve by 35% by FY12 to meet the capacity target.
The sales forecast is very ambitious because it is based on the assumptions that: 1) DSO w ill be able to operate at full capacity, w hich w ill require significant improvement of efficiency, and 2) DSO w ill be able to find orders in the competitive market. Therefore, significant sales and marketing ef forts w ill be required. The forecast seems to be reasonable upon the condition that DSO w ill include in the contracts w ith customers the price adjustment clause that w ill protect from steel prices volatility.
(33.1)
(28.6)
(43.2)
(39.8)
(81.4)
(130.3)
(144.7)
(137.8) 14.2%
37.3%
36.4%
% of Rev enues
-59%
-51%
-56%
-53%
-63%
-67%
-67%
-66%
Fabrication costs
(12.7)
(14.8)
(18.3)
(17.7)
(19.8)
(23.1)
(25.3)
(27.4) 20.0%
4.0%
11.5%
Productivity improvement seems to be a challenging task. How ever taking into account that 1) DSO has developed an action plan, and that 2) the productivity improvement is f orecasted to happen gradually through FY08-12, its achievement could be feasible. Productivity to be further analysed in course of your technical review This forecast seems to be reasonable taking into account the expertise of AYDU and long series forecast
Income Statement
% of Rev enues
-22%
-27%
-24%
-23%
-15%
-12%
-12%
-13%
Design costs
(2.0)
(2.7)
(2.8)
(2.9)
(3.1)
0.0%
0.0%
11.6%
Design costs w ill grow 9-12% p.a. follow ing inflation. Number of hours is stable as DSO and AYDU w ill benefit from experience gained from building long series. Starting from FY10 other costs (broker commission, guarantee provision) are forecast at EUR 0.6m for containers and EUR 1.0m for tankers. Decrease of overhead costs as a result of reduction in indirect personnel.
% of Rev enues
0%
0%
0%
-3%
-2%
-1%
-1%
-1%
This forecast seems to be reasonable and consistent
Other project costs
(3.8)
(8.5)
(4.7)
(1.6)
(7.6)
(6.0)
(6.7)
(6.3) 11.2%
27.2%
40.9%
% of Rev enues
-7%
-15%
-6%
-2%
-6%
-3%
-3%
-3%
Overhead costs
% of Rev enues
(10.3)
(8.3)
(16.1)
(17.9)
(17.5)
(17.0)
(16.0)
(16.0) 25.0%
4.3%
-2.8%
Taking into account the oversized indirect functions and the actions taken to reduce it, the forecast seems to be reasonable. Depreciation plan questionable; link to capex f or Business Plan not provided yet
-18% (3.0)
-15% (2.8)
-21% (2.9)
-24% (3.5)
-14% (3.5)
-9% (3.5)
-7% (3.5)
-8% (3.5) -1.7% 9.9% 0.0%
Depreciation
Depreciation plan fixed at 3.5m per year
Higher ris k (Vulnerability) Medium Ris k (Challenging) Low Ris k (Realistic) Upside
121
The Business Plan forecasts positive EBITDA starting from FY10

Business Plan AY Ukraine
in millions Net sales new merchant vessels Other revenues External revenues AYDU Total revenues Direct materials Fabrication Direct engineering Other project costs Total direct costs Fixed costs Total operating costs EBITDA
Source: Businessplan Version 6.02.2008 KPIs: Total Revenue grow th EBITDA grow th As a % of total Revenues: EBITDA Operating costs Direct costs Overhead costs As a % of total Operating costs: Direct material and other direct costs Fabrication Engineering Overhead costs
FY08 Plan 32.2 41.3 1.9 75.4 39.8 17.7 2.0 1.6 61.1 17.9 79.0 (3.6)
FY09 Plan 126.6 2.0 128.6 81.4 19.8 2.7 7.6 111.5 17.5 129.0 (0.4)
FY10 Plan 192.2 2.0 194.2 130.3 23.1 2.8 6.0 162.2 17.0 179.2 15.0
FY11 Plan 212.8 2.0 214.8 144.7 25.3 2.9 6.7 179.6 16.0 195.6 19.2
FY12 Plan 205.4 2.4 207.8
The adjacent table shows the summarised Business Plan for AY Ukraine prepared by management of AY Merchant Vessels Business Area, covering DSO and AYDU. The detailed Business Plan, broken down by types of vessels, is analysed in the next page. The Business Plan includes only profit and loss statement. Cash flow forecasts were not provided. Our comments on cash flow approximation are provided in Section 6. The Business Plan is based on the capacity limitation of 35,000 tonnes of steel from FY10 onward. Current capacity is 21,300 tonnes of steel. According to management, in order to achieve this target capacity DSO will need to: make necessary investments of a total of 22 m, and increase the productivity.
137.8 27.4 3.1 6.3 174.6 16.0 190.6 17.2
-1.6% -36.8% -4.8% 104.8% 81.0% 23.7% 50.4% 22.4% 2.5% 22.7%
70.6% -88.9% -0.3% 100.3% 86.7% 13.6% 63.1% 15.3% 2.1% 13.6%
51.0% -3850.0% 7.7% 92.3% 83.5% 8.8% 72.7% 12.9% 1.6% 9.5%
10.6% 28.0% 8.9% 91.1% 83.6% 7.4% 74.0% 12.9% 1.5% 8.2%
-3.3% -10.4% 8.3% 91.7% 84.0% 7.7%
As represented by management of AY Merchant Vessels Business Area, further increase of capacity in excess of 35,000 tonnes will require additional investments and increase in workforce. The potential lack of skilled workforce is considered as a major limitation in the Ukrainian market. In the following pages, we analyse revenue and costs components of the Business Plan.
72.3% 14.4% 1.6% 8.4%
122
The information in Business Plan is not sufficient to determine the results per vessel type
Business Plan AY Ukraine - detailed
in millions FY05 Act FY06 Act 0.2 1.9 24.4 24.6 51.1 4.7 55.8 (1.5) (17.2) (7.8) (2.1) (28.6) (14.8) (14.8) (43.4) (0.2) (3.1) (4.9) (0.3) (8.5) (8.3) (60.2) (4.4) 2.8 (7.2) FY07 Act 10.3 42.9 12.9 5.3 71.4 5.2 76.6 (6.7) (29.5) (7.6) 1.5 (0.9) (43.2) (18.3) (18.3) (61.5) (0.8) (1.8) (1.7) (0.4) (4.7) (16.1) (82.3) (5.7) 2.9 (8.6) FY08 Plan 12.4 6.0 13.8 32.2 41.3 1.9 75.4 (8.3) (31.5) (39.8) (18.9) 1.2 (17.7) (2.0) (59.5) (0.4) (1.2) (1.6) (17.9) (79.0) (3.6) 3.5 (7.1) FY09 Plan 62.0 54.0 10.6 126.6 2.0 128.6 (41.1) (33.7) (6.6) (81.4) (21.1) 1.3 (19.8) (2.7) (103.9) (1.9) (5.7) (7.6) (17.5) (129.0) (0.4) 3.5 (3.9) FY10 Plan 63.0 129.2 192.2 2.0 194.2 (41.5) (88.8) (130.3) (23.3) 0.2 (23.1) (2.8) (156.2) (1.9) (4.1) (6.0) (17.0) (179.2) 15.0 3.5 11.5 FY11 Plan 64.5 148.3 212.8 2.0 214.8 (42.5) (102.2) (144.7) (25.3) (25.3) (2.9) (172.9) (2.0) (4.7) (6.7) (16.0) (195.6) 19.2 3.5 15.7 FY12 Plan 138.2 67.2 205.4 2.4 207.8 (91.3) (46.5) (137.8) (27.7) 0.3 (27.4) (3.1) (168.3) (4.2) (2.1) (6.3) (16.0) (190.6) 17.2 3.5 13.7
Container 8.6 Product tankers MPP 19.3 Cargo vessels 25.8 Net sales new merchant vessels 53.7 Other revenues 2.8 External revenues AYDU after 2007 Total revenue Ukraine 56.5 Container (1.4) Product tankers MPP (13.6) Cargo vessels (16.8) Orderbook (1.3) Direct materials (33.1) Capacity (12.7) Reduction due to flexibility on unused capacity Fabrication (12.7) Direct engineering Subtotal direct costs (45.8) Container (1.6) Product tankers MPP (1.3) Cargo vessels (0.2) Orderbook (0.7) Other project costs (3.8) Fixed costs (10.3) Total operating costs (59.9) EBITDA Ukraine (3.4) Depreciation 3.0 EBIT (6.4)
The Business Plan presented in the adjacent table provides details regarding the types of vessels as well as comparative historical figures for FY05FY07. It should be noted that, as detailed further in this Section, in FY07, the first year fully under control of AY Group, the actual results were significantly below the budget. This may reflect a certain weakness of the budgeting process within AY Group. Orderbook costs (direct materials, other project costs) comprise the costs relating to the vessels covered by the signed contracts. These costs are shown in Business Plan as total amounts and are not allocated between the vessels/projects. Fabrication costs, overhead costs and depreciation are also given in Business Plan as total amounts without the allocation between the vessels. Therefore, due to the limitations indicated above, the information supplied in the Business Plan is not sufficient to determine and analyse the project results per vessel type.
123
Sales are projected to triple to 208 million by FY12 as compared with FY07
AY Ukraine: Booked vs. new sales
250.0
in millions
200.0 150.0 100.0 50.0 FY08 Plan FY09 Plan
194.2 115.9 61.4 14.0 12.7
214.8
207.8
DSO is going to change the product mix and concentrate on long series of CS1700 container vessels series, currently produced at German yards, and product tankers instead of sections. This should enable DSO to benefit from a more efficient production process and more profitable products. The Business Plan is very optimistic as it provides for three-fold sales growth over FY08FY12, while only 10% of FY09 sales are supported by contracts with customers and no orders have been contracted for FY10FY12. According to management, the major factors that fuel the sales growth are as follows: Elimination of buyer supply arrangements: During FY05FY07 DSO performed the inter-company projects using the materials supplied by the customers AY Group companies (so called buyer supply). These transactions were excluded both from revenues and costs in FY05-FY07 IFRS financial statements. The FY08 FY12 projected revenues represent gross revenue from shipbuilding operations of the yard. Increase in production capacity: The sales forecast is based on 35,000 tonnes of steel capacity achieved, starting from FY10. Price adjustment: market prices are used as a basis for revenue projections and are expected to grow 2% p.a.
FY10 Plan FY11 Plan FY12 Plan
Booked
New sales
AY Ukraine: Sales by types of vessels

200.0 148.3
in millions
150.0 100.0 50.0 41.3 12.4 13.8 6.0 FY08 Plan 62.0
129.2
138.2
54.0 10.6 2.0
63.0
64.5
67.2
FY09 Plan
FY10 Plan
FY11 Plan
FY12 Plan
Container
Product tanker
MPP
Cargo vessels
Modules
AY Ukraine: Order backlog as at Dec 31, 2007 Contract value 71.4m

9%
33% 58%
Product tanker
Cargo vessel
Hulls/ ships' sections
Therefore, significant efforts will be required to meet the forecast. We understand that marketing process will be changed after the separation from AY Group, and you are currently discussing with the Vendors the steps to be undertaken going forward including serious changes in product mix and sales and marketing efforts.
124
Productivity will improve by 35% by the end of FY12
Improved productivity
Number of hours FY07 Act FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan
Fabrication hours per ton of steel Increased productivity

Source: Businessplan Version 6.02.2008
139
130 7%
110 21%
100 28%
95 32%
90 35%
The main assumption made in the calculation of the costs in the Business Plan is a significant increase in the workforce productivity that will remain stable over FY08FY12; own personnel of 2,811 thousands man-hours and subcontractors of 564 thousand man-hours per annum. According to management of AY Merchant Vessels Business Area, the productivity will mainly be improved through the following measures: reorganisation of production process; optimisation of workshop space; implementation of measuring systems; and change of the building methodology (less assembling of small parts in docks, etc.).
CAPEX forecast
in millions FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan
Capex
Source: Businessplan Version 6.02.2008
7.0
4.0
4.0
4.0
4.0
We should note that we have not been provided with detailed description and quantification of these measures. Salary growth forecast follows the inflation rate. 1-2% annual reduction of material cost is planned as a result of the improvement of relations with suppliers. The detailed breakdown of capex per years and types of investments is presented on the next page.
125
FY08 capex budget is significantly higher than in FY09-FY11 due to carryovers of 8m from FY07
AYU: Investments Plan FY08 to FY11
in thousands Carryover on maintenance items Carryover on productivity Carryover on HSE Carryover on IT Carryovers New autogeneous cutting machine New micro panel line New countor cutting machine Supply system Other Productivity New profile cutting machine Crane with turnable magn. traverse New signing gantry New bending machine for large size pipes New bending machine for medium size pipes Welding equipment Others Capacity Crane after surface treatment upgrade Plate cutting machine refurbishment New compressor station Roof repair Others Maintenance HSE, Security, IT, Mars Estimate - year 2011 Total capex Depreciation Depreciation as a % of capex FY08 Plan 2,447 2,043 420 111 5,021 100 225 325 300 520 820 500 650 100 1,250 726 8,142 (3,500) -43% FY09 Plan 350 250 600 650 450 500 500 160 2,260 520 120 640 500 4,000 (3,500) -88% FY10 Plan 400 400 350 800 200 400 150 1,900 300 600 300 1,200 500 4,000 (3,500) -88% FY11 Plan 4,000 4,000 (3,500) -88% Total FY08-FY11 2,447 2,043 420 111 5,021 350 250 400 100 225 1,325 1,000 800 650 800 500 1,080 150 4,980 300 1,020 770 600 400 3,090 1,726 4,000 20,142
We present opposite the detailed capital expenditure budget that was provided by the management of AY on 5th March 2008. This budget is slightly different from the capex indicated in the Business Plan: the capex for FY08 as per the Business Plan is 1.1 lower. We understand that you will discuss with the Vendors and management capex requirements and respected projections going forward in the course of your technical review.
Source: Information provided by AY Group management on 05.03.2008, Pw C Analysis
126
Section 5 Net assets
Section 5.1 Germany
Total working capital remains negative over the period displayed and is mainly influenced by advance payments received
Net Asset Statement - FY05 to FY07
in millions Property, plant and equipment Intangible assets Fixed Assets Inventories Advance payments made Trade receivables Trade payables Advance payments received Trade working capital Short-term assets, interest free Short-term, interest-bearing receivables Short term payables Other short term liabilities Long-term assets Provisions Derivatives Deferred taxes Income tax payable VAT and employee related taxes Other working capital Total working capital Cash and cash equivalents Construction loans Net financial debt Employee related provisions Provision for pensions Debt-like items Net assets 31. Dec 05 31. Dec 06 31. Dec 07 Act Act Act 65.7 0.7 66.4 168.8 31.2 1.1 (35.1) (225.5) (59.5) 15.8 47.2 (0.3) (3.8) 3.1 (14.6) (4.7) 3.1 (1.5) (10.4) 33.9 (25.6) 79.2 (14.9) 64.3 (9.0) (0.5) (9.5) 95.6 66.1 0.6 66.7 229.2 67.1 4.9 (37.2) (381.0) (117.0) 15.3 20.0 (1.2) (4.4) 0.4 (13.6) 2.2 10.4 (1.4) (7.0) 20.7 (96.3) 153.5 (5.4) 148.1 (20.5) (0.4) (20.9) 97.6 68.1 0.5 68.6 153.7 38.9 5.3 (40.3) (187.0) (29.4) 20.2 1.0 (4.1) (2.7) 1.3 (13.5) 1.5 5.4 (0.7) (8.3) 0.1 (29.3) 98.1 (32.9) 65.2 (18.4) (0.3) (18.7) 85.8
The adjacent table shows the balance sheet in the net asset statement of AYG in accordance with IFRS. Detailed information and breakdowns available were mainly in accordance with German GAAP. Therefore, our analysis was challenged by certain reconciliation issues. Fixed assets remained fairly stable over the period displayed, as no major investments were undertaken. For further details, please refer to the capex section. Trade working capital decreased by 57.5m or 96.6% in FY06. This was mainly driven by an increase in advance payments received of 156m on account of some major instalment payments from customers in connection with orders of the Arctic Line vessels in July FY06. Other working capital mainly consists of short-term assets and, in FY05 and FY06, of short-term interest bearing receivables, partly offset by accruals and provisions as well as VAT and employeerelated taxes. Short-term assets in FY07 mainly include VAT receivables ( 5.8m), subsidies ( 4.9m), innovation aid and 1.9m in connection with additional receivables from the AIDA ship owner relating to budgets overruns during the ship production. Short-term interest bearing receivables decreased significantly by 46.2m from FY05 to FY07 and amounted to 1.0m as at December 2007. Management stated that the receivables relate to an escrow account for Euler Hermes. Provisions mainly include warranties, follow-up costs, outstanding invoices and insurances and, to a lesser extent, parts of the employee-related accruals such as vacation and overtime.
129
Source: DR Ref. 59.1040, 61.1102, 61.1105, Pw C Analysis
Net financial debt is indirectly driven by advance payments received resulting in higher cash accounts. These are, however, partly escrow accounts and therefore restricted
Net Asset Statement - FY05 to FY07
in millions Property, plant and equipment Intangible assets Fixed Assets Inventories Advance payments made Trade receivables Trade payables Advance payments received Trade working capital Short-term assets, interest free Short-term, interest-bearing receivables Short term payables Other short term liabilities Long-term assets Provisions Derivatives Deferred taxes Income tax payable VAT and employee related taxes Other working capital Total working capital Cash and cash equivalents Construction loans Net financial debt Employee related provisions Provision for pensions Debt-like items Net assets 31. Dec 05 31. Dec 06 31. Dec 07 Act Act Act 65.7 0.7 66.4 168.8 31.2 1.1 (35.1) (225.5) (59.5) 15.8 47.2 (0.3) (3.8) 3.1 (14.6) (4.7) 3.1 (1.5) (10.4) 33.9 (25.6) 79.2 (14.9) 64.3 (9.0) (0.5) (9.5) 95.6 66.1 0.6 66.7 229.2 67.1 4.9 (37.2) (381.0) (117.0) 15.3 20.0 (1.2) (4.4) 0.4 (13.6) 2.2 10.4 (1.4) (7.0) 20.7 (96.3) 153.5 (5.4) 148.1 (20.5) (0.4) (20.9) 97.6 68.1 0.5 68.6 153.7 38.9 5.3 (40.3) (187.0) (29.4) 20.2 1.0 (4.1) (2.7) 1.3 (13.5) 1.5 5.4 (0.7) (8.3) 0.1 (29.3) 98.1 (32.9) 65.2 (18.4) (0.3) (18.7) 85.8
Overall, trade as well as total working capital remain negative over the periods disclosed. These are almost solely driven by advance payments received from customers. Cash and cash equivalents include several escrow accounts representing instalments from customers. Depending on the contract parts of those accounts are restricted for utilisation and can only be used to provide security for a loan. The increase from FY05 to FY06 corresponds with the advance payments received movement. Debt-like items mainly include pensions and employee-related provisions. The latter mainly consists of early-retirement ( 17.4m in FY07) and jubilee provisions ( 1.0m in FY07).
Cash accounts driven by advance payments received from customer, partly escrow accounts
Source: DR Ref. 59.1040, 61.1102, 61.1105, Pw C Analysis
130
Section 5.2 Ukraine
In FY06-FY07 Ukrainian operations were accumulating losses

