NOTE F – EMPLOYEE BENEFIT PLANS

Pension and Postretirement Benefits

We maintain a defined benefit pension plan (the “Retirement Plan”) for employees hired prior to September 1, 2006, and all such employees of our domestic subsidiaries who are not covered by union sponsored plans may participate after one year of service. Employees hired on or after September 1, 2006 with at least one year of service as of June 30, 2008, are eligible to participate in the Cash Balance Plan as of July 1, 2008. Computation of benefits payable under the defined pension plan is based on years of service, up to thirty years, and the employee's highest sixty consecutive months of compensation, which is defined as the participant's base salary plus overtime (excluding incentive pay), bonuses or other extra compensation, in whatever form. Our funding policy is based on minimum contributions required under ERISA as determined through an actuarial computation. Retirement Plan assets consist primarily of investments in equity and fixed income mutual funds and money market holdings. The target asset allocation range is 40% in fixed income investments and 60% in equity investments. The asset allocation on December 31, 2011 was 40%, or $10,220,000, in fixed income investments and 60%, or $15,425,000, in equity investments. The asset allocation on December 31, 2010 was 42.74%, or $10,688,000, in fixed income investments and 57.26%, or $14,319,000, in equity investments. The plan's prohibited investments include selling short, commodities and futures, letter stock, unregistered securities, options, margin transactions, derivatives, leveraged securities, and International Shipholding Corporation securities. The plan's diversification strategy includes limiting equity securities in any single industry to 25% of the equity portfolio fair value, limiting the equity holdings in any single corporation to 10% of the fair value of the equity portfolio, and diversifying the fixed income portfolio so that no one issuer comprises more than 10% of the aggregate fixed income portfolio, except for issues of the U.S. Treasury or other Federal Agencies. The plan's assumed future returns are based primarily on the asset allocation and on the historic returns for the plan's asset classes determined from both actual plan returns and, over longer time periods, market returns for those asset classes. As of December 31, 2011, the plan has assets of $25,645,000 and a projected pension obligation of $32,496,000, and as of December 31, 2010, the plan had assets of $25,007,000 and a projected pension obligation of $27,473,000. The increase in the unfunded portion in 2011 was due to the discount rate dropping in the market from 5.5% to 4.5%.

Our postretirement benefit plans currently provide medical, dental, and life insurance benefits to eligible retired employees and their eligible dependents.

The following tables summarize our financial assets measured at fair value on a recurring basis as of December 31, 2011 and 2010, respectively, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, as defined in Note V.

December 31, 2011

(Amounts in thousands)	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

Cash Equivalents
Money Market Funds	$	418	$	-	$	-	$	418

Equities
Domestic Equity Mutual Funds	$	12,372	$	-	$	-	$	12,372
International Equity Mutual Funds	$	3,053	$	-	$	-	$	3,053

Fixed Income
Taxable Fixed Income Funds	$	9,802	$	-	$	-	$	9,802

Total Assets at Fair Value	$	25,645	$	-	$	-	$	25,645

December 31, 2010

(Amounts in thousands)	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

Cash Equivalents
Money Market Funds	$	391	$	-	$	-	$	391

Equities
Domestic Equity Mutual Funds	$	10,801	$	-	$	-	$	10,801
International Equity Mutual Funds	$	3,518	$	-	$	-	$	3,518

Fixed Income
Taxable Fixed Income Funds	$	10,297	$	-	$	-	$	10,297

Total Assets at Fair Value	$	25,007	$	-	$	-	$	25,007

The following table sets forth the two plans' changes in the benefit obligations and fair value of assets and a statement of the funded status:

(Amounts in thousands)	Retirement Plan		Postretirement Benefits
	Year Ended December 31,		Year Ended December 31,
	2011	2010	2011	2010
Change in Benefit Obligation
Benefit Obligation at Beginning of Year	$ 27,473	$ 25,432	$ 10,729	$ 6,863
Service Cost	542	477	41	76
Interest Cost	1,496	1,470	565	586
Actuarial Loss	4,304	1,377	1,060	3,753
Benefits Paid and Expected Expenses	(1,319)	(1,283)	(534)	(599)
Medicare Part D Reimbursements	-	-	37	50
Benefit Obligation at End of Year	$ 32,496	$ 27,473	$ 11,898	$ 10,729

