Swedish sea captains Contents 77th year of operations

Sweden’s first official training: a mate’s certifi cate was key figures ______2 educational institution for seamen, required for admission to the sea the Mates’ School in Stockholm, was captain’s class, a pass as second engineer presentation ______3 established on 4 June 1658, following was needed for a fi rst engineer’s class a royal letter of command. For many and so on. The tuition lasted for seven years it was the only one, but later it to nine months. However, skippers and comments by the chairman was joined by the ‘lower navigational third engineers made do with three. and the managing director ___ 4 institutions’ in Visby and Karlshamn. The navigation schools became naval The next royal letter on the subject command schools, were converted to market review ______4 did not come until 7 April 1841, when university college level education in 1980 special navigation schools were set up and were whittled down to two loca- summary of income statements in Stockholm, Gothenburg, Gävle, tions, Kalmar and Gothenburg. Today and balance sheets ______6 Malmö and Kalmar. Härnösand, Visby, an aspiring sea captain combines the Karlshamn, Västervik and Strömstad usual technology and seamanship with were added later. leadership. The tuition extends over administration report ______7 In 1911 the Swedish Parliament four years of study, three in classrooms, reduced the number of schools to the on simulators and on exercise ships, income statement ______8 original fi ve. Engineer training was and one practical year on commercial introduced into the navigation schools vessels. It consists of three principal at the same time, meeting a need which areas: ship propulsion, shipbuilding and balance sheet ______9 had long been felt by the maritime cargo handling and ship and shipping industry. The two parts, Navigation company organisation. The broadened capital adequacy ratio ______10 and Engineer, were each divided into syllabus today, in addition to naviga- three classes: sea captain, mate and skip- tion, seamanship and shipbuilding, also per and fi rst, second and third engineer includes radar, machinery and cargo cash flow analysis ______10 respectively. Eleven subjects were taught handling, as well as labour law, the at the schools, including mathematics, law of the sea and economics. A pass notes ______11-14 physics/mechanics, astronomical and in training as a sea captain in Sweden terrestrial navigation, shipbuilding, gives entitlement to command all types accounting and valuation mechanical engineering and seamanship. of ships anywhere in the world. In other principles ______15 The requirements for admission to a words, someone with a sea captain’s navigation school were an ability to read certifi cate in his pocket is well suited to and write, but also service at sea. A pass any of the professions related to auditors’ report ______15 in the class below was also required to shipping, both at sea and on the shore, be allowed to proceed to further at home and abroad. board of directors ______16 Key Figures

Swedish Ships’ Mortgage Bank ghghghgh2004 2003 2002 2001 2000 hghghghg Operating income, msek ghghghgh63.5 64.2 68.1 58.3 51.5 hghghghg Balance sheet total, msek 7,236.0 5,639.9 5,849.3 5,417.2 3,944.4 ghghghgh Reserve fund, msek hghghghg1,139.1 1,075.6 1,011.4 943.3 885.0 ghghghgh Profit level, per cent 1.0 1.1 1.2 1.3 1.4 hghghghg Return on equity, per cent ghghghgh5.9 6.3 7.2 6.6 6.2 hghghghg Solidity, per cent 15.7 19.1 17.3 17.4 22.4 ghghghgh Capital adequacy ratio, per cent hghghghg18.1 22.5 20.2 21.2 25.1 ghghghgh Number of employees 8 8 9 9 9 hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg

The photographer on the Vega Captain Louis Palander, 1842–1920

In 1868 he took part in the Spitzbergen prior to the expedition, and personally selected the expedition under the command of Baron von Otter, officers and crew. The expedition ship Vega was and in 1872 in Nordenskiöld’s attempt to reach the built in Bremerhaven as a whaler for Arctic waters. North Pole. So it was an experienced seaman and She was barque-rigged, had three masts, was 43 Louis Palander was born in Karlskrona polar explorer whom Nordenskiöld chose to take metres long and had a 60 horse-power steam in October 1842 and became a cadet at the age command of the steamer Vega for the 1878 attempt engine. With all the equipment the Vega had on of 14. Eight years later he became an officer in the to find the North-East Passage. Success in this board, it was realized that she was barely able to Swedish Royal Navy and went on the expeditions venture led to Louis Palander adding af Vega to his hold the coal needed to cope with the North-East of the corvette Gefle to the Mediterranean, Sierra name in 1880. Passage. Leone and Liberia. Palander was responsible for converting the Vega A smaller steamer, named the Lena after her first