Balance Sheet - DSO and AYDU Combined
in millions Intangible assets Tangible assets Advance payments for fixed assets Fixed Assets Raw materials WIP Advance payments made Advance payment for fixed assets Trade receivables Trade payables Trade payables for fixed assets Advance payments received Trade working capital VAT receivable Receivables from Group companies Payables to Group companies Interest payable to Group companies included in Payables to Group companies Provisions Tax payables Liabilities for wages and salaries Other debts and accruals Other working capital Cash and cash equivalents Liabilities to banks Loan payable to non-Group companies Loans payable to Group companies Loan interest payable to Group companies Financial debt Provision for pensions Debt-like items Net assets
n/a - not available Source: Internal reports, Datatoom Index 17.3.3.1-17.3.3.12, Add.doc.742-754, Add.doc 847, 1164
31.Dec 05 Act 0.0 21.9 0.3 22.2 8.1 56.2 2.1 (0.3) 1.7 (4.8) n/a (73.8) (10.8) 2.6 4.3 (6.4) 5.3 (1.0) (0.3) (0.7) (0.7) 3.1 3.1 (11.0) (16.3) (5.3) (29.4) (14.9)
31.Dec 06 Act 0.2 18.9 19.0 4.1 39.8 2.4 0.3 (4.5) n/a (54.7) (12.6) 4.3 4.2 (3.3) 3.2 (1.6) (0.4) (0.9) (0.8) 4.8 0.4 (0.6) (32.2) (3.2) (35.6) (2.5) (2.5) (26.9)
31.Dec 07 Act 0.5 18.6 0.1 19.2 7.3 48.1 2.1 (0.1) 0.1 (14.2) n/a (53.2) (9.9) 9.8 4.0 (5.9) 4.2 (0.4) (0.5) (0.9) (0.4) 9.9 3.5 (0.5) (45.9) (4.2) (47.2) (2.5) (2.5) (30.4)
The combined balance sheet of DSO and AYDU LLC presented in the adjacent table was calculated as a combination of standalone financial statements prepared in accordance with IFRS for AY Group consolidation purposes in Ukrainian Hryvnia and translated into EUR. Tangible assets comprise DSO shipyard buildings, equipment, plot of land and other assets. Major capex in FY06-FY07 comprises the acquisition of the plot of land beneath the shipyard ( 1.6m) and reparation of roof ( 1.2 m). Refer to the Appendix 2.4 for additional information. There is a potential dispute with Nikolaev municipality regarding the plot of land owned by DSO. We recommend you to discuss this with your legal advisors. Raw materials mainly include steel and other materials used in the ongoing vessels construction project and scrap from previous projects which, according to management, can be utilised, going forward. Raw materials are shown net of provision of 1.0m. Refer to the Appendix 2.4 for additional information. WIP represents costs incurred during projects in process presented net of expected losses at completion.
132
VAT receivable increases significantly following difficulties that DSO experiences with recovery of VAT
31.Dec 05 Act 0.0 21.9 0.3 22.2 8.1 56.2 2.1 (0.3) 1.7 (4.8) n/a (73.8) (10.8) 2.6 4.3 (6.4) 5.3 (1.0) (0.3) (0.7) (0.7) 3.1 3.1 (11.0) (16.3) (5.3) (29.4) (14.9)
31.Dec 06 Act 0.2 18.9 19.0 4.1 39.8 2.4 0.3 (4.5) n/a (54.7) (12.6) 4.3 4.2 (3.3) 3.2 (1.6) (0.4) (0.9) (0.8) 4.8 0.4 (0.6) (32.2) (3.2) (35.6) (2.5) (2.5) (26.9)
31.Dec 07 Act 0.5 18.6 0.1 19.2 7.3 48.1 2.1 (0.1) 0.1 (14.2) n/a (53.2) (9.9) 9.8 4.0 (5.9) 4.2 (0.4) (0.5) (0.9) (0.4) 9.9 3.5 (0.5) (45.9) (4.2) (47.2) (2.5) (2.5) (30.4)
Advance payments received represent the financing of the ongoing projects received from customers. All contracts with customers provide that the price is paid in several instalments during the execution of the contract. VAT receivable comprises the amounts of VAT that DSO may recover from the state. The increase in VAT receivable balance is explained by the difficulties that DSO experiences with recovery of VAT. As at 31 December 2007, the VAT receivable balance of 10.9 is disclosed net of provision of 1.1m. (Refer to Section 7 Taxation for additional information). Receivables from and payables to the Group companies mainly relate to settlements under shipbuilding contracts (receivables) and reinvoiced management fees. Please refer to Appendix for details. Loans payable to non-Group companies represent the loan payable to Damen Shipyards Cargo Vessel B.V. The loan bears interest of 3.2% and matures on 6 June 2011. The loan is secured by DSO assets. Loans payable to the Group companies represent the loans due to Okean B.V. and AY Design Ukraine B.V. These loans are eliminated at AYU consolidated level.
133
DSO is obliged to pay pensions to employees working in unhealthy conditions

31.Dec 05 Act 0.0 21.9 0.3 22.2 8.1 56.2 2.1 (0.3) 1.7 (4.8) n/a (73.8) (10.8) 2.6 4.3 (6.4) 5.3 (1.0) (0.3) (0.7) (0.7) 3.1 3.1 (11.0) (16.3) (5.3) (29.4) (14.9)
31.Dec 06 Act 0.2 18.9 19.0 4.1 39.8 2.4 0.3 (4.5) n/a (54.7) (12.6) 4.3 4.2 (3.3) 3.2 (1.6) (0.4) (0.9) (0.8) 4.8 0.4 (0.6) (32.2) (3.2) (35.6) (2.5) (2.5) (26.9)
31.Dec 07 Act 0.5 18.6 0.1 19.2 7.3 48.1 2.1 (0.1) 0.1 (14.2) n/a (53.2) (9.9) 9.8 4.0 (5.9) 4.2 (0.4) (0.5) (0.9) (0.4) 9.9 3.5 (0.5) (45.9) (4.2) (47.2) (2.5) (2.5) (30.4)
Provision for pensions covers two types of pensions: pensions to employees working in unhealthy and difficult conditions. These pensions are imposed by the legislation, and one-time payments to employees who wish to leave the company within 3 months of the attainment of pension age.
134
Section 6 Cash flows
Section 6 - Cash flows
Cash flow estimates calculated on the basis of the latest Business Plan are lower than in the initial vendor valuation due to the inclusion of capex and difference in tax calculation.
AYG: Cash Flow Approximation
in millions FY07 Act FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan Comment
FY08-12 Business Plan Projections FY08-12 CAPEX Projections provided by vendor WC change provided by the vendor 30.0% effektive tax rate calc. on EBT
EBITDA Income Statement GER 14.2 54.6 43.1 52.2 58.6 67.9 - Capital Expenditures (12.1) (9.7) (9.4) (9.0) (9.0) (9.0) +/- Working Capital change 1.3 (1.6) (1.6) 0.3 0.9 Cash Flow Approximation before taxes 2.0 46.2 32.1 41.6 50.0 59.8 - Tax German operations (2.2) (14.1) (10.6) (13.4) (15.3) (18.1) Cash Flow Approximation after taxes (0.1) 32.1 21.4 28.2 34.6 41.7
AYU: Cash Flow Approximation

in millions FY07 Act FY08 Plan FY09 Plan (0.4) (4.0) (3.5) (7.9) (7.9) FY10 Plan 15.0 (4.0) (4.3) 6.7 (2.9) 3.8 FY11 Plan 19.2 (4.0) (1.3) 13.9 (3.9) 9.9 FY12 Plan Comment 17.2 (4.0) 0.5 13.7 (3.4) 10.2
FY08-12 Business Plan Projections FY08-12 CAPEX Projections provided by vendor WC change provided by the vendor 25.0% effektive tax rate calc. on EBT
EBITDA Income Statement Ukraine (5.7) (3.6) - Capital Expenditures (7.5) (7.0) +/- Working Capital change 0.1 Cash Flow Approximation before taxes (13.2) (10.5) - Tax Ukraine operations Cash Flow Approximation after taxes (13.2) (10.5)
Group Combined Cash Flow Approximation

in millions EBITDA Combined - Capital Expenditures +/- Working Capital change - Tax CF approximation CF as per vendor valuation Variance FY07 Act FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan
8.5 51.0 42.7 67.2 77.8 85.1 (19.6) (16.7) (13.4) (13.0) (13.0) (13.0) 1.3 (5.1) (5.9) (1.0) 1.4 (2.2) (14.1) (10.6) (16.3) (19.3) (21.5) (13.3) 21.6 13.6 32.1 44.6 51.9 28.1 20.3 37.4 50.0 56.2 (6.5) (6.7) (5.3) (5.4) (4.3)
In contrast to the PwC approach (tax rate calculated on EBT) the vendor uses EBITDA minus capex as basis for tax calculation in his valuation
Source: Business Plan version 6.02.2008, Management information, PwC Analysis
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Section 7 Taxation
Section 7.1 Taxation Ukraine
Section 7.1 - Taxation Ukraine
Scope and process
Scope and period Issues outlined in the report
We performed a full scope tax due diligence of two Ukrainian operating companies (AYDU and DSO) for the period of FY05 - FY07. Our calculations of the tax exposures include underpaid taxes and applicable penalties as of 31 December 2007. Risk calculations were based on UAH/exchange rate as of 31 December 2007 [UAH7.42 per 1]. No late payment interest was assessed since according to Ukrainian tax legislation no late payment interest obligation arise for a taxpayer in case of tax underestimation. Our analysis was based on the information provided in a physical dataroom. Also we had a meeting with Mr. Torben Levinsen, President of DSO, and Mr. Alexander Shamray, Director Finance of DSO, at Management presentation in Odessa, Ukraine on 24 January 2008. Besides the meeting, several conference calls were arranged, during which Mr. Shamray answered our questions in respect of DSO and AYDUs activities.
Due diligence process and access to management
139
Key Deal Issues / Executive Summary

in thousands Issue Tax risks VAT recovery Potential withdrawal of tax privilege available for shipbuilding companies Deduction of engineering and design expenses Economically unjustified expenses Incorrect methodology of tax base calculation Transfer pricing Total
1)
Description VAT receivable in the amount of EUR 10,522K may not be fully recoverable by DSO during the next 12 months DSO may lose its right for the tax privilege available for Ukrainian shipbuilding entities Deduction of engineering and design expenses and recovery of the respective input VAT may be challenged due to the lack of documentary support Deduction of expenses incurred by DSO under loss-making contracts and recovery of the respective input VAT may be challenged as economically unjustified In case DSO is not able to prove that methodology applied did not lead to underestimation of CPT, additional CPT liabilities may be assessed Application of transfer pricing rules to intra group transactions may trigger additional CPT and VAT obligations for DSO and AYDU -
Amount 10,522 n/a
Technical risk assessment medium n/a
100 81,828
medium low
9,606 medium / low

1) 1)
102,056
A detailed transfer pricing analysis / benchmarking study is required in order to quantify and assess this risk
140
DSO reported 10.5m of VAT receivable which is not likely to be recovered from the budget within the next 12 months
Tax balances of the Target companies as of 31. Dec FY07
in thousands Reported taxes payable Profits tax VAT PIT Total tax payable Reported taxes receivable VAT Total tax receivable DSO AYDU
Tax filings and payments In majority of cases the tax returns were filed with the tax authorities in time, except for a couple of tax returns which were filed with a delay. This, however, did not lead to assessment of any significant penalties. The DSOs and AYDUs CPT returns for 12M07 have not been filed and were only available in draft at the moment we reviewed the dataroom. Tax balances As of the end of FY07 DSO reported VAT receivable in the amount of 10.5m, ca. 5.9m of which is currently disputed by the tax authorities and ca. 2.0m are pending tax authorities review. The remaining 2.6m are confirmed by the tax authorities for refund (however, was not yet refunded). Based on our high level analysis of the respective tax audit acts and court decisions related to dispute of ca. 5.9m of VAT receivable we believe that the company may have chances to sustain 70-80% of this amount. However, to confirm the likelihood of the successful outcome for the company, a more detailed analysis is necessary. Even if the tax authorities confirm the above amount of VAT receivable for refund, based on the current practice, we believe the company may not be able to recover this amount from the budget within the next 12 months.
92 92 10,522 10,522
2 7 9 -
Source: statutory accounting data, tax returns and Pw C analysis
141
DSO and AYDU are open for the tax audits in respect of FY07 and FY05-FY07 respectively
Tax audits DSO has been audited by the tax authorities through FY06. The scope of audit included review of all taxes and obligatory payments except for VAT, as VAT was subject to special VAT-refund audits (discussed further in this section). As a result of this audit, the tax authorities reduced DSOs tax losses available for carry forward on the basis of the following main findings: expired period for offset of tax losses carried forward ( 0.7m) deduction of expenses incurred under the loss making transactions with related parties ( 0.5m); and deduction of repair expenses due to insufficient documentary support ( 0.4m). Tax litigations We are not aware of any other open tax disputes except for VAT recovery disputes discussed above. Tax return amendment procedure In case the taxpayer submits amended tax returns to the tax authorities or introduces amendments to the prior periods in the current tax returns, the tax authorities have the right to perform a desk tax audit with respect to the proposed changes. In case the taxpayer discovers mistakes in a prior year tax returns (that led to underestimation of taxes) and submits amended tax returns / introduces amendments to current tax returns, the tax authorities have the right to assess the taxpayer with 5% penalty. Tax losses As of the end of FY05, FY06, FY07 DSO accumulated 0.8m, 4.2m, 0.7m of losses respectively. Although, in principal, tax losses should be available for carry forward for an indefinite period, local legislation may impose limitations / restrictions on the ability of taxpayers to utilise tax losses in each particular year. Under Ukrainian tax legislation tax losses available for carry forward will not be lost in case of the change of a shareholder.
DSO agreed with the respective adjustments without disputing. Period starting from FY07 is open for a tax audit for DSO. AYDU was not audited for the period of FY05-FY07. Respectively, these years are open for the tax authorities audit. Please note that in certain cases there is a possibility for the tax authorities to re-audit tax period that was already covered by the field tax audit.
142
There is a risk that DSO may lose the tax privilege available for Ukrainian shipbuilding entities
During FY05-FY07 DSO enjoyed special tax privilege available for shipbuilding entities1, according to which the taxpayers are allowed to defer taxation of advance payments received under the ship building contracts (while deduction of expenses is also deferred) until the acts of acceptance in respect of ships are signed. Potentially, there is a risk that DSOs right to enjoy such a privilege in the future may be revoked by the decree of the respective authorities on the basis that it did not fully comply with a requirement not to be in a loss position for more than 3 quarters.
The Law of Ukraine #1242-XIV of 18 November 1999 On governmental operations to support Ukrainian shipbuilding as amended, the Law of Ukraine #334/94-VR of 28 December 1994 On corporate profits tax as amended.
143
Deduction of engineering and design expenses and recovery of the respective input VAT may be challenged due to the lack of documentary support
Deduction of engineering and design expenses
in thousands CPT VAT Penalty (50%) LPI Total
Source: Pw C analysis
FY05 10 8 9 28
FY06 5 4 5 14
FY07 22 17 20 59
Total 37 30 33 100
In FY05-FY07 DSO purchased engineering and pre-contract design services under the agreement with AYDU. DSO deducted expenses incurred under this agreement and recovered the respective input VAT in full. Primary agreement and the documents supporting the AYDU s charges do not contain clear description of provided services, as well as detailed specifications and calculation of prices charge d. We were not provided with documents evidencing the nature of services rendered. In the absence of documentation supporting the nature of services rendered there is a risk that the tax authorities challenge deduction of these expenses and respective input VAT and assess additional amounts of CPT and VAT, as well as 50% penalty We estimate the risk as 0.1m. We assess this risk as medium.
144
Deduction of expenses incurred by DSO under loss-making contracts and recovery of the respective input VAT may be challenged as economically unjustified
Economically unjustified expenses
in thousands CPT VAT Penalty (100%) LPI Total
FY05 2,901 2,040 4,942 9,883
FY06 7,458 5,245 12,703 25,405
FY07 13,523 9,747 23,270 46,539
Total 23,882 17,032 40,914 81,828
The majority of DSOs FY05-FY07 shipbuilding contracts were loss-making. According to the current Ukrainian CPT legislation, the taxpayer is entitled to deduct only those expenses that are aimed at generation of income. According to the existing practice there are precedents of tax authorities considering the expenses incurred under loss-making contracts as not being aimed at generation of income and thus subject to challenge. Should the tax authorities raise this issue for DSO, they could challenge the deduction of the expenses incurred under the lossmaking contracts as well as the recovery of respective input VAT, assess additional CPT, VAT and 100% penalty. According to our preliminary estimation made based on the figures provided by DSO the maximum amount of risk is 81.8m. We assess the risk as low. Corresponding warranty is included into the current SPA draft.
145
Improper methodology of tax base calculation may trigger additional CPT liabilities
Improper methodology of tax base calculation

in thousands CPT Penalty (100%) LPI Total
FY05-FY07 4,803 4,803 9,606
During FY05-FY07 DSO enjoyed special tax privilege available for shipbuilding entities, according to which the taxpayers are allowed to defer taxation of advance payments received under the ship building contracts from taxable income (deduction of expenses is also deferred) until the acts of acceptance in respect of ships are signed. In its tax returns for FY05-FY07 DSO included in to the taxable base all expenses incurred in respective periods, while the amount of expenses, related to contracts under which advances were deferred, were added back to tax base as increase of WIP (rather than reducing expenses). This methodology may be interpreted as not being fully in line with the rules prescribed in legislation, although if properly applied, is unlikely to lead to underestimation of tax base. According to management, methodology, applied by DSO, should not result in underestimation of CPT. However, we cannot exclude that the tax authorities may challenge its application and, in case DSO will not be able to prove that the reflection of respective expenses in its tax returns did not result in reduction of the taxable base, the additional CPT liabilities may be assessed. Moreover, for tax purposes DSO does not allocate to WIP the general and administrative expenses, and such costs are included in deductible expenses as incurred. The tax authorities could argue that this approach leads to underestimation of the taxable profit. According to our preliminary estimation, the total amount of risk on the matter is 9.6m. This, however, is subject to further discussion / verification with the Group management and / or auditors. The level of the risk is assessed as medium in the amount of 1.4m for general and administrative expenses not allocated to WIP and low in the amount of 8.2m for expenses allocated to WIP.
146
Application of transfer pricing rules to intra group transactions may trigger additional CPT and VAT obligations for DSO and AYDU
During FY05-FY07 DSO and AYDU had the following transactions with the companies of AY Group: DSO received all its revenue under intra group shipbuilding contracts (except for revenue received under the contract with an unrelated company Ukrrichflot). Almost all intra group contracts were loss-making for DSO; AYDU received all its revenue under intra group contracts on provision of engineering, pre-contract design and other services. It should be noted that under the current local tax legislation the tax authorities tend to experience difficulties in proving that the level of prices applied is different from the arms length level, as in most cases (including this one) they may determine the arms length level of prices based on comparative prices method only. At the same time, the tax authorities are starting to pay more and more attention to this issue. In order to quantify and assess this risk a detailed transfer pricing analysis / benchmarking study is required.
According to the current tax legislation, companies of AY Group are treated as related parties to AYDU and DSO for tax purposes, and, therefore, the tax authorities have the right to control prices applied. If the tax authorities prove that prices applied between DSO / AYDU and the AY Group companies are not at arm s length level, they may adjust tax base of DSO and AYDU based on relevant fair market prices. As a result, additional CPT, VAT and 100% penalt y may arise for AYDU and additional CPT and 100% penalty may arise for DSO (no VAT obligations should arise for DSO assuming that all sales were export qualified for zero VAT rate). During the last tax audit, the tax authorities raised transfer -pricing issues with respect to loss-making contracts with affiliated parties (which resulted in challenge of loss carry forward for 0.5m).
147
Section 7.2 Taxation Germany
Section 7.2 - Taxation Germany
Scope and process

