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Important message to any person not authorized to have access to this report.

Any person who is not an addressee of this report or who has not signed and returned to PricewaterhouseCoopers Russia B.V a Release Letteris not authorized to have access to this report.

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1. The reader of this report understands that the work performed by PricewaterhouseCoopers Russia B.V was performed in accordance withinstructions provided by our addressee client and was performed exclusively for our addressee client's sole benefit and use.

2. The reader of this report acknowledges that this report was prepared at the direction of our addressee client and may not include allprocedures deemed necessary for the purposes of the reader.

3. The reader agrees that PricewaterhouseCoopers Russia B.V, its partners, principals, employees and agents neither owe nor accept any duty

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Transaction Services

12 March 2008

Project BearFinancial and Tax Due Diligence

Strictly Private and Confidential

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FLC West Holding S.a.r.l.15, Boulevard RooseveltL-2450 Luxemburg

12 March 2008

Dear Sirs,

In accordance with your instructions as confirmed in our contract 365/01/08/TS dated 17 January 2008 (theContract - Appendix 1), we report on current operations of:

AY Group in Ukraine (represented by the company Aker Yards Ukraine Holding AS (the Company) andits subsidiaries Aker Yards Ukraine BV, Aker Yards Design CJSC, Okean BV, Damen Shipyard OkeanOJSC); and

AY Group in Germany (represented by the company Aker MTW Werft GmbH and its subsidiaries AkerWarnemnde Operations GmbH, Aker Warnemnde Real Estate GmbH, Aker MTWGrundstcksverwaltung GmbH, Arctic Personaldienstleistung GmbH and Warnow Design GmbH).

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 AkerYards Holding AS (the Vendors) of a 70% stake in the Company that at the completion date will own directly orindirectly 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 immediatelyafter Table of contents.

You may not make copies of this report available to other persons except as described in the Contract, and subjectto the conditions described therein. We will not accept any duty of care (whether in contract, tort (includingnegligence) or otherwise) to any person other than you, except under the arrangements described in the Contract.

Yours faithfully

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

Matthias Buehler

Senior ManagerE mail: [email protected]: +49 69 9585 5886Mob ile : +49 1 51 1 67 63 978Fax: +49 69 9585 956325

Dmitry Rembovsky

Director

E mail: [email protected]: +7 495 232 5736Mob ile : +7 9 03 96 1 20 11Fax: +7 495 967 6016

Doug Miller

PartnerE mail: [email protected]: +7 495 967 6301Mob ile : +7 9 05 5 43 09 17Fax: +7 495 967 6016

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Table of contents

Page

1 Executive Summary 1

1.1 Business overview 3

1.2 Key deal issues

Financial

7

1.3 Key deal issues Tax 21

2 Group overview 33

2.1 Business overview 34

2.2 Standalone issues 44

2.3 Quality of earnings

analysis

51

2.4 Pro forma combined

financial statements

55

2.5 Working capital and net

debt

58

2.6 Management and Staff 63

3 Historical trading 67

3.1 Germany 69

3.2 Ukraine 77

3.3 Past budgeting accuracy 84

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Table of Contents

Page

4 Business Plan 93

4.1 Business Plan

Germany

104

4.2 Business Plan Ukraine 119

5 Net assets 127

5.1 Germany 128

5.2 Ukraine 131

6 Cash flows 135

7 Taxation 137

7.1 Taxation Ukraine 138

7.2 Taxation Germany 148

7.3 Taxation Netherlands 158

7.4 Taxation Norway 166Appendices

1 Contract 172

2 Group Overview 188

2.1 Business Overview 189

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Table of Contents

Page


financial statements -Germany

201


financial statements -Ukraine

209

2.4 Working Capital and NetDebt - Ukraine 214

2.5 Other Matters 219

3 Past Budgeting accuracy 225

4 Business Plan 234

4.1 Business Plan - Germany 235

5 Key outstanding

information

242

6 Glossary 246

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Summary of important due diligence process and information matters

Access to management According to Term sheet signed between Aker Yards Holding AS and FLC West HoldingS.a.r.l. our access to management was limited to interviews and management presentationsgenerally conducted by the Vendors upon our request and were attended and minuted bytheir legal advisors Wikborg Rein & Co., Oslo. Such restrictions comprise a common practice

in the dataroom situation. According to AY Group management our access to managementwas limited to prevent leakage of information that may impact AY ASA shares listed at Oslostock exchange.

We primarily obtained information from:

The documents included in the physical dataroom from 14 January 2008 through to 29February 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 inAppendix 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 weredelivered with significant delays. In general, no documents besides the final Business Plan

were provided in electronic versions which negatively affected efficiency of our work. Inaddition, shortly before finalising our report we received some individual documents inelectronic 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 beobtained with no limitations on access to the target and their management. As aconsequence, it is possible that, despite our best efforts, some issues relevant to yourdecisions 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 information

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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 ofthe Group reporting packages for 2006 and 2007. We have not reviewed their respectiveworking papers.

Historically, the Group entities have been and are functioning as a part of a AY Group, andproduces a substantial amount of financial information for internal and external reporting

requirements. We understand that the Group entities reporting systems cannot be readilymapped to the Groups standalone operating structure which forms the basis of theprojections. Accordingly, it can be difficult to obtain robust explanations of the Group at abusiness unit level and compare the historical performance with budgeted performance. The

information provided to us including management comments and explanations has allowed usto gain insight and understanding into some of the more significant risks, trends, and issues. Itshould be noted however that we have been provided with different sets of financialstatements (local management accounts, audited financial statements of individual

companies, Business Plan) which could not be readily reconciled to each other and thereforelimited our ability to analyse certain aspects in depth. Furthermore, the Business Plan hasbeen reworked during our dataroom phase and we have not been provided with details of theinitial Business Plan.

Clarity of information

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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 duediligence process is slowed down by the way the dataroom is organised, information is providedto 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 competitiveenvironment (key competitors, market shares) and the Groups strategic positioningstrategies;

The appropriateness or sufficiency of the Groups insurance arrangements;

Any environmental exposures of the Group or the adequacy of the Groups system foridentifying and controlling such exposures;

The nature and adequacy of the Groups pension arrangements; and Operational due diligence.

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There are three main sources of financial information on the Groups business andthose have been used in this report

Key features Used in the report for CommentsSource

Audited financialstatements

Management

accounts

Some reconciliation items on aline-by-line item basis are stilloutstanding

EBITDA and equity could bereconciled

Due to reclassification andnetting we could not reconcile allline items in the incomestatements and balance sheets

Since bottom line results couldbe reconciled we consider theprovided management accountsas a reliable source althoughsome analysis was limited

Pro forma analysis

Balance sheet analysis

Reconciliation to management accounts

Project analysis

Order backlog Project revenues and results

Cash flow analyses (also derived fromBusiness Plan)

Local GAAP: Clean auditopinions for FY05 and FY06;FY07 not received yet. (Auditedby Ernst & Young)

No audited IFRS financialstatements for individual Group

companies Projections and future strategy

Vessel type analysis

Reconciliation to management accountsand audit reports

Business Plan Financial models do not containa detailed description of theunderlying assumptions

High level assumptions weremade available in presentationbut could not always be linked toBusiness Plan

Consolidated Group P&L wasnot provided

Different models for Germanyand Ukraine

Business Plan contains onlyprofit and loss statements toEBT level from FY08 to FY12with 3 years of historical figures(FY05-FY07)

Prepared monthly by localmanagement in accordance with

IFRS Contains profit and loss

statement and balance sheet(only at quarter end)

Project reconciliation

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Important note on sources of information for AY Ukraine

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 inaccordance with IFRS for the purposes of AY Groupreporting. The Internal reports comprise Balance Sheet,

Income Statement and breakdowns of certain majoritems. It should be noted that we have not beenprovided with Group reporting packages of DSO underIFRS.