2 Swedish Ships’ Mortgage Bank – presentation

The Swedish Ships’ Mortgage Bank (the Bank) was Loans must be secured through balances with or guarantees established in 1929, with the task of facilitating the financing from banks or the State or collateral in ships. The collateral must of Swedish ship­owners, and contributing to the rejuvenation fall within 70 % of the value of the ship as estimated by the Bank of the Swedish merchant fleet. (in special cases 80 %). Today, the Bank can also finance foreign-owned shipp­ing Loans are provided in foreign or Swedish currency and with operations if there is a significant Swedish interest or influence. floating or fixed interest rates at the option of the borrower. The Bank does business on purely commercial terms, and in Interest rates are determined individually. competition with other credit institutions. Operations are financed primarily through promissory note Operations are governed by the Swedish Ships’ Mortgage loans. Borrowing is in principle subject to the same terms as Bank Act (SFS 1980:1097). The most recent amendment came lending with regard to currencies and fixed interest terms. into force on 1 July 1998 (SFS 1998:310). loans to smaller shipping companies the bank is subject to public law In certain cases, loans of up to 90 % of the vessel’s value can The Swedish State has provided a guarantee for the Bank’s be provided under the terms of a special ordinance. Preference operations. This guarantee amounts to MSEK 350. The Bank’s will be given to smaller shipping companies. reserve fund (currently MSEK 1,139) and the Swedish State guarantee are to be used to cover any losses. board for shipping support The Bank’s registered office is in Gothenburg. The Board The government has instructed the Board for Shipping Sup- – which consists of 7 Members and 7 Deputy Members – port to administer approved subsidies to Swedish shipping. The is appointed by the government.The term of loans may be up to Bank’s personnel also run the day-to-day operations of the Board 15 years. The Bank principally provides long-term loans against for Shipping Support. the security of Swedish or foreign ships.

The crew of the Vega Enantschin The chieftain Menka Ankoklovsiak

destination, was therefore built. She accompanied which necessitated an entire travelling laboratory. the Vega to the mouth of the River Lena, where she Excellent results were achieved, with several unique replenished the Vega’s coal supplies for the onward pictures from the long over-winter stay at Pitlekaj. journey. These tell us about the scientists on the expedition, On his expedition to Spitzbergen in 1864, the crew and the local fauna, but most importantly Nordenskiöld had experimented with the new wet- and most excitingly about the local Chukcher ethnic plate photographic technique. Palander too was group. an enthusiastic amateur photographer. He took When Palander took command of the Vega, he some 60 pictures using the wet-plate technique was a lieutenant. Later he become both an admiral during the Vega’s voyage, a complicated procedure and a minister of naval affairs.

3 Comments by the chairman and the managing director

2004 was one of the Swedish Ships’ An unchanged number of employees The work of the Board is running Mortgage Bank’s best years, although took the greatly increased volume in smoothly and co-operation with the profit was marginally down. Out­standing their stride, with a high level of skill and Managing Director is excellent. The loans increased by 33 per cent, from precision. Productivity is therefore very Board has begun an assessment of its MSEK 4,610 to MSEK 6,125. We granted good and profit per employee is high. own efficiency and has been prompted loans amounting to MSEK 2,200 and The shipbuilding industry is enjoying to add greater depth to its work for the paid out MSEK 1,882. We did not have good times and is investing for the future. benefit of the Bank. any credit losses or doubtful credits. We are holding onto our market share of The reserve fund increased to MSEK around 18 per cent and are competing by Pehr G Gyllenhammar 1,139.Profit was maintained despite a offering a high level of service and good Chairman decline in interest income and a weak terms. Our solidity and capital adequacy dollar, which resulted in lower margins on ratio are both satisfactory, and permit Birgitta Wickenberg Karlsson Managing Director dollar loans converted to Swedish kronor. substantial continued expansion.

Market Review

value of the country’s foreign trade was in excess of 1,000 billion US dollars. World transport needs are changing rapidly as the economies in the Far East grow. Most of what is shipped from Asia is also relatively immune to economic downturns in the West, as it largely consists of relatively cheap goods which, Birgitta Wickenberg in addition, are necessary for people’s Karlsson next to the everyday existence. Container shipping is Swedish America now in a period of rapid growth. Although Line’s Gripsholm. the volume of deliveries of new ships last 2004 was notable for good cargo almost all segments. The development of year was relatively normal, 175 ships with markets, record order books at the logistics in the industry is also making a a total of just under 640,000 TEU, almost shipyards and high ship values. Many contribution. Low warehousing capacity 500 ships were ordered with a total cargo shipping companies and shipyards have, on shore is increasing the role of shipping capacity of over 1.6 million TEU. Good however, been adversely affected by a as ”floating warehouses”, alongside freight rates due to strong demand have low dollar exchange rate, and the high its traditional transport task. China is also had an impact on the breaking-up of price of steel means that several yards will obviously instrumental in driving this old vessels, and last year only five container report a loss for 2004. Growing world growth. In 2004, Chinese GDP grew by vessels with a total of less than 4,000 TEU trade has generally meant a steady increase around nine per cent. Exports and imports were sold to scrapping yards. The fleet of in demand for maritime transport in both grew by around 35 per cent, and the container vessels is very young, with an