Scope and period Our tax due diligence work covered the period of FY04 - FY07 of six German companies (AMTW, AWRE, AWO, AMTWG, Arctic Personaldienstleistung GmbH and Warnow Design GmbH). OTP GmbH was not covered during our review since we understand that this company will not be part of the deal (i.e. it will be excluded from the Group companies before the Closing). Additionally, no information was provided in respect of this company in the dataroom. Our calculations of the tax exposures include underpaid taxes and applicable late payment interest as of 31 December 2007. We visited the physical dataroom at the premises of Wikborg Rein in Oslo in the period from 5 through 7 February 2008 and on 22 February 2008. Information delivered by the Group after we have visited the dataroom has not been checked by us. Our access to management was limited to the conference call with the German CFO of the Group prior to visiting the dataroom and one conference call afterwards. Additionally, we had a conference call with the German tax advisor of AYG, Ernst & Young, on 10 March 2008. During our review we requested, but were not provided with certain information required for completeness of our analysis, specifically (inter alia): tax returns and financial statements for FY07 for all target companies Information on the amounts of interest income (bank interest) earned in respect of prepayments made by customers to AMTW during periods FY04-FY07 specific information on intercompany transactions and confirmation of the correctness of the data provided. Respectively, we were not able to perform analysis of this information within the framework of our due diligence. Additionally, some information was provided in the dataroom after our last visit and therefore we were not able to review this information, eg information on the tax position of the German companies of AY Group for the fiscal year 2007 (including the breakdown of the CIT, Trade tax, VAT and RETT provisions and receivables).
149
Issues outlined in the report Due diligence process
Access to management
Significant scope matters
Key deal issues / Executive Summary

in thousands Issue Tax risks Tax losses Tax grouping Witholding tax in respect of royalty payments Improper tax treatm ent of interest incom e Transfer pricing Total
1) 2)
Description
Amount
Technical risk assessment
AMTW had significant tax losses as of the end of FY07, which are expected to be lost in case of change of ownership Due to failure to observe formal legislation requirements the tax authorities could challenge tax grouping Additional withholding tax may be assessed due to failure to withhold taxes from royalty paym ents in 2007 Improper tax treatm ent of interest income may entail additional tax assessments Prices charged under cross border intra-group transactions could be subject to transfer pricing scrutiny -
11,600 3,003 229

1)
n/a high high medium

2)
2)
14,832
Additional information is required to quantify this risk A detailed transfer pricing analysis / benchmarking study is required in order to quantify and assess this risk
150
AMTW had significant tax losses as of the end of FY07, which may potentially be lost in case of change of ownership (1 of 2)
General information During the period under review E&Y Hamburg was in charge of preparation of corporation tax and trade tax returns and also advice on tax issues for AMTW, AWO, AWRE and AMTWG. Corporation and trade tax returns for the years until 2006 were filed with the tax authorities within established deadlines. The years up to FY06 have already been assessed for tax grouping subsidiaries, while FY06 has not yet been assessed for AMTW as tax grouping parent. According to information provided in the dataroom (prepared by E&Y) the corporation tax and trade tax liability of AMTW as tax group parent for FY07 amounted to 0.4m and 0.2m respectively. We understand that this should not lead to significant cash outflow as soon as 2007 is assessed, as corporation tax is to be credited (against 1.1m of tax available for credit) and trade tax has already been prepaid in the amount of 0.2m. Nothing came to our attention that would let us know that taxes were not paid within the established deadline. No information was available as to who was in charge of preparation of tax returns for other taxes (i.e. payroll tax, VAT, social security charges). Losses available for carry forward According to the filed 2006 tax returns, AMTW had the following tax losses carried forward as of the end of 2006: corporation tax in the amount of 39.9m.
151
trade tax in the amount of 42.2m
According to information provided by E&Y tax losses carried forward are as follows as of the end of 2007 (not confirmed by us due to absence of relevant information): corporation tax in the amount of 36.9m trade tax in the amount of 38.8m.
Generally, tax losses could be carried forward for an indefinite period and be available for offset of up to 60% of profits earned. However, under the German change of control rules, tax losses carried forward are forfeited in case of a direct or indirect shareholder change of more than 50% (noting that Closing will take place in April 2008, corporation tax loss will be lost in full amount, whereas trade tax loss will be lost in the amount fixed by the tax authorities as of 31 December 2007). According to information provided in the dataroom the German tax group has capitalized in its IFRS accounts a deferred tax asset of 7.8m with respect of tax losses carried forward. We have not been provided with the information as to how this amount has been calculated.
AMTW had significant tax losses as of the end of FY07, which may potentially be lost in case of change of ownership (2 of 2)
Significant open tax disputes Currently AMTW has an open dispute in respect of tax treatment of interest income (bank interest) earned in respect of prepayments made by customers to AMTW. The tax authorities claim that such interest should be included into the taxable income of a company rather than reduce work in progress, as was done by the company. Despite the fact that the dispute is still open, we understand that the company has paid 0.5m claimed by the tax authorities. If the company wins this dispute, this amount should be recoverable from the budget. However, due to the absence of clear guidance in the legislation and lack of the relevant practice we believe it is unlikely that the dispute will be successful for the company. Ernst & Young estimates that there is a 50% chance to win the dispute. Respectively, they accrued no receivable in respect of this amount. According to Ernst & Young, the accounting treatment of interest income received in connection with prepayments was not changed in subsequent years (from 2004 onwards). Respectively there is a risk that tax authorities may challenge the treatment of this income in the future. We have no information on the amount of interest income received from prepayments during the years from 2004 onwards and, respectively, cannot quantify the amount at risk. The risk is assessed as medium.
152
Due to failure to observe legislation requirements the tax authorities could challenge tax grouping (1 of 2)
Tax Grouping
in thousands AMTW Combined tax Interest on late tax payments Subtotal AWO Trade tax Corporation tax Solidarity surcharge Interest on late tax payments Subtotal AWRE Trade tax Corporation tax Solidarity surcharge Interest on late tax payments Subtotal AMTWG Trade tax Corporation tax Solidarity surcharge Interest on late tax payments Subtotal Total FY04 (544) (544) 514 610 34 118 1,276 104 100 5 21 230 6 7 1 14 976 FY05 1,400 63 1,463 93 189 10 13 305 35 42 2 4 83 1,851 FY06 (298) (298) 87 181 10 278 87 103 6 196 176 Total 558 63 621 514 610 34 118 1,276 284 470 25 34 813 128 152 8 5 293 3,003
AMTW has applied the following tax grouping arrangements with its subsidiaries: with AWO - starting from 1 May 2004 with AWRE - starting from 1 May 2004 with AMTWG - starting from 1 January 2004
Tax grouping procedures are very formalistic in Germany and the legislation provides for a number of requirements to be observed by the companies for being eligible for benefiting from tax grouping. Based on our review we noted that certain legislation requirements were not properly observed by the above companies, specifically: under German GAAP AWO and AWRE have realised losses carried forward prior to the beginning of the tax grouping which were carried forward during the tax grouping period, whereas such losses should have been off-set against profits earned on a stand-alone basis; profit and loss pooling agreements do not meet the legislation requirements (i.e. the wording on reserves available for release was corrected in 2005 with effect from 2006 but the agreements do not provide for a proper minimum period of tax grouping of 5 years from 2006 onwards).
* 6% per annum assessed 15 months after the end of the respective FY

153
Due to failure to observe formal legislation requirements the tax authorities could challenge tax grouping (2 of 2)
Tax Grouping
in thousands AMTW Combined tax Interest on late tax payments Subtotal AWO Trade tax Corporation tax Solidarity surcharge Interest on late tax payments Subtotal AWRE Trade tax Corporation tax Solidarity surcharge Interest on late tax payments Subtotal AMTWG Trade tax Corporation tax Solidarity surcharge Interest on late tax payments Subtotal Total FY04 (544) (544) 514 610 34 118 1,276 104 100 5 21 230 6 7 1 14 976 FY05 1,400 63 1,463 93 189 10 13 305 35 42 2 4 83 1,851 FY06 (298) (298) 87 181 10 278 87 103 6 196 176 Total 558 63 621 514 610 34 118 1,276 284 470 25 34 813 128 152 8 5 293 3,003
Should the tax authorities raise this issue they may disallow tax grouping and recalculate taxes on a stand-alone basis, assess additional corporate profits tax and trade tax liabilities together with respective late payment interest (of 6% per year). According to our rough estimation the amount of risk could total 3.0m. We assess the risk as high. Please note that the companies have to report to the tax authorities that such a mistake took place (as soon as the mistake is revealed). Failure to inform tax authorities on such issues would be regarded as tax fraud that may entail significant administrative sanctions.
* 6% per annum assessed 15 months after the end of the respective FY

154
Additional withholding tax may be assessed due to failure to withhold taxes from royalty payments in FY07
Withholding Taxes on Royalty Payments in FY07
in thousands AMTW Withholding taxes * Solidarity surcharge Interest on late tax payments ** Total FY05 FY06 FY07 217 12 229 Total 217 12 229
In 2007 AMTW paid royalties to its shareholder Aker Yards AS (Norway) in the amount of 1,087K. No tax has been withheld from these payments and no exemption certificate is available. Should the tax authorities raise this issue, they may assess additional withholding tax and solidarity charge obligations in the amount of 0.2m. We assess the risk as high. Please note that there is a legal obligation for the company to report to the tax authorities that such a mistake took place (as soon as the mistake is revealed). Failure to inform tax authorities on such issue would be regarded as tax fraud that may entail significant administrative sanctions.
* this amount assumes that the withholding tax will be refunded by the Norwegian shareholder, so no gross up was made (otherwise the tax should be calculated on a grossed-up amount) ** 6% per annum assessible 15 months after the end of the respective FY
155
Prices charged under cross border intra-group transactions could be subject to transfer pricing scrutiny (1/2)
According to information from the dataroom, during FY05-FY07 the target group companies were involved in a number of cross border intercompany transactions, specifically the following could be identified: AMTW paid management service fees of 5.3m (FY05-FY07) to Aker Yards ASA under the management services agreement (the services agreement of 1 January 2006 was signed in July 2007) paid royalty charges to Aker Yards AS (accounts payable as of the end of FY07 totalled 1.1m) (no agreement was available in respect of these charges); paid design fees to Aker Yards OY (accounts payable as of the end of FY07 totalled 2,0m); received consulting fees from Damen Shipyard Okean (accounts receivable as of the end of FY07 totalled 0.8m); Additionally, AMTW sold LNG activities to Aker Yards Technology AS presumably at historical costs (for 1.7m) in February 2008. Existence of inter-company transactions may entail the following issues.
Arms length level of prices In Germany, transfer prices for cross-border intercompany transactions are required to be concluded following the arms length principle. The German tax authorities review prices applied in such transactions and make respective adjustments where they reveal that the prices are not at arms length. Adjustments are subject to additional corporation tax, solidarity surcharge, trade tax and dividend withholding tax liabilities (where applicable) as well as late payment interest. Should the tax authorities check the prices charged under the above transactions and reveal these prices are not at arms length, they may adjust these prices applying transfer pricing rules and assess additional corporation tax, trade tax and dividend withholding tax liabilities (where applicable) together with late payment interest. A special benchmarking study and transfer pricing analysis are necessary in order to quantify and assess this risk.
(no documents were provided for our review in respect of the last three transactions). AWO paid management service fees of 1.2m (FY05-FY07) to Aker Yards ASA (AWO did not enter into a management service agreement)
156
Prices charged under cross border intra-group transactions could be subject to transfer pricing scrutiny (2/2)
Availability of proper transfer pricing documentation Additionally, the tax payer is obliged to prepare transfer pricing documentation for cross-border intercompany transactions (to be provided during 60 days upon tax authorities request for ordinary transactions or to be prepared contemporaneously at least within 6 months after the end of the respective year for extraordinary transactions). Failure to meet this requirement may entail, among others, assessment of penalties (5 to 10% of tax adjustments), shift of burden of proof to taxpayer, unfavorable adjustments to taxable income and cost for setting up a proper documentation. If applicable, late submission of transfer pricing documentation may result in penalties of 1.0m, at least 100 per day of delay. Transfer pricing information provided in the dataroom was very limited (mainly including the management fee agreement between Aker Yards ASA and AMTW, the transfer pricing policy covering management fees, the agreement covering the transfer of the LNG activities as well as the intercompany receivables and liabilities as of 31 December 2007). Within the scope of this project we are not able to assess the companies ability to meet the above requirement.
157
Section 7.3 Taxation Netherlands
Section 7.3 - Taxation Netherlands
Scope and process

Scope and period Our high level tax due diligence work covered Dutch corporate income tax, VAT and payroll tax for the period of FY04 - through FY07 of four Dutch holding companies (Damen Okean SC-1 BV, Damen Okean SC-2 BV, Aker Yards Design Ukraine BV and Okean BV). Our review did not cover Dutch dividend withholding tax and RETT since it is unlikely that these taxes should be significant for these entities. Our calculations of the tax exposures include applicable late payment interest and an estimate of the level of penalties as of 31 December 2007. Our information was obtained primarily from the interview by telephone with AY Group management (Mrs. I. Heier, head of group accounting of AY Group) on 12 February, 2008. No information other than that was reviewed by us (as there were almost no information in the dataroom). In general, management was not able to answer all our questions, therefore, an access to the group tax advisors (E&Y) was requested in order to confirm / clarify the likely issues. Such access was not provided to us. Please note that Damen Okean AC1 BV and Damen Okean AC2 BV were outside the scope of our review. Based on discussion with the Group management on 12 February 2008 these are empty companies (similar to Damen Okean SC-1 BV and Damen Okean SC-2 BV), which hold one share each in the DSO. The only purpose of creation of these companies was to fulfil requirements under Ukrainian Company Law. Therefore, we do not expect any significant tax issues to be there, however, in order to confirm that an additional analysis of these companies is necessary. During our review we requested, but were not provided with certain information required for completeness of our analysis, specifically (but not limited to): - tax returns for FY04, FY05 of Damen Okean AC1 BV and Damen AC2BV and tax returns for FY06 for all Dutch companies (including the most critical FY06 corporate income tax returns of Okean BV and AY Design Ukraine BV); - the financial statements for FY07 (or drafts) for all Dutch companies; - fiscal unity approval in the Netherlands; - information on tax assessments and payments; - information on intra-group payments; - information on vessel supply and respective VAT treatment; - information receivable of 26.0m; - transparency of Ukrainian subsidiaries for Dutch tax purposes; - tax balances and tax losses as of the end of FY07 Respectively, we were not able to perform analysis of this information within the framework of our due diligence.
159
Issues outlined in the report Due diligence process and access to management
Key Deal Issues / Executive Summary

in thousands Issue Tax risks Deduction of interest expenses Interest expenses deducted by Okean BV in respect of a loan from Aker Yard Holding AS could be challenged based on the Dutch anti-base erosion rules Revaluation of a zero receivable from DSO may entail adverse tax consequences for Okean BV 276 high Description Amount Technical risk assessment
Revaluation of zero receivable Total Potential risk areas 1)
1)
1)
276
Application of the tax treaty benefits Application of the tax treaty benefits between the Netherlands and other may be challenged states (Norway and Ukraine) may be challenged by Norwegian and Ukrainian tax authorities Transparency of Ukrainian Ukrainian subsidiaries of Aker Yards Ukraine Holding AS could be subidiaries for Dutch tax purposes subject to taxation in the Netherlands based on the transparency rules Potential assessment of VAT liabilities
1)
Additional VAT liabilities may potentially be assessed on the amount of income received from the sale of vessels by Okean BV
Additional analysis is required to quantify and assess this risk
160
FY06 corporate tax returns are not filed yet by the Dutch companies (1 of 2)
Tax filings and payments Damen Okean SC-1 BV, Damen Okean SC-2 BV have been incorporated in 2004, whereas Okean BV and Aker Yard Design BV have been incorporated in 2006. Management was not aware whether the 2004 corporate income tax returns of Damen Okean SC-1 BV and Damen Okean SC-2 BV have been filed but confirmed the filing of the 2005 corporate income tax returns. Possibly, the first financial year of the Damen Okean SC-1 BV and Damen Okean SC-2 BV was over 12 months; as a result one tax return for each company was filed for the FY 2004/2005 (i.e., the 2005 tax return management referred to). Although this is allowed by the law, we were not able to confirm where the companies opted for such accounting periods. The 2006 corporate income tax returns of all Dutch entities are still under preparation and have not been filed yet. We understand that failure to submit these returns is the result of miscommunication and the returns are currently under preparation and to be filed in the nearest future. In the absence of filed tax returns the tax authorities may assess taxes for these companies without tax returns based on their reasonable estimation of the likely level of tax payable for the respective periods (such tax assessments, however, may be further corrected by the companies by submitting the relevant tax returns). Additionally, a penalty for late filing should be assessed (up to 1.1m) (this penalty will not be deductible for Dutch tax purposes).
Currently, the management is not aware of any preliminary and / or final corporate income tax assessments issued by the Dutch tax authorities in relation to the Dutch target companies. As a result, no corporate income tax due, if any, should have been paid by the Dutch target companies to date. Tax Profit / Tax losses The management could not indicate what the expected tax results of the Dutch target companies would be for the FY04-FY05 and FY06. In case the Dutch target companies have any tax losses, these losses may be carried back for one year and should be available for carry forward purposes for nine years, unless the company significantly changed the nature of its activities (more than 70%) compared to the last year from which the tax losses originate.
161
FY06 corporate tax returns are not filed yet by the Dutch companies (2 of 2)
Tax audits and litigations No tax audits have been announced nor undertaken in the last five years in respect of the Dutch target companies and thus all tax periods are open for the tax authorities review. Management informed us that currently there are no disputes/discussions with the Dutch tax authorities regarding the Dutch target companies. Application of tax optimisation schemes by Dutch target companies We are unaware whether any tax optimisation schemes have been applied by the Dutch target companies.
162
Interest expenses deducted by Okean BV in respect of a loan from Aker Yard Holding AS could be challenged based on the Dutch anti-base erosion rules
Anti-base erosion rules
in thousands Okean BV Tax risk Penalty Interest Total
FY05 -
FY06 95 47 8 150
FY07 82 41 3 126
Total 177 88 11 276
As noted above, Okean BV on-lent to DSO a loan received from Aker Yard Holding AS in the amount of 6.4m and did not charge any interest to DSO in respect of this loan, whereas interest expenses payable to Aker Yard Holding AS were fully deducted by Okean BV for Dutch corporate profits tax purposes. Based on the Dutch anti-base erosion rules, interest on related party debt is not deductible when this debt is used for certain tainted transactions. An (informal) capital contribution qualifies as such a tainted transaction, unless it can be demonstrated that this transaction (i.e., the capital contributions as well as the related party debt provided) was based on business reasons. The tax authorities may reclassify the loan to DSO as (informal) capital contribution (on the basis that it is a loss-making financing as the Ukraine company is not in a profitable position), exclude the respective interest expenses (payable by Okean BV to Aker Yards Holding AS) from deductions and assess additional corporate profits tax liabilities. We estimate the exposure to be 0.3m. The risk is assessed as high. If, however, Okean BV was in a tax loss position, there may be no assessment of additional tax liabilities as a result of this risk, rather it will decrease the amount of tax loss available for carry forward.
163
Revaluation of a zero receivable from DSO may entail adverse tax consequences for Okean BV
Okean BV has acquired its interest in DSO from a third party. Upon the acquisition, the vendor had a receivable from DSO in the amount of 26.0m. This receivable was assigned to Okean BV for free (as DSO was a loss-making entity, this receivable was deemed to have zero fair value at the moment of sale). Thus, Okean posted zero in its books as initial value of this receivable. Respectively, Okean BV does not charge any interest to DSO in respect of this outstanding debt. For Dutch tax purposes, Okean BV is required to report its loan receivable at the lower of nominal value and market value on an annual basis. Okean BV should be able to demonstrate that the market value of the receivable is nil. If Okean BV cannot demonstrate this, the Dutch tax authorities may take the position that the receivable should be revalued at a higher amount (the nominal value of 26.0m at the most) and for which additional taxable income should be recognized by Okean BV. Additionally, Okean BV would be required to report an arms length interest to DSO in respect of this debt. Additional analysis is required to determine the fair market value of the loan receivable and whether this will entail adverse tax consequences for the companies.
164
There are several areas where the tax risks could potentially arise
Potential non-application of the double tax treaty According to management, Aker Yard Design BV, Okean BV, Damen Okean SC-1 BV and Damen Okean SC-2 BV are managed by individuals who live outside of the Netherlands. For tax treaty purposes, companies should be effectively managed and controlled in the Netherlands in order to qualify as a Dutch tax resident. Considering the companies are incorporated according to Dutch civil law, they should be considered to be Dutch tax residents for Dutch corporate income tax purposes. Nonetheless, there potentially could be the risk that the foreign tax authorities (eg Ukraine and Norway) take the position that Aker Yard Design BV, Okean BV, Damen Okean SC-1 BV, Damen Okean SC-2 BV are not effectively managed and controlled in the Netherlands and therefore the relevant tax treaty with the Netherlands should not apply. Additional information is necessary to determine whether the companies used any double tax treaty benefits which may be challenged by the tax authorities in this basis.
VAT may potentially be assessed on the amount of income received from the sale of vessels Okean BV purchased a vessel produced by Shipyards Okean OJSC and subsequently sold it to a third party. We are not aware as to whether Okean BV charged output VAT on the amount of income received from the sale of this vessel. We are not aware where the factual supply of the vessel took place, to whom and whether the above mentioned vessel was dispatched to or from the Netherlands. In case the vessel was dispatched from the Netherlands, the tax authorities may assess Okean BV with additional VAT obligations. Additional information is necessary to determine whether this risk actually exists.
Transparency of Ukrainian subsidiaries for Dutch tax purposes For Dutch corporate income tax purposes, foreign companies are considered as an entity (opaque) or a partnership (transparent,) provided certain conditions apply. In case AYDU and DSO qualify as a partnership, their income/loss would be included in the Dutch tax base creating additional taxable income / loss. Additional analysis is required to determine whether this risk actually exists.
165
Section 7.4 Taxation Norway
Section 7.4 - Taxation Norway
Scope and process
Scope and period Issues outlined in the report
Our tax due diligence work covered review of Aker Yards Ukraine Holding AS for the period from the incorporation of the company on 29 May 2006 in FY06 through FY07. During our review we did not identify any material tax exposures. However, we noted some areas where the tax exposures could potentially arise. Additional information (set out below) is required to determine whether these risks can actually materialize. Our work included review of information provided in the dataroom and a telephone conference with management on 13 February 2008. In general, we had a reasonable access to management. Mr Idun Heier answered the majority of our questions during a conference call held on 13 February 2008 and a meeting of 20 February 2008 held at Wikborg Reins office. A due diligence reivew of the other companies in the VAT group has not been part of the scope of our work. As such we are not in a position ot comment upon the risk of any VAT exposures materialising from the VAT group registration.
Due diligence process
Access to management
167
Key deal issues / Executive Summary

