4 0 0 2 T R O P E R L A U N N A E M I T I R A M A I D R O C N O C

SE-405 19 Gothenburg Phone 031-85 50 00 E-mail [email protected] www.concordia-maritime.se Site Gothenburg, Sweden ANNUAL REPORT 2004 CONCORDIA MARITIME ADDRESSES ANNUAL REPORT 2004

MISSION CRITICAL SUCCESS FACTORS For those shareholders who wish to talk to us, we can be To provide our customers with safe and cost- reached at the following phone numbers or via e-mail: efficient tanker transportation based on innovation ■ Timing – methodical analysis of our business environment and performance. Hans Norén, President ■ Prioritizing – identifying and selecting deals and projects Phone +46 31 85 51 01 or +46 704 85 51 01 VISION [email protected] To be our customers’ first choice for safety, innovation and ■ Relations to customers and other stakeholders – long term performance in tanker transportation which will result in and based on trust Göran Hermansson, Financial Manager good profitability, steady growth and financial stability. Phone +46 31 85 50 46 or +46 704 85 50 46 ■ Transport solutions – innovative and customized [email protected] STRATEGY We strive towards our vision by utilizing as much as possible ■ Ship operation – first class Concordia Maritime AB (publ) of the knowledge and unique competence that our major SE-405 19 Gothenburg, Sweden service providers can offer in the areas of marketing, ship ■ Sale/purchase of assets with the right timing in Phone +46 31 85 50 00, fax +46 31 12 06 51 building and ship operation and by constantly seeking the market cycles www.concordia-maritime.se improvement of our critical success factors. Corporate number: 556068-5819 Registered office: Gothenburg

Concordia Maritime AG Bahnhofplatz CONCORDIA’S FLEET Delivery year Dwt Employment CH-6300 Zug Switzerland V-MAX Stena Vision* 2001 312,600 Time-chartered to Sunoco until 2007 Phone +41 41 728 81 21, fax +41 41 728 81 39 Stena Victory* 2001 312,600 Time-chartered to Sunoco until 2007

Panamax Stena Polaris (50%) 2006 74,500 Time-chartered to Fortum, 10 years Stena Poseidon (50%) 2007 74,500 Time-chartered to Fortum, 10 years

P-MAX Stena Paris 2005 49,900 Time-chartered to TOTAL, 5 years Stena Provence 2006 49,900 Time-chartered to TOTAL, 5 years Stena Primorsk 2006 49,900 Time-chartered to Progetra, 10 years Stena Performance 2006 49,900 Open market Stena Progetra 2007 49,900 Time-chartered to Progetra, 10 years Stena Progress 2008 49,900 Open market

MR Lyra Pioneer* 2003 45,900 Open market until July, 2005

1,119,500 *Chartered tonnage

Cover Bob Hossack and Kurt Jensen, members of Concordia’s site team, at the Brodosplit shipyard with the Stena Paris in the background (The picture is a photomontage.) CONTENTS ANNUAL REPORT 2004

President’s Views ...... 2

Markets and Ships 6 Markets and ships Freight Market ...... 6

Arlington Tankers ...... 9

Shipbuilding Market and Newbuildings

Shipbuilding Market ...... 10

Newbuildings ...... 12

P-MAX ...... 14

Quality, safety and environment

Environmental Policy ...... 16

The MAX Concept ...... 17 10 Shipbuilding market and New buildings

Ice Age ...... 18

Partners

Northern Marine Management ...... 20

Stena Teknik ...... 21

Stena Bulk ...... 22 1 A Global Presence ...... 23

Organisation

Knowledge and Competence ...... 24 16 Quality, safety and environment Concordia Personnel ...... 25

Corporate Governance ...... 26

Board of Directors and Auditors ...... 27

The Concordia Share

The Concordia Share ...... 28

Six-year Summary ...... 31

Key Ratios ...... 32

Financial Account 20 Partners Board of Directors’ Report ...... 33

Income Statements ...... 39

Balance Sheets ...... 40

Summary – Change in Equity ...... 42

Cash-flow Statements ...... 43

Accounting Principles ...... 44

Notes to the Financial Statements ...... 46

Audit Report ...... 55

Glossary ...... 56 24 Organisation

CONCORDIA MARITIME » It is with great respect that I take over from Lars Carlsson who, until I took up the post as president in April, 2004, had led and developed Concordia for 20 years, that is, ever since the company’s share was listed in 1984.«

2 PRESIDENT’S VIEWS

s a result of a number of business events in 2004, Concor- End of the Concordia Class era dia Maritime has undergone major changes as regards both 2004 signalled the end of 15 successful years with the Concor- A financial position and the direction of its business activities. dia Class, Concordia’s own brand name for high-quality VLCCs. In the autumn, a new company, Arlington Tankers, was formed The last tanker, the Stena Congress, was withdrawn from serv- together with Stena, which acquired Concordia’s two V-MAX VLCCs ice in November, a few days before her 30th birthday. Thanks to and four tankers from Stena. The company was successfully intro- the operative and maintenance philosophy consistently applied duced onto the New York Stock Exchange at the beginning of throughout the lifespan of the tankers, the Concordia Class ves- November. The pricing of the share, which then determined the sels were able to continue to sail much longer than their com- selling price of the ships, was very satisfactory and generated a petitors and four of six tankers could be sold for many years of large capital gain for Concordia. continued service in the offshore industry. This means that we are in a stronger financial position than ever before and that the company is currently free from debt and has P-MAX large liquid funds. At present, we do not own any vessels although The Stena Paris, the first vessel in the series of six P-MAX tankers we still have at our disposal the two V-MAX tankers via 5-year char- ordered in 2003, will be delivered at the end of 2005 and enter ter contracts. directly into its 5-year charter with the oil company TOTAL. Eight product tankers are on order and under construction, In addition to the 5-year charter contracts, which were signed in including two in which we have a 50% share. In the space of a few January with the French oil company TOTAL for the first two tank- years, Concordia will thus have a modern tanker fleet with a very ers, 10-year time-charter contracts were signed in September with low debt-equity ratio. the Russian logistics company Progetra for two vessels. These long- term contracts will secure a stable cash flow at the same time as the company is free to decide on the employment of the two remaining P-MAX tankers.

CONCORDIA MARITIME President’s views

Panamax tankers with ice class 1A Collaboration with Stena as supplier During the year, a joint project, involving the construction of two A shipping company of Concordia’s size is run most efficiently by Panamax product tankers with ice class 1A, was initiated together purchasing most of the services needed for its business operations. with the Finnish energy group Fortum. These vessels will be owned Through the years, Stena’s shipping organisation has been the com- by a joint venture, in which Fortum and Concordia each has a 50% pany’s main supplier of services. This gives us access to cutting-edge share, and they will be time-chartered to Fortum for ten years. shipbuilding competence and a unique marketing and global office The joint venture with Fortum is a good example of the type of network staffed by experienced businessmen and charterers. business aimed for co-operation between customer and supplier in order to create a long-term transport solution generating value for both parties. » The MAX concept represents everything we want to offer our Brodosplit shipyard All our new vessels will be built at the Brodosplit shipyard in Croatia, customers « which is one of the largest shipbuilding nations in Europe with a long tradition of producing well-built ships. Concordia’s techni- Optimum business utility for our customers cal director, Per Läbom, is stationed at the shipyard together with The objective of Concordia’s shipping business is to generate a team, consisting of experts in different areas such as steel and the optimum business utility for our customers. This goal will be coating, which is participating in and monitoring the construction achieved with a fleet that can offer the maximum added value in process on behalf of Concordia. terms of transport economy. The MAX concept represents every-

3 Our newbuilding team in one of the ballast tanks for the Stena Paris.

CONCORDIA MARITIME thing we want to offer our customers. The The MAX concept will be the focus of the vessels are wider than other vessels of the company’s business going forward. Con- same size, which means a shallower draft crete plans have taken shape and will be and larger cargo intake in ports with draft further developed in the years ahead. At restrictions. In addition, the MAX tankers’ present, the B-MAX, where B stands for Bal- full double hull, double main engines and tic, seems to be showing the most prom- double steering and propulsion systems ise. The B-MAX is a tanker intended for guarantee a very high level of safety. crude oil transportation, which would be optimised for the Baltic from both a trans- Quality and safety work port economy perspective and in terms Our customers and the world as a whole are of safety and environmental friendliness. increasingly demanding, and justifiably so, Other tanker deals could also be of inter- that oil transportation must be safe. Carry- est if the customer, the demand and the ing on successful shipping business in the additional value are identified, as in the long term is dependent on very good quality case of Fortum. A downturn in the shipping and safety work. Together with its sister markets, resulting in falling prices, could organisations Stena Bulk and Northern also present interesting opportunities for Marine Management, Concordia has been acquiring ships or businesses. working intensively in this area for many Concordia has a small organisation but years. This work will continue. we, of course, are not the only ones work- ing for the company on a daily basis. There 4 Good opportunities in the years ahead are a large number of people who work Concordia will generate long-term growth everyday for Concordia with a deep sense based on a policy of not jeopardising the of commitment, both at sea and in offices company’s stability by taking too large all over the world. I would like to thank all risks, for instance by extensive exposure to of you who are, and will be, vital to Concor- the open freight market or making costly dia’s continuing development and success. acquisitions. The Arlington deal has provided Con- cordia with a financial base giving it the Gothenburg, March, 2005 capacity for further investments with a reasonable debt-equity ratio. We have, however, a responsibility to continue to adhere to the criteria and profitability requirements always applied and will not Hans Norén, President invest until the right business opportunity presents itself. A very important compo- nent of successful shipping company busi- ness is timing when it comes to the purchase and sale of assets. As a result of the strong markets today, prices are very high, both when it comes to ordering new ships and buying second-hand tonnage.

CONCORDIA MARITIME President’s views

5

» The joint venture together with Fortum is a good example of the type of business aimed for – co-operation between customer and supplier in order to create a long-term trans- port solution generating value for both parties. «

(The picture is a photomontage)

CONCORDIA MARITIME he market for transportation of oil and refined petroleum prod- FREIGHT T ucts exceeded all expectations in 2004. Many shipowners, as well as chart- erers, were taken aback by the record MARKET strong market, which few – if anybody – had predicted. The market was strongest The spot market in 2004 began at a high level. The real peak came in November when the freight rate for a modern VLCC on the spot market was in the during the fourth quarter, even though December ended with a region of USD 200,000 per day. general decline in freight rates. The average freight rates were Strong growth in the world economy, fantastic, even in comparison with 2003, which was one of the low interest rates and high oil consump- best years ever. tion were some of the factors underlying the strength of the market. Another factor was the large increase in China’s demand for oil, which was largely met by tankers from the Arabian Gulf. The high level of capacity utilisation in the VLCC fleet, in part due to Chinese demand, drove up the market and affected other ship segments in other geographical markets. 6 In 2004, the average number of fixtures for VLCCs was 133 per month compared with 123 fixtures in 2003.

Freight market The spot market in 2004 began at a high level. The real peak came during the fourth quarter, even if December ended with a general decline in freight rates. The aver- age freight rates were fantastic, even in comparison with 2003, which was one of the best years ever.

1 Clarkson Research Studies. Theoretical freight rate is based on the spot market for modern tonnage without any waiting time, broker commissions, time spent at shipyards, etc. Rounded off to the nearest USD 100, last year’s figures in brackets. 2 20,000-75,000 dwt 3 47,000 dwt

CONCORDIA MARITIME Freight market

The average (theoretical1) freight rates on The combination of a high production the importance of the small, family-owned the spot market for modern vessels: rate and a high oil price might seem illogi- shipping companies diminishes. It is also cal, but it can partly be explained by the becoming increasingly common for small USD/day 2004 2003 fact that the end-user prices of oil and shipping companies to collaborate or to VLCC 96,000 52,400 petroleum products are subsidised in many assign the chartering of their vessels to Suezmax 75,000 41,700 of the importing countries. In many coun- pools, i.e. groups of vessels marketed Aframax 49,600 34,200 tries, the impact of price increases on the together. The reason for this is to be able 2 Product tanker 29,000 21,900 global market is not reflected in full by the to gain access to better market information domestic price of heating oil, petrol and and cargo opportunities. In the period market, charterers were diesel fuel. The high earnings generated in recent unwilling to tie up tonnage for more than The increase in consumption was also the years have enabled large international short periods due to the high freight rates largest in many years with Asia, and above tanker shipping companies such as Front- on the spot market. As a result, the total all China, as particularly strong markets. line, Teekay Shipping Corporation and volume of tanker tonnage contracted China increased its oil imports by around Overseas Shipbuilding Group to invest for periods of more than a year only rose 30% compared with 2003. heavily in continued expansion both by marginally from 16.3 million dwt in 2003 Asia, powered by the economic growth ordering new tonnage and buying up other to 16.4 million dwt in 2004. In 2004, the in China and India, is expected to continue shipping companies. average freight rate on the market for a to account for the largest increase in con- 3-year charter contract for a VLCC was about sumption in the years ahead. Future prospects USD 42,100 (30,100) and USD 16,600 (13,800) After last year’s record-high market quo- 3 per day for an MR tanker . Tanker fleet tations and prices, the prospects for 2005 Here, it is also worth mentioning the The fleet of large turbine tankers built in and the following years have been the sub- 7 growing volume of trading in the deriva- the 1970s has now passed the age limit and ject of lively discussion among analysts and tive market for oil freight rates. Driven has either had to be scrapped or converted shipping industry experts. Was last year by the market quotations in recent years, into storage and production units. The the top of a “bubble”, or is it the beginning shipowners, trading houses, oil companies remaining tankers will be phased out of of a more stable and permanently higher and financial investors are increasingly the market in 2005 and 2006. market level? utilising so-called FFA (Freight Forward The scrapping rate is generally speaking Few analysts and experts describe the Agreements) to cover their physical expo- low in years with high spot market freight upswing in recent years as a “bubble”. The sure, or to speculate. With the help of a FFA, rates. A consequence of this was that the shipping industry is by tradition a cyclical a player can buy or sell parts of a future number of tankers scrapped fell sharply last industry and fluctuations in the market freight rate on several standardised routes year compared with 2003. In 2004, tankers are normal. Many people are now saying for a certain type of vessel. This is a market totalling 8 million dwt (19.7 million dwt) that the necessary conditions are in place gaining ground with steadily increasing were scrapped. The tanker fleet increased for a favourable trend in the longer term. liquidity and a rising number of partici- by 201 vessels totalling 18,246,000 dwt to Consequently, most analysts have been pants. 3,550 vessels totalling 305,082,000 dwt. cautiously positive about 2005. None of IMO’s decision to not permit single-hull them has been bold enough to predict a Oil market tankers to sail after 2010 will have a damp- higher market level than the one we had In 2004, total global oil production rose ening effect on the growth of the fleet for in 2004, although good freight rates for about 4.2% (+3.4%) to a total of 79.1 mil- some years after 2010 since the new ves- tankers in all segments are predicted. lion barrels per day. OPEC accounted for sels will first replace the vessels phased out. On the global market for oil and other around 29 million barrels per day of this Tankers with double bottoms/double sides types of energy, demand will be subject volume. This was one of the highest figures will, however, be permitted to continue to to global politics and economic develop- recorded since 1979. At the same time, oil sail until they reach the 25-year mark. ment in equal amounts, just as in 2004, in prices rose sharply, with the average price the years ahead. Stability and production of a barrel of Brent at USD 38.04 (28.47). Competitors in the Middle East, how the US and Chinese Many of the oil-producing countries were A long-term trend in the shipping indus- economies perform, and Russia’s ability to pumping up oil at full capacity in 2004. try is the consolidation of shipping com- export, are all crucial factors that are diffi- panies into increasingly large units while cult to assess. An interesting trend in both the energy and the transport market is the Imports of crude oil Crude oil price Crude oil imports Crude oil price - Brent dtd increase in natural gas anticipated in the years immediately ahead. This has now Million barrels/day Europe Japan USD/barrel USA China persuaded several shipping companies to 12 50 order LNG tankers as a complement to their 10 existing tanker and dry-cargo fleets. 40

One cause for worry is that after two very 8 good years, many shipping companies are 30 flush with cash. The very good market has 6 also attracted the interest of institutional 20 4 investors and funds, which has resulted 10 in, among other things, several compa- 2 nies being listed and spun off. The result of a large surplus of capital in circulation, 0 0 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 in combination with low interest rates, Source: Platou Source: Platou could be less well considered investments, (* Europe including central Europe from 2001 which, in turn, could lead to unanticipated and unnatural prices in, above all, the ship- Crude oil price Existing fleet Seaborn trade and OPEC oil production Number of Vessels building market and the market for sec- Million barrels/day OPEC production MR VLCC ond-hand tonnage. Global oil trade 50 700 Concordia Maritime is, however, basi- 8 cally optimistic as regards the market in 600 the years ahead. We believe that there will 500 be a downward adjustment of the margins 40 applying in 2004 to a more balanced level. 400

The market will continue to be cyclical but 300

with reasonable lowest levels in the cycles. 30 200 Other factors such as IMO regulations and

stable demand for oil in large parts of the 100 world – combined with e.g. greater envi- 20 0 ronmental awareness will, we believe, ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 contribute to a good long-term market Source: Platou Source: Platou potential for well-managed tonnage.