4 average age of just under 12 years. for larger coastal tonnage were EUR On the dry-cargo side, the maritime 4,500 to 7,500.The world’s shipyards have transport market grew by five per cent, very full order books. There was intense and growth in the fleet was not sufficient activity in the market last year. The total to meet demand, with the result that 2004 value of world orders exceeded 4,000 ves- was a very good year for this segment. For sels before the turn of the year, and total the largest vessels, Capesize, average daily deadweight is in excess of 220 million net revenue was around USD 60,000, tonnes. Tankers and dry-cargo vessels ac- almost twice as high as in the previous count for around 70 per cent of the total year. A large number of dry-cargo ships order book, measured in deadweight. are being built, and orders have been at a The shipyards in Asia have full order last year, and at the turn of the year there high level, particularly for the largest units. books for three to four years ahead, and at were more than 50 confirmed orders from Around 200 Capesize ships are on order, the turn of the year there was already an Swedish shipping companies. Most of the which is equivalent to just over 30 per cent order for a bulk-cargo vessel for delivery orders relate to tankers, but ships on order of the existing fleet. No ship in this size in 2010. The highest rate of growth of all also include car carriers, roro vessels and class (over 80,000 tonnes deadweight) was is in orders for gas tankers. The European ropax vessels. At the turn of the year Stena scrapped last year. shipyards are contending with disadvanta- group had 16 vessels on order, Broström 6 2004 was also a good year for the tanker ges relating to costs and productivity, and vessels and Wallenius Lines 6 vessels. The companies, although profits for many of here the picture is more varied. More than most important shipbuilding partner for them were adversely affected by the low 90 per cent of world orders are at ship­ Sweden is China, which has 17 ships on dollar exchange rate. Growing Russian oil yards in Asia. Japan is the world’s largest order, followed by Croatia with 14. This exports and low stock-holding are having shipbuilding nation in terms of the number means that Swedish shipowners at the turn a great impact on tanker shipping. The of vessels (1,080) but also in deadweight of the year accounted for almost 20 per end of the year was notable for sharp rises (80 million tonnes). However, in terms cent of orders at Croatian yards in terms of in freight rates in all segments. At the of compensated gross tonnage, South the number of ships and almost a quarter turn of the year there were around 1,000 Korea is larger. China is the world’s third in deadweight. tankers on order at the world’s shipyards, largest shipbuilding nation, and Chinese The Swedish merchant fleet consisted of equivalent to nearly a third of the existing shipyards had 760 vessels on order at the just over 400 vessels with total deadweight fleet. At the same time it is tankers that are turn of the year. In Europe, Croatia is the of 7.0 million tonnes at the turn of the year. dominating the scrap market, as a result of largest shipbuilding country, followed by A total of 22 vessels with 0.9 million tonnes the regulations which require single-hulled Germany, Poland, the Netherlands and deadweight were delivered from shipyards vessels to be phased out. Around 1,000 of Turkey. The shipbuilding market in 2004 to Swedish shipping companies last year. the tankers in the world merchant fleet are was notable for sharply increased prices The trend observed in 2003 continued ice strengthened, and there are another due to the high level of demand and sharp for the merchant fleet sailing under the 250 on order. Of these, 150 are being built increases in steel prices. Prices in most ship Swedish flag. Older and smaller vessels are to ice class 1A or 1A Super. The increasing segments rose by more than 30 per cent being sold abroad and replaced by newly demand for tonnage to carry Russian oil during the year compared with the previ- built larger units. This means that the fleet has meant that ever larger tankers are ice ous year. In comparison with the price level is undergoing a necessary rejuvenation. strengthened. EU enlargement has meant at the turn of the century, the difference in The merchant fleet sailing under the increasing trade and traffic in the Baltic some cases is more than 75 per cent. Prices Swedish flag amounted to around 240 Sea. Smaller bulk tonnage also had a good can be expected to continue to rise, and vessels with 2.0 million tonnes deadweight year in waters close to Sweden, with a many shipyards which are reporting losses at the turn of the year. sharp upturn in the last few months of the for 2004 due to rising costs will probably year. Daily net revenue for 3,000—4,000 be able to reverse this within the next few Birgitta Wickenberg Karlsson Managing Director tonners was between EUR 3,000 and years. 5,500 during the year. Equivalent figures The Swedish order book also grew

5 Summary of income statements and balance sheets

income statement, sek thousandsghghghgh 2004 2003 2002 2001 2000 hghghghg Net interest income ghghghgh75,054 76,265 80,037 71,901 59,958 Other operating income hghghghg— — — — 3,968 ghghghgh General administrative costs hghghghg–8,761 –8,588 –7,920 –7,972 –6,753 Guarantee fund fee paid to the state ghghghgh–2,625 –3,237 –3,850 –5,330 –5,330 hghghghg Inventory depreciation ghghghgh–29 –47 –53 –142 –216 Other operating expenses hghghghg–166 –205 –135 –137 –136 ghghghgh Surplus for the year hghghghg63,473 64,188 68,079 58,320 51,491 ghghghgh balance sheet, sek thousands hghghghg ghghghgh ghghghgh hghghghg assets hghghghg ghghghgh ghghghgh hghghghg Liquid assets hghghghg4,805 5,897 2,857 3,747 3,450 ghghghgh Interest-bearing securities ghghghgh hghghghg hghghghg ghghghgh short-term investments ghghghgh213,978 479,911 205,817 169,578 208,979 hghghghg long-term investments hghghghg843,283 501,931 700,336 650,791 542,978 ghghghgh ghghghgh Lending to shipping companies hghghghg6,124,830 4,609,445 4,895,887 4,539,655 3,123,799 hghghghg ghghghgh Other assets ghghghgh49,068 42,689 44,382 53,431 65,212 hghghghg hghghghg ghghghgh ghghghgh7,235,964 5,639,873 5,849,279 5,417,202 3,944,418 hghghghg hghghghg liabilities and equity ghghghgh ghghghgh Promissory note loans hghghghg6,078,147 4,550,253 4,821,559 4,450,592 3,025,146 hghghghg ghghghgh Other liabilities ghghghgh18,752 14,028 16,316 23,285 34,267 hghghghg hghghghg Reserve fund ghghghgh1,139,065 1,075,592 1,011,404 943,325 885,005 ghghghgh hghghghg hghghghg ghghghgh7,235,964 5,639,873 5,849,279 5,417,202 3,944,418 ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg A veteranhghghghg of coastal voyages Captain Johannesghghghgh Olsson-Bolvig, 1830–1902 hghghghg ghghghgh hghghghg During constant voyages, under the command visible and always at his post. The ship was steered ghghghgh of his father, he came to know the coast better than with a firm hand. Captain Bolvig served dutifully hghghghg mostghghghgh people. He later became a helmsman on the in all weathers for several decades, from the time paddleshiphghghghg Strömstad and then also on the coastal when the vessel was delivered up to Christmas 1901, Johannes Olsson-Bolvig was born steamerghghghgh Eugenia. When its successor the Albert when he left his post because of ill health. Age took in 1830 at Korsnäs, Tjärnö. While still a boy, he Ehrensvärdhghghghg entered service, Bolvig was on the bridge. its toll, and in May 1902 his long voyage through started serving on his father’s yacht which plied the Butghghghgh it is from his long period on the steamer the life came to an end. coast between Gothenburg and Strömstad. Oscarhghghghg Dickson that Bolvig is best known, always On a familiar photograph of Captain Bolvig we ghghghgh 6 hghghghg Administration Report the board of directors of the swedish ships’ mortgage bank hereby submits its report on its administration during 2004.