Balance Sheet and Income Statement of AYDUextracted from Group reporting packages.

We used Internal reports as the main source of financial

information about DSO position and operations. Our analysiswas performed at the following levels:

Net debt at consolidated AY Ukraine Holding level,

Balance Sheet, W orking capital at DSO and AYDUcombined level,

Trading results at DSO and AYDU combined level.

The Internal reports were prepared in Ukrainian Hryvnia(UAH) for your convenience we provide opposite theinformation on the exchange rates used to convert UAH intoEUR. Closing and average exchange rates were applied to

balance sheet and income statement amount respectively.

Historically, AYU did not prepare the consolidated financial

statements for AY Ukraine Holding. However, for thepurposes of the Transaction the management preparedconsolidated financial statements of AY Ukraine Holding for

FY06 and FY07. These consolidated statements, which theystated are prepared in accordance with IFRS, have not andwill not be audited, and will be attached to SPA as Schedules1B and 1C.

These financial statements, that include AY Ukraine HoldingAS, AYDU B.V., Okean B.V., DSO, AUDU, were prepared as

follows:

individual statements of each company were addedtogether,

the intercompany balances and operations wereeliminated,

certain consolidation and top-level adjustments weremade (elimination of investments, recognition ofgoodwill, recognition of Production Royalty liability to

Damen).

Ukrainian Hryvnia ( UAH) for 1 EUR FY05 FY06 FY07

Closing exchange rate 5.97 6.65 7.42

Average exchangerate 6.39 6.34 6.92

Source: NationalBankof Ukraine, ww w.bank.gov.ua

Summaryexchange rates

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Section 1

Executive Summary

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The Group consists of two state-of-the-art German shipyards and one Ukrainianshipyard with a total revenue of786m and an EBITDA margin of 1.1% in FY07

2

3.5%

59%

CAGR

FY07-12

The Groupt consists of twoGerman and one Ukrainianshipyards with total steelcapacity of some 130,000t/p.a. and with approximately5,000 employees

Historical profitability ofGerman yards has been low,reflecting the intensecompetition for containervessels from Asian shipyards

Current orderbook:

Germany: 15 vessels withcontract value of1.48bnuntil FY10

Ukraine: 71m until FY09

Ongoing and post dealaccess to LNG (on exclusivebasis in respect of CIScountries) and Ice-classtechnologies within AY Group

6

5

7

1The two Germanshipyards have state-of-the-art facilitiesmodernized in the1990s

3

Significant profitability increase projected fromFY08 due to change in product mix for highervalue added vessels such as Arctic-line, Ice-class, Ro-Pax and LNG vessels

German shipyards functionquite independently. AkerYards ASA charged AYG2.8m and DSO 1m ofgroup charges in FY07

8

4

Significant operatingefficiency improvements areprojected for AYU, such asdecrease of fabrication hours

per ton steel by 35%

10

Actual profitability of Uk rainianoperations is unclear as most projectsare inter-company

9

The Groups EBITDAprojected in the BusinessPlan is sensitive to potentialchanges in direct materialand fabrication costs

11

Certain tax warranties andindemnities are included in

the draft SPA upon results oftax due diligence

12

The three yards account forapproximately 88% of theMerchant Vessel businesssegment of Aker Yards ASA

2

Source: Business Plan version 6.02.2008

Group - Total Revenues and EBITDA development

514588

786 755847

951 963 935

16.685.1

8.551.0 42.7 67.2 77.8

7.0

3.2%

1.2% 1.1%

6.8%

5.0%

7.1%

8.1%9.1%

-

200

400

600

800

1,000

1,200

FY05Act

FY06Act

FY07Act

FY08Plan

FY09Plan

FY10Plan

FY11Plan

FY12Plan

inmillions

0%

1%

2%

3%

4%

5%

6%

7%

8%9%

10%

T ot al Re ve nu es EB ITDA EB ITDA - ma rg in

Section 1 - Executive Summary

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Section 1.1

Business overview

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The Group consists of three shipyards operating in Merchant vessel segment (1/2)

4

Source: Management presentation; DR Ref. 16.7.2

Aker Yards WismarEinar Brnlund

Damen Shipyards

UkraineTorben Levinsen

Aker YardsWarnemnde

Einar Brnlund

SubsidiariesWarnow design

Aker Yards DesignUkraine

The GroupThe 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 delivered22 vessels, of which 13 were delivered by two Germanshipyards of the Group (FY05: 10). In FY07, 15 vesselswere delivered.

Main products of the Group consist of container vesselsand arctic vessels. The orderbook also includes RoRo/Ro-

pax vessels.

The Group will have approximately 5,000 employees.

AYG has state-of-the-art production facilities andhistorically concentrated on construction and fabrication ofsmall- and middle-class container vessels with capacitiesbetween 1,700TEU and 2,700TEU. AYG currentorderbook consists of 15 vessels (and one section) at a

total contract value of approximately 1.48bn.

1,302

560,000m340 x 67 x 13.4m

395 x 155 x 72mup to 1000tup to 300,000dwt

55,000t/p.a.

Employees:

Area:Building dock:

Dock shop:Crane capacity:

Building capacity:

Steel capacity:

986

850,000m320 x 54 x 10.7m


55,000t/p.a.

2,675

1,300,000m365 x 40 x 14m

140 x 21m (Floating dock)2 x 320t-

20,000t/p.a.

General cargo MPV*Ro-pax

Arctic container vessel Container vesselChemical tanker

* Multi Purpose Vessels

For further details on production facilities and company history please see Appendix.

Aker Yards Germany Aker Yards Ukraine

Section 1.1 - Business overview

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5Source: Management presentation; DR Ref. 16.7.2


Damen Shipyards


Aker YardsWarnemnde

Einar Brnlund



The GroupDSO 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 AYGroup entities. The only external client is the Ukrainianshipping firm Ukrrichflot. AYU orderbook consists of 5vessels and 10 sections with a contract value of 71m.

Warnow Design and Aker Yards Design Ukraine provideengineering and design services for the shipyards.

1,302

560,000m340 x 67 x 13.4m


55,000t/p.a.

Employees:

Area:Building dock:


Building capacity:

Steel capacity:

986

850,000m320 x 54 x 10.7m


55,000t/p.a.

2,675

1,300,000m365 x 40 x 14m


20,000t/p.a.




* Multi Purpose Vessels

For further details on production facilities and company history please see Appendix.


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For the Purpose of the Transaction German Entities will be consolidated under AYUkraine Holding

6

Aker Yards Ukraine Holding AS (to be renamed)

Aker MTWWerft GmbH

Aker WarnemndeReal Estate GmbH

Aker WarnemndeOperations GmbH

Arctic Personal-dienstleistung

GmbH (49%)

Aker MTWGrundstcks-

verwaltung GmbH

Source: Management reports

Aker Yards Holding AS FLC West Holding S.a.r.l.

30% 70%

Warnow DesignGmbH

Aker Yards DesignUkraine BV

Okean BV

Aker Yards DesignUkraine CJSC

AY SC- 1 B V AY AC- 1 B V AY SC- 2 B V AY AC -2 BV

Damen Shipyards Okean OJSC

1 share

If not otherwise stated, the entities own 100% of the subsidiaries.