Spot rates for tankers MR fleet per 1. Jan 2005 - in dwt Tanker freight rates in the open market AgeGrand ofTotal: MR 28.413.607 on 01-01-2005 dwt (dwt) USD/day MR CLEAN VLCC AFRAMAX SUEZMAX 200 2000-2004 -1974 1975-1979 (11,824,464) (368,599) (2,061,347)

150 1980-1984 (3,604,474)

100 1985-1989 (3,680,753)

50

1995-1999 1990 -1994 0 (4,136,131) (2,737,839) 2000 2001 2002 2003 2004

Source: Platou Source: Platou

CONCORDIA MARITIME Freight market ARLINGTON TANKERS

uring the autumn, a new company, on the capital markets, means that ships ers, with a book value of approx. USD 75 Arlington Tankers with registered are in many cases more attractive to inves- million each, were sold for about USD 120 Doffi ce in Bermuda, was formed tors than to other shipping companies on million, about 60% over their book value. together with Stena with the intention of the second-hand market. In addition, the As part of the deal, we have chartered a listing on the New York Stock Exchange. investors can count on a relatively high back the tankers for fi ve years at a fi xed For Concordia Maritime, the aim was to lib- return over a long period. For the fi rst year, rate. The V-MAX tankers have been time- erate the values in the two V-MAX tankers it is calculated that the quarterly payments chartered to Sunoco until mid-2007 and in order to be able, among other things, to to the shareholders in Arlington Tankers the revenue generated is expected to be fi nance comprehensive newbuilding pro- will amount to about USD 2 per share on at the same level as the costs. After this grams, at the same time as we were able an annual basis. date, we have options to extend the char- to secure the commitments we have to our The interest in the US coincided with good ter one year at a time for a total of three customers and retain our presence in the freight markets for tankers and an excel- years. Concordia has provided the tankers’ largest tanker segment. lent second-hand tanker market driven by technical manager, Northern Marine Man- The introduction of the company in the the very high demand for newbuildings at agement, with a guarantee according to US exceeded all expectations and several yards all over the world. In addition to our which Concordia will pay any operating analysts have said that it was one of the two V-MAX tankers, a further four tank- costs exceeding a pre-determined level. most successful introductions of a tanker ers from the Stena fl eet have been sold to Concordia Maritime has retained a 10% shipping company share ever. The reason Arlington Tankers, two Panamax tankers shareholding in Arlington Tankers. for this was that the necessary conditions and two product tankers. Our V-MAX tank- were very good in several markets at the same time. The share was oversubscribed more than ten times and it opened at USD 9 20. The share has subsequently developed well and continues to be a recommended buy by several of the leading banks. The reason for the interest shown in the US is that the interest in investments with a guaranteed return has increased sharply in the fi nancial market. The high cash fl ow generated by the tankers, combined with low interest rates and small fl uctuations

Arlington Tankers

USD The share Dow Jones Transport Index

26

25

24

23

22

21

20 Nov 04 Dec Jan 05 Feb March

(c) SIX

CONCORDIA MARITIME SHIPBUILDING MARKET FULL ORDER BOOKS

uring the year, the shipyards had a yards had difficulties in achieving profit- full backlog of orders and several ability in 2004. This was due to record-high D were accepting orders for delivery steel and oil prices – and the steadily weak- as far ahead as in 2009. The prices offered by ening US dollar. the shipyards reached record levels, driven It is difficult for a shipyard to hedge against by the high market level. fluctuations in steel prices by means of, for At the end of the year, the price of a con- example, derivatives. Because of currency tract for a newbuilding was in the region of fluctuations, shipyards have begun more and USD 110 (77) million. A total of 342 (410) new more to sign parts of a contract in different tankers were ordered during the year. currencies in order to reduce their currency Despite large orders for tankers, RoRo exposure. carriers and container carriers, the ship-

Scrapping Newbuilding prices Removals Newbuilding price MUSD EU steel price/ton Number MR VLCC MR USD/ton steel VLCC 50 120 800

10 40 100

30 80

500

20 60

10 40

0 20 200 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ’00 ’01 ’02 ’03 ’04 ’05 Source: Platou Source: Platou

Deliveries, new vessels Order book Deliveries Vessels on order

Number MR VLCC Number MR VLCC 120 100

100 80

80 60

60

40 40

20 20

0 0 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 Source: Platou Source: Platou

CONCORDIA MARITIME Shipbuilding Market

11

CONCORDIA MARITIME NEWBUILDING A MULTI-YEAR PROJECT

It takes 15 intensive months from when construction of a ship begins to when it is time for her maiden voyage. This is what the timetable looks like for Concordia Maritime’s P-MAX tankers. The first in the series, the Stena Paris, will be delivered at the end of October, 2005. When work is at its most intensive at the shipyard in Split, five vessels will be under construction simultaneously.

onstruction of the Stena Paris at mous building blocks, the sections are lifted the Brodosplit shipyard in Croatia into position and then welded together to C began on 30 August, 2004. It was form a hull. time, to “cut steel”, which means On 27 May, 2005, nine months after that the P-MAX project had well and truly construction began, the time for launch- begun after all the long preparations. The ing has come. Up until now, the ship has way of working and the milestones during rested on the stocks, with mostly steel and the project are, in principle, the same for painting work being carried out. The hull every type of vessel. When the work has has gradually taken shape during the begun, it is of utmost importance that time- intensive work on welding and corrosion table laid down is followed. protection in the form of preliminary work Building a ship is a project with thou- and painting. Parallel with this, work on sands of people involved in different ways the construction of engines and electrical 12 – working for the orderer, the shipyard, the power systems, piping and much more classification society, authorities and, not have been in progress. Before the ship least, all the subcontractors all over the glides down the slipway, the main engines world. The subcontractors manufacture will be lifted into position. everything from propellers, navigation equipment, safety systems, cargo pumps, Intensive period winches and lifeboats to ventilation sys- At the end of May, 2005, the personnel at tems, galley equipment and cabins. Every- the site office will be working, to say the thing needed before the ship is completed least, intensively. A further three P-MAX and fully equipped for her first voyage. tankers will be under construction during this period. By this time, another ten or so Initial phase persons have arrived at the yard to inspect As early as in spring, 2004, at the same time and carry out tests on the ships. The project as the Brodosplit shipyard was preparing to leader for the construction of all the P-MAX start construction, Concordia Maritime/Stena tankers is at Stena Teknik in Gothenburg. Teknik set up a site office in Split. We always During the construction period, he is in have a site office staffed by our own person- daily contact with the office in Split as well nel when the shipping company builds a ship, as spending at least a couple of days every regardless of where in the world. Concordia month at the yard. Maritime’s site manager was the first to Many shipping companies have their per- arrive in Split. He will be in charge of the per- sonnel at the yard while their ship is being sonnel who will be at the shipyard to ensure built, but not all. We are one of the ship- that the result will be as ordered. ping companies in the world that makes The next milestone in the construction of the most effort to ensure that our ships the ship is laying the keel. In the case of the are built according to plan. Large resources Stena Paris, this took place on 29 December, are invested in competent and skilled per- 2004, when the first section of the ship was sonnel at the site office since it is extremely placed on the stocks or the slip. Like enor- cost-effective to be able to begin to oper-

CONCORDIA MARITIME Newbuildings

ate safe, strong and maintenance-efficient ships straight after delivery. The job of the personnel at the site office is to check and inspect everything, e.g. painting work, the hull and steel work as well as engines and systems. Well-functioning collaboration with the yard’s personnel and mutual trust are extremely important and have proved to be a successful recipe for achieving the best possi- ble result. For example, any preliminary work or painting work done incorrectly will result in the ships having to be docked for mainte- nance earlier than calculated, which could be costly in many different ways. When the hull is beginning to look like a ship, it is time to install the equipment, fit- tings and other details. The fitting-out and installation period is mostly after launching and before the first sea trials. In addition to the installation work, a large number of tests have to be carried out. 13 Final phase Two to three weeks before delivery, the ship is, in principle, fully fitted out and is ready for testing in open water. The sea tri- als take between five and ten days and dur- ing this time, everything is done from speed and manoeuvre trials to tests of the main engines, automation systems, navigation systems, cargo pump systems and anchor winches. On the ship, we are, of course, accompanied by personnel from the yard but also by representatives of the different suppliers and classification societies. In the weeks prior to delivery, parts of the crew arrive to acquaint themselves with sys- tems and equipment. After 15 months, the ship is now almost ready to be delivered. A week or so later, the rest of the crew arrive and the ship is provisioned and bunkered. Adjustments and final touches to details are made by the yard right up to the last moment. When the ship is ready down to the small- est detail, she is handed over to the ship- ping company by the yard. It is first now that, legally speaking, the ship is owned by us. She is now ready for her maiden voyage.

CONCORDIA MARITIME P-MAX INNOVATION & PERFORMANCE

Length 182.9 m

Proactive safety 14 The P-MAX has been designed to minimise the risks of accidents proactive safety. Add very good manoeuvrability, a bridge giving and incidents. A full double hull, excellent corrosion protection, a 360°view and integrated systems for safe navigation in narrow two engine rooms separated by fireproof and watertight bulk- waters, as well as a well-trained and motivated crew, and you heads, separate systems for propulsion, which are independent have probably the safest product tanker ever built – the P-MAX. of each other, are examples of important parts of a vessel built for

Anchor Tank configuration More cargo To reduce the vessel’s resistance in rough To prevent corrosion and extend fatigue With its unusually wide beam, the vessel is seas, the anchor is placed on the back deck. life, the cargo and ballast tanks have been able to carry about 30% more cargo than provided with long-life epoxy corrosion other vessels of comparable size and with protection. All tanks containing cargo, fuel the same draft. and other liquids that are not pure water are protected by the double hull.

Standard MR P-MAX +30% 11.3 m

CONCORDIA MARITIME Newbuildings

Bridge

From the conning position, the operator has a 360° view. All navigation functions are centrally located on the bridge with immediate access to all manoeuvring parameters and navigation information. In addition, the layout enables co- pilot operation, which facilitates training and enhances safety when navigat- ing in narrow waters.

Flexibility

The P-MAX is designed to carry both refined petroleum products and crude oil. By implementing ETC (Effective Tank Cleaning) together with box-shaped cargo tanks with smooth sides and no blind spots, cleaning can be carried out quickly and effectively. This also minimises the risk of cargo residue contaminating the next cargo. But above all, is this important when switching from crude oil cargoes to cargoes of refined products.

Optimised hull design

The P-MAX tanker’s unique hull design has been developed with the help of Stena’s cutting-edge competence and the latest technology. The result is a vessel capable of a far higher service speed than competing product tankers in the MR size range. 15 Breadth 40.0 m

Freefall lifeboat A fully covered freefall lifeboat for the whole crew ensures fast and safe evacuation.

Two separated and independent main engines The P-MAX tankers will have the classification society DNV’s certificate for RPS (Redundant Propulsion Separate). In the event of an incident, when one of the main engines fails, the second engine is sufficient to manoeuvre the vessel in winds up to Beaufort 8 (18 metres/second). Double propellers and double rudders enable the P-MAX tankers to make faster and tighter turns than other vessels in the class. Double systems for propulsion All the systems for propulsion and manoeuvring – engines, propellers, shafts, generators, rudders and control systems – are doubled and can be operated independently of each other. The engine rooms are separated by a watertight and fireproof bulkhead.

CONCORDIA MARITIME ENVIRONMENTAL POLICY

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CONCORDIA MARITIME Quality, safety & environment THE MAX CONCEPT

17

The Max concept is Concordia’s spective. Furthermore, double propellers tem, which is a major advantage in terms proactive response to the market and rudders result in considerably improved of safety in addition to facilitating training T and society’s demand for economical, manoeuvrability – an advantage in terms of and education. flexible and very safe transportation by sea. both effectiveness and safety. The V-MAX tankers Stena Vision and Stena The basic idea behind the MAX tankers is The design of the hull and the divided Victory are the first vessels built according to that they are considerably wider than other stern also mean that fuel economy and the MAX concept. The vessels, delivered in vessels in the same size class, which enables speed are as good or better than standard 2001, are designated as VLCCs in terms of them to sail in shallower waters with a sub- tonnage. size. They can load at least 20% more cargo stantially larger cargo. The vessels have a full double hull, i.e. all than a conventional VLCC on certain trades. In addition to this transport-economy tanks not containing pure water – cargo, The P-MAX tankers currently under con- perspective, the vessels have double pro- fuel and ballast tanks – are protected by struction at the Brodosplit yard in Croatia pulsion systems and steering systems, i.e. the double hull. Many vessels are still being will probably be the safest tankers ever built double engines, propellers, steering gear built with only the cargo tanks protected by in the product tanker segment’s medium and rudders. There are two engine rooms their double hull. range (MR). Thanks to the hull design, their separated by a fireproof and watertight The bridge offers a 360° view and is cargo capacity will be so large that they can bulkhead. All control systems are separated equipped with the Integrated Bridge Con- be classified as small Panamax tankers. and each engine has its own fuel system. trol System, which enables manoeuvring The first P-MAX tanker will be delivered at This means that the systems function inde- and other critical operations to be carried the end of 2005. pendently of each other, which is naturally out from the same position. In addition, a very great advantage from a safety per- the bridge is equipped with a co-pilot sys-

CONCORDIA MARITIME ICE AGE

ust as has always been the case, ship- regulations for shipping in icy waters, not More than 140 ice-strengthened tankers ping in the future will require well- least for larger vessels. The development are currently on order, 70 of which will have J built, ice-strengthened ships. The of a comprehensive operational risk profile ice class 1A. The ice-classed tanker fleet will winter in 2004 was not particularly tough on for ship operation in cold climates is as increase 12% in 2005 and 33% in 2006. ice-classed tonnage in the Baltic Sea as ice important as ice class regulations. Besides Concordia is well prepared. The first P-MAX conditions were generally good. The last structural and engine requirements, there tanker, the Stena Paris, will be delivered at time we had such a mild winter was in 1995. are also many other factors that have to the end of October, 2005, after which she But there will be winters with more difficult be taken into consideration. These include will immediately begin trading on a long and severe ice conditions in the future. Fig- manoeuvrability, environmental aspects, charter with TOTAL. The P-MAX tankers will ures for ice cover between 1900 and 2004 preparedness measures, icing and, not least, have ice class 1B. show a clear recurring pattern of both the human factor. A further three P-MAX tankers as well as severe and very mild winters (see graph). Growing oil exports from Russian ports in a Panamax tanker with ice class 1A will be This means that ice conditions must always the Baltic Sea are one of the main reasons delivered in 2006. The remaining vessels will be taken into account in marine transport- why an increasing number of ice-strength- be delivered in 2007. ation – both now and in the future. ened tankers are being ordered. This type Officers and ratings are currently under- What demands will be made on ice ton- of tanker offers greater operational flexi- going training for navigation in icy waters. nage and how will ships be developed in bility in traffic areas with severe ice condi- Even the members of the crews, both on the future? tions. With the growing volume of traffic in deck and in the engine room, who have With new and changed traffic areas, the Baltic Sea, the general public is making solid experience of this, are undergoing increasing know-how and new techni- increasingly high demands on safe and envi- further training. cal solutions, there is a need for updated ronmentally friendly transportation. 18

(The picture is an illustration)

CONCORDIA MARITIME Quality, safety & environment

19

Water temperature during the very mild ice winter in 1990. The Ice cover during the severe winter in 1987. 5 cm > 70 cm isotherms indicate the same water temperature along each line.

