Annual report American Shipping Company ASA (AMSC) American Shipping Company owns and leases world-class quality vessels for operation between ports in the United States. AMSC is positioned to be the leading ship owner in the U.S. and will own the most modern product tanker fleet in the U.S. Jones Act market when the current series of twelve tankers is completed in 2011. In addition, the thirteen vessel option agreement with Aker Philadelphia Shipyard provides growth opportunities well beyond 2011. AMSC Timeline February 2007: Took delivery April 2005: Closed a ten ship of first product tanker, the bareboat charter agreement with Overseas Houston Overseas Shipholding Group, Inc. (OSG) February 2007: Obtained new USD 770 million credit facil- ity for permanent ownership financing for ten vessels 2005 June 2005: Aker American February 2007: Issued Shipping ASA (AKASA) estab- NOK 700 million bond. lished and listed on Oslo Stock Proceeds to be used for Exchange. Purchased the investments in vessels former Kvaerner Philadelphia and operations Shipyard. Aker ASA owns 53.2% of AKASA April 2005: Production June 2007: Took delivery began on first of ten of second product tanker, product tankers for OSG the Overseas Long Beach About us and our goals October 2007: Received April 2008: Took delivery order from OSG for two of fourth product tanker, the additional product tank- Overseas New York ers, which will be con- verted into the first U.S. built shuttle tankers for December 2007: Split of operation in the U.S. Gulf Aker American Shipping’s of Mexico ship owning operations from its ship building operations. Aker American Shipping sold Aker Philadelphia Shipyard (AKPS). AKPS listed as a September 2008: Took separate company on Oslo delivery of the fifth product Exchange tanker, the Overseas Texas City November 2008: The sixth product tanker launched, with delivery in February 2009 June 2008: Aker ASA reduced its ownership interest, as planned, to 19.9% from 53.2% due to U.S. Jones Act restrictions which would limit its further ambition for developing maritime business outside the U.S. November 2007: Took delivery of third product tanker, As a result, name changed from Aker the Overseas Los Angeles American Shipping ASA to American Shipping Company ASA. Trading tick- er symbol also changed from AKASA to AMSC American Shipping Company annual report 2008 3 About us and our goals Contents n About us and our goals 5 Key figures 2008 2008 7 Goals and strategies 8 Letter from the President and CEO n Our business 11 American Shipping Company 16 Our values 18 Corporate responsibility n Our performance 22 Board of Directors’ report 26 Group accounts 48 Parent company accounts Fourth and fifth product tankers delivered on time and on long-term charter. 55 Auditors’ report The Overseas New York and the Overseas Texas 57 Share and shareholder information City were delivered in April and September 2008, respectively and are on long-term charters to OSG. n Our organization and governance They join the Overseas Houston, Overseas Long Beach and Overseas Los Angeles in successful operation in 60 Corporate governance the U.S. Jones Act. 64 Board of Directors 65 Management team Name change and ticker symbol change. Key events With the reduction of Aker ASA’s majority 66 Addresses ownership position, the company was renamed to American Shipping Company ASA and its trading symbol on the Oslo Stock Exchange changed to “AMSC”. Long-term focus on emerging shuttle tanker market. Extensive resources have been committed and col- laborative efforts were held with a major oil company. Studies and analysis show strong potential for this new, exciting market segment. Financial Calendar 2009 03 April Annual General Meeting 2009 22 April 1st quarter interim results 2009 05 August 2nd quarter interim results 2009 22 October 3rd quarter interim results 2009 (Dates subject to change) 4 American Shipping Company annual report 2008 About us and our goals Profit and loss items 2008 2007 Operating revenues USD million 33.3 12.7 EBITDA USD million 27.9 10.9 EBITDA margin Percent 83.6% 85.8% Loss for the year USD million (74.7) (35.9) (1) 2008 Cash flow 2008 2007 Cash flow from operating activities USD million (15.5) 33.2 (2) Cash and cash equivalents as of 31 Dec USD million 71.8 151.9 Balance sheet 2008 2007 Interest bearing debt USD million 504.4 371.0 Equity USD million 101.0 155.7 Total assets USD million 714.1 573.0 Equity ratio Percent 14.1% 27.2% The AMSC share 2008 2007 Share price as of 31 December Norwegian Kroner 33.5 125.5 Dividend per share Norwegian Kroner - - 1) Including unrealized loss on interest swap hedge of USD 66.1 million in 2008 and USD 34.5 million in 2007 and gain on sale of Aker Philadelphia Shipyard of USD 8.2 million in 2007 2) Cash