Formed only due to legal reasons

Currently, Aker MTW Werft in Wismar and Aker Warnemnde RealEstate, Rostock as well as Aker Warnemnde Operations belongto 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 UkraineHolding.

The operational parts of AYG are Aker MTW Werft GmbH inWismar and Aker Warnemnde Operations GmbH inWarnemnde.

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 personnelto the operative entities.

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 legalpurposes only. Each of the four entities holds one share of Damen

Shipyards Okean OJSC.

Aker Yards Design Ukraine performs engineering and design tasksfor DSO and other yards in the AY Group (AY Floro and AMTW).

During 2000 2006, DSO was owned bythe Dutch shipbuilding group Damen. In

the middle of 2006, 50.01% shares inOkean B.V. were acquired by AY Groupvia AY Ukraine Holding AS. Theremaining 49.99% stake in Okean B.V.,

was transferred to AY Group in February2008.


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Section 1.2

Key deal issues Financial

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Business Plan

8

Issue Commentary Analysis

The Business

Plan provided to

us appears very

optimistic,particularly

considering

historical

performance andhistorical

forecasting

accuracy

The latest Business Plan was provided on 6 February 2008. TheBusiness Plan does not contain detailed description of the assumptionsunderlying the projected results. High level assumptions were madeavailable in a presentation but could not always be linked to BusinessPlan. Combined EBITDA margin of 1.1% (Germany : 2.0%, Ukraine7.4%) 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 toa certain extent from existing contracts in the order backlog for theyears until FY10. However, we identified significant man hours and

material overruns in the past that may adversely impact achievability ofbudgeted profitability.

The strategy for the Group, as stated by management, is based onchanges in the product mix (i.e. production of more complex vesselswith higher margins). It should be noted that the Group does not have atrack record for building most of the new vessels types over last threeyears, though, according to the management the Group has principaltechnologies for construction of these vessels. In addition, the Groupwill need to establish the necessary customer relationships in theseareas. In order to build up and increase the client base and marketpresence, 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 Ice-

class vessels from the current Orderbook (32.4m project result meanscontribution to EBIT). The main profit contribution is projected to resultfrom 5 RoPax vessels and 6 Ice-class vessels delivered FY09 onwards.

Management stated at the end of February 2008 that they are stilloptimistic to achieve the budget for FY08, however we have not beenprovided with any details to support the statement.

Source: Business Plan version 6.02.2008

Group Total Sale s : Booked vs. New Sale s

728 512

- -

330884 960 931

63

22

-

200

400

600

800

1,000

1,200

FY08

Plan

FY09

Plan

FY10

Plan

FY11

Plan

FY12

Plan

Orderbook Bear New Sales Bear

Group - EBITDA Margin Development

2.0%

9.3%

-6.0%

-7.9%-7.4%

-4.8%

-0.3%

7.7%

8.9%8.3%

3.2%

1.2% 1.1%

6.8%

5.0%

7.1%

8.1%

9.1%

2.1%

4.4%

6.9%

7.8%6.0%

8.0%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

FY05

Act

FY06

Act

FY07

Act

FY08

Plan

FY09

Plan

FY10

Plan

FY11

Plan

FY12

Plan

EBITDA-margin Germany EBITDA-margin EBITDA-margin Group

Group - Revenue by Country

457.0 532.67 09 .7 6 79 .7 717.9 756.4 7 48 .7 7 27 .1

56.555.8

76.6 75.4128.6

1 94 .2 2 14 .8 207.8

0

200

400

600

800

1000

1200

FY05

Act

FY06

Act

FY07

Act

FY08

Plan

FY09

Plan

FY10

Plan

FY11

Plan

FY12

Plan

Total Revenues Germany Total Revenues Ukraine

Section 1.2- Key deal issues Financial

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Sensitivity analysis Impact on earnings by changes in operating costs

Sensitivity

analysis

illustrates

significantimpact of

changes in direct

material and

fabrication costson EBITDA

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 inour analysis.

Source: Business Plan version 6.02.2008, PwC Analysis


Sensitivity analysis - EBITDA comparison to mgmt. Case

in millions

FY08

Plan

FY09

Plan

Y10

Plan

FY11

Plan

Y12

Plan

EBITD Aa s p e r Busi ne ss Pl an (Mg mt.ca se ) 5 1 .0 4 2 .7 6 7 .2 7 7 .8 8 5.1Cash Flow approximation as per BP*

EBITDA - opti mi stic ca se 66 .3 60 .0 8 6.6 97 .3 103 .4

EB ITDA c ha ng e t o mg mt . c as e 3 0. 0% 4 0. 4% 2 8. 8% 2 5 .0 % 2 1. 6%

EBITDA - pes sim is tic cas e 33 .1 22 .8 4 4.3 54 .4 64.0

EB ITDA c ha ng e t o mg mt . c as e -35 .1 % -46 .7 % -3 4. 2% -30 .2 % -2 4. 8%

Sensitivity EBITDA - comparison to mgmt.case

-

20.0

40.0

60.0

80.0

100.0

120.0

FY08

Plan

FY09

Plan

FY10

Plan

FY11

Plan

FY12

Plan

inmillions

EBITDA - Management case EBITDA - Opimistic case EBITDA - Pessimistic case

9


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EBITDA Bridge FY06 - FY07 (reported)

14.2(9.6)(21.0)

(143.7)

20.9156.2

11.4

020406080

100120140160180200

FY06

sales

revenues

other

revenues

Direct

material

andother

costs

Fabriaction

anddesign

costs

Overheads

FY07

inmillions

EBITDA Bridge FY05-FY06 (reported)

11.4

(17.1)

(16.2)

(50.9)75.6

20.0

0

20

40

60

80

100

120

FY 05 To talrevenues

DirectMaterial andother costs

Fabricationand Design

costs

Overheads FY06

inmillions

Historical trading Germany

10


The historical

profitability in

Germany has

been rather low

The historical profitability in Germany has been rather low, reflectingthe low margins earned mainly on container vessels (38 containervessels were delivered between FY05 and FY07).

Even though the increase in revenues from FY05 to FY07 has beensignificant (+55%), the reported EBITDA decreased from 20m in FY05to 14.2m in FY07, which is mainly caused by strong increase of directmaterial and other direct costs (FY05 63.3%, FY07 70.2% of salesrevenues).

We understand from the management comments that the decrease ofthe 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 theexception of overhead cost. These costs were mainly affected by therecognition of provisions for the early retirement scheme (11.3m,considered a one-off-item).

In FY07, the Business Plan shows sales revenues from projects of689m. However, total operating costs (without depreciation) of 696mexceeded project revenues. This is mainly due to the increase inmaterial and fabrication costs for the container vessels CS1700 andCS2100 as a result of design errors by design divisions. Other

revenues of21m allowed AYG to achieve positive EBITDA of 14m.



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Historical trading Ukraine

11


Historical trading

Ukraine

Based on information provided in the dataroom, it was not possible tounderstand the actual profitability of the Ukrainian shipyard mainlybecause most of the projects are inter-company. The majority of suchprojects were loss-making, while as represented by management ofDSO, the prices fixed for such projects are on arms length principle.

We requested, but were not provided with the figures representingprofit generated by AY Group outside Ukraine that relate to Ukrainiancontracts.

In addition, all projects carried out for Ukrrichflot, the onlyexternalcustomer of DSO, during FY05-FY07 were unprofitable (with negative

EBIT).