During the year, the Bank disbursed loans amounting ensures that the Bank’s loan portfolio is well distributed between to SEK 1,882 million (preceding year SEK 885 million). Total different types of ships. outstanding loan receivable at the year-end amounted to SEK The personnel of the Bank consisted of the Managing 5,281 million (SEK 4,029 million) at current exchange rates. Director and 7.0 (7.0) employees. On the instructions of the Loans granted by the Board, but not yet disbursed, amounted government, the Bank’s personnel also handle the day-to-day to approximately SEK 600 million (SEK 900 million) at the end operations of the Board for Shipping Support. of the year. The loans will be disbursed during 2005–2007 when The result of the Bank’s operations during the year and its the vessels for which the loans have been granted are delivered. position at year-end are shown in the following Income State- The Bank’s operations have generated a surplus of SEK 63 ment and Balance Sheet. million (SEK 64 million). The low interest rates prevailing in the capital market have meant a low rate of return on the securities portfolio. The falling exchange rate of the US dollar has also had an adverse impact on net interest income. Profit in relation to the average balance sheet total amounted to 1.0 per cent (1.1). No credit losses have occurred. The Bank does not have any doubtful credits or credits with interest remis- sion at the balance sheet date. Return on equity was 5.9 per cent (6.3) and the Bank’s solidity was 15.7 per cent (19.1). Capital adequacy ratio was 18.1 per cent (22.5). Growth in operations has meant that solidity and capital adequacy ratio have fallen. However, the balance sheet remains strong and permits expansion. The surplus for the year of SEK 63 million was allocated to the reserve fund, which subsequently amounts to SEK 1,139 million. On 20 December 1994, the Swedish Parliament passed a new Act concerning capital adequacy ratios and major risk exposures of credit institutions and investment companies. Under this Act, the Bank is exempt from the provisions relating to the limitation of major exposures, but remains subject to the provisions on capital adequacy ratios. The Board naturally follows an internal policy relating to major risk exposures. Besides the Board

can see two medals which he wears proudly on his The S/S Oscar Dickson was built at Lindholmen chest. He received one of these from King Oscar. As Mekaniska Verkstad in 1876, with a length of a passenger, the king had attached himself to Bolvig. 43 metres and a beam of 6.5 metres. The vessel The security Bolvig provided, without doubt coupled collided with the S/S Alpha in the Oslofjord in with a sense of duty, was rewarded with a silver 1927. After being salvaged, repaired and re- medal. He was also rewarded with another medal by named the Oslo, she re-entered service. the company Ångbåts AB Bohuslänska Kusten, for The Oscar Dickson made her last voyage in “long and loyal service”. 1956. She went to Germany to be broken up.

7 Income Statement

ghghghgh sek 2004 2003 hghghghg ghghghgh interest income hghghghg Lending to shipping companies: ghghghgh hghghghg Interest ghghghgh125,742,047 117,881,485 Compensation for funding costs hghghghg— 1,747,657 ghghghgh Short-term investments: hghghghg Swedish financial institutions ghghghgh76,468 151,194 Interests-bearing securities hghghghg18,440,198 19,661,247 ghghghgh Long-term investments: hghghghg Interest-bearing securities ghghghgh26,319,801 28,176,066 hghghghg Other interest income ghghghgh— 19,967 hghghghg interest costs (note 1) ghghghgh–95,524,256 –91,372,703 hghghghg net interest income (note 2) ghghghgh75,054,258 76,264,913 General administrative costs (note 3) hghghghg–8,761,182 –8,587,741 ghghghgh Guarantee fund fee paid to the state hghghghg–2,625,000 –3,237,500 Inventory depreciation ghghghgh–28,545 -47,194 hghghghg Other operating expenses ghghghgh–166,250 –204,798 hghghghg Surplus allocated to reserve fund ghghghgh63,473,281 64,187,680 hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh

8 Balance Sheet

ghghghgh sek 2004-12-31 2003-12-31 hghghghg ghghghgh assets hghghghg Cash ghghghgh10,000 10,000 hghghghg Lending to credit institutions (note 4) ghghghgh4,794,809 5,887,316 Bonds and other interest-bearing securities: (note 5) hghghghg ghghghgh short-term investments hghghghg213,977,932 479,910,938 long-term investments ghghghgh843,283,297 501,930,831 hghghghg Lending to shipping companies (note 6) 6,124,830,197 4,609,444,600 ghghghgh Tangible assets (note 7) hghghghg29,233 20,572 ghghghgh Accrued interest income 48,314,055 41,575,115 hghghghg Prepaid expenses and other accrued income ghghghgh724,016 1,093,926 hghghghg ghghghgh Total assets ghghghgh7,235,963,539 5,639 873,298 hghghghg hghghghg liabilities and equity ghghghgh ghghghgh hghghghg Liabilities hghghghg ghghghgh ghghghgh Liabilities to credit institutions (note 8) hghghghg6,078,147,438 4,550,252,897 hghghghg ghghghgh Accrued interest expenses ghghghgh17,507,403 12,443,342 hghghghg hghghghg Deferred income and other accrued expenses ghghghgh1,243,616 1,585,258 ghghghgh hghghghg Equity hghghghg ghghghgh ghghghgh Reserve fund, whereof surplus for the year MSEK 63.5 (64.2) hghghghg1,139,065,082 1,075,591,801 hghghghg ghghghgh ghghghgh Total liabilities and equity hghghghg7,235,963,539 5,639,873,298 hghghghg ghghghgh hghghghgghghghgh guarantee fund hghghghg ghghghghhghghghg ghghghgh Swedish State guarantee hghghghgghghghgh350,000,000 350,000,000 hghghghg ghghghghhghghghg ghghghgh collateral pledged hghghghgghghghghNone None hghghghg ghghghghhghghghg ghghghgh contingent liabilities hghghghgghghghghNone None hghghghg ghghghghhghghghg ghghghgh hghghghgghghghgh gothenburg 25hghghghg february 2005 ghghghghhghghghg ghghghgh hghghghgghghghgh hghghghg Pehr G Gyllenhammarghghghghhghghghg ghghghgh hghghghgghghghgh Anna-Lisa EngströmhghghghgTomas Abrahamsson ghghghgh Christer BerggrenghghghghTorsten Engwall hghghghg hghghghg Håkan LarssonghghghghAgneta Rodosi ghghghgh hghghghg/ Birgitta Wickenberg Karlsson hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh ghghghgh 9 hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh Capital Adequacy Ratio

capital base, sek thousands 2004-12-31

Primary capital = Reserve fund 1,139,065

Total capital base 1,139,065 capital requirement, sek thousands Weighted average % Weighted risk capital Group A 0 0 Group B 20 153,949 Group D 100 6,147,023

Total weighted risk capital 6,300,972

Total capital base x 100 Capital adequacy ratio in % = –––––––––––––––––––––––––––– = 18.08 % Total weighted risk capital Cash Flow Analysis day-to-day operations ghghghgh2004 2003 hghghghg Interest received and compensation for funding costs ghghghgh120,746,732 122,480,187 hghghghg Interest payments received on interest-bearing securities ghghghgh43,492,967 44,886,971 Interest paid hghghghg–90,460,195 –93,918,850 ghghghgh hghghghg73,779,504 73,448,308 ghghghgh Administrative expenses paid –11,924,289 –9,842,361 hghghghg ghghghgh Cash flow from day-to-day operations 61,855,215 63,605,947 hghghghg increase/decrease in assets and liabilities ghghghgh of day-to-day operations hghghghg ghghghgh Increase/Decrease in lending to shipping companies –1,515,385,597 286,442,042 hghghghg Increase/Decrease in borrowing ghghghgh1,527,894,541 –271,305,673 hghghghg Investments in interest-bearing securities –75,419,460 –75,688,629 ghghghgh hghghghg –62,910,516 –60,552,260 ghghghgh investment operations hghghghg ghghghgh Investments in inventory hghghghg–37,206 –13,283 ghghghgh–37,206 –13,283 hghghghg Cash flow for the year ghghghgh–1,092,507 3,040,404 Liquid assets at the start of the period hghghghg5,897,316 2,856,912 ghghghgh Liquid assets at the end of the period hghghghg4,804,809 5,897,316 ghghghgh Liquid assets consist of cash and loans to credit institutions. hghghghg ghghghgh 10 hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh Notes

