REPORT ATLA

ATLA N T I C CO NT A I N E R

L

^{l N E}

Ä NNU A L REPORT

ATLANTIC CONTAINER LiNE 1994

2 Comments by the Chairman

4 Market Strategy, Services and People 18 Transatlantic Services

20 The Fleet

21 Legal Structure and Number of Employees 22 Shareholding Information

23 Summary of Group Performance

24 Board, Executive Committee and Auditors 25 Directors' Report

33 Consolidated lncome statements 34 Consolidated Balance Sheets

35 Parent Company lncome statements 36 Parent Company Balance Sheets

37 statement of Changes in Financial Position 38 Nates to the Financial statements

55 Proposed Treatment of the Unappropriated Earnings 56 Auditor's Report

IMPORTANT EVENTS

• Economic recovery continued in 1994 and overall trade volumes increased.

• All offices were connected to the same computer system.

• All ACL officesin Europe received ISO 9002 certification by 1994.

• Newshare issue in August-September raised SEK 423.5 million.

• TAA withdrawn. TACA established. Eventually, in March 1995, a settlement agreement was reached between FMC and TACA, and the Court of First lnstance ruled in TAA's favor,

suspending the European Commission's decision to prohibit inland ratemaking authority for TACA.

• lnaugurated RoRo relay service from North America to southeast Asia.

• lnaugurated fifth weekly transatlantic service.

• All five G-3 vessels completed 10 days of dry-docking in Brest.

Operating profit after depreciation SEK million 202 102

lncome before taxes SEK million 37 -193

Equity/asset ratio % 23 3

Return on capital employed % 12 6

DMARK YEAR FOR ATLANTIC CONTAINER LiNE

1994 was a landmark year for Atlantic Container Line in several ways.

It

was the year that ACL began the third phase of its development. The first phase had lasted for 23 years, beginning

with its creation as a consortium of Swedish, Dutch, French and British shipowners in 1967 andending in 1989 when the Swedish transpartatian conglomerate, Bilspedition, acquired 100% of ACL from its previous owners.

Beginning its seeond phase in 1990, the company underwent some major changes.

A new management team came on board and redirected ACL's course away from one which had been essentially market share driven to one concentrated on restaring profitability. This required some significant strearnlining of ACL's operation, eliminating ships, equipment, officesand staffing, but,

just as importantly, developing a cost awareness and a focus on profitability in ACL's people.

By 1994 ACL had become a much leaner organization, with a single information system linking tagetherevery office and local salesperson in North America and Europe for the first time

in its history. Staffing and the equipment fleet had been cut by 50%, and non-core businesses and services had been shed. Customers were no longer targeted by volume or revenue, but by profitability and round trip efficiency. ACL was finally ready for the third phase of its development

~

becoming a company on its own. In September of 1994, ACL became a publicly held company.

1994 also marked the year of same other notable achievements. ACL passed the breakeven mark after several years of losses and achieved a small profit of $5 million. A fifth weekly service was added over the Atlantic, something no other carrier has ever offered. As a result of a lang-standing agency relationship with an Asian breakbulk carrier, ACL began a RoRo relay service from North America to southeast Asia, thereby helping to diversify our RoRo enstomer base beyond the North Atlantic.

The coming year is filled with apportunities and challenges. Ratification of the GATT Accord and the expanded E.U bodes well for trade growth around the globe. The continued economic development of Bastern Europe and the states of the former Soviet Union has already led to a significant increase in transattantic trade volume, and this will continne in 1995 and beyond.

The spring opening of the St. Clair Tunnelnear Detroit by the Canactian National Railroad

can potentially develop ACL's Halifax service into another major gateway for the U.S. Midwest,

traditionally a major source of ACL's container and RoRo cargo.

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The controversial tegulatory developments, which have been darninating the trade press for same time, should finally give us all a clearer picture of the new rules of the game in the months ahead .

It

is interesting to nate that lessthan a third of ACL's revenue falls under the scope of the Trans-Atlantic Conference Agreement.