In FY07, DSO increased considerably the sales as new orders from AYGroup were received.

However, the EBITDA is still negative due to increased overheads (oneof the major components reinvoiced AY Group charges increasedby 2.4m).


EBITDA Bridge FY05-06 (reported )

(4.2)

2

(4.7)

(2.1)

4.4

(0.7)(3.1)

-8

-6

-4

-2

0

2

F Y0 5 T ot al s al es D i re ct

materials

Fabrication

anddesign

costs

Other

project

costs

Overheads FY06

inmillions

EBITDA Bridge FY05-06 (reported )

(4.2)

2

(4.7)

(2.1)

4.4

(0.7)(3.1)

-8

-6

-4

-2

0

2

F Y0 5 T ot al s al es D i re ct

materials

Fabrication

anddesign

costs

Other

project

costs

Overheads FY06

inmillions

EBITDA Bridge FY06-FY07 (reported)

(5.3)(7.8)(4.2)

3.8

(3.5)(14.4)

20.8

-10

-5

0

5

10

15

20

F Y 0 6 T ot a l s al es D ir ec t

materials

Fabrication

and design

costs

Other

project

costs

Ov er heads FY07

inmillions


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Quality of earnings

12


Quality of

earnings: FY07

combined

EBITDA for non-recurring items

was 5.7m lower

than reported

Germany

Management of AYG provided us with certain one-off and non-operating items for FY05-FY07. We concur with proposed adjustmentsby management. As a result, reported EBITDA has been adjusted asfollows:

Reported EBITDA in FY05 and FY07 has been adjusteddownwards due to income considered to be one-off or non-operating by management. This income mainly relates to thereversal of accruals and allowances.

Reported EBITDA in FY06 has been negatively affected mainlyby the recognition of a provision for early retirement.

Ukraine

Reported EBITDA was adjusted for one-off and non-recurring itemsresult in lower EBITDA. As mentioned earlier, there is a potentialupside, should EBITDA be adjusted for profits generated outsideUkraine.

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

Qualityof Earnings

in millions

FY05

Act

FY06

Act

FY07

ct

AYG

EBITDA as re orted 0.0 11.4 14.2To ta l m an ag em en t a dj us tm en ts ( 3.0 ) 8 .8 ( 5.0 )

Adjusted EBITDA 17.0 0.2 .2

% of Sales

EBITDA 4.4% 2.1% 2.0%

Adjusted EBITDA 3.7% 3.8% 1.3%

AYU

EBITDA as reported (3.1) (4.2) (5.3)

To ta l m an ag em en t ad ju stm en ts - (3 .7 ) (0 .7 )

Adjusted EBITDA (3.1) (7.9) (6.0)

% of Sales

EBITDA -5.4% -7.2% -7.1%

Adjusted EBITDA -5.4% -13.5% -8.0%

Group

EBITDA Group 16.9 7.2 8.9

To ta l m an ag em en t a dj us tm en ts ( 3.0 ) 5 .1 ( 5.7 )

Adjusted EBITDA 13.9 12.3 3.2

% of Sales

EBITDA 3.3% 1.2% 1.1%

Adjusted EBITDA 2.7% 2.1% 0.4%


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Historical forecasting accuracy

13


The Group

historical

budgeting has

been inaccurate

The historical budgeting appears to be inaccurate, largely as a result offailure to predict and/or hedge against changes of steel and equipmentprices and frequent underestimation of fabrication cost/time, and theactual 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 partlyattributable to one-off and non-operating items of 3.0m.

In FY06 and FY07, the budgets for AYG have been clearly missed. Theactual and especially the adjusted EBITDA for FY07 are significantlybelow 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) andunder recovery of costs in FY06 (-7.4m) and FY07 (-11.8m). In FY07the budget overrun mainly related to CS 2100 vessels (8m) affectedEBITDA negatively. AYGs management stated that additional cross-checking methodologies have been introduced in the design process.

AYU management did not provide us with detailed explanations ofvariations but major factors impacting underperformance in FY07 were:

increase of raw materials costs exceeded the growth ofrevenues,

salaries costs have increased significantly as result of salariesrises.

AY Group costs were recharged to DSO in full.

Source: DR, PwC Analysis

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 AYG - Past Budgeting Accuracy

in millions FY05 FY06 FY07

ctual 20.0 11.4 14.2

Adjusted EBITDA 17.0 20.2 9.2

Budget 13.7 26.7 31.6

Variance 3.3 (6.5) (22.4)

in % of adjusted EBITDA

Variance 19.2% -32.0% -242.9%

EBITDA - Past Budgeting Accuracy

in millions FY05 FY06 FY07

Actual (3.1) (4.2) (5.3)

Adjusted EBITDA (3.1) (7.9) (6.1)Budget 1.0 4.8 7.0Variance (4.1) (12.7) (13.1)

in % of adjusted EBITDA

Variance 131% 161% 215%


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AYG orderbook and profitability of individual vessel types

Project Results (based on Project ReportsFY05-FY07)

-10%

-5%

0%

5%

10%

15%

C S1 70 0 C S2 10 0 C S2 50 0 C S2 70 0 C S28 00 C S65 0 R oP ax

with subsidies without subsidies


Orderbook AYG

contains 15

vessels with a

contract value of1,482m as at 31

December 2007

The current AYG orderbook contains contract values of1,482m as at31 December 2007. Container vessels still show the highest share ofthe current order backlog (719m).

In FY07, 15 ships were delivered (contract volume 584m) and onecontract for 6 CS2800 container vessels (contract volume 257m) wasacquired. Financing for 4 of these vessels ( 150m) has not beensecured by the customer as of the end of February 2008.

The current orderbook contains vessels that will be delivered by Q1FY10. The projected revenues (fabrication capacities) are covered bythe current orderbook - 96% (99%) for FY08, 61% (67%) for FY09 and

7% (6%) for FY10. In addition we were informed by management thaton 20 February 2008, a contract for 2 Arctic Line vessels with Royal

Arctic Line, with a contract volume of82m was signed. The tenderwas included in the project hotlist and therefore is reflected in BusinessPlan.

Profitability of

individual vesseltypes

Container vessels, the main source of revenue in the periods underreview, generally generated low or negative project margins (i.e.between +3.3% for CS2700 (26 vessels) and -5.6% for CS2100 (5vessels)).

According to management, negative results for CS2100 vessels weremainly 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 resultswithout these subsidies would convert to negative figures for CS2500and CS2700. However, management stated that the customers wereaware of these subsidies and, therefore considered them in pricenegotiations.

The contracted RoPax and CS650 vessels show higher contractvolumes and profitabilities and mark the change in product mix.

rder backlog asa t Dec 31, 2007 -

Contract values (1,482 M)

48.5%

27.7%

22.4%

1.3%

Container ships RoPax Ice-class Hulls/ ships's sections

number of ships analysed

14 5 6 26 64 2

Source: Project Calculations, PwC Analysis

Source: DR Ref. 3.1.2.2.1-3, Business Plan version 6.02.2008

14


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YG: Project Hotlist as at Dec 31, 2007 -by vessel types

12%

16%

7%

18%

32%

15%

Container Arct ic line RoPax RoRo Gas Special

Totala pprox.value = 2,189 M

Potential projects under negotiation (project hotlist)

15

Current AYG

project hotlist

shows a volume

of2,189m as atJanuary 2008

RoRo, Arctic Line and Special vessels contribute 81% to the total

volume of2,189m. 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.