Degree of severity Icy winters are divided into “mild”, “normal” Swedish-Finnish ice class and “severe”. The basic factor in an assess- – a definition ment of an icy winter’s total degree of severity is ice cover. Ice class Other factors affecting shipping are also taken into account. For example, the dura- 1A* Extreme ice conditions. tion of the ice period, navigability through Ice floes of 1.0 m thickness ice as it is affected by wind and current con- are anticipated ditions, etc. In some areas, the degree of 1A Severe ice conditions. severity can deviate from the total degree Ice floes of 0.8 m thickness of severity. are anticipated In an icy winter designated as mild, ice cover and navigability in the Gulf of Bothnia 1B Medium ice conditions could, for example, be typical of a normal Ice floes of 0.6 m thickness ice winter. are anticipated

1C Light ice conditions. Ice floes of 0.4 m thickness Source: Swedish Maritime Administration are anticipated

CONCORDIA MARITIME NORTHERN MARINE MANAGEMENT FOCUSING ON PROTECTION AND SAFETY

For manning, management and maintenance of its vessels, Concordia Maritime utilises the services of Stena-owned Northern Marine Management, which has its head office in Glasgow, Scotland.

ince it was formed in 1983, the com- the security requirements at airports and pany has expanded heavily and today, in the skies. The regulations are intended, S is responsible for the management among other things, to make it more diffi- and/or manning of more than 100 vessels cult for intruders to board a ship. Personal of varying types and sizes. The company identification requirements are very strict also has contracts in the offshore industry, and as a consequence, all seafarers now mainly covering manning. Its operations have individual ID documents and need a are run from Glasgow and eight other pass to board their ship. offices around the world. About 70% of The code has resulted in extensive work for the company’s assignments are for external Northern Marine Management in the form clients outside the Stena Sphere, which of training/education of personnel as well include well-reputed shipping companies as installations on board ship. Bridges and and oil companies. engine rooms, for example, have been The company’s operations are quality equipped with access control. All new vessels certified (ISO 9001:200) and environmen- deployed will also have additional security tally certified (ISO 14001:96) and satisfy the equipment installed, e.g. cameras for video 20 requirements in the ISM Code. surveillance. One of Northern Marine Management’s Based on the ISPS Code’s regulations, indi- basic objectives is to provide programs for vidual security plans have been drawn up the training/education and development of for all vessels in addition to existing security seagoing and shore-based personnel as an manuals. Crew of young people on the brig Stavros S Niarchos. integrated part of the company’s business.

Large resources are also invested in cadet The drilling rig Stena Don manned by NMM. programs for training/educating and quali- fying ship’s officers. The company has more than 4,000 sea- farers employed. In 2004, it undertook the recruitment of seafarers for six new vessels and is currently engaged in intensive prepa- rations in order to be able to meet the demand for new recruits in the years ahead, including the demand generated by Con- cordia’s newbuilding program. In 2004, Northern Marine Management focused heavily on protection and safety issues, largely as a result of the new interna- tional safety regulations in the so-called ISPS Code, which came into force on 1 July. ISPS stands for International Ship and Port Facility Security Code and makes stringent demands on security in ports and on board ships. With the introduction of the new ISPS Code, the security requirements in ports and at sea are becoming increasingly similar to

CONCORDIA MARITIME Partners STENA TEKNIK CUTTING-EDGE COMPETENCE IN NAVAL ARCHITECTURE

In questions involving naval architecture, a broad knowledge bank is of the utmost importance. Shipbuilding is one area where Stena Teknik acts as Concordia Maritime’s support function.

In a shipping company of Concordia which means that Stena Teknik must have how, which forms the platform for build- Maritime’s size, different types of ques- broad cutting-edge competence. Through ing ships for the future. I tions relating to naval architecture its different subcontractors, Stena Teknik Proof of the company’s large body of have to be dealt with on a daily basis. It has a large network of contacts in addition know-how is that it often functions as a could be anything from specific questions to which, the company can benefit from referral body in different questions relating about corrosion protection, classification the know-how and experience existing in to shipbuilding technology in the EU. Stena and safety to more comprehensive projects the Stena Sphere. In contrast to many other, Teknik also runs and actively participates such as building whole vessels. Stena Teknik’s similar companies, Stena Teknik has the in various research projects in Sweden as task is to act as a support function in these advantage of always receiving first-hand well as internationally. types of questions. information from the shipping companies One project it is in- Stena Teknik has a total of 13 employees in the Stena Sphere as well as the know- volved in at present and one of its principals is Concordia Mari- is research on time. Stena Teknik also serves and supports light weight the other parts of the Stena Sphere and this, materials for in itself, represents added value for each ships. individual company. With the knowledge bank built up through working with the 21 different Stena shipping companies, Stena Teknik possesses unique competence. Its work includes all types of shipping, from oil tankers and passenger traffic to rigs. The experience gained from one project can often be utilised in other projects. To build commercially successful vessels, the engineers must find the optimum solu- tion based on the requirements laid down. In the case of a tanker, the vessel must have a large cargo capacity, be safe, have a limited draft and, of course, be as cheap as possible to operate. In the case of a passenger ship, the necessary conditions are somewhat dif- ferent. What all shipbuilding projects have in common is, however, that they are subject to exacting requirements. In its field, Stena Teknik is a world-class company. Concordia Maritime and the other Stena companies make exacting demands,

Ice model test of the P-MAX in the ice model basin at HSVA Marine Research in Hamburg.

CONCORDIA MARITIME STENA BULK THE MARKET ORGANISATION

Close collaboration with Stena Bulk gives Concordia Maritime access to a worldwide organisation with solid know-how and experience in all the tanker market segments.

Access to a worldwide network of offices tankers with the Russian logistics company Besides Concordia’s own personnel in Swe- Progetra. This type of project takes many den and Switzerland, the company has years to finalise and is only possible with the access, via Stena Bulk, to a very competent help of a thorough understanding of the international market organisation. To be customers’ business activities. able to utilise business opportunities on The customers include large oil companies the world’s markets, there are offices in as well as independent trading companies Houston, London, Gothenburg, Moscow, and refiners. Cargoes are moved under Singapore and Beijing. Despite its geo- the terms of customised Freight graphical spread, the company’s organisa- Service Agreements and in tion is well trimmed with small and effective the form of single voyage units. All the offices keep in daily contact charters in a system where logistical inno- with each other via a well developed IT vations and customer alliances generating infrastructure. added value result in efficient vessel utilisa- tion for us as tanker owners, as well as 22 Personnel efficient service and competitive freight Stena Bulk has about 40 employees. Its rates for the customers. A mutually benefi- HOUSTON aim is to have a combination of locally cial business model that generates repeat employed personnel and Swedes in order business. to guarantee that “our tanker culture” is

disseminated throughout the company – at Two complementary strategies The HOUSTON office charters and operates principally Panamax the same time as being able to take advan- The MAX concept, in which Concordia has and product tankers. The traffic is concentrated to South and North American trades and the Caribbean. tage of the local business culture. invested, combined with the logistics strate- gies and experience described above, offers Understanding and supporting the prospect of very interesting business our customers’ business models opportunities both now and in the future Working and being physically close to the – two complementary strategies. customers results in an understanding of their logistics and trading requirements. One example of this is the development David Stanley Klas Eskilsson Northern Marine Stena Bulk of the V-MAX together with the oil company Sunoco. Another recent example is the 10-year time-charter contracts for two P-MAX

CONCORDIA MARITIME Partners WITH THE WORLD AS THEIR WORKPLACE

Hans Norén Ulf Ryder Kim Ullman Harry Robertsson Stena Bulk Stena Bulk Stena Teknik

All global tanker operations are coordinated from the offi ce in GOTHENBURG, which is also responsible for project and business development as well as the chartering of large tonnage.

Kenneth MacLeod Northern Marine

Manning and technical management are carried out in GLASGOW, Scotland. Management is provided in close collaboration with Northern Marine Management in Houston. Åke Rohlén Stena Bulk GOTHENBURG The latest addition to the global organisation is the offi ce in MOSCOW. From here, business on the Russian market is developed GLASGOW MOSCOW involving vessels of varying sizes. The main traffi c areas are the LONDON Baltic Sea, the Black Sea and the Murmansk region.

ZUG SPLIT

BEIJING 23

Chartering and operation of mainly Aframax and pro- duct tankers are carried out in LONDON. Principal traffi c areas are the North Sea and the Mediterranean.

Christina Aasa Carlsson

Concordia Maritime AG in ZUG is responsible for and administers Concordia’s fl eet. Danyang Fang Stena Bulk The offi ce in BEIJING Julian Henry continuously monitors Stena Bulk SINGAPORE the Chinese shipbuilding market.

Per Läbom

A Site Offi ce in SPLIT will be maintained throug- hout the construction of our new P-MAX tankers.

Andrew Watson Stena Bulk

The offi ce in SINGAPORE is responsible for the chartering of Aframax tankers in the Far East/ Pacifi c. The operational side is handled by the London offi ce.

CONCORDIA MARITIME KNOWLEDGE AND COMPETENCE THE BASIS OF SAFE AND ECONOMICAL SHIPPING

Today’s modern ships are equipped with ever-improving technology and monitoring systems, and regulations and legislation are becoming increasingly stringent. This is an excellent trend. But when all is said and done, it is still good seamanship that is the key factor in safe and economical shipping.

he very important manning function is equivalent to about SEK 7 (7) thousand without wearing eye protectors, he is asked for Concordia’s vessels is handled by per employee. why and a note is made of the reasons T Stena-owned Northern Marine Man- Northern Marine runs a cadet program given. These reasons could be that the eye agement in Glasgow. Concordia now has at for future officers where university studies protectors are broken or stored in a locked its disposal an excellent pool of seafarers are interspersed with shipboard practical cupboard, which the person in question thanks to the many years of experience world- experience. After they have completed has no key to unlock. A report is then sub- wide Northern Marine has in this field. the program, the cadets begin serving on mitted to the person responsible so that board. Some 50 cadets are currently par- this incident is not repeated. In 2004, the Training and education ticipating in the program. decrease in the number of accidents result- Continuous training and education in the ing in the persons involved being unable to Concordia organisation are subject to inter- Work environment work was as much as 30%. nal demands and goals, which are regulated Northern Marine Management is heavily by and structured around Northern Marine’s involved in the work environment field. Shipboard and shore-based quality and safety systems and are continu- It is responsible for manning a number of personnel in figures 24 ously adapted to satisfy new and amended drill rigs in the North Sea where the safety On average, there are 30 persons on board regulations and legislation. requirements are extremely rigorous. Much each one of Concordia’s ships. With four In 2004, Concordia invested SEK 1.3 (2) of the experience gained from these rigs is ships in service during the first half of the million in the education and training of applied when drawing up safety programs year and three during the second half, about shore-based and seagoing personnel, which also for ships. 100 positions were manned. At the end of The work begun in 2003 on the project the year, Concordia owned only one ship. “Behaviour Based Safety”, one of the aims The shipboard employees serve about of which is to reduce occupational injuries, six to eight months per year, which means continued in 2004. Besides the normal that there are about 160 (255) full-time analyses of accidents that have occurred, employees. the focus is on preventive work based on The subsidiary Universe Tankships in the behaviours. Many accidents are caused by US was sold in August and, as a result, the risky behaviours and “Behaviour Based only shore-based personnel are employees Safety” is a comprehensive program, which in the parent company and the subsidiary is intended to detect at-risk situations, in Switzerland. On average, there were 14 identify obstacles to a safe behaviour and (21) employees during the year. At year- then make changes. One of the ways this is end, the shore-based personnel consisted done in practice is that a member of the of 4 (19) persons. crew studies the way different jobs The average age is 43 years on board are performed. If someone, and 48 years ashore. The average period of for example, handles employment is 14 years for shipboard per- chemicals sonnel and 12 years for shore-based per- sonnel. Personnel turnover was approx. 8%, which is higher than in 2003. The rea- son for this is that older ships were phased out and many employees were offered the opportunity to serve on newer tonnage. The added value in relation to the number of full-time employees amounted to SEK

CONCORDIA MARITIME 727 (523) thousand per person. Organisation CONCORDIA PERSONNEL

Seagoing personnel by category Management Concordia

Masters Senior officers

Hans Norén, President.

Other officers Born in 1957. Employed in 1995 Shares held: 0.

Ratings

Hans Norén

Length of service Christina Aasa Carlsson, President,

20 Concordia Maritime AG, Zug. Born in 1950. Employed in 1991. Shares held: 18,945 Series B shares. 15 25

10 Christina Aasa Carlsson

5 icers ficers f s Rating Other of Masters Senior of Barbara Ouevray 0 Vice President (appointed on 1 January, 2005) Born in 1966. Employed in the Stena Group since 1989. Shares held: 0.

Age structure, seagoing personnel Barbara Oeuvray

50

40 Per Läbom, . Technical Director, 30 Born in 1943. Employed in 1999 (in the Stena Group in 1984). 20 Shares held: 0.

icers ficers

10 f s Masters Rating Senior of 0 Other of Per Läbom

CONCORDIA MARITIME CORPORATE GOVERNANCE

Annual General Meeting 2004 approving the budget and the business Principal owner to propose The Board of Directors of Concordia Mari- plan/objectives for the following year (six appointment of nomination committee time AB (publ) consists of six members elected meetings) The principal owner will propose that the Meet- by the General Meeting and two members ■ extra meetings called by the Chairman or at ing on 26 April decide in favour of the appoint- together with one deputy member elected by the request of the President or a board mem- ment of a nomination committee, which will the employees. All the board members elected ber. draw up a proposal to be presented at the were appointed by the Stena Sphere in its capac- The following points shall be dealt with at each Annual General Meeting in 2006 for the elec- ity as principal shareholder. regular meeting: tion of the Board of Directors as well as: At the Meeting, it was announced that the ■ The minutes of the previous meeting ■ a proposal for the election of the chairman president, Lars Carlsson, was retiring and would ■ Safety and environment for the meeting be succeeded by the executive vice president ■ The President’s report on business situation ■ a proposal for the election of the Chairman Hans Norén. including reports from the subsidiaries of the Board At the subsequent statutory board meeting, ■ The President’s report on the current status ■ a proposal for the directors’ fees specified Dan Sten Olsson was elected as Chairman and compared with the business plan/objectives for the chairman, deputy chairman and Mikael von Mentzer as Vice Chairman and Hans ■ Report on results and financial position. other board members. Norén was appointed as President. The principal owner will also propose that the c) The board shall make decisions on It was also decided that the total remunera- nomination committee’s members and chair- ■ the appointment and dismissal of the presi- tion for the board of directors decided on by man be appointed in accordance with the dent the Meeting would be SEK 1,045 thousand with following criteria: ■ organisational changes a fee of SEK 250 thousand paid to the deputy The nomination committee shall consist of ■ investments and borrowing chairman, SEK 150 thousand to each board deputy chairman of the board of directors and ■ delegation of the right of decision in accor- member elected by the General Meeting and a representative of each of the two share- dance with a special power reserved list SEK 15 thousand to each of the employee rep- holders holding the largest number of votes. ■ reports on final accounts, annual reports and resentatives. These representatives shall not be members interim reports of the board of directors. The chairman of the 26 Auditors ■ business plan/objectives. nomination committee shall be the representa- The auditor is proposed by the principal share- tive of the largest shareholder. The duration of holder and elected by the General Meeting Nine board meetings were held during the the nomination committee’s mandate period for a term of four years. The current auditor is year, six regular and three extra meetings. The shall be until a new nomination committee Thord Elmersson, KPMG, whose mandate period questions dealt with at these meetings in- has been appointed. If any of the sharehold- expires in 2007. The auditor’s work is invoiced on cluded the following: ■ ers ceases to be one of the two largest, the a current account basis. Every year, the auditor The sale of the subsidiary Universe Tankships member appointed by that shareholder shall reports to the Board on the results of his audit. (Delaware) LLC to Stena-owned Northern Marine Management Ltd. relinquish his position and the shareholder(s) Committees ■ Regular reports by company management having replaced the former shareholder shall A compensation committee decides on the Pres- and assessments of the ongoing dispute with appoint a new member. If a shareholder ident’s salary and other terms of employment. the buyer of the Stena Continent. refrains from the right to appoint a member, The committee consists of the Chairman of the ■ The investment in two Panamax tankers in a the shareholder with the next largest number Board and the Vice Chairman. joint venture with the Finnish energy group of votes shall appoint a member. If a mem- There is no separate audit committee. Fortum and their 10-year charter to Fortum. ber resigns from the nomination committee Instead, audit-related matters are dealt with by ■ Employment alternatives for the Group’s two before its work has been completed, the share- the whole board. V-MAX VLCCs. It was decided to approve the holder who appointed the member in question The Board’s work alternative of extending the time charter shall appoint a new member. If the member The Board’s work follows established rules of contracts with the US oil company Sunoco. appointed by the shareholder who was one of procedure. In broad outline, these cover: ■ The potential for selling the Group’s two the two largest but is no longer when the mem- V-MAX VLCCs. It was decided to approve the ber relinquishes his position, the shareholder(s) a) The Board’s general obligations alternative of selling the vessels to newly having replaced the former shareholder shall ■ to be responsible to the shareholders for formed Arlington Tankers Ltd with its subse- appoint a new member. A shareholder who has organisation and administration quent introduction on the New York Stock appointed a member of the nomination com- ■ to decide on written instructions for the Pre- Exchange instead of other sales alternatives. mittee is entitled to remove this person from sident ■ The time charter of two P-MAX tankers to the the committee and appoint a new member. The ■ to assess on an ongoing basis the company’s Russian logistics company Progetra. names of the nomination committee’s members financial situation and in the written instruc- ■ Discussion and evaluation of the Group’s cur- and which shareholders they represent shall be tions for the President, state when and how rency position. It was decided to hedge part posted on the company’s web site at least six information agreed on shall be reported of the Group’s exposure to the weakening months before the annual general sharehold- b) Meetings USD by hedging against the EUR and the SEK. ers’ meeting. ■ in conjunction with the report on the final accounts and the interim reports and when