in thousands Issue Tax risks Permanent establishment Dutch subsidiaries may be viewed as Norwegian tax of Dutch subsidiaries in residents and be subject to taxation in Norway Norway Total Potential areas for tax risks 1) Joint liability for tax risks of Aker Yards Ukraine Holding AS could potentially be held a VAT group liable for VAT risks due to its registration as a part of the VAT group
1)
Description
Amount
Technical risk assessment
high
1)
Additional analysis is required to quantify and assess this risk
168
In FY06 the company incurred tax loss of 0.4m that was utilized through group contribution
Tax balances of the Target companies as of 31. Dec FY07
in thousands Reported taxes payable Profits tax * VAT Property tax PIT Total tax payables Reported taxes receivable Profits tax VAT Total tax receivables Input VAT not claimed for recovery yet
* Before group contributions have been considered. Source: Preliminary tax computation for FY07
According to the tax assessment notice, the tax return for FY06 was duly signed and submitted to the Norwegian tax authorities on time and no tax was levied for FY06. The company incurred a tax loss in FY06 in the amount of 0.4m and subsequently received a group contribution in the amount of 0.4m from Aker Yards Electro AS. This was set off against the losses in the company resulting in a net taxable result of zero. As such, the company does not have any carry forward tax losses from FY06. The tax return for FY07 has not yet been filed and, if filed electronically, it is not due before 31 May 2008, if filed on paper, FY07 tax return is due by 31 March 2008. The company has no deferred tax liability as of 31 December 2007. Management has confirmed that the company has no ongoing tax audits, and that there are no pending tax disputes with the tax authorities. We understand that no tax optimisation schemes were used by the company. According to management, interest rate charged on loans to the companys Dutch subsidiaries was at arms length level. The company has not performed any formal benchmarking study in this respect. However, we have not found any information that could verify whether the arm's length principle was or was not followed.
Aker Yards Ukraine Holding AS 106 Pending 106 Pending -
Pending
169
Dutch subsidiaries may be viewed as Norwegian tax residents and be subject to taxation in Norway
We understand that several Dutch subsidiaries of Aker Yards Ukraine Holding ASA are being managed by Norwegian individuals, specifically: Okean BV is being managed by two Norwegian individuals (and two Dutch individuals) and Damen Okean SC-1 BV, Damen Okean SC-2 BV are being managed by two Norwegian individuals.
Management confirmed that no board meetings have been held since the companies were incorporated. Under the Norwegian tax legislation companies that are effectively managed from Norway are deemed as tax residents in Norway regardless of where the companies are incorporated. Thus, there is the risk that the Norwegian tax authorities would consider the companies with Norwegian managers to be tax resident in Norway. If so, the profits of the respective Dutch companies would be taxable in Norway, as Norwegian tax resident companies are taxable to Norway on their world wide profits. A detailed analysis is required to quantify the risk amount, although if the Dutch companies did not generate significant profits, this amount is not likely to be substantial. The risk is assessed as high.
170
Aker Yards Ukraine Holding AS could potentially be held liable for VAT risks due to its registration as a member of the VAT group
We understand that Aker Yards Ukraine Holding AS is registered as a part of a VAT group together with Aker Yards ASA, Aker Yards AS and Aker Yards Holding France AS. According to Norwegian law, the members of the VAT group are jointly and severally liable for VAT reporting and payment obligations. In case there are any unsettled VAT liabilities, Aker Yards Ukraine Holding AS may be held liable for such liabilities along with other group members. Generally, the company should be able to exit the VAT group by notifying VAT authorities that it no longer is a part of the group. After the exit, the company will still have a joint liability in respect of any VAT issues arising from the period when it was a part of the VAT group for a period of 10 years after the relevant income years (i.e. for issues arising from FY06 it will be responsible until the end of FY16 and for issues arising from FY07 until the end of FY17). Additional analysis of the other companies of the VAT group is required to determine whether this risk can actually materialise.
171
Appendix 1 Contract
Appendix 1 - Contract
Contract (1 of 15)
173
Contract (2 of 15)
174
Contract (3 of 15)
175
Contract (4 of 15)
176
Contract (5 of 15)
177
Contract (6 of 15)
178
Contract (7 of 15)
179
Contract (8 of 15)
180
Contract (9 of 15)
181
Contract (10 of 15)
182
Contract (11 of 15)
183
Contract (12 of 15)
184
Contract (13 of 15)
185
Contract (14 of 15)
186
Contract (15 of 15)
187
Appendix 2 Group Overview
Appendix 2.1 Business Overview
Appendix 2.1 - Business Overview
AY Group and Merchant Vessel shipbuilding experience

1841 1941 1946 1970 1996 2000 2001 2003 2004 2006 2007
Shipbuilding gradually added to business activities
Brevik yard IPO on AY Group Kjell Rkke in Norway Oslo Stock establishes becomes AY acquired exchange shipyard in Group's main shareholder and Kvaerners`s Braila Investment in Vietnam AY Group develops into driving force in shipyards in shipyard in Damen Shipyards an important builder of development of Germany and Romania Ukraine and whaling, passenger and the company acquired acquisition of SaintFinland were cargo vessels Nazire and Lorient added shipyards in Tuleca yard in France and Flro Romania yard in Norway acquired Promar shipyard in Brazil acquired
Access to cost effective shipbuilding capacity for AY Group
1946
1951
1990s
2004
2006
The Group
Separate foundation of two different owners of the shipyards in Wismar and Warnemnde Shipbuilding started at Okean in Nykolaiv, Ukraine Merger between Wismar and Warnemnde creating competence center for Merchant Vessels in AY Restructuring AY Group Merchant Vessel Group from 2004 (completely renewal) acquired Okean; Specialized in_Wisamar and chemical tankers capabilities Warnemnde added when AY Group acquired shipyard in Flor
190
Source: Management Presentation, Anker Yards Annual Report 2006
Summary of Merchant Vessel Organisation

LNG is a virtual R&D oriented entity which is constituted by a project team coming from different AY Group entities. AY Groups plans to combine LNG together with Arctic Vessels because no real competitors are on the market yet. The LNG Technology Cooperation Agreement providing the exclusivity in respect of CIS countries has been signed between Aker Yards Technology AS and FLC West Holding S.a.r.l.
President Merchant Vessels Tom Einertsen Business Improvement Thore Eilertsen Finance Stefan Suberlich Controller Trond Hellum Engineering Patrick Rautaheimo Chief Operating Officer Olav Nakken Marketing and Sales Finn Arne Rognstad Sourcing and Logistics Christian Henning HMS/ HR QA/ Communication
Aker Yards Wismar

Einar Brnlund
Aker Yards Warnemnde

Einar Brnlund
Aker Yards Ukraine

Torben Levinsen
Aker Yards Flor

Terje Bulling
LNG
Michael vom Baur
Bear Group
Source: Management Presentation
Flor ist not part of the transaction and stays with the AY Group. Within a new strategy Flor is positioned as part of the cruise department.
191
Aker Yards Germany

Aker MTW Werft GmbH, Wismar The yard was founded in 1946 and was restructured and renovated in the nineties. Main products of the yard consist of container vessels, chemical tankers, arctic vessels, Ro-pax (Roll On/Roll Off passenger ships) and general cargo vessels. The Wismar yard is a compact yard and more outfitting-oriented with focus on high complexity ships. Its core unique asset is the dock-hall which covers everything. With the high roof, high quality can be achieved especially in paintings. The shared services for AYG are mostly located in Wismar.
Wismar
The Wismar yard may build the vessels up to 300,000 dwt. Aker Yards Warnemnde Operations GmbH, Warnemnde The yard was also founded in 1946 and was renovated and renewed in the nineties. In 2002, Wismar and Warnemnde were merged, creating a competence center for Merchant vessels at AY Group. Steel capacity in both entities is the same, whereby Warnemnde is more production-site oriented. The key asset in the Warnemnde yard is the large dock, which allows building vessels up to 200,000 dwt.
Warnemnde
192
Aker Yards Okean

Damen Shipyards Okean (DSO) was established in 1951. The Heavy tonnage line includes an assembly-welding workshop and dry dock (354x60x14m) with two frame cranes of 320 tons lifting capacity, four portal cranes (80 tons each), and an outfitting quay of 420 (2 x 32 t capacity cranes). This production line can be used for constructing vessels with maximum dimensions 340x50x18m. The medium tonnage line makes it possible to build vessels with maximum dimensions 150x22x11m and launching weight up to 5,600 tons. Outfitting quay of 210 m (2 cranes of 10 and 15 t capacity).
Aker Yards Okean
Floating Dock
193
Wismar and Warnemnde - state of the art facilities
Panel and double bottom shop
Grand blocks fabrication
Paintshop
Grand blocks fabrication
Panel and double bottom shop
Steel plate cutting
Pre-fabrication of units
Fabrication of steel sections
Fabrication of pipes and modules
194
Detailed Key Production and Warehousing Facilities of AYG

Key production and warehousig facilities
Key production Plate store Aker MTW GmbH 9,550 m 4,000 t storage volume 3,800 m 1,200 t storage volume 3 oxyacetylene/WIPC units (Underwater plasma cutting) plate edge miller PFMDTAKrLL 1340 CNC 2 Profile cutting line 2x16 m panel lines 1 Panel line for curved panels 1x12m panel line 1 Micro-panel line Aker Warnemnde Operations GmbH
7,000 m 3,000 t storage volume Profile store 2,800 m 1,200 t storage volume Plate cutting 3 oxyacetylene/WIPC units (Underwater plasma cutting) Plate edge miller Profile cutting 2 Profile cutting line Panel line 2x16 m panel lines 1x12 m panel line 1 Panle line for curved panels 1 double hull line 1 Micro -panel line Painting shop preservation hall, 4,500 m preservation hall, 8,000 m Volumionous section voluminous panel assembly and fitting 7,000 m voluminous panel assembly and fitting 7,000 m Dock hall Block section building block section assembly and fitting 60.000 m2 incl. Dry Dock block section assembly and fitting 15.000 m Granty crane inside Dock hall lifting capacity 800 t lifting capacity 630t, in the center line of the dry dock up to 750 t inside the dry dock 1,000 t Dry Dock final assembly and fitting in dry dock (LxWxD 340x67x11) final assembly and fitting in dry dock (LxWxT 320x54x11) Outfitting area assembly center hall 9,000 m assembly center hall 9,000 m Warehouse, other storage areas 10,000 m appr. 10,000 m Quay for outfitting and testing length app. 1,000 m, Water Debth 5-9 m length app. 500 m, Water Debth10 m Supply installations 20 kV network 20 kV network central power supply with block-type thermal heating station thermal heating station transfer stations for technical gas transfer stations for technical gas natural gas natural gas
Source: DR Ref. 16.7.2
195
Warnow Design
Warnow Design
Kompetenz durch Praxis*
Warnow Design was established in 2004 by merger of the outsourced design offices of Kvaerner Warnow Werft and parts of the design office of Aker MTW. Warnow Design performs engineering and design tasks for Wismar and Warnemnde as well as for external companies It has 48 employees, mainly engineers. In shipbuilding Warnow Design provides services for Cargo ships (Container, Lo-Ro, Ro-Ro, Ferries), Tanker (Chemicals, LNG, LPG), passenger ships and ship repair. Services they provide range from basic planning to calculation, detailed design, production planning and supervision of construction. The experience of the engineers of Warnow Design in shipbuilding and offshore structures provide the basis of design and calculation methods for offshore structures and foundation of offshore wind parks. Services are offered in the field of regulatory issues, calculations and verifications as well as modelling and simulation. The machinery and plant design division provides service in basic design, project development, basic planning, detailed design, supervision of construction and operational service / consulting regarding machinery, machine and plant engineering. Research and development are focused on growth markets of the maritime industry, including aspects of product development, workflow management and manufacturing technology. The results of these activities are basis for realization decisions or continuative developments.
Shipbuilding
Offshore/ wind energy
Machinery and plant design
R&D
Source: Management Presentation, Warnow Design Homepage *engl: competence by practical experience
196
Organisation and Key Employees in Germany (Wismar and Warnemnde)
G
Works Council
Total number of employees:

1302 986
BR
President
Einar Brnlund
Project Management
GM GC GP
Quality Management
H. Redetzke
GQ
Overhead/other
Communications
M. Trott
Marketing & sales

A. Schulz
42
21
Strategic Development
M. Gnoth
Concept development
G. Schulte
Finance & Admin. Stefan Suberlich
Engineering Dr. Patrik Rautaheimo
Production Birger Schubert
Sourcing and Logistics VP Christian Henning
Planning F.G. Wegener
Employees
Engineers
Production mgmt
Procurement mgmt
Employees
29
105
91 38
48 58 834
26 11
7 9
17
Project services
Project services
Workers
Workers
940
Wismar Warnemnde
Comment: Date of extraction of employee data and underlying calculation are not consistent with Section Management and Staff. We understand that differences result from unequal moments of observations, with management and staff relying on most recent information as of yard end FY07. Source: Management Presentation
197
Organisation and Key Employees in Okean Ukraine

President
T. Levinsen
Deputy President
J. Skov Hansen
Total number of employees is 2 675
Ship Repair S. Voloshin

70 employees2
General director
N. Romanchuk
Project management
I. Snetkov
Sales & contracts

G. Nydal 4 employees
Quality control
S. Ivanenko 53 employees
Investments
M. Gratz
Technical M. Hake
74 employees
Procurement R. McKay
83 employees
Production P. Viergutz
Finance A. Shamray
74 employees
HR & Administration A. Pedersen

122 employees 1
Steel work
1099 employees
Outfitting & piping

739 employees
Prod. overhead, planning & coordination

95 employees
Maintenance & production support

239 employees 1) Including 46 invalids 2) To be closed
Comment: Date of extraction of employee data and underlying calculation are not consistent with Section Management and Staff. We understand that differences result from unequal moments of observations, with management and staff relying on most recent information as of yard end FY07. Source: Management Presentation
198
Software in use (AYG)