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Standalone issues

16

Standalone

issues are not

clearly identified

As a part of larger AY Group the Groups entities received somesupport from headquarters and other companies of AY Group.

We were provided with current Management Services Agreements anda schedule summarising the effects on earnings, had the Groupoperated on a standalone basis for historical and future periods (FY08-FY10). For AYU, we were only provided with historical information forFY05-07. Additionally management submitted shortly before finalisingour report a detailed table of current group charges FY07 and a non-quantified 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 thedataroom (unreconciled difference of0.4m).

From our discussions with the local management of the Group weunderstand that they are actually not aware of the reason for thereconciling differences to the information in the dataroom.

In addition, management stated that other intercompany relationshipswith AY Group might exist that are not documented and therefore,current management may not be aware of them. According tomanagement associated costs should not be material.

Besides the Management services Agreement, the guaranteesprovided by the AY Group have to be replaced in the future.

We recommend to include a provision in thefinal SPA to limit additional costs that mayoccur after transaction and to disclose a fulllist of related parties to the Group andamounts involved for FY06 and FY07 as aseparate schedule to the SPA. We furtherrecommend to require the Vendors to makerespective representations in relation to thecompleteness of this information.

tand alone - Group charges

1.6

2.12.4

2.72.5

0.3 0.4

2.8 2.8

-

0.5

1.0

1.5

2.0

2.5

3.0

FY05

Act

FY06

Act

FY07

Act

FY08

Plan

FY09

Plan

FY10

Plan

inmillions

Germany Ukraine

Source: DR Ref. 46.505, 24.4.2, Question Log FDD No. 85, PwC Analysis



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Net debt definition

17


Net debt

definition Based on Net Debt definition included in the latest draft SPA net debt

totalled16.2m as at 31 December 2007, resulting in a purchase price

adjustment of11.3m. However, the Vendors calculation does not

include provisions for early retirement of17.4m 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 convertinter-company loans of Aker Yards Ukraine Holding totalling ca. (

63.4m) into equity (price adjustment impact of44.3m). 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.

Source: SPA Schedule 12A.

Net debt - Group

in millions 1. Dec FY07

Germany

Cash and Cash equivalents 98.1

Interes t -bearing short-term debt (32.9)

Provisions for pensions (0.3)

Net debt reported 64.8

Ukraine

Cash and Cash equivalents 3.5

Loan payable to AY Group (41.5)

Loan payables to Damen Shipyards Cargo Vessel B.V. (0.4)

Long-term debt to Damen Group (20.0)

I nte re st- be ar in g s ho rt -te rm d eb t, i n te rn al ( 18 .0 )Interest accured to AY Group (1.8)

Provisions for pensions (2.8)

Net debt reported (81.0)

Total reported Net debt (16.2)

Adjustments:

Non current provisions (18.4)

Total adjusted Net debt (34.6)

Price adjustment (at 70%) (24.2)

Conversion of debt (at 70%) 44.3

Price Adjustment 20.1


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Working capital definition

18


Working capital

definition

Management did not provide us with the definition of working capitalother than current asset less current liabilities and with respectiveassumptions on benchmarking that are used for budgeting/control overworking capital.

For the purposes of SPA, price adjustments for the following definitionare currently being discussed with the Vendors: Net Working Capital isdefined as current assets excluding Cash less current liabilitiesexcluding Indebtedness, as exemplified in SPA Schedule 12A. Currentassets and current liabilities are classified according to IAS 1.57 and1.60. 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 beexcluded from working capital definition. The reason for the exclusionof this balance is that DSO currently cannot recover VAT in the normalcourse of operations due to on-going tax disputes and audits, whichresulted in significant balance accumulated as of 31 December 2007 of9.7m (net of provision of1.1m).

Management cannot estimate when this balance may be repaid while in

January-February FY08 around 1m of this balance was received fromUkrainian budget (and another1m became recoverable). Weunderstand that a specific warranty in relation to recoverability of thisbalance is included in the draft SPA.

Source: SPA Schedule 12A.

*excluding assets relating to fixed assets,

capital expenditure and investments, to theextent such fixed assets, capital expenditureor investments presented in the BalanceSheet as of 31 December 2007

Source: SPA 28.02.2008

Working Capital- Group

in millions 1. Dec FY07

GermanyTotal interest free short-term receivables,extern 218.6

Total interest free short-term receivables,internal 1.3

Interest-bearing short-term receivables, external 1.0

Total interest-free current l iabilities, external (252.7)

T otal i nteres t- free c urre nt l ia bi li ti es , i nterna l (4.1)

Net working capital Germany (35.9)

Ukraine

Total interest free short-term receivables,extern 49.3

Total interest free short-term receivables,internal 5.3

Interes t-be arin g s ho rt-term rec ei va bl es , e xterna l -

T otal i nteres t- free c urre nt l ia bi li ti es , e xterna l (35 .4 )T otal i nteres t- free c urre nt l ia bi li ti es , i nterna l (5.9)

Interest payable (Ukraine) (1.8)

Net working capital Ukraine 11.4

Total Net Working Capital (24.5)

Adjustments (at 70%):

Price Adjustment (17.1)

Total price adjustment (17.1)


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Subsequent events not included in the Business Plan and significant difference betweencash flow approximation and Vendors valuation

19


Subsequent

events which arenot included inthe Business

Plan

Before finalising this report, management of AYG informed us that in

early FY08 7 FTEs involved in specific LNG R&D activities of AYG willbe transferred to a German subsidiary of AY Technology AS, Oslo.Management also stated that the LNG technology under considerationwill most probably not be used by AYG in future and that other LNGtechnology and will be used for the ships included in the Business Plan(see comment opposite).

We understand this matter has been covered by

the LNG Technology Cooperation Agreemententered into by Aker Yards Technology AS andFLC West Holding S.a.r.l. The Agreement grantsto FLC West Holding S.a.r.l. the exclusivity inrespect of CIS countries.

Difference

between cash

flowapproximation

and Vendorsvaluation

Business Plan presented in the dataroom does not include cash flowforecast. Shortly before finalising our report, management provided uswith their updated cash flow approximation. The calculation wasproduced using EBITDA taken from Business Plan, revised capexprojections provided by management and taxes calculated by applying aGerman tax rate of 30% and Ukrainian tax rate of 25% to forecast EBTas per Business Plan.

For the purpose of the cash flow approximation management assumed a

working capital level of35m for the Group, which changes in line withthe revenue projections. This definition of working capital definition isdifferent to working capital stated in the respective SPA Schedule 12and information could not reconcile to historical data provided in thedataroom. Management stated that the assumed working capital for thecash flow projection is more representative expression of the WCamount that the Group needs in the ordinary course of business. Theresulting cash flow estimates are considerably lower than the initialvaluation presented by the Vendor during the discussions of the Termsheet that may result in decrease of the purchase price in the SPA.


Group Combined Cash Flow Approximation

inm illions

Y07

ct

FY08

Plan

Y09

Plan

Y10

Plan

FY11

Plan

Y12

Plan

EBITDA Com bined 8.5 51.0 42.7 67.2 77.8 85.1

- C ap i ta l Exp en di tu re s (19 .6 ) (16 .7 ) (13 .4 ) (13 .0 ) (13 .0 ) (13 .0 )+/ - Wo rk in g C ap ita l c ha ng e - 1 .3 ( 5. 1) ( 5.9 ) (1 .0 ) 1 .4- Tax (2.2) (14.1) (10.6) (16.3) (19.3) (21.5)

CF approxima tion (13.3 ) 2 1.6 13 .6 3 2.1 44 .6 51.9

CF as pe r ven dor va lua ti on 2 8.1 20 .3 3 7.4 5 0.0 5 6. 2

Variance (6.5) (6.7) (5.3) (5.4) (4.3)


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Recoverability of input VAT, Konverse-invest claim, contingent liability and possibledispute in respect of the plot of land

20

Konverse-invest

claim

There is an old dispute involving a promissory note issued by DSO. We

understand that this dispute was settled, as provided by the settlementagreement between Damen Group and AY Group on 26 February 2008(see details in Section 2.7).