CONCORDIA MARITIME Organisation BOARD OF DIRECTORS AND AUDITORS

Dan Sten Olsson, Chairman, born in 1947 Per Bjurström, born in 1939 Jens Ole Hansen, born in 1951 Group CEO and President, Stena AB, Göteborg. Executive, Göteborg Employee representative, Mölnlycke Board Member since 1984. Board Member since 1988 Employed in the Stena Group since 1973. Employed in the Stena Group since 1972 Chairman: Dolphin Holding AB, Reseriet AB, Group chairman: SEKO Sjöfolk. Chairman: Stena Line Holding B.V., Stena Metall AB, Ondina Invest AB, Ahlmark Lines AB, Board member since 1995. Stena Bulk AB, Stena Sessan AB. Board Member: O.F.Ahlmark & Co. Eftr. AB, Board member: SEKO Sjöfolk Vice Chairman: The Swedish Shipowners’ Association. Romulus B.V. Employee representative: Stena Rederi AB, Shares held: Through companies (see page 28) Shares held: 0 Stena AB, Stena Line Scandinavia AB. Shares held: 0

C. Mikael von Mentzer, Vice Chairman, born in 1944 Consultant, UK 27 Bert Åke Eriksson, born in 1944 Jörgen Lorén, born in 1961 Board Member since 1998 Executive, Hovås Employee representative, Svanesund Shares held: 60,000 Series B President, Stena Sessan AB Board Member since 2003. Board Member since 1998. Employed in the Stena Group since 1985. Board Member: Stena Sessan AB, Meda AB, Chairman: Swedish Ship Officers’ Association. Beijer Electronics AB, Catella Fondförvaltning AB. Secretary: SFBF-Stena. Shares held: 0 Shares held: 0

Morten Chr. Mo, born in 1948 Board Member since 2000. Chairman: OSCO AS, Lonni AS, Fjellbygdtiltak AS, Ocean Invest AS, Stemoco Holding AS, MCM Shipping & Investments AS, Finance Development AS. Lars Carlsson, born in 1942 Deputy Board member: KAUPA AS. Director and Senior Advisor, Zug, Switzerland Göran Dahlman, born in 1953 Shares held: 0 Board member since 1984 Employee representative, Torslanda Chairman: ABS North Europe Committee. Board Member since 1996 Honorary Board Member of Intertanko and Employed in Stena Group since 1989. Member of Intertanko Council Shop chairman: SEKO Sjöfolk. Shares held: 0. Shares held: 0

Auditor Thord Elmersson, born 1949 Authorized Public Accountant, Hindås KPMG, Göteborg

Sten A. Olsson Deputy auditor Honorary Chairman Anders Ivdal, born in 1951 Shipowner, Hovås Authorized Public Accountant, Partille Chairman of the Concordia Board 1984-1990 KPMG, Göteborg (not pictured)

CONCORDIA MARITIME THE CONCORDIA SHARE

Concordia Maritime was founded in 1984 and its Series B share was Shareholder structure listed on the O list at the Stockholm Stock Exchange the same year. No. of No. of Share of Share of Since 1 January, 2005, the share has been listed on the Attract40 Holding owners shares capital, % votes, % list. At the end of 2004, the share capital amounted to SEK 381.8 1-1.000 4,736 1,737,828 3.7% 2.1% million represented by 47.7 million shares, 43.7 million of which are 1.001-10.000 1,119 3,646,300 7.6% 4.3% Series B shares. The nominal value is SEK 8 per share. The Series A 10.001-100.000 134 3,807,495 8.0% 4.5% 100.001- 29 38,538,175 80.7% 89.1% share represents ten votes and each Series B share one vote. A trad- Total 6,018 47,729,798 100.0% 100.0% ing unit consists of 500 shares.

Shareholders Holdings of different ownership categories in % At year-end, the Stena Sphere owned about 52% of the capital and 2004-12-30 had about 73% of the votes. The Stena Sphere, which has been the Number of shareholders 6.018 Market value, MSEK 1.661 principal owner since the company was listed in 1984, owns all the Series A shares. Stena has declared that a holding in Concordia of % Capital Votes about 50% of the capital is a long-term objective. The second larg- Foreign owners 21.1 12.0 Swedish owners 78.9 88.0 est shareholder is ODIN Fonder, which owns shares equivalent to of which about 5% of the capital and 3% of the votes. institutions 0.5 0.3 unit trusts 4.8 2.7 private persons 73.5 84.9 Equity Concentration, capital On 31 December 2004, equity amounted to SEK 33.87 (21.51) per 10 largest shareholders 70.8 83.4 share. 25 largest shareholders 75.0 85.7 28 100 largest shareholders 79.3 88.2 Trend of share prices The price of Concordia’s Series B share was SEK 17.50 on 1 Janu- The ten largest shareholders ary, 2004, and SEK 34.80 on 31 December, 2004; an increase of 2004-12-30 % Capital Votes 99%. During the same period, the Stockholm Stock Exchange All Stena Sphere 52.2 72.7 Share index rose 16%. During the year, a total of 24.3 million Odin Fonder (Norway) 5.1 2.9 Series B shares were traded, which was equivalent to 51% (18%) Skagen Fonder (Norway) 3.3 1.9 of the average number shares. Pecunia Fond 2.3 1.3 Fidelity Fonder 2.0 1.1 Concordia’s market value was SEK 1,661 (835) million on 31 Mariedals Lantbruk AB 1.6 0.9 December, 2004. Robur Fonder 1.5 0.8 Rune Pettersson 1.3 0.7 Per Lindstedt 1.1 0.6 Dividend policy Johan Thorell 0.6 0.3 Concordia’s long-term objective is to maximise the value of its share- holders’ capital in the company through the long-term growth in the value of the fleet and a good return on oil transportation. This should provide the prerequisites of a long-term increase in the share price. The shareholders should be able to expect a reasonable dividend related to the Company’s profit but also to its investment require- ments. Since Concordia operates in a cyclical industry, the dividend can vary considerably from year to year. Our ambition is to distrib- ute a dividend amounting to 20-30% of the consolidated profit after tax. However, a minimum of 10% of the profit after tax should be distributed to the shareholders. The Board of Directors and the President propose that a dividend of SEK 3.00 per share be distributed for 2004, which is equivalent to 19% of the consolidated profit after tax (2003: SEK 0.50, which was approx. 30% of the profit).

CONCORDIA MARITIME The Concordia share

The global tanker market Share price and turnover, 2001-2004 Concordia Maritime operates in the tanker market. This global market is generally Series B share Enskilda Norge Shipping Index Number of shares traded, thousands SX All-Share Index extremely cyclical and is very susceptible to 60 the influence of external factors. Upswings and downturns in the demand for oil trans- 50 portation are primarily a consequence of increases and decreases in oil consump- 40 tion. 5000 30 The demand side of oil transportation An expanding world economy generally 4000 results in a rising demand for oil transpor- 20 tation and vice versa. Changes in national 3000 strategic oil stocks, changes in oil produc- tion and refining capacity in different pro- 2000 duction areas and the OPEC countries’ price strategies are other examples of factors 10 1000 that affect the demand for transportation on the tanker market. 8 01 02 03 04

The supply side of oil transportation 29 The supply side consists of a large number of vessels in the world tanker fleet. At the end of 2004, there were approximately Despite periods with low freight rates, Tanker shipping companies’ strategies in 3,500 tankers in the world (vessels under e.g. in 2002, generally speaking, there has a cyclical industry 10,000 dwt excluded). This fleet increases been a better balance in the freight mar- For a company in an extremely cyclical and decreases as a result of newbuildings kets. In the last few years, the growth of industry where profits fluctuate consid- and scrapping. the world economy, not least in China and erably, share prices can be irregular and India, has increased the need for transpor- the dividend paid to shareholders can Balance/imbalance between supply and tation. In some size segments, demand vary. Historically, shipping company share demand has exceeded supply by a wide margin, prices have often followed the upswings Since the mid-1970s, the tanker market which has resulted in much higher freight and downturns of the freight market. In has been characterised by long periods rates, e.g. in the largest segment – VLCC. a rising freight market, rapid and sharp with a surplus of transport capacity, i.e. The good markets have led to a wave of increases in value have been possible, but the number of ships was larger than the new orders and the addition of new ton- the downside has been an equally rapid demand for transportation, which resulted nage in the years immediately ahead will drop in value when the market weakens. in low or very low freight rates. At the be between 20% and 30% in the different There are shipping companies, particularly end of the 1990s, this trend appeared to size classes. in the large segments, with a strategy of have been reversed with a better balance being exposed to the open market in this between supply and demand. Legislation/environment way. However, with the help of the mar- Legislation and regulations applying to ket balance prevailing in recent years, a the environment and safety have had, and number of shipping companies have built will continue to have, a large impact on up a business designed to even out the the industry. As a result of the double hull large fluctuations in the shipping cycles requirement, single-hull vessels are gradu- by adopting a more industrial approach, ally being phased out. In 2010, single-hull particularly in segments with tankers in tankers will be banned in large parts of the the smaller size classes. world. Where does Concordia stand? Concordia’s mission is to generate value and growth for sharehold- The tanker shipping company’s revenues ... ers by providing our customers with safe and cost-efficient tanker Tankers are employed either on the spot market, i.e. they transportation based on innovation and performance. are chartered out for one voyage at a time, or by means of Up until 2003, Concordia was a dedicated large-tanker ship- different types of contracts with the customers. These con- ping company. With the disposal of its fleet of older VLCCs and the tracts can vary in length, from a few months to several years. order of eight product tankers, Concordia will also be active in the A shipping company, which has its ships solely on the spot product tanker segment. The MAX concept means that the vessels market, is exposed to market downturns, but can also ben- have a large cargo capacity on a limited draft, which makes them efit immediately from the often rapid market upswings. A economically very efficient. In addition, a very high level of safety shipping company, which has its vessels signed to charters, is achieved by doubling all critical components such as engines, has secured its revenue level and is less affected by short- steering systems, etc. The design of the vessels, with double rud- term fluctuations in the market. A combination of employ- ders and propellers, gives them superior manoeuvrability. ment on the spot market and charters is not unusual. A large part of the fleet on order already has employment with cash flow and profits secured by means of long-term charters. The ... and costs tankers will be delivered in 2006 and 2007. The Board of Directors’ Apart from voyage costs (fuel consumption, port dues), the Report contains a detailed account of the company’s financial posi- largest cost a large-tanker shipping company has is normally tion, financial and operational risks and a forecast. its vessels’ daily running costs. These consist mainly of costs for crews, insurance, periodic (dry-dockings) and day-to-day maintenance and repairs. The quality of the ships and how they are maintained by their crews have the greatest impact 30 on the daily running costs. A major factor affecting profit- ability is the level of control the shipping company has over the daily running costs.

Capital costs – timing – purchases/sales The ships’ so-called capital costs, depreciation and inter- est payments, can vary considerably. Ship prices, both of second-hand tonnage and newbuild- ings, fluctuate, sometimes widely, together with fluctua- tions in the freight market and shipbuilding market. Timing is thus extremely important and has a large impact on the ship’s capital costs and thus the shipping company’s profitability over a long period of time. As a consequence of this, most shipping companies’ business concepts also include purchases and sales.

CONCORDIA MARITIME The Concordia share SIX-YEAR SUMMARY

2004 2003 2002 2001 2000 1999

Profit/loss items (SEK million) Net sales 354.0 649.7 768.6 1,334.8 1,327.6 773.6 Operating costs 271.2 575.7 877.9 1,043.6 1,098.2 817.7 Operating result 729.4 58.9 -98.2 292.5 246.0 -44.1 - of which profit/loss on ship sales 646.6 -15.1 11.1 1.5 16.6 - Result after financial items 740.2 35.1 -142.4 251.9 227.7 -72.0 Cash flow from operating activities1 136.2 150.5 40.0 392.1 337.2 15.9

Balance-sheet items Ships 32.5 1,223.9 1,907.0 2,544,3 1,073.3 1,121.3 (Number of ships) (1) (4) (6) (9) (9) (10) Ships under construction 128.0 55.4 - - 1,001.8 573.7 (Number of ships) (7) 2 (6) - - (2) (2) Liquid funds 1,123.4 40.3 115.2 263.0 81.0 16.2 Other assets 444.1 87.8 216.7 343.0 338.4 180.1 Interest-bearing liabilities 0.0 300.7 926.6 1,261.7 936.0 950.2 Other liabilities and provisions 111.2 80.2 159.3 295.4 346.9 218.6 Equity 1,616.8 1,026.5 1,153.0 1,593.2 1,211.6 721.5 Total assets 1,728.0 1,407.4 2,238.9 3,150.3 2,494.5 1,890.3

Key ratios (%) Equity ratio 94 73 51 51 48 38 Return on total capital 47 3 -4 11 12 -2 Return on capital employed 49 3 -4 12 14 -2 31 Return on equity 56 7 -11 16 21 -8

Per-share data (SEK) Profit/loss after tax 15.51 1.62 -3.12 4.85 4.47 -0.96 - of which profit/loss on ship sales 13.55 -0.32 0.23 0.03 0.35 - Cash flow1 2.85 3.15 0.84 8.21 7.14 0.68 Equity 33.87 21.51 24.16 33.62 26.67 20.03 Share price at year-end 34.80 17.50 11.00 16.00 21.50 11.80 Dividend 3.00 3 0.50 - 0.60 1.10 -

Miscellaneous P/E ratio including ship sales 2.2 10.8 neg 3.3 4.8 neg P/E ratio excluding ship sales 17.8 9.0 neg 3.3 5.2 neg

Number of shareholders 6,081 5,431 5,542 5,215 5,551 5,268

1 Ship sales not included 2 Six wholly-owned ships and two ships in which the Group has a 50% holding 3 Proposed dividend

DEFINITIONS Equity ratio Equity as a percentage of total assets. Earnings after tax per share Result for the year in relation to the average number of shares during the accounting year. Return on total capital Result after financial net plus financial expenses as a per- centage of average total assets. Cash flow per share Result after financial net plus depreciation minus tax paid Return on capital employed Result after financial net plus financial expenses in relation to the average number of shares during the accounting year. as a percentage of average capital employed. Capital employed refers to total assets less non-interest bearing liabilities including deferred tax liabilities. Equity per share Equity in relation to number of shares at year-end.