All Microsoft application licences are purchased centrally by the holding for the whole AY Group within a Microsoft Enterprise Agreement. The costs are allocated to the yards with the number of users (employees) as the key. The agreement comprises mainly Windows XP and Office Pro as well as Office Win32, Project Win32, Visio pro and Windows Server Applications. The Microsoft enterprise agreement of Aker Yards ASA will expire as of 30 June 2008. There was no information available, if it will be prolonged (the question was raised in the Q&A process with the answer outstanding). The Hardware of AYG mainly consists of 570 Desktop PC, 50 Notebooks and 45 servers based in Germany. The Email-system (Global ICT Common Email System) is administered by the holding and the cost are allocated based on the number of users.
n t io ra t nt nt es n is al me eme s d mi S e n d A t t a g nag t io g an en en an a ic a an d g m rin t ion m n M M g n e l e i p e t u y t e c lo it e m an c n u c teria nn in ag e l e i j k d n a r v m g o o a a n a a M Pr Qu M De Co Fi En Pr M Pl
Software MS Office MS Project NAPA
Function
Years in use >15 >15 >15 >15 10 12 12 12 10 1 10 1
Number of licences 750 60 15 unlimited, for now 135 250 300 50 unlimited 3 3 unlimited
Office Applications Project Net Planning Ship predesign, technical Calculations Tribon 3D Ship design, Production Controlling AutoCAD, It 2D Design, general planning Projector entrerprise ressource planning Pro*file technical document management IDOL time accounting Mega finance Professional finance planing and Planner controlling Cotel payment HR Works tip costing planning and calrificaiton
Source: DR Ref. 68.1247, 24.1.2
X X
X X
X X
X X X
X X X X X X X x
x x X X
x x X X
x x X X
x x X X
x x X X
X X
X X
X X
X X
x x
x x
X X X X
199
Software in use (AYU)
The two major software used by DSO and AYDU are Tribon and IT-Enterprise: Tribon: This is a computer-aided drafting program (CAD) used during the shipbuilding design process. The current licensing agreements with AVEVA, owner of Tribon, stipulate the following fees: 146 thousand Maintenance fee to be paid quarterly (AYDU), and 148 thousand Maintenance fee to be paid annually (DSO)
MARS Management has stated that the Company intends to replace its current Enterprise Reporting Package (IT-Enterprise) with a package from the Dutch company Logimatic. According to Logimatics website (www.logimatic.dk) MARS is a vertical ERP (Enterprise Resource Planning) system especially developed for shipyards and consisting of four major applications which together function to support all major business processes are supported, including: Tendering & Pre-calculation, Project Establishment and Planning, Project & Budget Control,
IT-Enterprise: This program is a complete Enterprise resource planning (ERP) package which offers the following functions: Finance document flow and reporting, Bookkeeping, Budgeting, Salary calculation, Fixed asset management, and HR management
Design & Engineering, Material Definition, Material Management, Procurement, Warehousing, Production Control, Subcontracting, Document Management, Drawing Management, Tool Management, and After Sales.
DSO is currently operating this software under an agreement with IT Technology of Kiev, Ukraine, for an annual maintenance fee of 13 thousand. The agreement has no expiration.
200
Appendix 2.2 Pro forma combined financial statements Germany
Appendix 2.2 - Pro forma combined financial statements - Germany
AYG Group Consolidating Balance Sheet FY06

in millions Plant under construction Ships and riggs Machinery and transportation equipment Buildings Quays Land, forests, sites Property, plant and equipment Other intangible assets Deferred tax assets Property, plant and equipment & intangible assets Shares in subsidiaries Shares and interests in other companies Long-term investments Interest-bearing long-term receivables, internal NON CURRENT ASSETS Accounts receivables, external Advance payments to suppliers Projects under construction Other short-term current assets, external, interest free Short-term interest free investments Firm commitments asset (hedge accounting) Total short-term receivables, external, interest free Short-term current assets, internal, interest free Total short-term current assets, interest free Raw materials Inventories Cash and cash equivalents Interest-bearing short-term receivables, external Interest-bearing short-term receivables, internal Total interest-bearing short-term receivable CURRENT ASSETS TOTAL ASSETS AYG Eliminations AMTW 1.1 0.0 8.9 13.2 6.3 4.3 33.9 0.5 9.4 43.8 40.0 0.3 40.3 84.1 4.4 62.3 149.2 13.2 2.2 231.2 0.6 231.8 3.7 3.7 139.6 20.0 7.2 27.2 402.3 486.4 AWO 0.8 6.7 0.5 Warnow Total bef. Auto Other AWE Design elim. elimination elimination 1.9 0.0 15.6 17.0 13.1 18.4 66.1 0.6 10.4 77.1 0.4 0.4 77.4 4.9 67.1 219.8 13.4 1.5 2.2 308.9 3.9 312.8 9.4 9.4 153.5 20.0 7.2 27.2 502.9 580.3 (7.2) (7.2) (10.7) (10.7) 31. Dec FY06 Act 1.9 0.0 15.6 17.0 13.1 18.4 66.1 0.6 10.4 77.1 0.4 77.4 4.9 67.1 219.8 13.4 1.5 2.2 308.9 0.4 309.3 9.4 9.4 153.5 20.0 20.0 492.2 569.6
7.9 0.1 1.0 9.0 0.0 0.0 9.0 0.6 4.8 70.6 0.2 1.5 77.7 2.9 80.6 5.7 5.7 13.8
3.3 6.8 14.1 24.3
(40.0) (40.0) (40.0)
24.3
24.3 0.0
0.0
0.1 0.4 0.4 0.1
(3.5) (3.5) -
(40.0)
100.1 109.1
0.5 24.8
Source: DR Ref. 59.1038-1040, 75.1382 (updates 59.1040 netting of def. tax assets with l iabilities)
202

AYG Eliminations (7.5) (32.5) (40.0) (40.0) Warnow Total bef. Auto Other Design Elim. elimination elimination 8.6 60.9 69.5 28.0 97.6 0.4 20.5 20.9 7.2 381.0 5.4 7.0 37.2 10.9 0.0 4.4 1.4 2.7 4.6 461.8 580.3 31. Dec FY06 Act 8.6 60.9 69.5 28.0 97.6 0.4 20.5 20.9 381.0 5.4 7.0 37.2 10.9 0.0 4.4 1.4 2.7 1.2 451.1 569.6
in millions Share capital Share premium reserve Total paid-in capital Retained earnings TOTAL EQUITY Deferred tax liability Pension liabilities Non current provisions TOTAL NON CURRENT LIABILITIES Interest-bearing short-term debt, internal Advances from customers Construction loans VAT, tax withholding from employees and other deductions Accounts payable, external Other incurred, unpaid cost Firm commitments liability (hedge accounting) Other interest-free short-term liabilities, external Income tax payable Current provisions Current other interest-free short-term payables, internal TOTAL CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES
AMTW 8.6 52.1 60.7 25.8 86.5 0.4 14.1 14.4 336.5 5.4 4.2 23.0 5.8 0.0 2.7 1.4 2.6 3.7 385.5 486.4
AWO 5.0 27.2 32.2 1.4 33.6
AWE 2.5 14.1 16.6 0.8 17.4
6.5 6.5 44.5 2.8 14.2 5.0 1.6 0.1 0.9 69.0 109.1
7.2
(7.2)
0.1 0.0 0.0
(40.0)
0.0 7.4 24.8
(3.5) (10.7) (10.7)
203

in millions Plant under construction Ships and riggs Machinery and transportation equipment Buildings Quays Land, forests, sites Property, plant and equipment Other intangible assets Deferred tax assets Property, plant and equipment & intangible assets Shares in subsidiaries Shares and interests in other companies Long-term investments Interest-bearing long-term receivables, internal NON CURRENT ASSETS Accounts receivables, external Advance payments to suppliers Projects under construction Other short-term current assets, external, interest free Short-term interest free investments Firm commitments asset (hedge accounting) Total short-term receivables, external, interest free Short-term current assets, internal, interest free Total short-term current assets, interest free Raw materials Inventories Cash and cash equivalents Interest-bearing short-term receivables, external Interest-bearing short-term receivables, internal Total interest-bearing short-term receivable CURRENT ASSETS TOTAL ASSETS AYG Eliminations AMTW 1.2 0.0 9.5 13.3 5.9 4.3 34.2 0.4 5.4 40.0 40.0 0.4 40.4 80.4 4.6 85.0 71.3 17.1 1.7 179.8 3.7 183.5 8.4 8.4 94.5 1.0 6.8 7.8 294.1 374.6 AWO 0.8 8.0 1.4 AWE 0.0 0.0 3.2 6.3 14.1 23.7 0.1 Warnow Total bef. Auto Other 31. Dec FY07 Design Elim. elimination elimination Act 2.0 0.0 17.5 18.0 12.1 18.4 68.1 0.5 5.4 74.1 0.5 0.5 0.8 75.3 5.3 38.9 136.2 17.4 1.5 1.7 201.1 7.9 208.9 17.5 17.5 98.1 1.0 10.5 11.4 335.9 411.3 (10.5) (10.5) (17.0) (17.0) 2.0 0.0 17.5 18.0 12.1 18.4 68.1 0.5 5.4 74.1
10.2 0.1 10.3 0.0 0.0 0.8 11.1 0.6 2.4 95.6 0.2 1.5 100.3 3.3 103.7 9.1 9.1 2.7 3.6 3.6 119.1 130.2
0.1 0.1
(40.0) (40.0) (40.0) (48.5) (30.7)
23.7
0.1
23.7 0.0
0.1 0.1
0.5 0.8 75.3 5.3 38.9 136.2 17.4 1.5 1.7 201.1 1.3 202.4 17.5 17.5 98.1 1.0
0.0
0.1
(79.2) (79.2) -
0.0 0.4 0.5 0.2
0.1 0.5 0.6 0.6
(6.5) (6.5) -
(79.2) (119.2)
0.7 24.4
1.2 1.3
1.0 318.9 394.2
204

AYG Eliminations (7.5) (32.5) (40.0) (40.0) Warnow Total bef. Auto Other 31. Dec FY07 Design Elim. elimination elimination Act 0.0 0.1 0.1 0.5 0.6 8.6 52.4 61.0 24.7 85.8 0.3 18.4 18.7 10.5 187.0 32.9 8.3 40.3 12.0 0.2 2.7 0.7 1.6 296.1 400.6 8.6 52.4 61.0 24.7 85.8 0.3 18.4 18.7 187.0 32.9 8.3 40.3 12.0 0.2 2.7 0.7 1.6 4.1 289.7 394.2
in millions Share capital Share premium reserve Total paid-in capital Retained earnings TOTAL EQUITY Deferred tax liability Pension liabilities Non current provisions TOTAL NON CURRENT LIABILITIES Interest-bearing short-term debt, internal Advances from customers Construction loans VAT, tax withholding from employees and other deductions Accounts payable, external Other incurred, unpaid cost Firm commitments liability (hedge accounting) Other interest-free short-term liabilities, external Income tax payable Current provisions Current other interest-free short-term payables, internal TOTAL CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES
AMTW 8.6 43.5 52.1 3.8 55.9 0.3 12.4 12.8 3.6 217.7 32.9 5.1 28.6 6.4 0.2 2.4 0.7 1.6 299.3 368.0
AWO 5.0 27.2 32.2 19.6 51.8
AWE 2.5 14.1 16.6 0.8 17.4
6.0 6.0
6.8
(10.5)
(79.2)
48.5 3.2 11.4 5.4 0.2
0.1 0.0
0.3 0.2
(79.2) (119.2)
68.7 126.5
6.9 24.3
0.4 1.1
(10.5) (10.5)
Source: DR Ref. 59.1038-1040, 75.1382 (updates 59.1040 netting of def. tax assets with liabilities)
205
AYG Group - Consolidating Income Statement FY05

in millions External sales Internal sales Turnover Other operating revenue Sales gains Operating revenues Cost of raw materials, purchased goods and services Personnel expenses Guarantee commissions Hired services Material and administration cost Other operating expenses Allocated group expenses (royalty) Internal guarantee commissions Ordinary operating expenses EBITDA Ordinary Depreciation Goodwill and intangibles amortization Restructuring cost (non-recurring) Operating Profit Interest income on bank deposits Interest income, external Interest income, internal Dividends from other companies Dividends from companies within the group Other financial income Financial income Interest expenses external Interest expenses internal Other financial expenses Financial expenses Net financial items Profit before tax Taxes payable Change in deferred taxes Tax expense Profit for the period AYG Eliminations AMTW 407.9 17.8 425.7 11.3 0.0 437.0 AWO AWE 1.9 152.4 154.3 3.1 0.0 157.5 3.2 3.2 Warnow Total bef. Design Elim. Auto elim. 409.8 170.2 (140.0) 580.0 17.7 0.0 597.7 (426.6) (103.1) (1.2) (14.6) (11.6) (19.1) (1.5) (0.1) (577.8) 19.9 (6.7) (0.8) 12.5 0.5 0.6 0.0 3.2 5.5 9.7 (0.1) (0.5) (5.5) (6.1) 3.7 16.2 (1.5) (2.9) (4.4) 11.8 (140.0) Other elim. 2005 Act 409.8 30.2 440.0 17.7 0.0 457.7 (286.6) (103.1) (1.2) (14.6) (11.6) (19.1) (1.5) (0.1) (437.8) 19.9 (6.7) (0.8) (140.0) 140.0 12.5 0.5 0.1 0.0 5.5 (3.6) 0.5 0.5 (3.2) (143.2) 140.0 (5.5) (5.6) 0.5 13.0 (1.5) (2.9) (4.4) 8.6 6.1 (0.1)
(140.0)
140.0
(319.6) (107.0) (60.5) (42.7) (1.2) (8.1) (6.0) (0.5) (4.4) (7.1) (0.0) (18.0) (0.6) (0.4) (1.2) (0.4) (0.1) (413.0) (163.8) (0.9) 24.0 (6.3) 2.3 (3.9) (0.5) (2.0) (0.8) (0.3) (8.6) 0.2 0.3 1.5 0.0
140.0 (140.0) 140.0
19.5 0.3 0.3 0.0 3.2 5.5
(0.5) (3.2)
9.3 (0.1) (0.2) (5.5) (5.8) 3.5 23.1 (1.5) (1.6) (3.0) 20.0
0.4 (0.0)
0.0 (0.3)
(0.0) (0.3) 0.4 (0.3) (8.1) 1.3 (1.3) (1.3) (9.5) 1.3
(143.2) 140.0
Source: DR Ref. 59.1038.1040
206

in millions External sales Internal sales Turnover Other operating revenue Sales gains Operating revenues Cost of raw materials, purchased goods and services Personnel expenses Guarantee commissions Hired services Material and administration cost Other operating expenses Allocated group expenses (royalty) Internal guarantee commissions Ordinary operating expenses EBITDA Ordinary Depreciation Goodwill and intangibles amortization Restructuring cost (non-recurring) Operating Profit Interest income on bank deposits Interest income, external Interest income, internal Dividends from other companies Dividends from companies within the group Other financial income Financial income Interest expenses external Interest expenses internal Other financial expenses Financial expenses Net financial items Profit before tax Taxes payable Change in deferred taxes Tax expense Profit for the period AYG Warnow Total bef. Other Eliminations AMTW AWO AWE Design Elim. Auto elim. elim. 514.5 1.9 516.4 9.2 199.3 208.5 (199.6) (0.4) (0.4) 523.6 4.8 528.4 201.3 0.1 201.3 2.9 2.9 724.9 7.3 732.3 (551.1) (105.4) (2.2) (12.5) (13.9) (22.6) (1.9) (0.1) (709.8) 22.5 (7.0) (0.6) (11.3) 3.6 0.4 0.4 0.3 3.3 4.4 (0.0) (0.4) (3.3) (3.7) 0.8 4.4 (1.8) 7.3 5.6 9.9 (199.6) FY06 Act 516.4 8.9 525.3 7.3 532.7 (351.5) (105.4) (2.2) (12.5) (13.9) (22.6) (1.9) (0.1) (510.2) 22.5 (7.0) (0.6) (11.3) 3.6 0.4 0.0 0.3 3.3 (0.4) 0.4 0.4 0.0 (199.6) 199.6 (3.3) (3.3) 0.8 4.4 (1.8) 7.3 5.6 9.9 4.0 (0.0)
(199.6)
199.6
(411.1) (140.0) (62.7) (42.7) (2.2) 2.6 (8.8) (5.9) (0.5) (6.1) (7.8) (0.0) (1.8) (19.6) (0.7) (0.5) (1.6) (0.4) (0.1) 0.9 (512.2) (197.4) (1.0) 0.5 16.2 3.9 1.9 (4.2) (0.5) (7.9) 3.6 0.2 0.3 0.8 0.9 3.3 5.5 (0.0) (0.1) (3.3) (3.4) 2.1 5.7 (1.7) 5.8 4.0 9.8 (2.1) (0.8) (0.1) (3.3) (1.6) 1.1 0.2 0.1 8.2 8.5 0.0 (0.0) (0.0) (0.3) (0.0) (0.3) 8.5 (0.3) 6.8 0.8 1.6 1.6 8.4 0.8 0.0
(199.6)
199.6 199.6
0.5 0.0 (0.5) (9.1) (9.5)
(199.6)
199.6
(0.4)
(9.5) (9.0) (0.0) (0.0) (9.1)
(199.6)
199.6
Source: DR Ref. 59.1038.1040
207

in millions External sales Internal sales Turnover Other operating revenue Sales gains Operating revenues Cost of raw materials, purchased goods and services Personnel expenses Guarantee commissions Hired services Material and administration cost Other operating expenses Allocated group expenses (royalty) Internal guarantee commissions Ordinary operating expenses EBITDA Ordinary Depreciation Goodwill and intangibles amortization Restructuring cost (non-recurring) Operating Profit Interest income on bank deposits Interest income, external Interest income, internal Dividends from other companies Dividends from companies within the group Other financial income Financial income Interest expenses external Interest expenses internal Other financial expenses Financial expenses Net financial items Profit before tax Taxes payable Change in deferred taxes Tax expense Profit for the period AYG Eliminations Warnow Total bef. Other AMTW AWO AWE Design Elim. Auto elim. elim. 585.5 94.8 0.2 680.5 1.7 157.3 3.8 162.8 (154.4) 587.2 13.5 600.7 252.1 4.5 256.6 2.9 2.9 4.0 0.5 4.5 (1.2) (2.8) (0.1) (0.1) (0.1) 843.3 21.4 864.7 (664.9) (119.9) (1.8) (15.0) (14.0) (32.4) (2.3) (0.0) (850.4) 14.4 (7.6) (0.5) 6.2 0.6 0.6 0.6 0.6 2.4 (0.0) (0.6) (0.6) (1.2) 1.2 7.4 (0.9) (4.9) (5.8) 1.7 (154.4) 154.4 (154.4) FY07 Act 680.5 8.5 689.0 21.4 710.3 (510.6) (119.9) (1.8) (15.0) (14.0) (32.4) (2.3) (0.0) (696.0) 14.4 (7.6) (0.5) 6.2 0.6
(154.4)
154.4
(494.9) (168.9) (70.0) (47.1) (1.8) (10.1) (4.3) (0.5) (6.0) (7.9) (0.0) (25.0) (6.8) (0.5) (1.9) (0.5) (0.0) (609.6) (235.4) (1.0) (8.9) 21.1 1.9 (4.3) (0.4) (2.5) (0.8) (0.1) 18.6 0.2 0.2 1.6 2.0 0.0 (0.0) (0.0) (0.4) (0.0) (0.4) 2.0 (0.4) 20.6 0.8 (2.4) (2.4) 18.2 0.8 1.2 0.0
(4.3) 0.2 (0.0) (0.0) 0.2 0.0
154.4 (154.4) 154.4
(13.7) 0.4 0.4 0.6 0.8 0.6 2.8 (0.0) (0.2) (0.6) (0.8) 2.0 (11.7) (0.8) (2.5) (3.3) (15.0)
(0.6) 0.6 0.6 (0.6) 0.6 0.6 (154.4) 154.4 (0.6) (0.6) 1.2 7.4 (0.9) (4.9) (5.8) 1.7 1.9 (0.0)
(2.4) (2.4)
0.0
(2.4) (2.4)
0.0 0.2 (0.1) (0.1) 0.1
(2.4)
(154.4) 154.4
Source: DR Ref. 59.1038.1040
208
Appendix 2.3 Pro forma combined financial statements Ukraine
Appendix 2.3 - Pro forma combined financial statements - Ukraine
AYU Consolidation table (1/4)

Consolidated Balance Sheet Data AY Ukraine Holding at 31.Dec FY07
Assets AY Ukraine Holding AS in millions Property, plant and equipment Intangible assets Shares in subsidiaries Goodwill in subsidiaries Interest-bearing long-term receivables, internal Deferred tax assets Non-current assets Accounts receivables, external Advance payment to suppliers Projects under construction Other short-term current assets, external, interest-free Short-term current assets, internal, interest-free Short-term current assets, internal, interest-free Short-term current assets, related parties, interest-free Raw materials Interest-free short-term receivables, internal Cash and bank deposits Total current assets Total assets 15.7 29.5 0.1 45.3 0.0 1.2 1.2 46.5 44.8 44.8 17.9 4.3 0.0 22.2 67.0 1.2 1.2 0.0 0.0 1.2 18.4 18.4 2.0 10.9 10.0 3.9 1.1 7.3 2.8 38.0 56.4 0.2 0.5 0.7 0.0 0.1 0.0 0.0 0.2 0.7 0.9 1.7 Okean BV AYDU BV DSO AYDU LLC Total before elimination 18.6 0.5 15.7 75.4 0.1 110.3 0.0 2.1 28.8 10.0 9.6 1.1 7.3 3.5 62.4 172.7 Total eliminations Unexplained consolidation Consolidated adjustments (0.0) (15.7) 30.6 0.0 0.0 0.0 (5.3) (0.0) 5.3 (0.0) 14.8 18.6 0.5 30.6 0.1 49.8 0.0 2.1 28.8 10.0 1.1 7.3 5.3 3.5 58.1 107.8
(75.4) (4.3) (79.7)
Source: Management Statements of Aker Yards Ukraine Group 2007, Schedule 1B to SPA
210