We recommend you to analyse this issue in the

course of your legal due diligence. We alsorecommend you to include in SPA specific

warranty in relation to this dispute.

Possible disputein respect of the

plot of land

According to information provided in the dataroom, there is possibility ofa dispute with Nikolaev city municipality regarding the plot of landacquired from the municipality in 2005. No documents have beenprovided 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.

Recoverability of

input VAT

As of 31 December 2007 DSO has accumulated the VAT receivablebalance of10.8m. We understand that since 3Q07 DSO hasexperienced significant difficulties with recovery of VAT from Ukrainianbudget. We were informed by management that in FY08 DSO receivedfrom tax authorities around 1.0m. Management cannot estimate whenDSO will be able to recover the remaining amount.

We understand that a specific warranty in

relation to recoverability of this balance is

included in SPA.

Issue Commentary Recommendation

Contingent

liabilities

AYG has taken over surety for a couple of loans of Lubmin with a totalnominal amount of 17.0m.

We understand that specific warranties inrespect of sureties provided to third parties areincluded in the draft SPA.


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Section 1.3

Key deal issues Tax

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Summary of Key tax issues (1 of 2)

22

in millions

Country ssue escription igh edium Low PA/deal recommendation

Ukraine

VAT recovery VAT receivable in the amount of EUR 10,522K may not be fully recoverable by DSOduring the next 12 months

- 10. 5 - C orres ponding w arrant y f or 90% of t he out st andingamount is provided in the current SPA draft

Potential withdrawal of tax privilegeavailable for shipbuilding companies

DSO may lose its right for the tax privilege available for Ukrainian shipbuilding entities n/a n/a n/a

Deduction of engineering and designexpenses

Deduction of engineering and design expenses and recovery of the respective input VATmay be challenged due to the lack of documentary support

- 0.1 - I f c onsidered mat erial, c onsider ask ing f or s peci fic t axindemnity; alternatively you should seek ways tomitigate the risk (eg getting additional documentation

from AYDU) post signing/closing

In case DSO is not able to prove that methodology applied did not lead to underestimationof CPT, additional CPT liabilities may b e assessed

- 1.4 8.2 C orres ponding w arrant y is inc luded int o t he c urrentSPA draft

Econically unjustified expenses Deduction of expenses incurred by DSO under loss-making contracts and recovery of therespective input VAT may be challenged as economically unjustified

- - 81. 8 C orres ponding w arrant y is inc luded int o t he c urrentSPA draft

Transfer pricing Application of transfer pricing rules to intra group transactions may trigger additional CPTand VAT obligations for DSO and AYDU

1) 1) 1) Corresponding warranty is included into the currentSPA draft

Subtotal - 12.0 90.1

Germany

Tax losses AMTW had significant tax losses as of the end of FY07, which are expected to be lost incase of change of ownership

n/a n/a n/a

Tax grouping Due to failure to observe formal legislation requirements the tax authorities could

challenge tax grouping

3.0 - - C orres ponding w arrant y is inc luded int o t he c urrent

SPA draft

Witholding tax in respect of royaltypayments

Additional withholding tax may be assessed due to failure to withhold taxes from royaltypayments in 2007

0.2 - - I f c onsidered mat erial, c onsider ask ing s peci fic t axindemnity

Improper tax treatment of interestincome

Improper tax treatment of interest income may entail additional tax assessments - 2) - If considered material, consider asking specific taxindemnity

Transfer pricing Prices charged under cross border intra-group transactions could be subject to transferpricing scrutiny

1) 1) 1)

Subtotal 3.2 - -

Netherlands

Deduction of interest expenses Interest expenses deducted by Okean BV in respect of a loan from Aker Yard Holding AScould be challenged based on the Dutch anti-base erosion rules

0.3 - - I f c onsidered mat erial, c onsider ask ing s peci fic t axindemnity

Revaluation of receivable from DSO Revaluation of the receivable from DSO (currently valued at zero) may entail adverse taxconsequences for Okean BV

2) 2) 2)

Corresponding warranty is included into the currentSPA draft

Subtotal 0.3 - -

Norway

Tax residency of Dutch subsidiariesin Norway

Dutch subsidiaries may be viewed as creating tax residency in Norway and, thus, besubject to taxation in Norway

2) 2) 2) If considered material, consider asking specific taxindemnity; additional effort to ensure proper tax

residency of Group companies post signing/closing isrequired

Subtotal - - -

TOTAL 3.5 12.0 90.1

Tax risk summary for FY05 - FY07

1)A detailed transfer pricing analysis / benchmarking study is required in order to quantify and assess this risk

Tax risks

Tax risks

(continued on the next page)

Tax risks

Tax risks

)Additional analysis is required to quantify and assess this risk

Section 1.3- Key deal issues Tax

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Summary of Key tax issues (2 of 2)

23

(continued from the previous page)

Country Issue Description SPA/deal recommendation

Netherlands

Application of tax treaty

benefits may be

challenged

Application of the tax treaty bene fits b etween the N etherla nds and

Norwayand between the Netherlands and Ukraine may be challenged

by Norwegian and Ukrainian tax authorities

Additional effort to e ns ure prope r tax

residencyof Group companies post

signing/closing is required

Transparency of Ukrainian

subidiaries for Dutch taxpurposes

Ukrainian subsidiaries of Aker Yards Ukraine Holding AS could be

subje ct to taxation in the Netherlands b ased on the transparen cy rules

Verify that AYDU and DSO do not qualify

as partnership for Dutch tax purpose

Potential asses sment of

VAT liabilities

Additional VAT lia bilitie s may potentia lly be as se ss ed on the a mo unt o f

income received from the sale of vess els by Okean BV

Corresponding warranty is included into

the current SPAdraft

Norway

oint liability for taxrisks of

a VAT group

Aker Yards Ukrain e Ho ldin g AS cou ld potentia lly be h eld liabl e for VAT

risks of other Norvegian companies due to its registration as a part of

the VAT group

Corresponding warranty is included into

the current SPAdraft

1) Additional information is required to quantifya nd ass ess these risk areas

Other potential tax risk areas1)


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Key deal issues Taxation (1 of 9)

24

Issue Commentary Conclusion / Recommendation

Tax issue

Ukraine

Recoverability ofVAT receivable

As of the end of FY07 DSO reported VAT receivable of

10.5m, which may not be fully recoverable from the budgetwithin the next 12 months.

Corresponding warranty for 90% of the

outstanding amount is provided in thecurrent SPA draft.

Tax issue

Ukraine

Potentialwithdrawal of taxprivileges 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 paymentsreceived under the ship building contracts, while postponing

deduction of respective expenses until the acts acceptance inrespect of ships are signed) on the basis that it was in a loss-

making position for more than 3 quarters.

Additionally, challenge by the tax authorities of methodologyapplied by DSO may cause tax risks in respect of past periods(please see below).