Change in Plan Assets
Fair Value of Plan Assets at Beginning of Year	$ 25,007	$ 22,473	$ -	$ -
Actual Return on Plan Assets	731	2,867	-	-
Employer Contribution	1,226	950	497	549
Benefits Paid and Actual Expenses	(1,319)	(1,283)	(534)	(599)
Medicare Part D reimbursements	-	-	37	50
Fair Value of Plan Assets at End of Year	$ 25,645	$ 25,007	$ -	$ -

Funded Status	$ (6,851)	$ (2,466)	$ (11,898)	$ (10,729)

Key Assumptions
Discount Rate	4.50%	5.50%	4.50%	5.50%
Rate of Compensation Increase	4.50%	4.50%	N/A	N/A

The accumulated benefit obligation for the pension plan was $29,420,000 and $25,117,000 at December 31, 2011 and 2010, respectively.

The following table shows amounts recognized in accumulated other comprehensive income (loss):

(Amounts in thousands)	Retirement Plan		Postretirement Benefits
	Year Ended December 31,		Year Ended December 31,
	2011	2010	2011	2010
Prior Service Cost	$ 22	$ 26	$ 43	$ 55
Net Loss	(11,467)	(6,368)	(4,587)	(3,741)
Change in Other Comprehensive Income (Loss)	$ (11,445)	$ (6,342)	$ (4,544)	$ (3,686)

The following table provides the components of net periodic benefit cost for the plans:

(Amounts in thousands)	Retirement Plan			Postretirement Benefits
	Year Ended December 31,			Year Ended December 31,
	2011	2010	2009	2011	2010	2009
Components of Net Periodic Benefit Cost
Service Cost	$ 542	$ 477	$ 468	$ 41	$ 76	$ 16
Interest Cost	1,496	1,470	1,481	565	586	416
Expected Return on Plan Assets	(1,907)	(1,706)	(1,426)	-	-	-
Amortization of Prior Service Cost	(3)	(3)	(3)	(11)	(11)	(11)
Amortization of Net Actuarial Loss	380	342	409	213	198	(16)
Net Periodic Benefit Cost	$ 508	$ 580	$ 929	$ 808	$ 849	$ 405

The assumptions used in the measurement of net pension cost are shown in the following table:

Key Assumptions	2011	2010	2009	2011	2010	2009
Discount Rate	5.50%	6.00%	6.75%	5.50%	6.00%	6.00%
Expected Return on Plan Assets	7.75%	7.75%	7.75%	N/A	N/A	N/A
Rate of Compensation Increase	4.50%	4.50%	4.50%	N/A	N/A	N/A

For measurement purposes, the health cost trend was assumed to be 7.8% and the dental care cost trend rate was assumed to be 5.0% in 2011-2067. The health care cost trend will decrease by 0.5% in 2012, 0.4% in 2013 and 0.5% in 2014-2016. The health cost and dental care cost trends above are the same for employees over 65. A one percent change in the assumed health care cost trend rates would have the following effects:

(Amounts in thousands)	1% Increase	1% Decrease
Change in total service and interest cost components
for the year ended December 31, 2011	$67	($56)
Change in postretirement benefit obligation as of December 31, 2011	$1,483	($1,237)

The following table provides the expected future benefit payments as of December 31, 2011:

(Amounts in thousands)
Fiscal Year Beginning	Retirement Plan	Postretirement Benefits
2012	$ 1,474	$ 675
2013	$ 1,558	$ 688
2014	$ 1,639	$ 687
2015	$ 1,662	$ 677
2016	$ 1,753	$ 675
2017-2021	$ 9,935	$ 3,525

We continue to evaluate ways in which we can better manage these benefits and control the costs. Any changes in the plans or revisions to assumptions that affect the amount of expected future benefits may have a significant effect on the amount of the reported obligation and annual expense.

In December of 2003, the Medicare Prescription Drug, Improvements, and Modernization Act of 2003 (“Act”) was signed into law. In addition to including numerous other provisions that have potential effects on an employer's retiree health plan, the Act includes a special subsidy beginning in 2006 for employers that sponsor retiree health plans with prescription drug benefits that are at least as favorable as the new Medicare Part D benefit. We have determined that our plan is actuarially equivalent and as such we qualify for this special subsidy. The law resulted in a decrease in our annual net periodic benefit cost.

In early 2010, Congress passed and the President signed into law the Health Care and Education Affordability Reconciliation Act of 2010. Based on our review and evaluation of the law, we do not believe the impact on our postretirement benefits will be material to us at this time.