Equity and liabilities AY Ukraine Holding AS (0.3) 15.3 15.3 26.2 (0.0) 0.0 0.0 3.5 1.8 Okean BV 19.5 28.3 28.3 17.9 0.0 0.0 1.2 AYDU BV (0.0) 1.2 1.2 0.0 DSO (30.2) 44.8 2.8 47.6 16.0 0.5 14.1 0.9 0.4 7.1 AYDU LLC (0.1) 0.4 1.2 1.6 0.1 0.0 0.0 0.0 0.0 Total before elimination (11.1) 0.4 62.4 2.8 28.3 93.9 26.2 0.1 17.9 16.0 0.5 14.2 0.0 4.5 0.4 10.2 Total eliminations Unexplained consolidation Consolidated adjustments (5.1) 20.0 26.2 0.1 (26.2) (0.1) (17.9) 18.0 (0.0) (0.1) (5.9) 5.9 31.5 46.5 19.1 67.0 0.0 1.2 39.1 56.4 0.2 1.7 90.0 172.7 (79.7) 14.8 (16.2) 20.4 41.5 2.8 64.6 0.1 16.0 18.0 0.5 14.2 (0.1) 4.5 0.4 5.9 59.5 107.8
in millions Total equity Other long-term liabilities, external, interest-bearing Interest-bearing long-term debt, internal Pension liabilities Interest-free long-term debt, internal Total non-current liabilities Interest-bearing short-term debt, external Bank overdrafts Current portion of long-term interest-bearning liabilities, external Interest-bearing short-term debt, internal Advances from customers Construction loans VAT, tax withholding from employees and other deductions Accounts payable, external Incurred, unpaid interest Other interest free short-term liabilities, external Income tax payable Income tax payable Current provisions Other interest-free short-term payables, internal Other interest free short-term payables, internal Current liabilities, related parties, interest-free Interest-free current liabilities, internal Total current liabilites Total Equity and liabilites
(47.1) (28.3) (4.3) -
Source: Management Statements of Aker Yards Ukraine Group 2007, Schedule 1B to SPA
211

Assets AY Ukraine Holding AS in millions Property, plant and equipment Intangible assets Shares in subsidiaries Goodwill in subsidiaries Interest-bearing long-term receivables, internal Deferred tax assets Non-current assets Accounts receivables, external Advance payment to suppliers Projects under construction Other short-term current assets, external, interest-free Short-term current assets, internal, interest-free Short-term current assets, related parties, interest-free Raw materials Interest-free short-term receivables, internal Cash and bank deposits Total current assets Total assets 14.8 0.1 14.9 0.1 6.3 0 6.5 21.4 32.2 32.2 0.8 3.2 0.0 4.0 36.2 19.1 19.1 2.5 4.6 0.8 3.5 4.2 0.2 15.8 34.9 0.1 0.2 0.3 0.1 0.0 0.1 0.3 0.4 0.7 Okean BV AYDU BV DSO AYDU LLC Total before elimination 19.2 0.2 14.8 32.2 0.1 66.5 0.1 2.5 0.1 5.4 4.1 3.5 4.2 6.3 0.5 26.7 93.1 Total eliminations Unexplained consolidation Consolidated adjustments (14.8) 30.2 0.0 15.4 19.2 0.2 30.2 0.1 49.7 0.1 2.5 0.1 5.4 0.1 3.5 4.2 0.5 16.4 66.0
(32.2) (4.0) (6.3) (42.6)
Source: Management Statements of Aker Yards Ukraine Group 2006 , Schedule 1C to SPA
212

Equity and liabilities AY Ukraine Holding AS (0.2) 17.3 (0.1) 0.3 3.5 (0.0) 0.6 21.6 21.3 Okean BV 28.8 6.3 0.1 1.0 7.4 36.2 AYDU BV DSO (27.4) 2.7 32.8 35.6 15.3 0.4 4.6 1.5 1.6 3.3 0.1 26.8 34.9 AYDU LLC (0.0) 0.5 0.5 0.1 0.0 0.0 0.0 0.2 0.7 Total before elimination 1.1 0.5 2.7 32.8 36.1 17.3 0.1 6.3 15.3 0.3 4.9 5.0 0.1 1.6 4.8 0.1 56.0 93.1 Total eliminations (32.8) (6.3) (3.4) (42.6) Unexplained consolidation Consolidated adjustments (3.9) 19.3 17.3 (17.3) 0.0 0.0 (0.0) 0.0 15.4 (2.8) 19.9 17.3 2.7 39.9 0.1 15.3 0.4 4.9 5.0 0.1 1.6 1.4 0.1 29.0 66.0
in millions
Total equity Other long-term liabilities, external, interest-bearing Interest-bearing long-term debt, internal Pension liabilities Interest-free long-term debt, internal Total non-current liabilities Interest-bearing short-term debt, external Bank overdrafts Current portion of long-term interest-bearning liabilities, external Interest-bearing short-term debt, internal Advances from customers Construction loans VAT, tax withholding from employees and other deductions Accounts payable, external Incurred, unpaid interest Other interest free short-term liabilities, external Income tax payable Current provisions Other interest free short-term payables, internal Current liabilities, related parties, interest-free Interest-free current liabilities, internal Total current liabilites Total Equity and liabilites
Source: Management Statements of Aker Yards Ukraine Group 2006 , Schedule 1C to SPA
213
Appendix 2.4 Working Capital and Net Debt - Ukraine
Appendix 2.4 - Working Capital and Net Debt - Ukraine
Quarterly working capital - DSO
Quarterly working capital - DSO

in millions Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407
Stocks Trade debtors (net) Group companies VAT Other accounts receivable (net) Trade creditors I/co debts Taxes Other debts and accruals Working capital reported Norm alization adjustm ents: loan Interest in I/co debts less pension liability less prepayments to FA suppliers less payables to FA suppliers Working capital norm alized
(8.0) 0.0 3.9 2.6 2.5 (1.4) (5.0) (0.2) (0.6) (6.2) 4.3 n/a (1.9)
(6.5) 2.3 4.5 3.6 (1.8) (5.4) (0.3) (0.8) (4.3) 4.5 n/a 0.2
(17.1) 0.9 7.0 4.2 5.3 (1.6) (6.9) (0.3) (0.8) (9.3) 4.7 0.1 n/a (4.5)
(12.1) 0.4 3.1 5.3 3.5 (2.6) (7.1) (0.6) (0.8) (11.0) 4.9 0.1 n/a (6.0)
(9.5) 0.3 4.2 2.6 3.4 (4.8) (6.4) (0.3) (1.4) (11.9) 5.3 0.3 n/a (6.2)
(13.0) 0.3 8.3 3.0 3.0 (4.3) (8.5) (0.4) (1.8) (13.3) 5.8 n/a (7.5)
(8.1) 0.3 3.6 3.4 1.8 (3.7) (8.3) (0.4) (1.3) (12.6) 5.7 n/a (6.9)
(6.2) 0.4 1.3 4.5 1.9 (3.4) (7.0) (0.4) (1.0) (10.0) 6.1 (0.2) n/a (4.0)
(10.9) 0.2 4.2 4.3 2.4 (4.5) (3.3) (0.4) (1.6) (9.5) 3.2 (0.2) n/a (6.5)
(13.2) 0.0 4.1 6.0 2.1 (3.8) (4.0) (0.5) (1.2) (10.4) 3.5 (0.4) n/a (7.3)
(10.4) 0.0 1.8 5.9 3.9 (5.4) (5.2) (0.6) (1.2) (11.1) 4.5 (0.4) 0.1 n/a (6.9)
(5.1) 0.0 1.2 9.5 3.6 (3.8) (7.0) (0.7) (1.1) (3.2) 5.3 (0.4) 0.1 n/a 1.8
2.1 0.1 3.8 9.7 2.0 (13.9) (5.8) (0.5) (1.3) (3.8) 4.2 (0.3) 0.1 n/a 0.2
n/a - information is not available in dataroom Source: Internal reports, Datatoom Index 17.3.3.1-17.3.3.12, Add.doc. 1459
215
Tangible assets
Fixed assets breakdown - Net Book Value
in millions Buildings Docks Equipment Land Other Total Construction in progress Total
Source: DR Ref.18.1.3.1-3
31.Dec FY07 Act 4.1 7.6 2.5 1.4 0.9 16.4 1.8 18.3
31.Dec FY05 31.Dec FY06 Act Act 6.4 10.4 4.0 1.0 21.8 0.1 21.9 4.8 8.7 3.1 1.5 0.6 18.8 0.1 18.9
The tangible fixed assets are presented at historical values (as represented by DSO CFO, based on values determined by Damen Group when acquiring the yard) as included in Internal reports. DSO does not perform the revaluation of fixed assets to reflect their market value. In FY05, DSO acquired a land plot beneath the yard of 108.8 ha from Nikolaev municipality for 1.6m (UAH10.3m).. The land was recorded in accounting records in FY06. As indicated in the List of claims of 03 October, 2007, there is a possibility of dispute by Nikolaev municipality of DSO title to the land plot. The management of DSO has not provided us with any details about this possible dispute. We recommend you to discuss this issue with your legal advisors. Translation difference accumulates the differences between historical and closing exchange rates at each balance sheet date. Due to the depreciation of UAH against during FY06FY07 the value of fixed assets was decreasing. Most of fixed assets are pledged to secure loans received from Okean B.V.
Movement of fixed assets in FY06-FY07

in millions Balance as at 31 December 2005 Additions for FY06 Disposals for FY06 Depreciation charge for FY07 Translation difference Balance as at 31 December 2006 Additions for FY07 Disposals for FY07 Depreciation charge for FY07 Translation difference Balance as at 31 December 2007
Net Book Value 21.9 2.4 (0.0) (2.9) (2.5) 18.9 4.3 (0.1) (2.8) (2.0) 18.3
Construction in progress
in millions Reconstruction of warehouse Tube wedge demountable wood Other Total
Source: DR Ref.18.2.3.1
Construction started October FY07 September FY07
31.Dec FY07 Act 1.2 0.4 0.2 1.8
216
Raw Materials
Raw Materials
in millions Steel Paint Vessels equipment Pipes Welding materials Other Total related to current projects Steel Other Total left-over from previous projects Repair and maintenance materials Instruments Other Total miscellaneous Total raw materials, gross Reserve Unreconciled difference Total raw materials, net
Raw Materials Reserve analysis

31.Dec FY05 31.Dec FY06 Act Act 2.7 0.6 1.6 0.3 0.4 0.7 6.3 1.1 0.2 1.3 0.3 0.1 0.2 0.6 8.1 (0.3) 0.2 8.1 1.0 0.4 0.9 0.3 0.2 0.4 3.1 1.2 0.2 1.5 0.1 0.2 0.1 0.4 5.0 (0.9) 4.1 31.Dec FY07 Act 3.6 0.5 0.3 0.2 0.2 0.2 5.0 1.8 0.4 2.2 0.5 0.1 0.3 0.9 8.2 (1.0) 0.0 7.1
in millions Related to previous projects >360 days Related to previous projects, other Miscellaneous >180 days Miscellaneous, other Total reserve
Reserve % 50% 25% 100% 25%
31.Dec FY07 Act 0.4 0.4 0.2 0.1 1.0
The raw materials values are as per Internal reports. In FY07, DSO changed the policy for the calculation of the reserve for materials from previous projects aged over 360 days the percentage was decreased from 100% to 50%. As explained by the CFO of the DSO the reserve created at 31 December 2007is based on the analysis of the actual state of materials. The impact 0.4m. Raw materials balances do not comprise the materials received from customers for use in the construction of the vessels (Buyer Supply).
>360 0.2 0.7 0.1 1.1 Total 5.0 2.2 0.9 8.2
Raw Materials aging at 31.12.2007

in millions Related to current projects Related to previous projects Miscellaneous Total raw materials, gross
Source: DR Ref.18.12.3.3
<30 2.7 0.1 0.2 3.0
30-60 0.4 0.1 0.4 0.9
60-90 0.6 0.1 0.0 0.8
90-180 180-360 0.8 0.2 0.6 0.5 0.1 0.1 1.5 0.8
217
Intercompany Receivables and Payables (excluding loans)

Group balances - Receivables
in millions Receivables Okean B.V. Damen Shipyards Cargo Vessels B.V. AY Floro S.A. Other Total
Source: DR Ref. 18.11.3.1-6, 17.3.3.12
31.Dec FY05 31.Dec FY06 Act Act 31.Dec FY07 Act
Receivables from Group companies comprise the amounts due under the completed vessel construction projects. Payables from Group companies comprise the amounts due to AY ASA and AY Germany as management and consulting fees.
4.2 0.1 4.3 0.8 3.4 4.2 1.1 2.7 0.1 4.0
Group balances - Payables

in millions Damen Vijf (loan interest) Damen Hoogezand Holding costs NCM costs Damen Group (loan interest) Damen Marine Components Ship Design & Eng Ukraine DS Gorinchem Damen representatives Okean B.V. (loan interest) Management fee AY ASA AY Germany Total Less Loan Interest Payable Total
Source: Internal reports, DR Ref. 17.3.3.1-17.3.3.12
31.Dec FY05 31.Dec FY06 Act Act 5.2 0.7 0.5 0.2 0.0 0.0 0.0 (0.2) 6.4 (5.3) 1.1 0.1 3.2 3.3 (3.2) 0.1
31.Dec FY07 Act 4.2 0.8 0.8 5.8 (4.2) 1.6
218
Appendix 2.5 Other Matters
Appendix 2.5 - Other Matters
Top 15 Customers based on total contract volume since FY05
AYG: Top Customer Analysis

Customers No. of ships ordered Total contract volume (in millions) Knig & Cie Stena Rederi Laeisz Norilsk Nickel Schoeller Thien & Heyenga NSB NDRG Winter Hartmann Schulte Rehder AY Finland Genesis MAB Lubmin Total order volume 12 2 8 4 8 8 5 4 4 3 3 2 63 465.5 410.6 345.0 332.3 306.2 278.0 198.8 147.3 129.8 109.0 102.7 67.0 35.5 19.8 3.2 2,950.7 Total profit thereof: to be delivered in to be delivered in to be delivered in calculated Margin delivered in FY05 delivered in FY06 delivered in FY07 FY08 FY09 FY10 value of value of value of value of value of value of ( in millions) in % No. ships ships ships ships ships ships ships ships ships ships ships 21.6 4.6% 21.7 5.3% 12.3 3.6% 35.1 10.6% 3.5 1.1% 2.5 0.9% (11.1) -5.6% (1.0) -0.7% (0.2) -0.2% 2.7 2.5% (0.3) -0.3% 0.3 0.4% (0.8) -2.3% 1.1 5.5% (0.2) -6.3% 87.2 2 4 2 3 11 75.5 147.3 71.7 102.7 24.9 422.2 6 5 1 12 230.7 180.4 37.2 10.6 459.0 6 2 3 4 15 239.6 88.2 97.6 158.8 3.2 587.5 6 3 1 2 2 14 225.8 247.7 39.9 64.9 67.0 19.8 665.3 2 1 2 5 85.6 84.5 64.9 235.0 2 4 6 410.6 171.2 581.8
Source: DR Ref. 7.1.2, 17.3.2
220
Top 20 Suppliers - 2005
Top 20 Suppliers Aker Yards Germany - FY05

Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Supplier Man B&W Diesel A/S DanStel A/S Universal Eisen + Sthal GmbH Blume Stahlservice GmbH Rautaruukki Steel AS R&M Schifsisolierungen + Ausbau GmbH MacGregor (Fin) OY Wismarer Korrosioinsschutz GmbH Vert.ges. Dillinger Huette GTS Muehlhan GmbH & Co. KG STN Schiffselektrik GmbH Rautaruukki Profiler AS Werkzeughandel Weber Wismar GmbH G+H Schiffsbau GmbH Khler Stahlhandel GmbH KLH Montage GmbH MESA Metall- u. Stahlbau GmbH Nord. Metall-Berufsgenossenschaft HSP Hsch Spundwand u. Profil GmbH INGRA Geschftsverein Location Copenhagen, Denmark Frederiksvaerk, Denmark Hannover, Germany Mlheim/Ruhr, Germany Raahe, Finland Rostock, Germany Kaarina, Finland Wismar, Germany Stuttgart, Germany Rostock, Germany Elmenhorst, Germany Moi Rana, Norway Wismar, Germany Rostock, Germany Hamburg, Germany Bad Doberan, Germany Carlow, Germany Hannover,Germany Dortmund, Germany Zagreb, Croatia Total Top 20 Costs in a 33.4 16.2 16.0 15.6 12.8 9.8 8.4 7.8 7.1 6.7 6.0 5.8 5.6 5.3 4.3 3.7 3.6 3.6 3.4 3.1 178.3
Top 20 Suppliers of AYG by country FY05

3% 2% 12%
55% 28%
Germany
Denmark
Finland
Norw ay
Croatia
221

Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Supplier Man B&W Diesel A/S DanStel A/S Blume Stahlservice GmbH Universal Eisen + Stahl GmbH Vertr.. Ges. Dillinger Huette GTS MacGregor (Fin) OY Rautaruukki Steel AS Khler Stahlhandel GmbH R&M Ship Technologies GmbH Muehlhan GmbH & Co. KG Wismarer Korrosioinsschutz GmbH Mitsuhbishi Heavy Industries Lt STN Schiffselektrik GmbH Rautaruukki Profiler AS Wrtsil Finland OY Man Diesel SE G+H Schiffsbau GmbH Werkzeughandel Weber Wismar GmbH BMC Begemann Maritime HSP Hsch Spundwand u. Profil GmbH Location Copenhagen, Denmark Frederiksvaerk, Denmark Mlheim/Ruhr, Germany Hannover,Germany Stutgart, Germany Kaarina, Finland Raahe, Finland Hamburg, Germany Rostock, Germany Rostock, Germany Wismar, Germany Tokyo, Japan Elmenhorst, Germany Moi Rana, Norway Finalnd Augsburg, Germany Rostock, Germany Wismar, Germany Hamburg, Germany Dortmund, Germany Total Top 20 Costs in a 34.7 23.1 22.8 15.8 12.6 12.4 11.4 10.9 10.1 8.5 8.4 8.4 7.6 7.4 7.0 7.0 6.8 6.2 6.0 5.8 233.0

4% 3% 13%
55% 25%
Germany
Denmark
Finland
Japan
Norw ay
Source: DR Ref. 8.2.1.1.
222

Ranking 2007 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Supplier Wrtsil Finland OY DanStel A/S Mitsuhbishi Heavy Industries Lt Man Diesel SE Universal Eisen + Stahl GmbH Blume Stahlservice GmbH Vertr. Ges. Dillinger Htte GTS Man B&W Diesel A/S MacGregor (Fin) OY Khler Stahlhandel GmbH Wismarer Korrosioinsschutz GmbH R&M Ship Technologies GmbH Rautaruukki Profiler AS Aker Yards Oy Rollys-Royce AB Werkzeughandel Weber Wismar GmbH Mhlhan Rostock GmbH G+H Schiffsbau GmbH Prysmain Kabel und Systeme BMC Bergmann Maritime Location Finland Frederiksvaerk, Denmark Tokyo, Japan Augsburg, Germany Hannover,Germany Mlheim/Ruhr, Germany Stutgart, Germany Copenhagen, Denmark Kaarina, Finland Hamburg, Germany Wismar, Germany Rostock, Germany Moi Rana, Norway Rauma, Finland Kristinenhamn, Sweden Wismar, Germany Rostock, Germany Rostock, Germany Berlin, Germany Hamburg, Germany Total Top 20 Costs in a 26.7 23.2 21.3 19.7 19.3 17.4 15.1 13.1 13.0 10.9 9.8 8.9 8.9 7.3 7.3 7.1 7.0 6.9 5.5 5.3 253.9