ghghghgh hghghghg note 1 interest costs ghghghgh2004 2003 hghghghg Liabilities to credit institutions ghghghgh95,524,256 91,372,703 hghghghg note 2 net interest income ghghghgh hghghghg Average interest during the year for ghghghgh hghghghg – lending to shipping companies 2.36 2.52 ghghghgh – promissory note loans 1.81 1.95 ghghghghhghghghg hghghghgghghghgh note 3 general administrative costs ghghghghhghghghg hghghghgghghghgh Personnel costs: ghghghghhghghghg Fees and salaries to the Board and Managing Director hghghghgghghghgh1,994,408 1,798,081 Capital adequacy ratio in % = = 18.08 % ghghghghhghghghg including: ghghghghhghghghg Chairman of the Board 100,000 hghghghgghghghgh Deputy Chairman of the Board 40,000 ghghghghhghghghg Managing Director 1,514,408 hghghghgghghghgh Whereof bonus 203,896 ghghghghhghghghg ghghghgh Salaries to other employees hghghghg2,307,816 2,052,979 ghghghghhghghghg Allocation to bonus scheme 2,466 406,789 hghghghgghghghgh ghghghgh Pension costs in excess of the general pension plan ghghghghhghghghg— — hghghghg Other pension costs hghghghgghghghgh1,155,924 961,895 ghghghgh Social contributions ghghghghhghghghg1,435,236 1,421,162 hghghghg hghghghg Other personnel costs ghghghgh490,989 426,614 ghghghgh hghghghg Rent and other costs for premises hghghghg1,156,930 1,127,842 ghghghgh ghghghgh Other administrative costs hghghghg2,028,949 2,105,998 hghghghg ghghghgh ghghghgh hghghghg10,572,718 10,301,360 ghghghghhghghghg Administrative compensation ghghghgh–1,811,536 –1,713,619 ghghghgh hghghghg hghghghg ghghghgh8,761,182 8,587,741 ghghghgh hghghghg Bonus paid: hghghghg ghghghgh ghghghgh Managing Director hghghghg203,896 190,744 hghghghg ghghghgh Others ghghghgh168,570 216,045 hghghghg ghghghghhghghghg ghghghgh372,466 406,789 hghghghgghghghgh hghghghg 2003 ghghghghhghghghg ghghghgh Of the remaining allocated company-related funds of sek 1,743,812, a total ofhghghghgghghghgh sek 1,743,812 was received during the year. hghghghg The position of Managing Director of the Bank is subject to a mutual periodghghghghhghghghg of notice of 2 years. The Managing Director is entitled to draw a pension, ghghghgh equivalent to 70% of salary, on retirement at 62 years of age. hghghghgghghghgh hghghghg ghghghghhghghghg audit fee ghghghgh hghghghgghghghgh hghghghg KPMG AB ghghghghhghghghg86,424 82,190 ghghghgh hghghghgghghghgh Other auditors appointed by the government hghghghg40,000 40,000 ghghghghhghghghg ghghghgh hghghghgghghghgh126,424 122,190 hghghghg ghghghghhghghghg ghghghgh hghghghg ghghghgh 11 ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh Notes

ghghghgh note 4 lending to credit institutions hghghghg2004-12-31 2003-12-31 ghghghgh Payable on demand hghghghg4,794,809 5,887,316 ghghghgh ghghghgh note 5 bonds and other interest-bearing securitieshghghghg hghghghg ghghghgh ghghghghPurchase value Market value Nominal value hghghghg hghghghg Short-term investments ghghghgh ghghghgh hghghghg Mortgage institutions hghghghg218,407,960 217,207,060 213,000,000 ghghghgh ghghghgh Accumulated amount in value adjustment account hghghghg–4,430,028 hghghghg ghghghgh ghghghgh Book value hghghghg213,977,932 hghghghg ghghghgh Long-term investments (bonds) ghghghgh hghghghg hghghghg Mortgage institutions ghghghgh535,997,655 545,530,449 514,500,000 ghghghgh hghghghg The Swedish State hghghghg314,294,927 315,838,862 299,900,000 ghghghgh ghghghgh hghghghg hghghghg850,292,582 861,369,311 814,400,000 ghghghgh ghghghgh Accumulated amount in value adjustment account hghghghg–7,009,285 hghghghg ghghghgh ghghghgh Book value hghghghg843,283,297 hghghghg ghghghgh ghghghgh hghghghg2004-12-31 2003-12-31 hghghghg ghghghgh Remaining duration ghghghgh hghghghg hghghghg Maximum three months ghghghgh0 0 ghghghgh hghghghg Longer than three months but maximum one year hghghghg213,977,932 479,910,938 ghghghgh Longer than one year but maximum five years ghghghgh843,283,297 501,930,831 hghghghg hghghghg Remaining fixed interest term ghghghgh ghghghgh hghghghg Maximum three months hghghghg0 0 ghghghgh Longer than three months but maximum one year ghghghgh213,977,932 479,910,938 hghghghg hghghghg Longer than one year but maximum five years ghghghgh843,283,297 501,930,831 ghghghgh hghghghg Average remaining duration 2.2 (1.4 years). Average effective interest rate as hghghghgpercentage of purchase value 3.99 % (4.77 %). ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg hghghghg ghghghgh ghghghgh hghghghg A pioneer of linerhghghghg traffic ghghghgh Captain Wilhelm Rogatiusghghghgh Benjamin Lundgren, 1856–1914 hghghghg ghghghgh hghghghg hard and instructive yearsghghghgh at sea, mainly on English company AB Concordia, and himself took command vessels, under both sail and steam, he returned to of the company’s first ship. In 1900 he took another dry land to take examinations at the Gothenburg step. Together with G.D. Kennedy, he formed navigation school, first as a mate and then as Rederi AB Nike. The company’s first vessel was a Wilhelm Rogatius Benjamin captain, commanding officer of a steamer. 20-year-old Italian steamer, which was re-named Lundgren was born on 24 May 1856 in the parish However, he had already set his sights on the S/S Nike. of Söderåkra in the county of Kalmar. He enrolled another profession – that of a shipowner. In 1888, However, Lundgren had more ambitious plans, on his first ship at the age of thirteen. After five Lundgren invested in the newly established shipping a regular steamer line operating between Sweden