Union Plans

In September 2011, the FASB issued guidance for disclosures of multi-employer pension and other postretirement benefit plans. The guidance requires an employer to provide additional quantitative and qualitative disclosures for these plans. The disclosures provide users with more detailed information about an employer's involvement in multi-employer pension plans. We adopted this guidance during 2011 and applied the requirements retrospectively for all periods presented.

Crew members on our U.S. Flag vessels belong to union-sponsored, multi-employer pension plans. We contributed approximately $3,548,000, $3,526,000, and $3,184,000 to these plans for the years ended December 31, 2011, 2010, and 2009, respectively. These contributions are in accordance with provisions of negotiated labor contracts and generally are based on the amount of straight pay received by the union members. The MM&P plan for Waterman was the only plan whose contributions exceeded 5% of the total plan contributions. Information from the plans' administrators can be found in the table below:

Plan			Company		EIN	Pension Protection Act Zone Status	FIP/RP Status Pending/Implemented (5)	Contribution Amount (In Thousands)			Surcharge Imposed	Expiration Date
								2011	2010	2009
MM&P		(1)	WSC	13-100310		Green	Yes	$ 1,297	$1,299	$ 1,153	No	9/30/2015
			SCI					$ 280	$ 279	$ 241		6/30/2017
			CGL					$ 1,029	$1,004	$ 868		9/30/2015 & 6/30/2017
MEBA	(2)		WSC	51-029896		Green	No	$ 408	$ 413	$ 410	No	9/30/2015
			SCI					$ 62	$ 61	$ 59		6/30/2017
			CGL					$ 237	$ 230	$ 221		9/30/2015 & 6/30/2017
ARA	(3)		WSC	13-161999		Green	No	$ 20	$ 29	$ 28	No	*
			CGL					$ 51	$ 49	$ 48		9/30/15 & 6/30/17
SPP	(4)		WSC	13-100329		Green	No	$ 61	$ 60	$ 59	No	12/31/2011
			SCI					$ 18	$ 17	$ 17		6/30/2017
			CGL					$ 85	$ 85	$ 80		12/31/2011 & 6/30/2017

			Total Contributions					$ 3,548	$3,526	$ 3,184

			(1)	Masters, Mates & Pilots Pension Plan
			(2)	MEBA Pension Trust
			(3)	American Radio Association Pension Trust
			(4)	Seafarers Pension Plan
			(5)	Financial Improvement Plan/Rehabilitation Plan
			*	In full force and effect until otherwise noted

Of the above mentioned plans, only the Masters, Mates & Pilots Pension Plan is in critical status for the plan year. Because of this, the Trustees and collective bargaining parties adopted a financial improvement/rehabilitation plan.

401(k) Savings Plan

We provide a 401(k) tax-deferred savings plan to all full-time employees. The plan is a defined contribution plan established under the provisions of Section 401(a) of the Internal Revenue Code (the Code) and covers eligible employees of the Company and our domestic subsidiaries. Employees become eligible to participate in the plan on the first day of the calendar month following their date of hire. Effective July 1, 2008, a participant must be age 21 to participate in the plan. The plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). We match 50% of the employee's first $2,000 contributed to the plan annually. We contributed $102,000, $96,000 and $105,000 to the plan for the years ended December 31, 2011, 2010 and 2009, respectively.

Stock Incentive Plan

In April 2011, the stockholders of International Shipholding Corporation approved the International Shipholding Corporation 2011 Stock Incentive Plan (the “Plan”). The compensation committee of the board of directors of the Company will generally administer the Plan, and has the authority to grant awards under the Plan, including setting the terms of the awards. Incentives under the Plan may be granted in any one or a combination of the following forms: incentive stock options under Section 422 of the Internal Revenue Code, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards.

A total of 400,000 shares of the Company's common stock are authorized to be issued under the Plan with 394,288 shares available to be issued. The Company has no other equity compensation plan with shares available for issuance. Officers, directors, and key employees of the Company and the Company's consultants and advisors will be eligible to receive incentives under the Plan when designated by the compensation committee as Plan participants. (See Note T – Stock-Based Compensation).

Life Insurance

We have agreements with the two former Chairmen of the Company whereby their estates or designated beneficiaries will be paid approximately $822,000 and $627,000, respectively, upon death. We reserved amounts to fund a portion of these death benefits, which amount to $822,000 at December 31, 2011 and 2010 and $433,000, and $410,000 at December 31, 2011 and 2010, respectively.