3% 3% 8% 14%
19%
53% Denmark Finland Germany Japan Norw ay Sw eden
223
Key Suppliers 2007 - AYU
DSO Key Suppliers - FY07

in millions
TOV Leman-Ukrana Korporatzia Industrailna cpilka Donbasu ("Industrial Donbass Union") TOV Ukrainska Girnicho-Metalurgina Kompania RAUTARUUKKI OYJ TOV MetalInvestResource Total steel m aterials TOV Metakom Ukr HEMPEL D.O.O. UMAG TOV Yoog Antikor BAT MIP Raiduga Total paint m aterials and services DRAHTZUG STEIN WIRE TOV UkrAgroTrans Total w elding m aterials and services MAN B&W DIESEL A/S TOV Energoservis RUUKKI PROFILER AS SC RETEC S.A. BAT EK Mikolaivoblenergo TOV Pivdennii terminal BAT Linde Gaz Ukraina TOV Kredo-Okean Total other m aterials and services Total Key Suppliers Source: Presentation Damen Shipyard Okean, January 2008
Nature of supplies
Steel Steel Steel Steel Steel
FY07 Purchases
13,425 4,149 3,487 1,135 604 22,801 1,836 1,013 1,004 609 4,462 1,489 641 2,130 1,932 1,884 1,774 1,488 1,391 1,033 657 525 10,684 40,076
Painting services Paint materials Painting services Painting services
Welding materials Welding services
Propulsion device Repair, maintenance Profile materials Electronic materials Electricity Unspecified materials Gas equipment Acetylene
224
Appendix 3 Past Budgeting accuracy
Appendix 3 - Past Budgeting accuracy
The average project result for CS 1700 container vessels amounts to 200k, thus however, missing the contract budget result by 1.1m or 84%. The budget overrun is caused by design errors as well as through production starting aid for DSO*.
AYG: Project budgeting accuracy - CS 1700
in 000s Contract price Subsidies Change orders Revenue Direct material Fabrication Design Other direct cost Contingency Total direct costs Overhead costs Depreciation Total costs Project result
Key ratios Number of vessels Total direct costs margin Project result margin Fabrication hours (in thousand) Design hours (in thousand) Source: DR 32.72
The analysis above is based on the vessels which were delivered by AYG in the period between FY05 and FY07 or which are included in AYGs order backlog as at Dec 31, FY07. The figures are calculated by adding up the values per line item of the available project reports and dividing those totals by the number of ships in that vessel category. * according to management
Contract budget 31,566 125 31,690 (21,059) (4,372) (454) (1,301) (225) (27,412) (2,697) (331) (30,440) 1,251
Latest estimate 31,594 116 713 32,423 (21,554) (5,412) (647) (1,287) (58) (28,959) (2,935) (329) (32,223) 200
Diff 29 (9) 713 732 (495) (1,040) (193) 14 167 (1,547) (238) 3 (1,783) (1,050)
% 0.1% -7.0% n/a 2.3% 2.3% 23.8% 42.6% -1.1% -74.3% 5.6% 8.8% -0.8% 5.9% -84.0%
As a result of design errors, the CS1700 vessels had more building pieces than originally planned although the total ship weight was within the original estimation. Subsequently, additional fabrication hours were required in all process steps. Management stated that, after they had become aware of these design errors, they implemented additional cross-checking methodologies in the design department in co-operation with Germanischer Lloyd in order to avoid such design errors in the future.
The change orders are mainly related to additional cranes for some of the
vessels as well as contract price increases based on the agreed steel price escalation clause.
The deviation in direct material costs is almost exclusively driven by two
recent projects (# 151, 154) with an cost increase of 3.1m for each vessel. Management stated that the reason for this additional charge is that the production of the two foreships was contracted out with DSO in order to giving them a starting aid for their future business. As stated by management, the production of this smaller vessel type for 1,700 TEU is transferred to AYU which is considered to have a better market position especially from a more competitive cost base. driven by the higher building complexity as a result of the design errors and by two projects with expected deliveries in January 08 and February 08 (# 145, 149 with a negative variance of 2.3m and 2.6m respectively) which incurred higher cost due to the production of sections in Lubmin.
Fabrication costs in total show a negative variation of 24%. This is mainly
14 13.5% 3.9% 173 12
10.7% 0.6% 194 15
20 3
10.5% 19.5%
226
The CS2100 vessels show the poorest budget accuracy of the vessels analysed. As a consequence of design errors, the average project results are negative ( -2.2m) and significantly below the contract budget results ( 1.1m).
The analysis above is based on the vessels which were delivered by AYG in the period between FY05 and FY07 or which are included in AYGs order backlog as at Dec 31, FY07. The figures are calculated by adding up the values per line item of the available project reports and dividing those totals by the number of ships in that vessel category.
The five CS 2100 vessels in the analysis relate to one contract. Four vessels were delivered in FY07, one is scheduled for delivery in March 08.
Diff 427 427 (986) (2,355) (230) 106 402 (3,064) (572) (108) (3,743) (3,316)
% 0.0% n/a n/a 1.1% 3.7% 44.9% 25.2% -7.8% -97.6% 8.9% 17.0% 25.5% 9.8% -302.7%
Contract budget 39,325 39,325 (26,502) (5,240) (916) (1,366) (412) (34,436) (3,372) (422) (38,229) 1,096
Latest estimate 39,325 427 39,752 (27,488) (7,595) (1,146) (1,260) (10) (37,500) (3,943) (529) (41,972) (2,221)
As a result of design errors, the CS2100 vessels had about 35% more building pieces than originally planned although the total ship weight was within the original estimation. Subsequently, additional fabrication hours were required in all process steps. Management stated that, after they had become aware of these design errors, they implemented additional crosschecking methodologies in the design department in co-operation with Germanischer Lloyd in order to avoid such design errors in the future.
The additional revenues are the results of change orders for additional
cranes on the vessels.
Due to the design errors, the fabrication costs show a significant variance of
45% above the budgeted average fabrication costs per vessel.
Overhead costs are allocated to a project based on fabrication hours. The

overrun in overhead costs reflects the additional fabrication works.
As stated by management, it is not expected to produce this vessel type at AYGs yards in the future.
5 12.4% 2.8% 212 24
5.7% -5.6% 269 27
56 3
20.9% 11.3%
227
The last CS 2500 vessel analysed was delivered in April 2006. Although the actual project result is positive ( 0.4m) it is 58% lower than the budgeted result mainly due to higher direct material costs.
in 000s Contract budget 32,412 2,080 34,492 (20,503) (6,113) (244) (2,005) (226) (29,090) (3,766) (665) (33,521) 971 Latest estimate 33,110 2,080 94 35,283 (22,049) (6,167) (272) (1,810) (30,299) (3,961) (616) (34,876) 408 Diff 698 94 791 (1,546) (55) (28) 195 226 (1,209) (195) 49 (1,354) (563)
% 2.2% 0.0% n/a 2.3% 7.5% 0.9% 11.6% -9.7% -100.0% 4.2% 5.2% -7.3% 4.0% -58.0%
All six CS2500 vessels were delivered between January 2005 and April 2006. The subsidies included relate to competition aids of the EU which were granted for orders taken until Q1/05. Since then no further competition aids were granted for new contracts. The payments of the subsidies however is made after delivery of the respective ships only.
Contract price
Subsidies Change orders Revenue Direct material Fabrication Design Other direct cost Contingency Total direct costs Overhead costs Depreciation Total costs Project result
The CS2500 contracts in general did not include a steel price gliding clause. As the steel price strongly increased during the production phase of the first vessels, management succeeded in negotiating price increases of 1.8m for the last two CS2500 vessels to be produced (projects 116, 119). The significant increase in steel prices are reflected in the variation of the direct material costs. In FY05, steel accounted for a slightly higher share of the direct material costs than the current one of 22%. Deviation in direct material costs increased the later the ship was delivered (from 0.8m to 2.9m).
all the CS 2500 vessels are completed, the contingencies which are As generally included in all contract budgets for uncertainties and unexpected costs or cost increases are reversed as all incurred costs are allocated and disclosed in the respective line items.
6 15.7% 2.8% 241 7
14.1% 1.2% 240 9
(0) 1
-0.2% 17.1%
228
The CS2700 is the vessel type with the highest number of produced vessels (26), the highest project result margin of the container ships (3.3%) and the lowest deviation between budgeted and actual profit (-16%).
Contract budget 37,726 1,461 39,187 (23,931) (6,473) (261) (2,133) (367) (33,165) (3,856) (609) (37,630) 1,557
Latest estimate 37,817 1,386 341 39,544 (24,864) (6,646) (362) (1,850) (4) (33,726) (3,986) (520) (38,231) 1,313
Diff 91 (75) 341 357 (933) (173) (101) 283 363 (561) (130) 89 (601) (244)
% 0.2% -5.1% n/a 0.9% 3.9% 2.7% 38.7% -13.3% -99.0% 1.7% 3.4% -14.7% 1.6% -15.7%
From FY05 to FY07 has concluded contracts for 26 container ships of the CS2700 type. 23 vessels are delivered until end of FY07. Another three vessels in the orderbook as at 31 December 2007 are scheduled for deliveries in January, April and July 2008 (projects 140, 152, 157). These three vessels are part of a contract package of four CS2700 vessels which was concluded in May 2005 (first vessel delivered in September 2007). The subsidies relate to competition aids granted by the EU until Q1/05.
The analysis of the variations of direct material costs show that the vessels
with deliveries until FYE06 have negative variations whereas the vessels delivered in January 2007 or later have all positive variations. These positive variations however, are partially compensated by negative variations in fabrication costs.
As most of the CS 2700 vessels are completed, the contingencies which are
generally included in all contract budgets for uncertainties and unexpected costs or cost increases are almost completely reversed as all incurred costs are allocated and disclosed in the respective line items. The two vessels with scheduled delivery dates in April and July 2008 still bear 50k each.
26 15.4% 4.0% 254 8
14.7% 3.3% 254 9
(0) 2
-0.2% 18.7%
229
CS2800 vessels are those container vessels which are included in the Business Plan. The first orders for CS 2800 vessels were concluded in October 2007 and scheduled for delivery between August 2009 and June 2010. Budget accuracy is critical.
This container vessel type is the successor to the CS 2700.

Diff -
Contract budget 42,600 200 42,800 (27,689) (7,106) (761) (1,760) (400) (37,716) (4,281) (527) (42,524) 277
Latest estimate 42,600 200 42,800 (27,689) (7,106) (761) (1,760) (400) (37,716) (4,281) (527) (42,524) 277
% 0.0% 0.0% n/a 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Six CS2800 vessels of one contract package are in AYGs orderbook as at 31 December 2007. Our analysis of this vessel type is based on the contract calculations because project reports have not been available mainly because only minor portions of work, if at all, have been carried out so far. The financing for four of the vessels still needs to be secured until end of March 2008 to have the related contracts effective. The Business Plan includes 14 container vessels of this type to be produced in the planning period between FY08 and FY12. The underlying calculations for the Business Plan are based on the adjacent figures with minor adaptations. Seeing the past budget accuracy, we see some risk that the project margins will turn out to be positive for these container ships.
6 11.9% 0.6% 248 18
11.9% 0.6% 248 18
0.0% 0.0%
230
Ice-class vessels in AYGs orderbook as at 31 Dec 2007 have the highest estimated project margin of all vessels analysed (10.6%). These vessels are said to be copies of a vessel that was delivered by a Finish sister yard to the same customer in FY05.
AYG: Project budgeting accuracy - Ice-class
Contract budget 82,000 82,000 (43,600) (12,230) (1,457) (3,393) (6,713) (67,392) (8,050) (1,045) (76,487) 5,513
Latest estimate 82,000 1,063 83,063 (44,311) (12,938) (1,884) (2,781) (3,533) (65,447) (7,870) (974) (74,291) 8,772
Diff 1,063 1,063 (711) (709) (427) 612 3,180 1,946 180 71 2,197 3,259
% 0.0% n/a n/a 1.3% 1.6% 5.8% 29.3% -18.0% -47.4% -2.9% -2.2% -6.7% -2.9% 59.1%
The four ice-class vessels (CS650) in AYGs orderbook as at 31 December 2007 were ordered in July 2006 by the Norilsk Nickel (Russia). According to management, the ordered vessels are copies of one vessel that was designed by AY Finland, jointly produced by AY Finland (aft part) and AYG (fore part) and delivered to Norilsk Nickel in FY06. The four ice-class vessels are scheduled for deliveries between July and November 2008. The keel laying for the first vessel is expected for January 2008.
Change orders mainly relate to additional cranes on the vessels. The increase of direct material costs in the latest estimates reflect the price
increase for the contracted material packages in comparison to the estimated ones in the contract budget. No steel price gliding clause has been negotiated. Management expects that further variations in material costs will not be significant.
The increase in fabrication costs is mainly related to the additional cranes. The additional design costs partially relate to the additional cranes but also
reflect increased costs for subcontracted design works.
Contingencies in the contract budget are said by management to have been
4 17.8% 6.7% 461 36
21.2% 10.6% 464 40
intentionally high due to negotiation tactics with the labour unions at the time of negotiations for salary increases. In the latest estimate, only 47% of the these contingencies had been reversed. To this respect, management stated that for the ship currently in process they are optimistic to achieve at least the estimated project result.
3 4
0.7% 8.8%
231
The two RoPax vessels in AYGs orderbook will be the largest in the world and the most challenging in respect to technology. Some variations in direct material and fabrication cost have already been experienced thus decreasing the expected project margin to 5.3%.
AYG: Project budgeting accuracy - RoPax
Contract budget 199,800 199,800 (115,818) (29,459) (7,223) (10,003) (4,416) (166,918) (18,562) (2,321) (187,800) 12,000
Latest estimate 199,800 5,505 205,305 (120,332) (31,736) (7,661) (8,847) (4,416) (172,990) (18,625) (2,854) (194,469) 10,837
Diff 5,505 5,505 (4,514) (2,277) (438) 1,156 (6,072) (64) (533) (6,669) (1,164)
% 0.0% n/a n/a 2.8% 3.9% 7.7% 6.1% -11.6% 0.0% 3.6% 0.3% 23.0% 3.6% -9.7%
The two RoPax vessels (RoPax 55) were ordered by Stena Rederi AB in November 2006. Deliveries of the ships are scheduled for January and July 2010. The unique feature of these ships is the total track length of 5.5km. The original concept for these ships was taken over from AY Finland. At 31 December 2007, the design works have been done by about 30% for the two vessels. Changes in the estimated cost therefore represent expected cost variations rather than actually incurred costs, especially for design, fabrication and other direct costs.
According to management, already some 70 smaller change orders have

been contracted for the vessels after the first signing.
The additional direct material costs in the latest estimate are mainly caused
by the change orders. Steel price gliding clauses have been negotiated for the vessels. It is foreseen in the contract that price changes on the basis of such clause will become effective only at delivery of the ships. For the time being, no price adaptation has been made.
The deviation in fabrication costs are mainly caused by the change orders,
too.
The variance in other direct costs per is mainly driven by lower finance
costs ( 0.5m) and other direct costs (0.6m).
2 16.5% 6.0% 1,100 177
For the RoPax vessels, the amount of contingencies is evaluated by means

15.7% 5.3% 1,111 183 11 6 1.0% 3.4%
of a risk register. Each identified individual risk is rated based on expected probabilities and effects in Euro. The contingencies disclosed represent the expected value of all identified risks.
232
Historically, DSO reported negative EBITDA while positive EBITDA was budgeted (1/2)
Historical budgets analysis - DSO
FY05 in millions
Sales Other income Raw materials, co-makers Salaries, social security, pensions Other production costs WIP provision Other provisions General expenses Other operating costs Depreciation Financial result Holding costs Result from ordinary activities Depreciation Financial result EBITDA Source: DR Ref. 17.3.3.1-17.3.3.12, 203
FY06 %
-7% 82% -13% 1% 2% -147% 1308% 64% 43% 1% -291% 25% -22% 1% -291% -439%
FY07 % Actual
73.5 0.2 (46.4) (16.0) (8.5) 0.1 (3.1) (2.6) (2.8) (8.5) (2.8) (16.9) 2.8 8.5 (5.7)
Actual
56.8 0.6 (37.0) (11.6) (5.6) (1.3) 1.0 (2.6) (3.2) (3.0) 3.4 (0.3) (2.9) 3.0 (3.4) (3.3)
Budget
61.2 0.3 (42.3) (11.5) (5.5) 2.8 0.1 (1.6) (2.3) (3.0) (1.8) (0.2) (3.8) 3.0 1.8 1.0
Variance
(4.4) 0.3 5.3 (0.1) (0.1) (4.1) 0.9 (1.0) (1.0) (0.0) 5.1 (0.1) 0.8 0.0 (5.1) (4.3)
Actual
57.9 4.5 (38.5) (14.2) (7.2) 1.0 (1.7) (3.0) (2.7) (2.9) (4.3) (0.4) (11.5) 2.9 4.3 (4.3)
Budget
63.1 0.4 (38.5) (14.1) (5.1) 2.4 (0.2) (1.3) (1.6) (3.1) (1.8) (0.3) (0.1) 3.1 1.8 4.8
Variance
Budget
60.7 0.4 (32.3) (13.6) (5.0) (0.1) (1.3) (1.6) (3.1) (1.4) (0.3) 2.5 3.1 1.4 7.0
Variance
12.8 (0.3) (14.0) (2.4) (3.6) 0.2 (1.8) (1.0) 0.3 (7.0) (2.5) (19.3) (0.3) 7.0 (12.7)
%
21% -63% 43% 17% 72% 0% -306% 146% 65% -11% 491% 819% -788% -11% 491% -181%
(5.2) -8% 4.1 1041% (0.0) 0% (0.0) 0% (2.0) 40% (1.5) -60% (1.6) 918% (1.6) 120% (1.2) 72% 0.2 -7% (2.5) 137% (0.1) 36% (11.4) 14447% (0.2) 2.5 (9.1) -7% 137% -190%
233
Appendix 4 Business Plan
Appendix 4.1 Business Plan - Germany
Appendix 4.1 - Business Plan - Germany
Between FY05 and FY11 order backlog in terms of accumulated contract volumes exceeds 1.2bn with a continuously reduced share of container ships. AYG expects to regularly produce RoPax ferries in future
AYG: order backlog - per vessel types
2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 FY05 Act FY06 Act Container ships FY07 FC Arctic line RoPax FY08 Plan Ice-class RoRo FY09 Plan Arctic LNG Rockdumper FY10 Plan Hulls/ ships's sections FY11 Plan FY12 Plan
236
Projected profitability is dominated by the new vessel types at the end of the Plan period. The contribution of traditional container vessel business decreases respectively
According to management, Arctic Line contracts for 2 vessels have been signed in February FY08 40.1 46.7 55.9
Development of project result per vessel type
41.8
60
30.7 The Groups strategy and objective is to become the worlds leading provider of solutions for the Arctic and partner for complex vessels. According to management, high quality, innovation solutions, advanced technologies and delivery positions are the key strengths of AYG.
50
( - 10.1m )
40
in millions
30
20
10
0 FY08 Plan
FY09 Plan Container Ships Arctic Line RoPax
FY10 Plan Ice-class RoRo Arctic LNG
FY11 Plan Rockdumper Other
FY12 Plan
237
Order backlog detailed