12 Notes

ghghghgh hghghghg ghghghgh note 6 lending to shipping companies 2004-12-31 2003-12-31 hghghghg ghghghgh Loans in SEK 1,062,291,136 78,632,869 hghghghg Loans in foreign currency ghghghgh4,833,127,541 4,359,303,608 hghghghg Loans to smaller shipping companies in accordance with SFS 1988:103 229,411,520 171,508,123 ghghghgh hghghghg 6,124,830,197 4,609,444,600 ghghghgh Lending to shipping companies includes non-settled but non- hghghghg doubtful receivables. This item relates to repayment respite granted. ghghghgh 21,824,400 23,503,200 hghghghg Remaining duration ghghghgh Maximum three months hghghghg6,747,625 4,382,700 ghghghgh Longer than three months but maximum one year ghghghgh5,023,666 — hghghghg Longer than one year but maximum five years hghghghg96,621,335 109,087,024 ghghghgh ghghghgh Longer than five years hghghghg6,016,437,571 4,495,974,876 hghghghg Average remaining duration 11.5 years (11.8 years). ghghghgh ghghghgh hghghghg Remaining fixed interest term hghghghg ghghghgh ghghghgh Maximum three months hghghghg3,159,858,766 1,737,024,391 hghghghg Longer than three months but maximum one year ghghghgh2,611,719,935 2,745,077,168 ghghghgh hghghghg Longer than one year but maximum five years hghghghg353,251,496 127,343,041 ghghghgh Longer than five years ghghghgh— — hghghghg hghghghg ghghghgh A special fund, administered by the Bank (by Government decree of 1987) mayghghghgh be used to cover losses in connection hghghghg with new loans to smaller shipping companies The capital balance of the fundhghghghg on 31 December 2004 was msek 54.5 (msek 106.8). ghghghgh According to a decision made by the government on June 23, 2004 the Swedishghghghgh Ships’ Mortgage Bank, transferred 55 msek hghghghg from the Smaller Shipping Companies’ Fund to the Swedish State. On the accounthghghghg of the State, the Swedish National Debt Office ghghghgh has issued a guarantee on the equivalent amount. ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghg- hgh hghgh- and southern Africa. In 1903 he ordered two line sailing to the Unitedghg States. Captain vessels of 5,500 dwt each in England, the first Lundgren worked hard toghghg complete the- one for Rederi AB Nike and the second for a newly line and it took until 1915hgh for regular established company with a registered office in passenger traffic to start.hghgh Unfortunately- Gothenburg, Rederi AB Transatlantic. The new liner Captain Lundren did not live to see the route to southern Africa became Sweden’s first liner day. He died in 1914. But it is to Captain service outside Europe. Lundgren that Sweden owes its place in North But his great dream was a direct Swedish steamer Atlantic liner traffic.

13 Notes

note 7 tangible assets

Equipment Acquisition value brought forward 1,290,516 Acquisition value for the year 37,206

Total acquisition value 1,327,722

Accumulated depreciation brought foward 1,269,944 Depreciation for the year 28,545

Total accumulated depreciation –1,298,489

Book value 29,233 Equipment acquired prior to 31 December 1996 has been written off in full. Equipment acquired as of 1 January 1997 has been activated with a depreciation period of 3 years. note 8 liabilities to credit institutions ghghghgh2004-12-31 2003-12-31 hghghghg Swedish banks ghghghgh4,355,160,679 3,735,793,567 hghghghg Swedish financial companies 1,722,986,759 814,459,330 ghghghgh hghghghg6,078,147,438 4,550,252,897 ghghghgh Remaining duration hghghghg Maximum three months ghghghgh6,057,625 4,382,700 Longer than three months but maximum one year hghghghg5,023,643 — Longer than one year but maximum five years ghghghgh77,988,521 92,540,776 hghghghg Longer than five years 5,989,077,649 4,453,329,421 ghghghgh Average remaining duration 11.5 years (11.8 years). hghghghg Remaining fixed interest term ghghghgh hghghghg Maximum three months 3,120,508,741 1,717,068,831 ghghghgh Longer than three months but maximum one year hghghghg2,604,387,201 2,705,841,025 Longer than one year but maximum five years ghghghgh353,251,496 127,343,041 Longer than five years hghghghg— — ghghghgh hghghghg ghghghgh hghghghgCaptain Johan Meijer Treacherous coral reefghghghgh hghghghg ghghghgh Captain Johan and the ship was left lyinghghghghg on her side on the reef, ashore and they were not afraid even when he went Meijer, from Råå, with the sea pounding overghghghgh her and the bank of quite close to them. The following night they visited commander of the barque sharp coral. A mate washghghghg successfully put ashore, us in our little tent and disturbed our night’s rest Diana af Helsingborg, set sail and eventually a rope wasghghghgh also attached. by biting our feet and making a din.” on 12 July 1886 with a cargo of sawn timber from The remaining eleven peoplehghghghg on board were able On October 12th, eight of the twelve men leave Port Gamble on the west coast of North America for to reach shore along thisghghghgh rope. But they were not the island in a couple of dinghies from the Diana Sydney on the east coast of Australia. alone in using the rope. hghghghgCaptain Meijer writes: to which makeshift repairs had been made. 30 days and 3,600 sea miles later, at two “On board the Diana thereghghghgh were huge numbers Twelve days later they were relieved to reach hghghghg o’clock at night the Diana, sailing at a speed of of rats … one of the sailors … has been down on the inhabited island of Manihikim, where they ghghghgh nine knots, struck an underwater reef off the coral the shore in the twilight and saw a remarkable receive help transporting the four remaining hghghghg Starbuck Island. There was a shuddering impact, sight,as the rope was coveredghghghgh with rats walking men on the schooner Buster. 14 hghghghg ghghghgh hghghghg ghghghgh hghghghg ghghghgh Accounting and Valuation Principles