Tax issue

UkraineDeduction of

expensesincurred by DSO

under loss-

making

contracts

Deduction of expenses incurred by DSO under loss-making

contracts and recovery of the respective input VAT may bechallenged as economically unjustified. The estimated riskamount is 81.8m. We assess the risk as low.

Corresponding warranty is included into the

current SPA draft


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25


Tax issue

Ukraine

Improper

methodology oftax base

calculation

(DSO)

In its tax returns for FY05-FY07 DSO included in the taxable base

all expenses incurred in respective periods, while the amount ofexpenses, related to contracts under which advances weredeferred, were added back to tax base above the line asincrease of WIP (rather than reducing expenses). This

methodology may be interpreted as not being fully in line with therules prescribed in legislation, although if properly applied, isunlikely to lead to underestimation of the tax base.

According to management, methodology, applied by DSO, shouldnot 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 ofrespective expenses in its tax returns did not result in reduction ofthe taxable base, the additional CPT liabilities may be assessed.

The level of the risk is assessed as medium in the amount of1.4m for general and administrative expenses not allocated to

WIP and low in the amount of8.2m for expenses allocated toWIP.


current SPA draft

Tax issue

Ukraine

(continued)

Deduction of

engineering and

design expenses

/ VAT recovery

Deduction of engineering and design expenses and recovery ofthe respective input VAT may be challenged due to the lack ofdocumentary support. We estimate the risk as 0.1m. We assessthis risk as medium.

If considered material, consider asking forspecific tax indemnity; alternatively youshould seek ways to mitigate the risk (e.g.getting additional documentation from

AYDU) post signing/closing


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26


Tax issue

Ukraine

(continued)

Transfer-pricing

issue

Should the tax authorities check the prices applied between DSO/ AYDU and the Groups companies (especially, noting that DSOand AYDU were in a loss making positions) and conclude they

are not at the arms length level, they may adjust tax base of DSOand AYDU based on relevant fair market prices. A special transferpricing analysis / benchmarking study is required to quantify andassess this risk.


current SPA draft

Tax issue

Germany

Tax groupingbetween AMTWand its

subsidiaries

AWO, AWRE and

AMTWG may bechallenged

Tax grouping between AMTW and its subsidiaries AWO, AWRE

and AMTWG may be challenged by the tax authorities due tofailure to observe formal legislation requirements. As such,

additional corporation and trade tax liabilities in total amount of3.0m may be assessed. The risk is high.


current SPA draft

Tax issue

Germany

Tax losses

available forcarry forward at

AMTW are to be

lost

Corporation and trade tax losses (in the amounts of36.9m and

38.8m respectively) available for carry forward at AMTW as ofthe end of FY07 are to be lost due to change in the direct orindirect shareholder.


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27


Tax issue

Germany

Improper tax

treatment ofinterest income

Improper tax treatment of interest income may entail additional

tax assessments. We have no information to quantify the amountat risk. The risk is assessed as medium.

If considered material, consider asking

specific tax indemnity

Tax issue

Germany

Additional

liabilities may be

assessed due toapplication 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 mayadjust prices applying transfer pricing rules and assess additionalcorporation tax, trade tax and dividend withholding tax liabilities.

A special transfer pricing analysis and benchmarking study isrequired to quantify and assess this risk.

Tax issue

Germany

Withholding tax

in respect of

royalty payments

Additional withholding tax and solidarity charge obligations in theamount of0.2m may be assessed due to failure to withholdtaxes from royalty payments in FY07. We assess the risk ashigh.

If considered material, consider askingspecific tax indemnity


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28


Tax issue

Netherlands

Corporate profits

tax obligations

may potentiallyarise from the

application of

anti base erosionrules

Okean BV has taken up a loan of6.4m from Aker Yards Holding

AS to grant a loan to Damen Shipyards Okean OJSC. No interestwas charged by Okean BV, while interest expenses werededucted in full.

The tax authorities may take the position that the loan to DamenShipyards 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. Asa result, the interest expenses on the loan payable to Aker YardsHolding 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.


specific tax indemnity


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29


Tax issue

Netherlands

(continued)

Corporate profits

tax liabilitiesmay potentially

be assessed if

the amount ofreceivable is

more than zero

Okean BV has acquired its interest in DSO from a third party.

Upon the acquisition, the vendor had a receivable from DSO inthe amount of26.0m. This receivable was assigned to OkeanBV for free (as DSO was a loss-making entity, this receivable wasdeemed 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 inrespect of this outstanding debt.

For Dutch tax purposes, Okean BV is required to report its loanreceivable at the lower of nominal value and market value on an

annual basis. Okean BV should be able to demonstrate that themarket value of the receivable is nil.

If Okean BV cannot demonstrate this, the Dutch tax authoritiesmay take the position that the receivable should be revalued at ahigher amount (the nominal value of26.0m at the most) and forwhich additional taxable income should be recognized by Okean

BV. Additionally, Okean BV would be required to report an armslength interest to DSO in respect of this debt. Additional analysisis required to determine the fair market value of the loanreceivable and whether this will entail adverse tax consequences

for the companies.


current SPA draft

4


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30


Tax issue

Netherlands

(continued)

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 aremanaged by individuals who live outside of the Netherlands. Fortax treaty purposes, companies should be effectively managedand controlled in the Netherlands in order to qualify as a Dutch

tax resident. Even though the Dutch tax authorities wouldconsider these companies to be tax residents, there potentiallycould be the risk that the foreign tax authorities (e.g. Ukraine andNorway) 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 andtherefore the relevant tax treaty with the Netherlands should notapply. Additional information is necessary to determine whether

the companies used any double tax treaty benefits which may bechallenged by the tax authorities in this basis.

Additional effort to ensure proper tax

residency of Group companies postsigning/closing is required


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31


Tax issue

Netherlands

(continued)

VAT maypotentially be

assessed on the

amount of

income receivedfrom 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 awareas to whether Okean BV charged output VAT on the amount ofincome received from the sale of this vessel. We are not awarewhere the factual supply of the vessel took place, to whom and

whether the above mentioned vessel was dispatched to or fromthe Netherlands. In case the vessel was dispatched from theNetherlands, the tax authorities may assess Okean BV withadditional VAT obligations. Additional information is necessary to

determine whether this risk actually exists.


current SPA draft

Tax issue

Netherlands

Transparency ofUkrainian

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 qualifyas a partnership, their income/loss would be included in the Dutchtax 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


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32


Tax issue

Norway

Joint liability fortax 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 thegroup.

According to Norwegian law, the participants of the VAT groupmay be held jointly liable for VAT obligations. Thus, in case other

participants have unsettled VAT liabilities, Aker Yards UkraineHolding 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.


current SPA draft

Tax issue

Norway

Creation of

permanent

establishment byDutch

companies in

Norway

We understand that Okean BV, Damen Okean SC-1 BV and

Damen Okean SC-2 BV are being managed by Norwegianindividuals and thus could be deemed as tax residents in Norwayregardless of place of their incorporation. If so, the profits of therespective Dutch companies would be taxable in Norway, as

Norwegian tax resident companies are taxable to Norway on theirworld wide profits. A detailed analysis is required to quantify therisk amount. However, if the Dutch companies did not generatesignificant profits, any Norwegian taxes are not likely to be

substantial. The risk is assessed as high.


specific tax indemnity; additional effort toensure proper tax residency of Groupcompanies post signing/closing is required


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Section 2

Group overview

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Section 2.1

Business overview

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35



Damen Shipyards


Aker YardsWarnemnde

Einar Brnlund



The GroupThe 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 Germanshipyards of the Group (FY05: 10). In FY07, 15 vesselswere delivered.