AYG: Order backlog as at 31. Dec FY07 - detail
in millions ID Ship Type Expected delivery dates 18/01/2008 28/01/2008 14/03/2008 28/02/2008 17/04/2008 29/04/2008 28/05/2008 22/04/2008 10/07/2008 04/06/2008 31/07/2008 28/07/2008 24/07/2008 29/08/2008 30/10/2008 28/11/2008 20/01/2009 08/01/2010 07/07/2010 03/08/2009 06/11/2009 05/10/2010 23/02/2010 15/04/2010 08/06/2010 28/03/2008 Current contract values 43.4 31.7 39.9 31.6 31.8 43.6 33.5 32.5 33.5 32.5 82.6 43.8 32.5 32.5 82.6 82.6 84.5 205.3 205.3 42.8 42.8 42.8 42.8 42.8 42.8 19.8 1,482.1 poc Revenues Revenues in % recognised expected YTDDec07 after Dec07 94.0% 93.1% 83.5% 85.8% 70.0% 62.5% 41.6% 0.9% 13.4% 0.5% 26.0% 8.5% 8.1% 5.5% 5.4% 1.9% 1.4% 1.7% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 42.8% 40.8 29.5 33.4 27.1 22.2 27.3 13.9 0.3 4.5 0.2 21.5 3.7 2.6 1.8 4.4 1.6 1.2 3.4 2.5 0.0 8.5 250.3 2.6 2.2 6.6 4.5 9.5 16.4 19.6 32.1 29.0 32.3 61.1 40.1 29.8 30.7 78.1 81.0 83.3 201.9 202.8 42.8 42.8 42.8 42.8 42.8 42.8 11.4 1,231.8 Expected Profits Profits Risks to profits on recognised expected profits contracts YTDDec07 after Dec07 considered 3.0 1.3 (1.5) 1.0 0.6 2.5 0.3 (0.6) 0.0 (0.5) 6.7 2.2 0.4 0.5 8.3 9.5 10.6 12.3 9.4 (0.4) 0.6 0.7 (0.0) 0.8 0.6 1.1 69.6 3.0 1.2 (1.5) 1.0 0.4 1.7 0.0 (0.6) (0.5) 2.0 0.0 0.1 0.0 0.0 0.0 0.5 7.4 0.0 0.0 0.0 0.2 0.9 0.3 0.0 0.0 4.7 2.2 0.3 0.5 8.3 9.5 10.6 12.3 9.4 (0.4) 0.6 0.7 (0.0) 0.8 0.6 0.7 62.2 0.05 0.05 0.05 0.05 0.05 0.25 0.05 0.25 3.84 0.05 0.05 0.05 4.19 3.24 2.86 4.00 4.83 0.4 0.4 0.4 0.4 0.4 0.4 0.33 26.6
140 CS 2700 Container 145 CS 1700 Container 146 CS 2100 Container 149 CS 1700 Container 150 CS 1700 Container 152 CS 2700 Container 153 CS 1700 Container 147 CS 1700 Container 155 CS 1700 Container 148 CS 1700 Container 156 CS 650 Ice-class 157 CS 2700 Container 151 CS 1700 Container 154 CS 1700 Container 158 CS 650 Ice-class 160 CS 650 Ice-class 161 CS 650 Ice-class 159 RoPax 55 RoPax 164 RoPax 55 RoPax 162 CS 2800 Container 163 CS 2800 Container 165 CS 2800 Container 166 CS 2800 Container 168 CS 2800 Container 169 CS 2800 Container 423 Sec. Gen. Other Orders on hand Dec 31, 07
Source: DR Ref. 3.1.2.2.1-3, Business Plan v 6/2/8
238
Backlog / WIP
AYG: Order backlog and work-in-progress as at 31. Dec FY07 - detail
in millions ID Ship Type 140 CS 2700 Container 145 CS 1700 Container 146 CS 2100 Container 149 CS 1700 Container 150 CS 1700 Container 152 CS 2700 Container 153 CS 1700 Container 147 CS 1700 Container 155 CS 1700 Container 148 CS 1700 Container 156 CS 650 Ice-class 157 CS 2700 Container 151 CS 1700 Container 154 CS 1700 Container 158 CS 650 Ice-class 160 CS 650 Ice-class 161 CS 650 Ice-class 159 RoPax 55 RoPax 164 RoPax 55 RoPax 162 CS 2800 Container 163 CS 2800 Container 165 CS 2800 Container 166 CS 2800 Container 168 CS 2800 Container 169 CS 2800 Container 423 Sec. Gen. Other Orders on hand 31. Dec FY07 Expected Current delivery contract dates values 18/01/2008 43.4 28/01/2008 31.7 14/03/2008 39.9 28/02/2008 31.6 17/04/2008 31.8 29/04/2008 43.6 28/05/2008 33.5 22/04/2008 32.5 10/07/2008 33.5 04/06/2008 32.5 31/07/2008 82.6 28/07/2008 43.8 24/07/2008 32.5 29/08/2008 32.5 30/10/2008 82.6 28/11/2008 82.6 20/01/2009 84.5 08/01/2010 205.3 07/07/2010 205.3 03/08/2009 42.8 06/11/2009 42.8 05/10/2010 42.8 23/02/2010 42.8 15/04/2010 42.8 08/06/2010 42.8 28/03/2008 19.8 1,482.1 Revenues recognised YTD Dec 07 40.8 29.5 33.4 27.1 22.2 27.3 13.9 0.3 4.5 0.2 21.5 3.7 2.6 1.8 4.4 1.6 1.2 3.4 2.5 0.0 8.5 250.3 WIP gross 40.8 29.5 33.4 27.0 22.2 27.3 13.9 0.3 4.5 0.2 22.1 3.7 2.6 1.8 4.4 1.4 1.0 3.4 2.5 8.6 250.6 Advance payments received 8.6 9.4 7.5 9.4 9.4 8.6 6.6 1.6 6.6 1.6 49.2 8.6 4.8 1.6 49.2 24.6 24.6 41.1 21.1 7.4 301.4 WIP WIP
assets liabilities 32.2 20.1 25.9 17.7 12.9 18.7 7.3 (1.3) (2.1) (1.4) (27.2) (4.8) (2.2) 0.2 (44.8) (23.2) (23.6) (37.8) (18.7) 1.2 136.2 (187.0)
Source: DR Ref. 3.1.2.2.1-3, Business Plan v 6/2/8
239
Business Plan GER Results per vessel type based on project reports (1/2)
AYG: Result per vessel type - Container ships
in millions Sales Revenues Direct material costs Fabrication costs Design costs Other direct costs Contingency Total direct costs Indirect costs Total project costs Project Result FY08 Plan FY09 Plan FY10 Plan FY11 Plan FY12 Plan
AYG: Result per vessel type - Arctic Line

in millions Sales Revenues Direct material costs Fabrication costs Design costs Other direct costs Contingency Total direct costs Indirect costs Total project costs Project Result FY08 Plan 8.4 (5.3) (1.1) (1.3) (0.0) (0.2) (7.8) (0.8) (8.7) (0.3) FY09 Plan 58.7 (36.9) (7.5) (1.1) (0.1) (1.1) (46.8) (5.7) (52.4) 6.2 FY10 Plan 16.8 (10.4) (2.2) (1.3) (0.0) (0.3) (14.3) (1.7) (15.9) 0.8 FY11 Plan 41.9 (26.2) (5.5) (1.5) (0.1) (0.8) (34.1) (4.2) (38.3) 3.6 FY12 Plan -
242.0 284.0 242.6 184.0 134.0 (163.3) (196.4) (161.3) (122.4) (89.4) (40.4) (45.1) (39.5) (30.6) (22.5) (4.6) (4.9) (3.9) (1.9) (0.9) (1.4) (3.2) (2.4) (1.9) (1.4) (0.9) (2.6) (2.3) (1.7) (1.3) (210.6) (252.2) (209.4) (158.5) (115.5) (25.5) (27.6) (25.3) (20.0) (15.1) (236.0) (279.8) (234.7) (178.5) (130.6) 6.0 4.2 7.9 5.5 3.3
AYG: Result per vessel type - RoPax

AYG: Result per vessel type - Ice-class

in millions Sales Revenues Direct material costs Fabrication costs Design costs Other direct costs Contingency Total direct costs Indirect costs Total project costs Project Result FY08 Plan 296.2 (166.4) (48.2) (2.5) 0.1 (13.9) (230.8) (33.1) (263.8) 32.4 FY09 Plan FY10 Plan FY11 Plan FY12 Plan
116.4 346.9 239.2 174.5 143.7 (69.7) (214.1) (150.5) (106.4) (87.9) (19.5) (55.0) (34.0) (26.6) (22.2) (7.9) (7.5) (5.4) (6.7) (2.9) (0.2) (4.8) (2.4) (1.3) (1.1) (2.3) (7.9) (5.6) (4.1) (3.4) (99.6) (289.3) (197.9) (145.1) (117.4) (13.3) (36.2) (22.3) (17.4) (14.9) (112.8) (325.5) (220.2) (162.6) (132.3) 3.6 21.3 19.0 12.0 11.4
7.2 164.4 131.5 148.0 (6.7) (93.0) (74.6) (84.2) (0.1) (27.2) (22.1) (25.2) (1.8) (2.5) (2.7) (1.7) 0.0 (1.6) (1.3) (1.4) (0.2) (8.0) (6.4) (7.2) (8.7) (132.3) (107.2) (119.7) (0.1) (17.7) (14.5) (16.9) (8.8) (149.9) (121.7) (136.6) (1.6) 14.5 9.8 11.3
Source: Business Plan Version 6.February 2008, PwC analysis
240
Business Plan GER Results per vessel type based on project reports (2/2)
AYG: Result per vessel type - RoRo
in millions Sales Revenues Direct material costs Fabrication costs Design costs Other direct costs Contingency Total direct costs Indirect costs Total project costs Project Result FY08 Plan FY09 Plan (1.0) (1.0) (1.0) (1.0) FY10 Plan 89.3 (51.0) (16.0) (2.2) (0.9) (0.7) (71.0) (10.4) (81.4) 7.9 FY11 Plan 47.0 (27.0) (8.6) (1.2) (0.5) (0.4) (37.6) (5.6) (43.2) 3.8 FY12 Plan 55.7 (32.0) (10.3) (0.6) (0.5) (43.3) (6.9) (50.3) 5.4
AYG: Result per vessel type - Arctic LNG

in millions Sales Revenues Direct material costs Fabrication costs Design costs Other direct costs Contingency Total direct costs Indirect costs Total project costs Project Result FY08 Plan FY09 Plan FY10 Plan FY11 Plan (2.5) (2.5) (2.5) (2.5) FY12 Plan 43.0 (26.3) (7.2) (2.6) (0.6) (0.6) (37.2) (4.8) (42.0) 1.0
AYG: Result per vessel type - Rockdumper

AYG: Result per vessel type - Other

in millions Sales Revenues Direct material costs Fabrication costs Design costs Other direct costs Contingency Total direct costs Indirect costs Total project costs Project Result FY08 Plan 12.0 (2.0) (5.3) (0.6) (0.1) (0.3) (8.3) (3.5) (11.7) 0.2 FY09 Plan 16.8 (1.1) (8.5) (0.2) (0.1) (9.9) (5.3) (15.2) 1.6 FY10 Plan FY11 Plan FY12 Plan -
165.7 198.8 (83.7) (100.7) (25.3) (30.7) (10.1) (12.7) (7.7) (3.0) (3.6) (10.0) (12.0) (10.1) (134.6) (154.7) (16.5) (20.6) (10.1) (151.2) (175.3) (10.1) 14.5 23.5
Source: Business Plan Version 6.February 2008, PwC analysis
241
Appendix 5 Key outstanding information
Appendix 5 - Key outstanding information
Issue
Main outstanding information/ Documentation for Tax DD Germany
Commentary
Tax returns and financial statements for FY07 for all German companies of AY Group; Specific information on intercompany transactions and confirmation of the correctness of the data provided; Certificate of tax baskets from which the 2006 dividend emanated
Information on the amounts of interest income (bank interest) earned in respect of prepayments made by customers to AMTW during periods FY04-FY07.
Additionally, the following information has been provided in the dataroom after last visit of the tax team to the dataroom and respectively, we were not able to perform analysis of this information: Detailed information on the tax position of the German companies of AY Group for the fiscal year 2007, especially breakdown of the corporation tax, trade tax, VAT and Real Estate Transfer Tax provisions and receivables.
Netherlands
The 2004/2005 tax returns of Damen Okean AC1 BV and Damen AC2BV and the 2006 tax returns for all Dutch companies (including the most critical FY06 corporate income tax returns of Okean BV and AY Design Ukraine BV); Copies of 2004, 2005, 2006 and 2007 corporate income tax assessments for all Dutch companies;
243
Issue
Netherlands (continued)
Commentary
Deadline for filing the 2006 corporate income tax returns of all Dutch companies; Financial statements (or drafts, if final statements are not available) for FY07 for all Dutch companies; Information on tax balances and tax losses as of the end of FY07; Supporting information that the fair market value of the loan receivable of Okean BV on Damen Shipyards OJSC is nil (nominal value is 26.0m) and confirmation that Okean BV will report a deemed interest income on this receivable as per FY2006; Information whether the Ukrainian subsidiaries are considered transparent or non-transparent for Dutch tax purposes; Information as to whether there were any payments from Ukrainian subsidiaries to its Dutch parents which qualified for the Dutch participation exemption; VAT treatment of the supply of vessel by Damen Shipyards Okean OJSC to Okean BV and subsequently by Okean BV to the third party; Confirmation that Damen Okean AC1 BV and Damen Okean AC2BV are Dutch tax residents for tax treaty purposes.
244
Issue
Ukraine
Commentary
For DSO: Confirmation that all expenses attributed to uncompleted shipbuilding contracts at the end of each tax reporting period have been eliminated by means of reverse recognition of the taxable income on increase of WIP balances. Confirmation that in 2005-2007 DSO allocated absolutely all deductible expenditures to the WIP balances for tax purposes. Detailed breakdown of WIP balances recorded for tax purposes (i.e. in tax return) as of 31 December 2007 (or, if not available, as of the end of 31 December 2006). Such breakdown shall disclose all group of expenses allocated to WIP. Description of the methodology for allocation of office overhead and other fixed expenses to the WIP balances (if allocated), or confirm that such expenses are not allocated to WIP for tax purposes. Please provide relevant attachments to the tax returns (for FY06 or FY07) with detailed breakdown of calculations.
245
Appendix 6 Glossary
Appendix 6 - Glossary
Glossary of Terms and Abbreviations
Term
Act AMTW AMTWG AWO AWRE AY ASA AY Group AYDU AYG AYU AY Finland CAGR capex
Definition
Actual Aker MTW Werft GmbH Aker MTW Grundstcksverwaltung GmbH Aker Warnem nde Operations GmbH Aker Warnem nde Real Estate GmbH Aker Yards ASA (Norway), parent company of Aker Yards Group Aker Yards Group Aker Yards Design Ukraine Aker Yards Germany Aker Yards Ukraine Aker Yards Finland subsidiaries Compound average growth rate Capital Expenditures
247
Term
CFO CS DR Ref. DSO DWT E&Y e.g. EBT EBIT EBITDA etc. FTE
Definition
Chief Financial Officer Containership Reference (Index of dataroom) Damen Shipyards Okean Deadweight in tons Ernst and Young exempli gratia Earnings before tax Earnings before interest and tax Earnings before interest, taxes, depreciation and amortization et cetera Euro Full time equivalent
248
Term
FY GAAP GmbH HGB High risk (Tax risk assessment) HR HSE i.e. IFRS k KPI LLC
Definition
Financial year (equivalent to calendar year) Generally Accepted Accounting Principles Gesellschaft mit beschrnkter Haftung (limited liability company) Handelsgesetzbuch High risk exists (1) where the treatment is clear in the law, and the taxpayers position clearly contradicts this treatment; and/or (2) where, based on the current court practice, the courts clearly support the position of the tax authorities, and there are no strong technical arguments to defend the approach applied by the taxpayer. Human Resources Human Safety and Environmental Program that is International Financial Reporting Standards thousands Key Performance Indicators Limited liability company
249
Term
LNG Low risk (Tax risk assessment)
Definition
Liquified natural gas Low risk exists (1) where common (tax advisors, federal tax authorities, courts) interpretation of the regulations support the treatment applied by the taxpayer, but the local tax authorities constantly raise the issue during tax audits; or (2) where the treatment applied is in accordance with the regulation s, however, there was a recent case where the tax authorities questioned such an approach and a lower level court supported their position; or (3) where the issue is not clear under current regulations, but a given problem is typical for a given industry and the tax authorities, being more or less aware of the issue, have not challenged the treatment. millions maximum Medium risk exists (1) where there is no clear regulation in the law and the issue is subject to contradictory opinions, interpretations, rulings, courts decisions and in our view, there are arguments to defend the approach applied by the taxpayer; or (2) where the tax authorities are of a different opinion than the approach applied by the taxpayer but the issue was never considered by courts and there are arguments to defend the approach applied by the taxpayer; or (3) where the issue was never raised by the tax authorities, but there is a risk of this based on wording of the regulations and there are no sound defence arguments per annum Percentage of Completion Questions and answers
m max. Medium risk (Tax risk assessment)
p.a. POC Q&A
250
Term
QoE R&D RETT SPA t TEU UAH VAT Warnow WC WIP
Definition
Quality of earnings Research & Development Real Estate Transfer Tax Sale and Purchase Agreement Tons Twenty feet Equivalent Unit Ukrainian Hryvnia, currency of Ukraine Value Added Tax Warnow Design GmbH Working Capital Work in Progress
251

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Summary of important due diligence process and information matters

Summary of important due diligence process and information matters

Summary of important due diligence process and information matters

Summary of important due diligence process and information matters

Audited financial statements

Pro forma analysis Balance sheet analysis Reconciliation to management accounts

Important note on sources of information for AY Ukraine

Summary exchange rates

FY05 5.97 6.39

FY06 6.65 6.34

FY07 7.42 6.92

Section 1 Executive Summary

Section 1 - Executive Summary

Group - Total Revenues and EBITDA development 10% 951 786

847 755 6.8%

514 3.2% 1.2% 7.0

Source: Business Plan version 6.02.2008

Section 1.1 Business overview

Section 1.1 - Business overview

Aker Yards Germany Aker Yards Warnemnde

Aker Yards Ukraine Damen Shipyards Ukraine

Aker Yards Wismar

Aker Yards Design Ukraine

Section 1.1 - Business overview

Aker Yards Germany Aker Yards Warnemnde

Aker Yards Ukraine Damen Shipyards Ukraine

Aker Yards Wismar

Aker Yards Design Ukraine

Section 1.1 - Business overview

FLC West Holding S.a.r.l.

Aker Yards Ukraine Holding AS (to be renamed)

Warnow Design GmbH

Aker Yards Design Ukraine BV

Aker Yards Design Ukraine CJSC

Formed only due to legal reasons

Section 1.2 Key deal issues Financial

Section 1.2 - Key deal issues Financial

76.6 56.5 55.8 532.6 709.7

400 200 0 FY05 Act FY06 Act

Total Revenues Germany

Total Revenues Ukraine

Group Total Sales : Booked vs. New Sales

22 330 884 728

960 FY11 Plan New Sales Bear

931 FY12 Plan

Group - EBITDA Margin Development

FY09 Plan EBITDA-margin

FY10 Plan EBITDA-margin Group

Source: Business Plan version 6.02.2008

Section 1.2 - Key deal issues Financial

Sensitivity analysis Impact on earnings by changes in operating costs

FY08 Plan 51.0 66.3

FY09 Plan 42.7 60.0

FY10 Plan 67.2 86.6

FY11 Plan 77.8 97.3

FY12 Plan 85.1 103.4

EBITDA - pes simistic case

Sensitivity EBITDA - comparison to mgmt.case

EBITDA - Management case

EBITDA - Opimistic case

EBITDA - Pessimistic case