Return on equity Result for the year as a percentage of average equity. P/E ratio Share price at year-end in relation to earnings per share after tax. Cash flow Result after financial net plus depreciation minus tax paid (cash flow before change in working capital and investments and before the effect of ship sales). KEY RATIOS

Eget kapital och skulder

Cash Flowflow from operating activities Equity and liabilities OperatingRörelseresultat result

SEK million SEK million Operations Ship sales Current liabilities Long-term liabilities 400 2.9% 0.5% 600

Provisions 350 3% 500

300 400

250 300

200 200

150 100

100 0

50 Equity -100 93.6%

0 -200 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004

Operating costs Financial structure Result after financial net Rörelsekostnader Financial structure (MSEK) Result after financial net

SEK million SEK million Average, six years (173.4) Depreciation 800 Operating costs, ships according to plan Interest-free liabilities 32 47.0% 24.3% 111.2 700 600

500

400

300 Personnel costs 18.2% 200 100

0

Other external -100 costs Equity 10.5% 1,616.8 -200 1999 2000 2001 2002 2003 2004

Return on equity Assets Equity ratio Return on equity Assets Equity ratio

SEK million Equity SEK million Total assets % Return on equity Equity ratio 2,000 60 3,500 100 Ships and ships under construction 9.3% 3,000 Other receivables 1,500 40 4.6% 2,500 Shares, Arlington Tankers 2,000 13.5% 1,000 20 1,500 50

1,000 500 0

500 Liquid funds and investments 0 -20 72.6% 0 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004

CONCORDIA MARITIME

BOARD OF DIRECTORS' REPORT

The Board of Directors and the President of Concordia The first vessel in the series of six P-MAX tankers ordered Maritime AB (publ) hereby submit their report for the in 2003 will be delivered at the end of 2005. In addition to operating year 1 January, 2004 - 31 December, 2004. The the 5-year charter contracts, which were signed in January parent company is Stena Sessan Rederi AB, which controls with the French oil company TOTAL for the first two about 52% of the capital and about 73% of the total voting tankers, 10-year time-charter contracts were signed in power and whose parent company is Stena Sessan AB. September with the Russian logistics company Progetra for two vessels. These long-term contracts will secure a stable SUMMARY OF THE BUSINESS YEAR 2004 cash flow at the same time as the company is free to decide

As a result of a number of business events in 2004, on the employment of the two remaining P-MAX tankers. Concordia Maritime has undergone major changes as regards During the year, a joint project, involving the construction both financial position and the direction of its business of two Panamax product tankers with ice class 1A, was activities. initiated together with the Finnish energy group Fortum. 2004 signalled the end of 15 successful years with the These vessels will be owned by a joint venture, in which Concordia Class, Concordia's own brand name for high- Fortum and Concordia each has a 50% share, and they will quality VLCCs. The two remaining tankers in the original series be time-chartered to Fortum for ten years. of six tankers were sold in 2004 for employment in the off- shore industry. One of the vessels was delivered in June TANKER MARKET IN 2004 and the other, the Stena Congress, was withdrawn from The market for the transportation of oil and refined petro- service in November and delivered in January, 2005. leum products exceeded all expectations in 2004 and In the autumn, a new company, Arlington Tankers, was proved to be much stronger than predicted. A generally formed together with Stena, which acquired Concordia's strong global economy with a very healthy growth rate, 33 two V-MAX VLCCs and four tankers from Stena. The company particularly in China, resulted in increased demand for oil. was successfully introduced onto the New York Stock During the year, total global oil production rose 4.2%. Exchange at the beginning of November. The pricing of China increased its oil imports by some 30% compared the share, which then determined the selling price of the with 2003. The rising demand for oil generated a growing ships, was very satisfactory and generated a capital gain of demand for tanker transportation – again, due not least to just over SEK 600 million for Concordia. Approx. 87% of the China, which met a large proportion of its import needs sales proceeds was paid in cash and approx. 13% in the with oil from the Arabian Gulf. form of shares in the newly formed company. In conjunction with this sale, Concordia Maritime entered SHIPBUILDING MARKET into an agreement with Arlington Tankers to time-charter During the year, the shipyards had, in principle a full backlog the V-MAX tankers for five years at a fixed rate with an option of orders and several were accepting orders for delivery as on three 1-year extensions. Concordia thus has these vessels far ahead as in 2009. The high demand in all ship segments at its disposal for a further five to eight years. drove newbuilding prices up to very high levels during the

This means that the company is currently free from year. The price of a VLCC was in the region of USD 110 million, debt and has liquid funds, including short-term investments, an increase of about 40%. A total of 342 new tankers were which amounted to approx. USD 190 million at year-end. The ordered during the year compared with 410 in 2003. company has eight product tankers on order, including two Despite the large backlog of orders, the profit margins in which it has a 50% share. The majority of these tankers at many of the shipyards were low due to record-high steel will be delivered in 2006 and 2007. The investment amounts prices and the steadily weakening US dollar. to approx. USD 275 million, of which about USD 20 million has already been paid in the form of advance payments and VLCC project costs. In the space of a few years, Concordia will thus The two remaining Concordia Class VLCCs were sold at the have a modern tanker fleet with a very low debt-equity ratio. beginning of the year. The Stena Constellation was deliv- ered to the buyer on 29 June. The Stena Congress was with- drawn from service at the beginning of November and de- livered at the beginning of January, 2005. The capital gain

CONCORDIA MARITIME

BOARD OF DIRECTORS' REPORT

on the sale of the Stena Constellation, SEK 45.0 million, is Concordia has also undertaken to defray the cost of off-hire included in the result for 2004 while the profit on the sale if the vessel has not been available for a period of 355 days of the Stena Congress will be shown in the interim report or more per year for technical reasons. for the first quarter of 2005. The average freight rate for It is estimated that the cost of these undertakings could

the two tankers until they were withdrawn from service amount to approx. SEK 53 million and this amount is in-

was USD 20,000 (25,000) per day. cluded as a reduction in the reported result of ship sales.

The estimated cost for 2005, SEK 11.5 million, is included in V-MAX the item Accrued expenses in the balance sheet while the

Sales long-term portion, SEK 41.7 million, is included in provisions.

In November, the Group's two V-MAX VLCCs, the Stena Vision and Stena Victory, were sold to Arlington Tankers. In con- P-MAX junction with this sale, Concordia Maritime entered into an Ships under construction

agreement with Arlington Tankers to time-charter the V-MAX In 2003, six product tankers of about 49,000 dwt, which will

tankers for five years at a fixed rate with an option on three be built in accordance with the MAX concept, P-MAX, were 1-year extensions. ordered. They will be built at the Brodosplit shipyard in Croatia with delivery of the first vessel set for the end of 2005. The

Employment total investment amounts to approx. SEK 1,500 million. The tankers are on time charter to the US oil company Sunoco until mid-2007. The revenue from this contract Employment covers the charter costs paid to Arlington Tankers after the In January, a 5-year time charter contract for the first two 34 sale of the vessels. Concordia Maritime is thus exposed to vessels was signed with the French oil company TOTAL. In the open market for about 2.5 years, from mid-2007 to the September, 10-year time charter contracts for two vessels end of 2009. were signed with the Russian logistics company Progetra S.A. Progetra is a rapidly expanding logistics company, which Undertakings in conjunction with ship management co-operates closely with a number of Russian oil companies. Stena-owned Northern Marine Management, Glasgow, is Today, the company's business consists mainly of overland responsible for the management of the vessels on behalf transportation and the operation of a number of oil terminals of the new owners. in Russia. This deal means that Concordia has now secured

In conjunction with the sale to Arlington Tankers, employment for four of the six P-MAX tankers on order. Concordia undertook to pay for the vessels' operating costs if they exceeded a pre-determined level.

SHIPS UNDER CONSTRUCTION

Size Ice Estimated Name Type dwt class delivery date Employment on delivery

Stena Paris P-MAX 49,900 1B 4th quarter, 2005 Time-chartered to TOTAL, 5 years Stena Provence P-MAX 49,900 1B 1st quarter, 2006 Time-chartered to TOTAL, 5 years Stena Primorsk P-MAX 49,900 1B 2nd quarter, 2006 Time-chartered to Progetra, 10 years Stena Performance P-MAX 49,900 1B 3rd quarter, 2006 Open market Stena Progetra P-MAX 49,900 1B 4th quarter, 2007 Time-chartered to Progetra, 10 years Stena Progress P-MAX 49,900 1B 1st quarter, 2008 Open market

Stena Polaris (50%) Panamax 74,500 1A 4th quarter, 2006 Time-chartered to Fortum, 10 years Stena Poseidon (50%) Panamax 74,500 1A 1st quarter, 2007 Time-chartered to Fortum, 10 years

CONCORDIA MARITIME BOARD OF DIRECTORS' REPORT

PANAMAX PRODUCT TANKERS RESULT AND FINANCIAL POSITION Ships under construction Consolidated sales and result

At the end of August, Concordia Maritime ordered two Consolidated sales were SEK 354.0 (649.7) million. The result

Panamax product tankers with Finnish/Swedish ice class 1A in after financial items was SEK 740.2 (35.1) million, including a a 50/50 joint venture with the Finnish energy group Fortum. result of SEK 646.6 (-15.1) million on the sale of ships. The result

These vessels, like the P-MAX tankers, will be built at the after tax was SEK 740.2 (77.1) million, which corresponds to a

Brodosplit shipyard in Croatia. They will have a deadweight profit per share of SEK 15.51 (1.62) after tax. of 75,000 tons, a length of 228 m and a beam of 32 m. Delivery will take place in 2006 and at the beginning of 2007. Parent Company's sales and result

The Parent company's sales amounted to SEK 9.4 (18.1) million

Employment of which SEK 7.9 (17.4) million refers to intergroup invoicing.

In conjunction with the order, a 10-year time charter contract The result after financial items was SEK 281.3 (34.9) million was signed for both vessels with Fortum, which plans to employ including an anticipated dividend of SEK 278.4 (22.5) million the vessels primarily in the transportation of refined products from subsidiaries. from the Baltic Sea to the North American market. Operating costs

DISPUTE CONCERNING SHIP SALE IN 2000 Total operating costs amounted to SEK 271.2 (575.7) million.

The tanker Stena Continent was sold in 2000. For the last four The largest cost item was ship-operating costs, SEK 127.4 years, there has been a dispute between Concordia Maritime (335.8) million. and the buyer concerning the interpretation of certain parts of the sales agreement, that is, whether or not the seller is obliged Investments 35 to pay the cost of certain work done on the vessel by the Investments amounted to SEK 86.3 (61.6) million and consist of buyer. The buyer is claiming a sum of USD 11.5 million, equivalent advance payments to the shipyard and project costs relating to to SEK 75 million. The contract of sale stipulates arbitration in the vessels on order as well as SEK 2.3 (0.4) million in capitalised the event of a dispute but, instead, the buyer entered an ap- interest. plication for a summons in a London court against the com- panies, which represented and guaranteed the stipulated Liquid funds fulfilment of the contract by the companies that sold the ves- The Group's disposable liquid funds, including unutilised sel. The companies involved in the Concordia Group are the credit facilities, amounted to SEK 1,153.2 (319.6) million on parent company and the Swiss subsidiary Concordia Maritime 31 December 2004. Short-term investments totalling SEK 130.7 AG. Concordia rejects the claim in its entirety and the com- million are not included in disposable liquid funds. pany's view is that the dispute should not have any financial In order to secure the borrowing requirements arising as a consequences apart from legal costs. SEK 1.6 million has been result of the investments in new tonnage, the old credit facility allocated to cover legal costs. was replaced with new financing at the end of June. The new credit facility, which has a duration of about seven years,

SALE OF SUBSIDIARIES originally totalled USD 250 million. In conjunction with the sale

The subsidiary Universe Tankships (Delaware) LLC, which of the V-MAX tankers, the facility was reduced to USD 150 million, conducts ship management business from Houston, was sold which will be made available as the P-MAX tankers are delivered. to Northern Marine Management Ltd, Glasgow, in August. In November and December, as protection against a further

See also under the heading Related company transactions. weakening of the US dollar, USD 80 million were converted into Euros at an average exchange rate of 1.31.The exchange rate MERGER OF SUBSIDIARIES on 31 December 2004 was 1.36. The transaction is not classified During the year the Swiss subsidiary Concordia Finanz AG was as hedging and is valued at its actual value in the balance sheet merged with the subsidiary, also Swiss, Concordia Maritime AG. and a positive exchange rate difference of SEK 21.0 million is included in the result for the year. The Parent Company's dis- posable liquid funds, including unutilised credit facilities,

amounted to SEK 20.7 (23.1) million at year-end.

CONCORDIA MARITIME

BOARD OF DIRECTORS' REPORT

Holdings of securities The Company's policy is that if any of the risks can be

In the sale of the two V-MAX tankers to Arlington Tankers Ltd, judged to have a significant negative impact on the 87% of the sales proceeds was paid in cash and 13% in the Company's result and position in an unfavourable trend, this form of shares. The Group's shareholding thus consists of risk should be reduced as far as possible by means of financial

1,534,785 Arlington shares. The price of the share was USD 20 instruments. The objective is to take an active approach to when it was introduced to the stock exchange. The price at preventing the Group's business activities from being affected

year-end was USD 23 per share. The holding has been valued by large fluctuations in the result and cash flow due to at its market value in the balance sheet. The change in value, exposure to financial risks.

amounting to SEK 29.9 million, has been reported in equity under the heading “Fair Value Reserve”. Price risk Interest-rate risk, liabilities At present the Group has no Short-term investments interest-bearing liabilities. Future interest rates have not been

After payment from the sale of the V-MAX tankers was received hedged. in November, a number of investments in corporate bonds have been made. The objective has been to increase the return Price risk, short-term investments The Group's short-term on liquid funds, compared with bank interest, and with a limited investments in corporate bonds are exposed to price risks.

risk by investing in well-analysed companies. The focus has I Currency risk. Investments in currencies other than USD

primarily been on the oil sector for the reason that activities or SEK are hedged.

and developments in this sector are to a large extent linked I Interest-rate risk. Price changes due to changes in to the tanker market in which Concordia Maritime operates. market interest rates have not been hedged. 36 In view of the fact that the investments have been subject to a short-term perspective, the alternative of investing in shares Currency risk, equity A weak USD reduces Concordia's equity

has been ruled out. At year-end, short-term investments and net worth, while a strong USD has the reverse effect.

amounted to SEK 130.7 million. The exchange rate effect arising when converting foreign

The holdings have been valued at their actual value in the subsidiaries to SEK is recorded directly to shareholders' equity

balance sheet. The investments in NOK have been hedged in the consolidated balance sheet. The Company's overall

against the USD. currency policy, bearing in mind the view of the independent foreign business operations, is not to hedge this currency

Interest-bearing liabilities exposure. As a result of the continued fall in the USD exchange

At year-end, there were no interest-bearing liabilities (2003: rate with SEK and other currencies, and on the basis of an

SEK 309.7 million). assessment that the USD would continue to weaken, it was

decided to hedge a portion of the exposure to the USD. This

FINANCIAL RISKS took the form of partly forward cover amounting to USD 20

Concordia's business is capital-intensive and is exposed to million against the SEK and partly by converting USD 80 million various types of financial risks; interest-rate risks, currency into Euros.

risks and market risks – together with price risks, liquidity risks The USD exchange rate fell from SEK 7.28 on 31 December

(the risk that the company will be unable to borrow money to 2003 to SEK 6.61 on 31 December 2004, which reduced

meet its commitments), credit risks and cash flow risks. Concordia's equity by SEK 156 (204) million. This is equivalent to

The effects and influence of the different risks on the SEK 3.27 (4.27) per share. The amount includes a positive effect

Company's result and position change over time depending of SEK 6 million resulting from forward cover of the SEK. on the size of Concordia's fleet and how it is employed but The accumulated exchange rate differences, which have

also by the tanker market's cycles in general. been recorded directly to shareholders' equity, amount to SEK

-227 (-71) million, equivalent to SEK -4.76 (-1.49) per share.

It is estimated that a change of SEK 0.10 in the USD exchange

rate would affect Concordia's net worth by about SEK 20 million,

or SEK 0.40 per share.

CONCORDIA MARITIME BOARD OF DIRECTORS' REPORT

Exchange rate difference recorded to shareholders' equity – Credit risk, investments The Group's investments in ships USD/SEK exchange rate means that advance payments are made to shipyards on an

Exchange rate difference Exchange rate difference Exchange ongoing basis during the construction period. Bank guar- SEK million USD/SEK exchange rate USD/SEK antees are supplied in order to secure repayment of the 200 12 150 amount paid in advance in the event of the other party 100 being unable to meet its obligations. 50

0 Cash flow risk -50 8 -100 The market in which the Group operates, tanker shipping, -150 is very cyclical. This means that if a vessel is employed on -200 the so-called open market, revenue and thus cash flow can -250 vary considerably. The cash flow risk has been reduced by -300 4 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 signing time charter contracts of between five and ten years for most of the fleet on order. Currency risk in operating activities All the consolidated income is in USD. Expenses are also heavily USD dominated PREPARATIONS FOR THE TRANSITION TO INTERNATIONAL with the exception of certain expenses in SEK and Swiss francs. FINANCIAL REPORTING STANDARDS (IFRS) This means that exchange rate fluctuations have little effect As of 1 January, 2005, all listed companies in the EU must on either Concordia's cash flow or its result. Exchange rate comply with International Financial Reporting Standards differences in the activities amount to SEK 0.3 million. Exchange (IFRS). A gradual adjustment has been in progress for a rate variations in operating activities are not hedged. number of years in the form of implementation of the 37 Swedish Financial Accounting Standards Council's recom- Market risk, bunkers Market prices of bunkers (a ship's fuel) mendations, which are based on IFRS. In a review of the fluctuate widely. Concordia normally makes assumptions effects of full adjustment to IFRS, no items have been iden- about future changes in the price of bunkers and on the basis tified as having a significant impact on financial reports of these assessments, may hedge the prices of a portion of the and comparative figures. estimated annual consumption of vessels employed in the In the annual accounts for 2004, financial instruments open market. The Group currently has only one vessel employed have been valued similarly to the way prescribed in IAS 39 in the open market, which means that the exposure to price and which are permitted in accordance with the amend- changes is very limited and no prices are hedged at present. No ments made in Ch. 4, §14 of the Swedish Annual Accounts prices have been hedged with respect to future consumption. Act and which may be applied from 2004. The interim report for the first quarter of 2005 will be the Liquidity risk The Group has secured loans amounting to approx. first financial report to be prepared in accordance with IFRS.

70% of the total investment amount for the six P-MAX tankers under construction. No loans have been secured for the two RELATED COMPANY TRANSACTIONS vessels under construction owned by a joint venture in which Concordia purchases services on a regular basis from re- the Group has a 50% share. lated companies in the Stena Sphere, including Stena Bulk. The loans secured together with available liquid funds Concordia Maritime and Stena Bulk are engaged in similar mean that the Group will have a very low loan level when tanker activities. Consequently, there is an agreement, its investments in the new fleet have been completed. which regulates the relationship between the two companies with respect to new business. According to the terms of this CREDIT RISK agreement, Concordia Maritime has the right to choose Credit risk, short-term investments The Group's short-term whether it wishes to participate 0%, 50% or 100% in the investments in corporate bonds are exposed to credit risks. By deal in question. No joint deals were concluded in 2004. investing in well-analysed companies primarily in the sector and industry in which the Group is active and is thus familiar with, these risks are substantially reduced.