Main products of the Group consist of container vesselsand arctic vessels. The orderbook also includes RoRo/Ro-

pax vessels.

The Group will have approximately 5,000 employees.

AYG has state-of-the-art production facilities andhistorically concentrated on construction and fabrication ofsmall- and middle-class container vessels with capacitiesbetween 1,700TEU and 2,700TEU. AYG currentorderbook consists of 15 vessels (and one section) at a

total contract value of approximately 1.48bn.

1,302

560,000m340 x 67 x 13.4m


55,000t/p.a.

Employees:

Area:Building dock:


Building capacity:

Steel capacity:

986

850,000m320 x 54 x 10.7m


55,000t/p.a.

2,675

1,300,000m365 x 40 x 14m


20,000t/p.a.



* Multi Purpose VesselsFor further details on production facilities and company history please see Appendix.



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36



Damen Shipyards


Aker YardsWarnemnde

Einar Brnlund



The GroupDSO 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 Ukrainianshipping firm Ukrrichflot. AYU orderbook consists of 5vessels and 10 sections with a contract value of 71m.

Warnow Design and Aker Yards Design Ukraine provideengineering and design services for the shipyards.

1,302

560,000m340 x 67 x 13.4m


55,000t/p.a.

Employees:

Area:Building dock:


Building capacity:

Steel capacity:

986

850,000m320 x 54 x 10.7m


55,000t/p.a.

2,675

1,300,000m365 x 40 x 14m


20,000t/p.a.




* Multi Purpose VesselsFor further details on production facilities and company history please see Appendix.


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For the Purpose of the Transaction German Entities will be consolidated under AYUkraine Holding

37

Aker Yards Ukraine Holding AS (to be renamed)

Aker MTWWerft GmbH

Aker WarnemndeReal Estate GmbH

Aker WarnemndeOperations GmbH

Arctic Personal-dienstleistung

GmbH (49%)

Aker MTWGrundstcks-

verwaltung GmbH

Source: Management reports

Aker Yards Holding AS FLC West Holding S.a.r.l.

30% 70%

Warnow DesignGmbH

Aker Yards DesignUkraine BV

Okean BV

Aker Yards DesignUkraine CJSC

AY SC- 1 B V AY AC- 1 B V AY SC- 2 B V AY AC -2 BV

Damen Shipyards Okean OJSC

1 share

If not otherwise stated, the entities own 100% of the subsidiaries.

Formed only due to legal reasons

Currently, Aker MTW Werft in Wismar and Aker Warnemnde RealEstate, Rostock as well as Aker Warnemnde Operations belongto 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 UkraineHolding.

The operational parts of AYG are Aker MTW Werft GmbH inWismar and Aker Warnemnde Operations GmbH inWarnemnde.

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 personnelto the operative entities.

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 legalpurposes only. Each of the four entities holds one share of Damen

Shipyards Okean OJSC.

Aker Yards Design Ukraine performs engineering and design tasksfor DSO and other yards in AY Group (AY Floro and AMTW).

During 2000 2006, DSO was owned bythe Dutch shipbuilding group Damen. In

the middle of 2006, 50.01% shares inOkean B.V. were acquired by AY Groupvia AY Ukraine Holding AS. Theremaining 49.99% stake in Okean B.V.,

was transferred to AY Group in February2008.


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Market overview of shipbuilding industry: worldwide and Russian markets

38

Based on information available from public sources (R.S. Platou), the

shipbuilding industry currently experiences a very strong general growthdriven 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 andtankers, which constitute a notable part of the Groups projected portfolio.

The shipbuilding industry capacity has been increasing: in FY07, the yardsdelivered 15% more tonnage in CGT (compensated growth tons) terms thana year before. Orderbook has increased by over 50% in FY07.

We understand from your shipbuilding and shipping management team that itconsiders the growth potential in the Russian market as a major driver for the

Group business going forward. This growth is mainly attributable to theperspective development of oil and gas fields at Russian Arctic and Far Eastsea shelf.

As indicated in the Strategy of shipbuilding industry development till 2020and further adopted by the Russian Ministry of industry and energy, about 90

specialized transport vessel of ice-class, 140 auxiliary vessels, 12 ice-breakers will be needed by FY30 for the transportation of oil and gas fromRussian 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 $22bby FY15. We understand from you that due to situation on the Russianshipbuilding 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 futureorders at the Groups shipyards with various Russian clients. However, inspite of certain progress in this process we understand from you that nocommitted sales are expected before signing of SPA scheduled at the end of

March 2008.

Source: www.platou.com


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Management has evaluated the current strategic positioning of AYG: advanced vesselsand small series/tailor made production are existing strengths, whereas currently therelationships to customers are seen in weaker positions - except with container ships.

39

Source: DR 29.74

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

signif icant strength/ position no strength/position


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Group's Top 20 Customers: Contract value, profit margin (%) & numbe r of ships ordered by customer (Period FY05-

FY10 as of orderbook)

Knig & Cie

Norilsk Nickel

NSB

Hartmann

Genesis (Section)

MAB Lubmin

Stena Rederi

Laeisz

Schoeller

Thien & Heyenga

NDRG

Winter

Schulte

Rehder

AY Finland

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

(50) 50 150 250 350 450 550 650

Contract value in millions

Profitmargin

Top 20 customers

40

Source: dataroom information

Comment: For more detailed and further information please refer to the Appendix.

Future prospectsmight be weaker ascustomer iscurrently facingfinancial problems

Norilsk Nickel ordered allfour ice-class vessels,which are currently in theOrderbook

Stena Redericontractedthe twoRoPaxvessels

Laeisz ordered 6 containervessels CS2800 in FY07.Financing still need to besecured for 4 of these vessels(150m)


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Additional steel capacity through a contract with Lubmin block factory to secureadditional vessel orders

41

Source: DR Ref. 8.11.2.2, Management presentation

Lubmin is a block factory situated in north-east Germany, close tothe shipyards of Wismar and Warnemnde. AYG and Lubmin

signed a contract effective 1 August 2006 concerning theassembly of ship sections. The initially agreed fixed phase runsfrom 1 July 2007 to 30 June 2009.

For the fixed delivery period, AYG is committed to call the contractvolume of 48,000t (24,000t p.a.) completed weight of the vesselparts.

The contracted yearly volume will be in 12 parts (vessel sections

up to 2,000t per section) and the guarantee for each deliveredsection starts with the date of acceptance until 13 months afterdelivery of the ship to the shipping company (maximum 18 monthsafter 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 of36.5 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 of20k per year and to call for 12,000t yearly.

AYG has to deliver complete detailed construction plans and isresponsible for equipment material. AYG is expected to put apermanent/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, thepenalty would amount to 1.0m p.a.

Workshop dimensions:

Length 430 metres Width 34.5 metres Height 30 metres

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


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Contingent liabilities derive from the business relation with Lubmin. Liquidated damagesof maximum 1.0m out of a frame purchase agreement and the obligations as surety ofloans taken by Lubmin amount to 16.7m as at 31 December 2007

AYG has taken over surety for acouple of loans of Lubmin with atotal nominal amount of17.0m.

As we understand specialwarranties in respect of thesureties given to third parties areincluded in draft SPA.

AYG has partnered withLubmin in order tosecure additional steelworking capacity.

42

AYG: Off-balance sheet obligations as of 31. Dec FY07

T yp e o f o blig at io n b en ef iciary Eff ective D at e Exp iry D at e Am ou

Documents

Bear Report 21032008