This annual report has been pre- shown as interest. Accrual accounting is valued at current exchange rate. pared in accordance with the Swedish Act applied during the remaining term. The interest risk is limited, due to the concerning Annual Reports for Credit The valuation of outstanding loans, fact that the interest terms for the Bank’s Institutions and Investment Companies from the point of view of the credit long-term borrowing correspond to (1995:1559). The directions of the Swedish risk, has been made in accordance with investments in outstanding loans. Financial Supervisory Authority have the Financial Supervisory Authority’s Lending to shipping companies are been observed. directions. made against security of mortgage deeds The short-term investments referred Loans in foreign currencies to shipping over ships within 70% or, in special cases, to under interest-bearing securities have, companies have been valued at the his- 80% of the value of the ships as estimated in all essentials, been valued at the lower torical exchange rate, in view of the fact by the Board. Mortgage deeds may not be of cost or market value, as per balance that the equivalent borrowing in the same accepted as security for ships which are sheet date. Interest-bearing securities that currency has likewise been valued at the more than 20 years old, unless there are refer to long-term investments have been historical exchange rate. Thus, there is no special reasons for doing so. The market valued at cost value, with appropriate currency risk involved. Accrued interest values of ships are continuously reviewed premium and discount adjustments income and interest expenses have been by the Board. Auditors’ report

We have examined the annual counts. An audit also entails checking the in accordance with the Annual Reports report, the accounts and the administra- accounting principles and the application Act, and therefore provides a fair picture tion of the Swedish Ships’ Mortgage Bank of same by the Board and the Managing of the Bank’s financial results and position by the Board of Directors and Managing Director, as well as analysing and asses- in accordance with good auditing practice Director for the year 2004. The Board and sing the information in the annual report, in Sweden. The Administration Report Managing Director are responsible for the as a whole. It shall also entail an assess- is consistent with the other parts of the records of accounts and administration ment of the important estimations done Annual Report. and for the Annual Accounts Act being by the Board and the Managing Director We therefore recommend that the applied in drawing up the annual report. in the annual report. We have scrutinised Income Statement and Balance Sheet Captain Johan Meijer Our responsibility lies in commenting on the important decisions, actions and be adopted and that the members of the the annual report and administration, on conditions of the Bank in order to assess Board of Directors and the Managing the basis of our audit. whether any member of the Board or the Director be discharged from liability for Our examination was carried out in ac- Managing Director has a liability towards the financial year. cordance with generally accepted auditing the Bank. We have also scrutinized standards in Sweden. This means that we whether any member of the Board or the gothenburg, 28 february 2005 have planned and carried out the audit in Managing Director has in any other way order to ensure, as much as is reasonable, acted contrary to the Law (1980:1097) per- Fredrik Ahlén that the annual report does not contain taining to the Swedish Ships’ Mortgage Lena Möllerström Nording any essential errors. An audit entails the Bank and the Annual Accounts Act. We authorised public accountant scrutiny of a selected number of sup- consider that our audit gives us reasonable porting documents for the amounts and grounds for the following statement. auditors appointed by the government other information contained in the ac- The Annual Report has been prepared

15 Board of Directors

members

chairman deputy chairman Pehr G Gyllenhammar Anna-Lisa Engström m.d.hc, d.tech.hc, managing director, d.econ.hc, london dag engström rederi ab, lysekil Tomas Abrahamsson Christer Berggren deputy chairman, deputy director, ministry of industry, seko, stockholm employment and communications, stockholm Torsten Engwall chief executive officer Håkan Larsson rederi ab nordship, gävle president and ceo, b&n nordsjöfrakt ab, skärhamn Agneta Rodosi treasurer, akademiska hus ab, gothenburg deputy members

Ture Axelsson Petra Hedengran shipowner, legal attorney, advokatfirman charterfrakt ab, skärhamn lindahl kb, stockholm Lars Höglund Geir Jansen shipowner, area director scandinavia, furetank rederi ab, donsö stena line scandinavia ab, gothenburg Ulla Lax-Nordström chairman of the trade Anders Lindström union committee, seko-department director general, seamen’s union, gothenburg national mediation office, stockholm Inger Lundin first financial officer city of gothenburg, gothenburg

managing director

Birgitta Wickenberg Karlsson

production and graphic design: larsson communications and radiator, gothenburg. paper of cover: classic brightwater 220 g. paper of inside: lessebo bok 150 g. printing and repro: optimera grafiska. special thanks are due to, tidskrift från de sju haven and christer olausson, maritime museum gothenburg.

16