CONCORDIA MARITIME BOARD OF DIRECTORS' REPORT

Services are purchased on a regular basis from Stena Bulk to generate a break-even result. Apart from the V-MAX or other companies in the Stena Sphere: tankers, it is anticipated that the Group will conduct a limited

I Vessel charter. Payment is based on a commission of amount of chartering in and out. Currently, a product 1.25% on freight rates. tanker is on charter until July, 2005.

I Commission on the purchase and sale of vessels. The remaining Concordia Class tanker was delivered to Payment is based on a commission of 1% on purchases the buyer on 7 January.

and sales. The forecast for the full year is SEK 100 million before

I Operation and manning of the Group's vessels, so-called tax, including a capital gain of SEK 45 million on the sale of

ship management. Payment is based on a fixed price per ships. This corresponds to SEK 2.10 per share. The forecast month and vessel. does not include any exchange profit or exchange loss on

I Purchases of bunker oil. Payment is based on a commis- the Group's position in the Euro. sion of about 0.2% per ton purchased.

I Administration, marketing, insurance, technical follow- DIVIDEND POLICY up and development of Concordia's fleet. Payment is The shareholders should be able to expect a reasonable based on a fixed price per month and vessel. In the case dividend related to the Company's profit but also to its invest- of technical consulting services for newbuilding projects, ment requirements. Since Concordia operates in a cyclical an hourly rate is charged on current account, which is industry, the dividend can vary considerably from year to year. then charged to the project. Our ambition is to distribute a dividend amounting to

I Office rent and office services for Concordia's personnel. 20-30% of the consolidated profit after tax plus. However, A fixed price per year is charged. a minimum of 10% of the profit after tax should be distrib- 38 uted. The proposed dividend of SEK 3.00 (0.50) is equivalent All related company transactions take place on commercial to 19% (31) of the consolidated profit. terms and at market-related prices. During the year, a total

of SEK 17.3 (19.2) million was paid to companies in the PROPOSED TREATMENT OF UNAPROPRIATED EARNINGS Stena Sphere. As shown in the consolidated balance sheet, on 31 December,

In August, the ship management company Universe 2004, the Group's unrestricted equity amounted to SEK 1,093.7 Tankships (Delaware) LLC was sold to Stena-owned million. No transfers to restricted equity are required. The Northern Marine Management. Because of the close rela- Board of Directors and the President propose to the tionship between the companies, the deal was presented at Annual General Meeting that the funds available in the

and approved by the Annual General Meeting in April, 2004. Parent Company, SEK 313.9 million, be allocated as follows: As regards commission on the sale of ships, no commission

was paid to Stena when the V-MAX tankers were sold to the SEK million

jointly owned Arlington Tankers Ltd. SEK 3.00 per share to be paid as a dividend to the shareholders 143.2 EVENTS AFTER THE ACCOUNTING DATE To be carried forward 170.7 Apart from the previously mentioned delivery of the tanker 313.9 Stena Congress, no significant events have occurred after For additional information on the financial position of the the accounting date. Group and Parent Company, please refer to the following income statements, balance sheets, statements of change FORECAST FOR 2005 in financial position and notes to the financial statements. The Group currently owns no vessels and 2005 will go down in the history of Concordia as “the newbuilding year”. The Group's revenue and result will mainly be generated by share dividends from Arlington Tankers and interest in- come from investments and bank funds. The time charter

contract for the two V-MAX tankers, which was signed in conjunction with their sale to Arlington Tankers, is expected

CONCORDIA MARITIME INCOME STATEMENTS

Group Parent Company

SEK million 2004 2003 2004 2003

Net sales (Note 1) 354,0 649.7 9.4 18.1 Sales, ships 646.6 - 15.1 – –

Total income 1,000.6 634.6 9.4 18.1

Operating costs, ships - 127.4 - 335.8 – – Other external costs - 28.4 - 36.7 - 12.1 - 14.4 Personnel costs (Note 20) - 49.3 - 84.6 - 6.9 - 9.3 Depreciation according to plan (Note 7) - 66.1 - 118.6 – –

Total operating costs - 271.2 - 575.7 - 19.0 - 23.7

Operating result 729.4 58.9 - 9.6 - 5.6

Result from other securities and receivables accounted for as fixed assets (Note 2) – – 278.4 34.6 Interest expenses and similar profit/loss items (Note 3) 26.0 0.5 14.5 10.2 Interest income and similar profit/loss items (Note 4) - 15.2 - 24.3 - 2.0 - 4.3 39 Financial net 10.8 - 23.8 290.9 40.5

Result after financial items 740.2 35.1 281.3 34.9

Appropriations (Note 5) – – 7.2 0.3 Tax cost (Note 6) 0.0 42.0 - 3.1 0.2

Net result after tax 740.2 77.1 285.4 35.4

Shares at end of period 47,729,798 47,729,798 Average number of shares 47,729,798 47,729,798

Result per share after tax, SEK 15.51 1.62

Proposed dividend per tax, SEK 3.0 0.50

There are currently no convertible debenture loans, options or other instruments that would increase the number of shares in the future.

CONCORDIA MARITIME

BALANCE SHEETS

Group Parent Company

SEK MILLION 2004 2003 2004 2003

Assets Fixed assets

Tangible assets Ships (Note 7) 32.5 1,223.9 – – Ships under construction (Note 7) 128.0 55.4 Equipment (Note 7) 0.1 0.5 0.1 0.0

Total tangible fixed assets 160.6 1,279.8 0.1 0.0

Financial assets Participations in group companies (Note 21) – – 754.2 754.2 Other long-term holdings of securities (Note 8) 232.9 – – – Deferred tax claim (Note 6) 1.8 3.2 1.1 – Other long-term receivables (Note 9) 9.0 8.5 9.0 8.5

Total financial assets 243.7 11.7 764.3 762.7

40 Total financial assets 404.3 1,291.5 764.4 762.7

Current assets

Current receivables Other current receivables (Note 10) 19.8 51.8 65.2 7.5 Prepaid expenses and accrued income (Note 11) 49.8 23.8 6.1 4.5

Total current receivables 69.6 75.6 71.3 12.0

Short-term investments Other short-term investments (Note 12) 130.7 – 13.6 –

Total short-term investments 130.7 0.0 13.6 0.0

Total short-term investments 1,123.4 40.3 0.8 0.3

Cash and bank balances 1,323.7 115.9 85.7 12.3

Total assets 1,728.0 1,407.4 850.1 775.0

CONCORDIA MARITIME

BALANCE SHEETS

Group Parent Company

SEK MILLION 2004 2003 2004 2003

Equity and liabilities Equity Restricted equity

Share capital, 47,729,798 shares at a par value of SEK 8 per share 381.8 381.8 381.8 381.8 Restricted reserves 141.3 154.5 138.3 138.3

Total restricted equity 523.1 536.3 520.1 520.1

Non-restricted equity Profit or loss brought forward 353.5 413.1 28.5 27.8 Net result for the year 740.2 77.1 285.4 35.4

Total non-restricted equity 1,093.7 490.2 313.9 63.2

Total equity 1,616.8 1,026.5 834.0 583.3

Untaxed reserves (Note 5) 4.2 11.4

Provisions (Note 13) 52.5 13.7 – – 41

Long-term liabilities Liabilities to Group companies – – – 156.7 Long-term interest-bearing liabilities (Note 14) – 300.7 – – Other long-term liabilities (Note 15) 9.0 8.5 9.0 8.5

Total long-term liabilities 9.0 309.2 9.0 165.2

Current liabilities Credit institutions (Note 16,) – 9.0 – 9.0 Other current liabilities (Note 17) 2.9 8.3 0.3 1.9 Accrued expenses and deferred inincome (Note 18) 46.8 40.7 2.6 4.2

Total current liabilities 49.7 58.0 2.9 15.1

Total equity and liabilities 1,728.0 1,407.4 850.1 775.0

Pledged assets (Note 22) 272.1 770.5 – 67.1 Contingent liabilities (Note 22) – – 2,050.1 557.2

CONCORDIA MARITIME

CHANGE IN EQUITY SUMMARY

Share Restricted Non-restricted SEK million capital reserves capital TOTAL

GROUP, 31-12-2004 Opening balance on 01-01-2004 381.8 154.5 490.2 1,026.5 Exchange rate differences not shown in income statement – - 66.4 - 89.5 - 155.9 Transfers between restricted and non-restricted equity – 53.2 - 53.2 0.0 Change in fair value reserve – – 29.9 29.9 Dividend – – - 23.9 - 23.9 Net result for the year – – 740.2 740.2 Closing balance on 31-12-2004 381.8 141.3 1,093.7 1,616.8

GROUP, 31-12-2003 Opening balance on 01-01-2003 381.8 293.9 477.3 1,153.0 Exchange rate differences not shown in income statement – - 76.5 - 127.1 - 203.6 Transfers between restricted and non-restricted equity – - 62.9 62.9 0.0 Net result for the year – – 77.1 77.1 Closing balance on 31-12-2003 381.8 154.5 490.2 1,026.5

2004 2003 Specification of exchange rate difference not shown in the Income Statement (refers to translation of independent foreign businesses): 42 Accumulated exchange rate difference on 01-01-2004 - 71.1 132.5 Exchange rate difference for the year - 155.9 - 203.6 Accumulated exchange rate difference on 31-12-2004 - 227.0 - 71.1

The portion of untaxed reserves included in the closing balance for restricted reserves 3.0 8.2

Share Restricted Non-restricted SEK million capital reserves capital TOTAL

PARENT COMPANY, 31-12-2004 Opening balance on 01-01-2004 381.8 138.3 63.2 583.3 Dividend – – - 23.9 - 23.9 Group contribution – – - 10.8 - 10.8 Net result for the year – – 285.4 285.4 Closing balance on 31-12-2004 381.8 138.3 313.9 834.0

Proposed dividend 143.2 Per share, SEK 3.0

PARENT COMPANY, 31-12-2003 Opening balance on 01-01-2003 381.8 138.3 27.8 547.9 Net result for the year – – 35.4 35.4 Closing balance on 31-12-2003 381.8 138.3 63.2 583.3

Proposed dividend 23.9

Per share SEK 0.50

CONCORDIA MARITIME

CASH FLOW STATEMENTS

Group Parent Company

SEK million 2004 2003 2004 2003

Cash flow from operating activities Result after financial net 740.2 35.1 281.3 34.9 Adjustment items: Depreciation according to plan 66.1 118.6 – – Profit on the sale of ships - 646.6 15.1 – – Exchange rate differences - 21.0 0.0 - 13.7 - 10.1

138.7 168.8 267.6 24.8 Tax paid - 2.5 - 18.3 4.0 - 8.0

Cash flow from operating activities before changes in working capital 136.2 150.5 271.6 16.8

Increase (-)/decrease (+) in current receivables 8.5 121.9 - 6.3 - 22.9 Increase (+)/decrease (-) in current liabilities - 28.7 - 24.6 - 3.2 10.2

Cash flow provided by operating activities 116.0 247.8 262.1 4.1

Cash flow from investing activities Ships sold 1,634.7 262.7 – – Advance payment of project costs for ships under construction - 86.3 - 61.6 – – Investment in financial assets - 148.2 – - 13.6 – Sale of subsidiary 7.1 – – – 43 Others – 4.1 – - 0.4

Cash flow provided by investing activities 1,407.3 205.2 - 13.6 - 0.4

Cash flow from financing activities Repayment of loans - 312.8 - 515.0 - 9.0 - 0.7 Change in inter-company balances – – - 215.1 - 27.1 Dividend to shareholders - 23.9 – - 23.9 –

Cash flow provided by financing activities - 336.7 - 515.0 - 248.0 - 27.8

Cash flow for the year 1,186.6 - 62.0 0.5 - 24.1

Balance at beginning of year 40.3 115.2 0.3 24.4 Exchange rate differences, cash and bank balances - 103.5 - 12.9 – – Balance at end of year 1,123.4 40.3 0.8 0.3

Additional information on the Group's cash flow analysis

Balance Interest paid Sale of subsidiary Transactions that have not Balance consists of cash Interest paid during the period: During the year, the wholly- resulted in payments and bank balances SEK 17.3 (22.3) million of which owned subsidiary Universe During the year, the Group sold million is related to: Tankships (Delaware) LLC was two V-MAX VLCCs to Arlington Exchange rate differences, - Operating activities SEK 15.0 (21.9) sold for SEK 7.1 million. A small Tankers Ltd in conjunction with cash and bank balances - Investing activities (ships under portion of the proceeds of the the introduction of the company Exchange rate differences construction SEK 2.3 (0.4) million sale was related to fixed assets, to the New York Stock Exchange. related to: During the period, interest received, SEK 0.4 million. The remaining SEK 1,542.5 million of the sales Balance at beginning related to operating activities, amount, SEK 6.7 million, consisted proceeds were paid in cash and of year 0.9 amounted to SEK 4.8 (0.5) million. of the net of current assets and the equivalent of SEK 225.5 million Cash flow for the year - 104.4 current liabilities. was paid in shares in Arlington - 103.5 Tankers Ltd.

CONCORDIA MARITIME

ACCOUNTING PRINCIPLES

GENERAL ACCOUNTING PRINCIPLES added, item by item, to the corresponding items in the

The Annual Report is prepared in accordance with the consolidated accounts. SEK 14.9 million of the Group's assets Swedish Annual Accounts Act as well as relevant laws and under the heading “Ships under construction” represent recommendations issued by the Swedish Financial assets in joint ventures. Accounting Standards Council and statements by its Emerging

Issues Task Force. CLASSIFICATION As of this year, the following new recommendation issued Fixed assets, long-term liabilities and provisions consist in all by the Swedish Financial Accounting Standards Council is essentials solely of amounts that are expected to be recovered applied: or paid more than twelve months after the closing date.

I RR 29 Employee benefits Current assets and operating liabilities consist in all essen- The application of the new recommendation has not had tials solely of amounts that are expected to be recovered or any material effect on the consolidated result or financial paid within twelve months of the closing date. position of the Group.

All amounts in the Notes are given in SEK million unless INCOME otherwise stated. The Group's income consists primarily of freight income and time-charter income from ships. GROUP ACCOUNTING Freight income is generated when the ships are employed The consolidated income statements and balance sheets on the spot market, i.e. chartered for single voyages. have been prepared in accordance with the Swedish Freight income is received and recorded as income when 44 Financial Accounting Standards Council's recommendation the single voyage has been completed. Freight income no. 1:00. The consolidated accounts include the Parent from voyages in progress at year-end is distributed between Company and all the companies in and outside Sweden in the years on the basis of the number of sailing days. If the which the Parent Company has a direct or indirect interest of net result (freight income less direct voyage costs) for the more than 50% or in any other way has a determining influence. voyage is negative, the whole loss is recorded to the previous The consolidated accounts are prepared in accordance with year. the purchase method. Time-charter income is received when the ships are chartered out for a fixed period of time, usually one year Translation, foreign subsidiaries or more. Income, which consists of a fixed daily hire for the The current method is applied in the case of foreign subsidiaries. ship, is paid in advance on a monthly basis and is recorded Accordingly, the income statements are translated into SEK at as income in the same way as freight income. the average exchange rate while balance sheets of foreign

subsidiaries are translated at the year-end rate of exchange. LEASING The exchange rate difference that arises due to the result of Time charters are classified as operational leasing. In a the year being translated into the average rate of exchange is time charter, the shipowner normally assumes all the risks, recorded directly to shareholders' equity. for instance when a ship is out of service due to repairs or technical problems. The shipowner is responsible for oper- Joint venture ation and manning. The charterer normally has no finan- The Company participates with a 50% share in a joint venture cial obligations after expiry of the time-charter period. in which it has joint control. This share is reported in the Income and costs consist of a fixed daily hire and are consolidated accounts by applying proportional accounting paid in advance on a monthly basis and are recorded as as this provides a true and fair view of the business activities income and costs, respectively, in the same way as freight in the Group. The Group's share of the jointly controlled income. company's assets, liabilities, income and costs has been