flow from continuing operating activities (e.g. excluding Aker Philadelphia Shipyard) Key figures Key figures Revenues Amount in in USD USD millions millions Overseas Houston Houston 35 Overseas Long Long Beach Beach Overseas Los Los Angeles Angeles 30 Overseas New New York York 25 Overseas Texas Texas City City 20 15 10 5 0 2007 2008 American Shipping Company annual report 2008 5 About us and our goals <cmd+shift+click> The preferred partner 6 American Shipping Company annual report 2008 About us and our goals Goals and strategies Goals and Strategies To be the preferred ship owning and leasing partner to the U.S. Jones Act market Be the major, most profitable vessel owning and leasing company in the Jones Act market n Leverage our close relationship with Aker Philadelphia Shipyard by working closely to develop new vessel designs to offer the Jones Act market and by maintaining open communication on all issues relating to ship construction in a collaborative partnering approach n Expand our partnership with OSG within the product tanker market by exploring additional product tanker opportunities together and working to ensure that maximum value is gained from each of the time charters and the profit sharing arrangements n Maintain stringent controls on all costs associated with the management of AMSC Have the newest, safest and most modern and operationally friendly fleet n Continue to seek improvements in the design and operation of our vessels in a manner that will ensure the safest, highest quality and most environmentally friendly fleet Pursue new business opportunities in the Jones Act market n Capture additional shuttle tanker opportunities by developing a comprehensive and compelling business case for the emerging shuttle tanker market in the U.S. Gulf of Mexico and undertake an aggressive marketing effort focused on companies actively engaged in the development of producing deep water fields in the region n Work with Aker Philadelphia Shipyard and the oil majors to develop the next generation vessel designs that will fully meet the requirements for these conditions and pursue market-wide leasing opportunities with end- users of these vessels n Capture other Jones Act business including barges, ATB’s, short-sea shipping and container vessel opportunities n Explore opportunities to participate in the operation of Jones Act vessels Explore and invest in value creation opportunities for our shareholders n Continue to focus our efforts on value creation opportunities in the Jones Act market and position ourselves to take advantage of these opportunities n Continue to develop close relationships with the oil majors with business in the deep water U.S. Gulf of Mexico American Shipping Company annual report 2008 7 About us and our goals Letter from the President and CEO 8 American Shipping Company annual report 2008 About us and our goals Letter from the President and CEO Facing Today’s Challenges, But Focused On The Future This past year was one characterized by some our ability to obtain financing, on reasonable to recover sometime in 2009 due to a slowly significant achievements as well as a number commercial terms, is certainly one of the key improving economy and oil company refin- of challenges. The good news is that Ameri- factors in achieving our growth plans. ery expansions that will occur over the next can Shipping Company ASA (AMSC) contin- With respect to our financials, while our several years, our view is that rates for mod- ues to grow and now owns one of the larg- quarterly and annual revenue figures were in ern vessels will firm and additional new build- est, most modern product tanker fleets in the line with internal forecasts, our quarterly and ings will be needed. Thus, although we have U.S. Jones Act market. This commitment to annual EBITDA figures were below internal not been able to exercise any of our thirteen growth, coupled with our unique partnership forecasts due to higher than expected S,G&A options to date, we still strongly believe in the with Aker Philadelphia Shipyard ASA (AKPS) costs. S,G&A costs were significantly higher long-term value of these options. and our dedicated management team, is why than expected due to increased third party Despite the dramatic reduction in the price AMSC is clearly becoming the preferred ship- legal and consulting costs incurred in con- of crude oil over the second half of 2008, our ping partner to the U.S. Jones Act Market. junction with our ongoing “exclusivity” arbi- belief is that the deepwater Gulf of Mexico On the positive side, the company took tration with OSG. We expect that our legal will continue to be explored and developed, delivery of an additional two product tank- and consulting costs will return to normal lev- and that U.S.