CONCORDIA MARITIME

ACCOUNTING PRINCIPLES

TAXES newly built, by assessing what the cost of periodic maintenance Reported taxes consist of tax to be paid for the year in will be at the time it is carried out. A depreciation plan, in most question and changes in deferred tax. cases for three years, is drawn up for this cost – the component Deferred tax is computed for all temporary differences – and depreciation is linear until the next time periodic main- arising between reported and fiscal values of assets. The tenance is carried out. required tax rates are applied when calculating deferred tax. Deferred tax assets in respect of tax-deductible temporary Receivables and liabilities differences and loss allowances are stated only to the Receivables are stated after individual valuation of the extent that they are likely to be utilised and entail lower amounts that the company expects to receive. tax payments in the future. Receivables and liabilities denominated in foreign cur- rencies are translated at closing date rates. Exchange rate VALUATION PRINCIPLES differences in long-term receivables from independent foreign Tangible assets subsidiaries are recorded directly to shareholders' equity. Ships and equipment are recorded at their historical acquisi- tion cost less accumulated depreciation and any write- Financial instruments downs. Financial instruments have been valued in all essentials Depreciation is made according to plan based on the similarly to the way prescribed in IAS 39 (Financial original acquisition value less the estimated book value Instruments) and which is permitted in accordance with and is linear over the estimated economic life of the assets. the amendments made in Ch. 4, §14 of the Swedish Annual The depreciation period for equipment is 3-5 years. The Accounts Act and which may be applied from 2004. 45 economic life of the Group's tankers built in the 1970s is Financial assets, which have been acquired with the estimated at 28-30 years in accordance with IMO's regulations intention of either selling or repurchasing them within 12 for phasing out older tonnage, which came into force in months in order to generate a profit as a result of short- 2001. These vessels are written down to their scrap value term fluctuations in price and which comprise part of a over their remaining economic life. portfolio intended for short-term trade for profit, are valued At year-end, only one vessel of this type remained in the at their actual value via the income statement. fleet. This vessel was delivered to the buyer at the beginning Other financial assets are classified as “financial assets of 2005. available for sale”. The changes in the value of these financial

The Group’s two V-MAX tankers were sold in November. assets are reported in the “Fair value reserve” as part of equity. Until their sale, the vessels' economic life was estimated at Instruments for hedging the net investment in foreign business 25 years and they were written down to zero value, which activities are recorded directly to equity in the consolidated was also their estimated book value. accounts. The difference in the calculation of the book value of the older vessels and the book value of the new vessels is Write-downs explained by the fact that when vessels are due to be sold in The reported values relating to the Group's assets are examined 20-25 years, it is estimated that the cost involved will corre- on every accounting date to determine whether there is any spond to their scrap value. indication of write-downs being required. The cost of periodic maintenance (docking) required for a tanker to be permitted to operate is treated in accordance with the component approach described in Statement no. 31 from the Swedish Financial Accounting Standards Council's Emerging Issues Task Force. This approach means that the cost is determined and activated either on the basis of actual costs or, in cases when the ships have been purchased or are

CONCORDIA MARITIME ACCOUNTING PRINCIPLES

Provisions SEGMENT Provisions are made when the company has a formal or The Group was previously active primarily in the large-

informal commitment resulting from an event that has tanker/VLCC segment. As a result of the orders for six P-MAX taken place and it is likely that an outflow of resources will tankers placed in 2003 and the orders for two Panamax be required to settle the commitment and that a reliable tankers placed in 2004, in which it has a 50% share, the estimate of the amount can be made. Group will also be active in the product tanker segment as A present value calculation is performed in order to of 2005/2006.

take into account significant effects of time on future pay- The primary segments will then be large tanker/VLCC ments. and product tanker. Accordingly, for 2004, all profit and loss items and balance-sheet items, with the exception of

FINANCIAL NET ships under construction, relate to the large tanker/VLCC The financial net comprises interest income, interest ex- segment. penses, exchange rate differences, dividend income and Geographical areas are classified as secondary segments. transaction costs related to loans raised. See Note 1 for information on geographical areas. Dividend income is stated when dividends have been This activity, where the fixed assets (ships) are constantly approved and the right to payment is judged to be certain. moving and significant cost items are tied to the fixed assets, Transaction costs for loans raised are periodised over the means that selecting geographical areas as primary segments duration of the loan. Interest on advance payments to provides no meaningful information. The Swedish Financial shipyards for ships under construction is activated and Accounting Standards Council's Recommendation no. 25 46 recorded at the acquisition value of the assets. states that fixed assets for each geographical area must be stated as secondary segments. This does not provide any REMUNERATION TO EMPLOYEES meaningful information for the same reason given above. All pension plans in the Group can be classified as defined On the other hand, information on income for each geo- contribution pension plans. The liability for each period consists graphical area could provide an indication of the Group's of the amount the company must contribute for the period in exposure from a geopolitical perspective. question. This amount is charged to the income statement for the period. GROUP CONTRIBUTIONS Group contributions are reported according to economic EQUITY significance. This means that group contributions provided Non-restricted equity is available for payment of dividend, with the purpose of minimising the Group's total tax are given that certain other criteria are also satisfied. It consists recorded directly to the profit brought forward after of non-restricted reserves and the net profit for the year. deduction of the relevant tax amount. Restricted equity is not available for payment of dividend. It consists of the share capital, the legal reserve and funds that have been transferred to reserve owing to statutory rules in several countries in which foreign subsidiaries are registered.

CONCORDIA MARITIME NOTES

Group Parent Company Note 1. Net sales 2004 2003 2004 2003

Income per significant type of income Freight income 140.0 380.3 – – Time-charter income 211.0 239.5 – – Services 3.0 2.6 9.4 18.1 Others – 27.3 – –

Total 354.0 649.7 9.4 18,1

Invoicing to group companies accounts for SEK 7.9 (17.4) million of the Parent company's net sales.

Information on business areas and geographical areas Large tanker/VLCC Product tanker Total Primary segment - business areas 2004 2003 2004 2003 2004 2003

INCOME Total income 349.2 649.7 4.8 0.0 354.0 649.7 Ship sales 646.6 - 15.1 0.0 0.0 646.6 - 15.1

RESULT Result per business area 734.2 64.5 4.8 0.0 739.0 64.5 47

Unapportioned costs - 9.6 - 5.6

Operating result 729.4 58.9

Interest income and similar items 26.0 0.5 Interest expenses and similar items - 15.2 - 24.3 Tax expense for the year 0.0 42.0

Net result for the year 740.2 77.1

OTHER INFORMATION Assets 310.9 1,278.6 142.9 55.4 453.8 1,334.0 Unapportioned assets 1,274.2 73.4

Total assets 1,728.0 1,407.4

Liabilities 84.1 323.4 2.5 32.8 86.6 356.2 Unapportioned liabilities 24.6 24.7

Total liabilities 111.2 380.9

Investments 0.0 0.0 86.3 61.6

Depreciation 66.1 118.6 0.0 0.0

Expenses, in addition to depreciation with no corresponding payment 0.0 15.1 0.0 0.0

CONCORDIA MARITIME

NOTES

Secondary segment - geographical market Group Parent Company Net sales per geographical market 2004 2003 2004 2003

UK 135.7 266.7 – – USA 211.0 239.5 – – South Africa – 94.2 – – Saudi Arabia – 27.3 – – India – – – – Switzerland – – 7.9 12.9 Japan – – – – Others 7.3 22.0 1.5 5.2

Total 354.0 649.7 9.4 18.1

Distribution of net sales is based on the respective customer's domicile.

Note 2. Result from other securities and Group Parent Company receivables accounted for as fixed assets 2004 2003 2004 2003

Dividend from Group companies*) – – 278.4 34.6 48 – – 278.4 34.6 *) of which 278.4 (22.5) in anticipated dividends

Group Parent Company Note 3. Interest income and similar profit/loss items 2004 2003 2004 2003

External interest income 4.8 0.5 0.6 0.1 Profit on sale of shares 0.2 – 0.2 – Exchange rate differences 21.0 – 13.7 10.1

26.0 0.5 14.5 10.2

Group Parent Company Note 4. Interest expenses and similar profit/loss items 2004 2003 2004 2003

External interest expenses 15.0 24.3 0.3 0.5 Inter-company interest expenses – – 1.7 3.8 Exchange rate differences 0.2 – – –

15.2 24.3 2.0 4.3

Interest expenses with respect to the inter-company debt to Concordia Maritime Chartering AB have not been charged to the Parent Company. The average debt to Concordia Maritime Chartering AB amounted to 137.9 (143.5).

CONCORDIA MARITIME NOTES

Group Parent Company Note 5. Appropriations and untaxed reserves 2004 2003 2004 2003

Tax allocation fund: Opening balance 11.4 11.7 Change for the year – – - 7.2 - 0.3

Closing balance – – 4.2 11.4

Specification provision/dissolution 1999 Provision 7.3 2002 Provision 4.4 2004 Dissolution - 0.3 2005 Dissolution - 7.2

4.2

Group Parent Company Note 6. Tax cost 2004 2003 2004 2003

Tax cost/revenue is divided as follows:

Tax cost 49 Tax cost for the period - 0.6 2.4 – – Adjustment of tax related to previous years – – – 0.2

- 0.6 2.4 0.0 0.2

Deferred tax Changes in respect of temporary changes 2.0 - 44.4 – – Loss allowance - 1.4 – - 3.0 –

0.6 - 44.4 - 3.0 0.0

Reported tax 0.0 - 42.0 - 3.0 0.2

The difference between income tax rate in Sweden and the effective tax rate divided as follows: Reported result before tax 740.2 35.1 288.5 35.2

Tax according to applicable tax rate 207.2 (28%) 9.8 (28%) 80.8 (28%) 9.8 (28%) Effect of other tax rates in foreign subsidiaries 1 - 207.4 (-28%) - 7.0 (-20%) – – Tax relating to previous years – - 44.4 2 (-126%) – - 0.4 (-1%) Non tax-deductible costs 0.2 (0%) 0.1 (0%) 0.2 (0%) – Loss allowances utilised – - 0.5 (-1%) – 0.1 (0%) Tax-exempt dividend – – - 77.9 (-27%) - 9.7 (-28%)

Effective tax rate 0.0 (0%) - 42.0( -119%) 3.1 (1%) - 0.2 (-1%)

1) Refers to business activities conducted in Switzerland and Bermuda where the income tax rate is 16% and 0%, respectively. 2) Refers to the effect of restructuring in the Group.

CONCORDIA MARITIME NOTES

Group Parent Company Note 6 Tax cost (cont.) 2004 2003 2004 2003

Deferred tax liabilities: Provisions 10.8 13.7 0.0 0.0

10.8 13.7 0.0 0.0

Deferred tax assets: Loss allowances 1.8 3.2 1.1

1.8 3.2 1.1 0.0

Net deferred tax liability/asset - 9.0 - 10.5 1.1

The Group's loss allowances are divided as follows:

2004 2003

Sweden 6.5 11.5 50 Rest of world 0.0 0.0

6.5 11.5

CONCORDIA MARITIME NOTES

Group Parent Company Note 7. Tangible assets 2004 2003 2004 2003

Vessels Opening acquisition value 1,727.1 3,290.6 – – Purchases – – – – Sales - 1,487.4 - 1,103.3 – – Exchange rate differences - 21.8 - 460.2 – –

Closing acquisition value 217.9 1,727.1 – –

Opening accumulated depreciation 503.2 1,383.6 – – Sales - 365.4 - 840.6 – – Depreciation for the year 66.1 118.6 – – Exchange rate differences - 18.5 - 158.4 – –

Closing accumulated depreciation 185.4 503.2 – –

Opening book value 1,223.9 1,907.0 –– Closing book value 32.5 1,223.9 – –

The insurance value of the Group's fleet amounts to 99.2 (1.673.3) 51

Vessels under construction Opening acquisition value 55.4 0.0 – – Purchases 86.3 61.6 – – Exchange rate differences - 13.7 - 6.2 – –

Closing acquisition value 128.0 55.4 – –

The closing acquisition value includes an activated interest expense of SEK 2.7 million. Additional investments in ships over the next three years will amount to approx. SEK 1,700 million.

Equipment Opening acquisition value 11.2 13.7 0.5 0.5 Sales - 10.7 – - 0.2 – Exchange rate differences - 0.1 - 2.5 – –

Closing accumulated depreciation 0.4 11.2 0.3 0.5

Opening accumulated depreciation 10.7 13.2 0.4 0.4 Sales - 10.4 – - 0.2 – Depreciation for the year 0.0 0.0 0.0 0.0 Exchange rate differences 0.0 - 2.5 – –

Closing accumulated depreciation 0.3 10.7 0.2 0.4

Opening book value 0.5 0.5 0.0 0.1 Closing book value 0.1 0.5 0.1 0.0

CONCORDIA MARITIME NOTES

Group Parent Company Note 8. Other long-term holdings of securities 2004 2003 2004 2003

Original value of 1,534,785 shares in Arlington Tankers Ltd 203.0 – – – Change in value recorded to fair value reserve in equity 29.9 – – –

232.9 0.0 0.0 0.0

Group Parent Company Note 9. Other long-term receivables 2004 2003 2004 2003

Endowment insurance for pension commitments 9.0 8.5 9.0 8.5

9.0 8.5 9.0 8.5

Group Parent Company Note 10. Other current receivables 2004 2003 2004 2003

Receivables, Group companies – – 57.4 – Receivables, agents 0.6 1.6 – – Other short-term receivables 19.2 50.2 7.8 7.5

52 19.8 51.8 65.2 7.5

Group Parent Company Note 11. Prepaid expenses and accrued income 2004 2003 2004 2003

Prepaid bunker expense 0.6 9.8 – – Prepaid financing expense 10.7 2.3 – – Other prepaid expenses 22.0 10.9 0.5 4.5 Outstanding forward contracts 5.6 – 5.6 Accrued freight income 9.0 0.8 – – Accrued interest income 1.9 – 0.1 –

49.8 23.8 6.1 4.5

Group Parent Company Note 12. Short-term investments 2004 2003 2004 2003

Corporate bonds: Matures Nominal Company month-year Currency value

Sibneft Feb. 07 USD 2,500 17.7 – – –

Fred Olsen Energy A/S March 09 NOK 60,000 68.7 – – –

Ocean Rig ASA Oct. 09 NOK 27,500 30.7 – – –

Ocean Rig ASA June 08 USD 2,000 13.6 – 13.6 –

130.7 0.0 13.6 0.0

The corporate bonds are valued at their market value on the accounting date. Changes in value are recorded to the income statement.

CONCORDIA MARITIME NOTES

Group Parent Company Note 13. Provisions 2004 2003 2004 2003

Provision for estimated costs of commitments relating to operating costs of the chartered tankers Stena Vision and Stena Victory 41.7 – – –

The amount refers to the estimated costs of years 2-5 of the charter period. The estimated cost of year 1 is reported as a current liability.

Deferred tax liabilities: Opening balance 13.7 46.1 – – Change during the year - 2.9 - 32.4 – –

Closing balance 10.8 13.7 – –

52.5 13.7 – –

Group Parent Company Note 14. Long-term interest-bearing liabilities 2004 2003 2004 2003

The amount in 2003 refers to a bank loan with an original 53 duration of five years, which falls due in June, 2005.

The amount utilised as of 31-12-2003 was USD 41.3 million. – 300.7 – –

The loan was repaid in 2004 and replaced by a bank loan totalling USD 150.0 million, which can be drawn on as the ships currently under construction are delivered. Consequently, the loan had not been drawn on as of 31-12-2004. Pledged assets, see Note 22.

Group Parent Company Note 15. Other long-term liabilities 2004 2003 2004 2003

Pension commitments (covered by endowment insurance contracts) 9.0 8.5 9.0 8.5

Group Parent Company Note 16. Bank overdraft 2004 2003 2004 2003

Bank overdraft amounting to SEK 10 million – 9.0 – 9.0

Additionally, the Group has an unutilised overdraft facility amounting to USD 3 million.

Group Parent Company Note 17. Other current liabilities 2004 2003 2004 2003

Income tax liability 0.2 2.1 – – Other liabilities 2.7 6.2 0.3 1.9

2.9 8.3 0.3 1.9

CONCORDIA MARITIME

NOTES

Group Parent Company Note 18. Accrued expenses and deferred income 2004 2003 2004 2003

Accrued voyage expenses, vessels 11.3 12.3 – – Accrued estimated costs in conjunction with commitments related to operating costs of the chartered ships Stena Vision and Stena Victory (the amount refers to the estimated cost in year 1. Years 2-5 are reported as provisions 11.5 – Accrued personnel costs 3.2 4.0 0.3 1.5 Accrued interest costs – 1.5 – – Other accrued expenses 16.8 18.5 2.3 2.7 Deferred income 4.0 4.4 – –

46.8 40.7 2.6 4.2

Note 19. Operational leasing

The Group's contracts with respect to time charters in and out of ships are classified as leasing.

54 Time charter, in In conjunction with the sale of the tankers Stena Vision and Stena Victory, an agreement was signed to time-charter the vessels for five years. During the fourth and fifth year, in addition to the fixed daily hire, a variable daily hire amounting to 50% of what the vessels generate in freight income will be paid over and above the fixed hire. In December, an agreement was signed to time-charter a product tanker for eight months at a fixed daily hire.

During the year, SEK 32.1 million was paid in daily hire for the vessels.

In 2005, the daily hire in existing agreements will amount to approx. SEK 239.0 million.

For 2005-2009, it is estimated that the fixed daily hire in existing agreements will amount to approx. SEK 720.0 million. There are no agreements running longer than to 2009.

Time charter, out The time-chartered tankers Stena Vision and Stena Victory are time-chartered out to the US oil company Sunoco at a fixed hire per day. Depreciation for the period prior to the sale of the vessels in November has been charged to the result in an amount

of SEK 43.3 million.

In 2005, the daily hire in existing agreements will amount to approx. SEK 190.5 million.

For 2005-2007, it is estimated that the fixed daily hire in existing agreements will amount to approx. SEK 303.0 million. There are no agreements running longer than to 2007.

CONCORDIA MARITIME NOTES

Note 20. Information on personnel and remuneration to 2004 2003 Board of Directors and auditors Total Whereof men Total Whereof men

Average number of employees: Parent Company Sweden 3 2 6 5

Subsidiaries: Switzerland 3 2 2 1 USA 7 6 10 9 Bermuda 1 1 1 1

Total in subsidiaries 11 9 13 11

Seagoing personnel 160 160 255 255

Total in Group 174 171 274 271

The subsidiary Universe Tankships was sold in August after which there have been no employees in the US. Information on absence due to illness is not provided as the parent company in Sweden has fewer than 10 employees.

2004 2003 Salaries and Social security Salaries and Social security other (whereof other (whereof 55 compensations pensions) compensations pensions)

Salaries, other remunerations and social security expenses Parent Company 4.1 3.9 (1.9) 7.3 3.4 (1.2) Subsidiaries 11.5 4.8 (2.6) 15.8 6.1 (4.0) Seagoing personnel 25.0 – 44.8 –

40.6 8.7 (4.5) 67.9 9.5 (5.2)

2004 2003 The Board The Board and the Other and the Other President employees Total President employees Total

Salaries and other remunerations divided by country board members, etc. and employees Parent Company Sweden 3.2 0.9 4.1 3.4 3.9 7.3

Subsidiaries: Switzerland 2.1 3.4 5.5 1.4 0.7 2.1 USA 1.8 4.0 5.8 2.4 11.2 13.6 Bermuda 0.2 – 0.2 0.2 – 0.2

Total in subsidiaries 4.1 7.4 11.5 4.0 11.9 15.9

Seagoing personnel – 25.0 25.0 – 44.7 44.7

Total in Group 7.3 33.3 40.6 7.4 60.5 67.9

CONCORDIA MARITIME

NOTES

Benefits for members of the management

Principles Fees paid to members of the Board of Directors are subject to the approval of the Annual General Meeting. No specific fee is paid for committee work. Remuneration paid to the President and other senior company officers consists of a basic salary, other benefits and a variable component. Other senior company officers are the president of the subsidiary in Switzerland and the Group's technical director who, together with the President, comprise the senior management group. Variable remuneration (bonus) paid to the President consists of the outcome in relation to targets set individually and is decided by the salary committee. Other senior executives are paid a bonus based on proposals from the President, which must be approved by the compensation committee. The compensation committee consists of the chairman and vice chairman of the board.

Remuneration and other benefits during the year Basic salary/ Variable Other Pension TSEK Directors' fees remuneration benefits expense Total

Chairman of the board 150 – – – 150 Vice chairman of the board 250 – – – 250 Other board members 645 – – – 645 56 President 1,420 – 98 451 1,969 Former president 3,326 – 46 216 3,588 Other leading senior executives 2,667 – 100 923 3,690

8,458 0 244 1,590 10,292

The present president took up his position on 1 May and was previously the company's executive vice president. The remuneration specified also includes amounts paid during the period when he held the position of executive vice president. The former president will cease to be employed on 30 April, 2005. Other benefits consist chiefly of company cars. No remuneration over and above the fees decided on by the annual general meeting was paid to any board member.

Bonus No bonuses were paid out during the year.

Pensions The retirement age for the President is 62 years. The Company pays for pension insurance allowing him to retire at the age of 62 with 65% of his annual salary at that time and which will be paid out until he has reached the age of 65. From the age of 65, pension terms in accordance with the so-called ITP plan apply. None of the other senior executives have a lower retirement age than 62 years, nor do they have pensions higher than 65% of their pension-carrying income.

Severance pay Between the company and the President there is a reciprocal 12-month period of notice. In the event of his contract being ter- minated by the company, severance pay will amount to 12 monthly salaries, with no deduction made for any other income. The President is not entitled to severance pay if he himself terminates his contract. Other senior executives have a 12-month period of notice if their contracts are terminated by the company and are not entitled to severance pay.

CONCORDIA MARITIME

NOTES

Fees and reimbursement of expenses paid to auditors Group Parent Company 2004 2003 2004 2003

KPMG Audit assignments 0.9 1.1 0.8 0.9 Other assignments 1.6 1.4 0.2 0.2

Audit assignments refer to the examination of the Annual Report, the accounts and the administration of the Board of Directors and the President; other tasks included in the duties of the Company's auditor as well as advice and other assistance occasioned by observations made during his examination or performance of these other tasks. Anything else falls under other assignments.

Note 21. Participations in Group companies Corp. ID number Reg. office Number Owned share Book value

Subsidiaries Parent Company holdings: Concordia Maritime Chartering AB 556260-8462 Göteborg 250,000 100% 38,0 Rederi AB Concordia 556224-6636 Göteborg 3,000 100% 0,4 Concordia Maritime AG Schweiz 15,000 100% 715,8 57 754,2 Concordia Maritime AG: CM Constellation Shipping Ltd Bermuda 12,000 100% CM Continent Shipping Ltd Bermuda 12,000 100% CM Congress Shipping Ltd Bermuda 12,000 100% CM V-Max I Ltd Bermuda 12,000 100% CM V-Max II Ltd Bermuda 12,000 100% CM V-Max III Ltd Bermuda 12,000 100% CM P-Max I Ltd Bermuda 12,000 100% CM P-Max II Ltd Bermuda 12,000 100% CM P-Max III Ltd Bermuda 12,000 100% CM P-Max IV Ltd Bermuda 12,000 100% CM P-Max V Ltd Bermuda 12,000 100% CM P-Max VI Ltd Bermuda 12,000 100% Concordia Maritime (Bermuda) Ltd Bermuda 12,000 100% NDS Shipping Inc Bermuda 100 100% Seatankers Inc Bermuda 1,000 100% Terra Ltd Bermuda 6,000 50% Lacus Ltd Bermuda 6,000 50% Constellation Concept KS Norge – 98%

98% of Constellation Concept AS is owned by Concordia Maritime AG while the remaining 2% is owned by Constellation Concept AS, which, in turn, is owned by CM Constellation Shipping Ltd.

CONCORDIA MARITIME

NOTES

Group Parent Company Note 22. Pledged assets and contingent liabilities 2004 2003 2004 2003

Assets pledged as security for loans Mortgages on ships – 300.7 – – Shares in subsidiaries 272.1 469.8 – 67.1

272.1 770.5 0.0 67.1

The rights under the terms of certain insurance, newbuilding and time-charter contracts have been pledged in favour of the banks, which have issued a credit commitment to the Group. The credit commitment, amounting to

USD 150 million, can be utilised when the ships currently under construction begin to be delivered at the end of 2005.

Contingent liabilities The guarantees provided by the Parent Company to the banks, which granted credit commitments to subsidiaries. The amount consists of the total credit commitment. 58 The credit facility had not been drawn on as of 31-12-2004. – – 991.9 557.2

The Parent Company's guarantees for subsidiaries' fulfilment of commitments relating to payments according to the terms of the time-charter contract with Arlington Tankers Ltd. The amount consist of minimum payments during the period of the contract. – – 1,058.2 –

– – 2,050.1 557.2

In 2005, commitments in contracts relating to investments in ships amount to SEK 362.0 million, of which SEK 29.0 million is the Group's share in joint ventures.

For 2006 and the following years, these commitments amount to SEK 1,223.0 million, of which SEK 247.0 million is the Group's share in joint ventures.

CONCORDIA MARITIME Gothenburg, 22 March, 2005

Per Bjurström Lars Carlsson Bert Åke Eriksson C. Mikael von Mentzer Vice Chairman

Morten Chr. Mo Hans Norén Dan Sten Olsson Jens Ole Hansen Jörgen Lorén President Chairman

AUDIT REPORT To the general meeting of the shareholders of Concordia Maritime AB (publ) Corporate identity number 556068-5819

I have audited the annual accounts, the consolidated accounts, Company in order to be able to determine the liability, if any, the accounting records and the administration of the Board to the Company of any board member or the President. I also of Directors and the President of Concordia Maritime AB for examined whether any board member or the President has, the year 2004. These accounts and the administration of the in any other way, acted in contravention of the Companies Company are the responsibility of the Board of Directors and Act, the Annual Accounts Act or the Articles of Association. 59 the President. My responsibility is to express an opinion on I believe that my audit provides a reasonable basis for my the annual accounts, the consolidated accounts and the ad- opinion set out below. ministration based on my audit. The annual accounts and the consolidated accounts have I conducted my audit in accordance with generally ac- been prepared in accordance with the Annual Accounts Act cepted auditing standards in Sweden. Those standards re- and, thereby, give a true and fair view of the Company's and quire that I plan and perform the audit to obtain reasonable the Group's financial position and results of operations in assurance that the annual accounts and the consolidated ac- accordance with generally accepted accounting principles counts are free of material misstatement. An audit includes in Sweden. The statutory administration report is consistent examining, on a test basis, evidence supporting the amounts with the other parts of the annual accounts. and disclosures in the accounts. An audit also includes assess- I recommend to the general meeting of shareholders that ing the accounting principles used and their application by the income statements and balance sheets of the Parent the Board of Directors and the President, as well as evaluat- Company and the Group be adopted, that the profit for the ing the overall presentation of information in the annual ac- Parent Company be dealt with in accordance with the proposal counts and the consolidated accounts. As a basis for my opin- in the administration report and that the members of the ion concerning discharge from liability, I examined Board of Directors and the President be discharged from significant decisions, actions taken and circumstances of the liability for the financial year.

Gothenburg, 22 March, 2005 Thord Elmersson Authorized Public Accountant KPMG

CONCORDIA MARITIME GLOSSARY

ABS American Bureau of Shipping. Depreciation The deductions made in a MR Medium Range tankers of up to Classification society. company’s annual accounts in order to about 40,000 DWT. compensate for the wear on, and ageing of, Aframax Tanker of approx. 90,000 dwt. M/T Motor tanker. the company’s vessels and machinery. Ballast Time a vessel spends at sea Nautical = 1,852 metres. DNV Det Norske Veritas, classification without carrying cargo. Return voyage. society. OPA-90 Oil Pollution Act 1990. US law Bareboat-charter Charterer hires ves- governing liability questions related to oil FPSO Floating Production, Storage and sel without crew; charterer pays all spills in the US. Offloading. Floating oil production and expenses, including crew costs, insurance, storage unit, e.g. a converted tanker. OPEC Organisation of the Petroleum maintenance and operating expenses. A Exporting Countries. bareboat charter typically extends over a Freight rate The cost per unit of cargo long period of time. Shipowner receives (ton, cubic metre, barrel, etc.) or deadweight PreMARPOL name for ships built up monthly fixed sum as bareboat hire. capacity of a vessel that the charterer has to until the 1980s, before the international pay to the shipowner on a voyage basis. regulations, MARPOL 78, came into force. BBL, barrel, = 159 litres. These stipulated, among other things, FSO Floating Storage and Offloading Unit Beaufort An accepted scale for weather segregated ballast tanks. – e.g. a converted tanker. at sea, i.e. wind and waves. Beaufort 8 is SBM Single Buoy Mooring – intended for equivalent to a moderate gale, 18–20 m/s. IACS International Association of Classifica- tankers when loading or discharging. tion Societies. Brent Type of North Sea oil, which SBT Segregated ballast tanks. Tanks functions as a commercial benchmark. IMO International Maritime Organisation intended solely for ballast water. - UN’s international advisory shipping 60 Bunker, bunkring Fuel oil used for the organization. Slop tank Tank for storage of residues. propulsion of the vessel. When the vessel is taking fuel on board, it is said to be Intertanko Organisation for independent Special Survey Mandated inspection of bunkering. tanker shipping companies. the whole hull, which is carried out every fifth year by a classification society (DNV, CAP Condition Assessment Program – a ISM International Safety Management Code. ABS, Lloyd’s). voluntary quality classification program Standardised regulations for organising a for tankers introduced by Det Norske company in relation to ship safety and pre- Spot market The segment of the Veritas. vention of environmental pollution. shipping market where deals are made for single voyages. Charterer A cargo owner or one who hires ISO 9002 Standard for quality systems. the vessel. A shipping company employee or Suezmax Tanker of approx. 150,000 dwt. ISO 14000 Standard for environmental an employee at a shipbrokers whose job is management systems. Time charter The shipowner lets, and to do business on the freight market is also the time charterer hires the vessel complete called a charterer. ITF International Transport Workers’ Federation. with crew for a voyage or a period of time. Charter party Contract between ship– J/V Joint venture The charterer pays port charges and for owner and charterer for the carriage of fuel. Knot A measure of speed at sea. 1 knot = goods on a given voyage or for a period 1 nautical mile, or 1.85 kilometres per hour T/T Turbine tanker. of time. Light weight The ship’s unladen weight, ULCC (Ultra large crude carrier). Coating Paint (corrosion protection) i.e. the total weight of the ship’s steel and Tanker vessel over 300,000 tons. Daily running cost Cost of crew, machinery. VLCC (Very large crude carrier). Tanker insurance and maintenance of vessel. Lloyds Register A classification society vessel over 200,000 tons. Deadweight (dwt) Weight of the cargo, MARPOL International convention with Worldscale An international freight bunker and movable equipment the vessel regulations designed to prevent oil spills. index system for tankers. When tankers

is capable of carrying. Conny Wickberg/Thomas Kohnle Illustrations: Dan Hambe are chartered to carry a cargo, the freight MARPOL 13G IMO regulation, which speci-

rate is almost always expressed as a per- Photo: fies conditions applying to existing tankers centage of the Worldscale index. more than 25 years old.

admarco

C ONCORDIA MARITIM E CONCORDIA MARITIME ADDRESSES ANNUAL REPORT 2004

MISSION CRITICAL SUCCESS FACTORS For those shareholders who wish to talk to us, we can be To provide our customers with safe and cost- reached at the following phone numbers or via e-mail: efficient tanker transportation based on innovation ■ Timing – methodical analysis of our business environment and performance. Hans Norén, President ■ Prioritizing – identifying and selecting deals and projects Phone +46 31 85 51 01 or +46 704 85 51 01 VISION [email protected] To be our customers’ first choice for safety, innovation and ■ Relations to customers and other stakeholders – long term performance in tanker transportation which will result in and based on trust Göran Hermansson, Financial Manager good profitability, steady growth and financial stability. Phone +46 31 85 50 46 or +46 704 85 50 46 ■ Transport solutions – innovative and customized [email protected] STRATEGY We strive towards our vision by utilizing as much as possible ■ Ship operation – first class Concordia Maritime AB (publ) of the knowledge and unique competence that our major SE-405 19 Gothenburg, Sweden service providers can offer in the areas of marketing, ship ■ Sale/purchase of assets with the right timing in Phone +46 31 85 50 00, fax +46 31 12 06 51 building and ship operation and by constantly seeking the market cycles www.concordia-maritime.se improvement of our critical success factors. Corporate number: 556068-5819 Registered office: Gothenburg

Concordia Maritime AG Bahnhofplatz CONCORDIA’S FLEET Delivery year Dwt Employment CH-6300 Zug Switzerland V-MAX Stena Vision* 2001 312,600 Time-chartered to Sunoco until 2007 Phone +41 41 728 81 21, fax +41 41 728 81 39 Stena Victory* 2001 312,600 Time-chartered to Sunoco until 2007

Panamax Stena Polaris (50%) 2006 74,500 Time-chartered to Fortum, 10 years Stena Poseidon (50%) 2007 74,500 Time-chartered to Fortum, 10 years

P-MAX Stena Paris 2005 49,900 Time-chartered to TOTAL, 5 years Stena Provence 2006 49,900 Time-chartered to TOTAL, 5 years Stena Primorsk 2006 49,900 Time-chartered to Progetra, 10 years Stena Performance 2006 49,900 Open market Stena Progetra 2007 49,900 Time-chartered to Progetra, 10 years Stena Progress 2008 49,900 Open market

MR Lyra Pioneer* 2003 45,900 Open market until July, 2005

1,119,500 *Chartered tonnage

Cover Bob Hossack and Kurt Jensen, members of Concordia’s site team, at the Brodosplit shipyard with the Stena Paris in the background (The picture is a photomontage.) 4 0 0 2 T R O P E R L A U N N A E M I T I R A M A I D R O C N O C

SE-405 19 Gothenburg Phone 031-85 50 00 E-mail [email protected] www.concordia-maritime.se Site Gothenburg, Sweden ANNUAL REPORT 2004