B ut our membership in the TACA has given us the stable

environment necessary to build an ACL service network with other carriers covering 20 direct ports on five separate services.

The U.S. regulatory environment certainly appears to be headed toward greatly increased maritime deregulation at same point down the road. The recent U.S. elections give evidence that the American government will be putting greater effort inta cutting costs by downsizing

the bureaucracy, something that industry hasdonefor years with great success.

At this point, it is undear whether we will still have the Federal Maritime Commission, tariff filing or even antitrust immunity in five years' time.

The Competition Directorate of the European Commission is taking an opposite approach to that of the Americans, but apparently seeking the same end results. The European regulators have been actively engaged in the process of reinterpreting the laws of shipping

that have prevailed since the beginning of containerization. We await the outcome of their ruling on such issues as whether conferences will continue to have inland ratemaking authority

and service contract authority.

The outcome of the current legal discussions in Washington and Brussels will have

a significant impact on the direction of our future strategy. We will have to evaluate the impact of the eventual decisions on how we work with our customers, as well as on o ur operational network of joint services. We have invested a great deal in building long-term relationships with our customers, and we will be careful to ensurethat those relationships are not jeopardized w hen the new rules of the game are established.

Unfortunately, this type of environment does not make it easy to do long-term planning.

But it puts a small, highly focused and closely managed company like ACL m' a better position to adapt to change than the larger, bureaueratic global carriers. With short lines

of communication and a flat organizational structure, ACL can mobilize its forces much more quickly than our competition. So we view the current challenges as great apportunities to improve our competitive position, beneritting both our customers

and our shareholders.

Gothenburg, March 10, 1995

Olav Rakkenes

Chairman and Chief Executive Officer

r STRATEGY: ESTABLISHING A NiCHE

The overall market had a healthy growth in 1994, stimulaled by economic recovery in Europe and Canada and sustained growth in the U.S. North American Automobile Sales and Housing starts -the key leading economic indicators for Westbound Trade volume - continued to have strong performances in 1994 and into 1995 despite rising interest rates.

North American Exports, spurred on by a weakening dollar and European economies reinvesting

in infrastructure, began to accelerate at the end of the fourth quarter. At the current time,

assuming a stabilization of the dollar, it

is

expected that 1995 willshow the best balance of cargo volume in many years.

Atlantic Container Line~s core market has become less voJatile during the past few years, and this trend should continue into the future. This is largely due to the fact that the

company's strategy since 1990 has been to intentionally prune away most of its marginal container traffic. As a result of that strategy, ACL gradually reduced

capacity, eliminating separate services to the North American West Coast, Montreal and Mexico, and concentrating

its efforts and resources on its core North Atlantic market.

The company today has a smaller overall market share than what it had during the '70s and '80s, but its cargo base is now dominated by many small and medium-sized customers with cargo of high contribution.

ACL's marketing organization is constantly seeking outbound cargo flows that fit the patteros of its inbound flows. This is done in order to minimize the costly empty positioning of containers and chassis and to increase the number of annual roundtrip moves of the equipment fleet.

This process has led to some major changes to ACL's customer base.

It

was necessary to redirect marketing efforts away from cargo that did not meet with

the company's contribution requirements or could not be matehed with its other cargo flows. When campared with its past,

ACL is now profit-oriented rather than market share-oriented.

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Once Atlantic Container Line prided itself by being

the largest carrier in the trade. Today, ACL retains its reputation

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as "Number One on the North Atlantic" by striving

to be the carrier with the highest service quality and highest

profitability in the trade.

ACL has been able to maintain its leading position

by offering unique services with unique ships, by calling at unique ports, by being increasingly east efficient, and most importantly, by staying close to its customers.

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STATEMENT

ACL's focus can be summarized in the words that make up the company's mission statement

Atlantic Container Line will consistently provide an excellent, reliable and cost~competitive service.

We will be attentive to our customers' needs

and respond to them prompt/y. We will continuously explore innovative ways to make it even easier to do business with ACL.

UNIQUE SERVICEs

ACL offers five sailings per week across the Atlantic, two more than its clasest competitor

.

Today, ACL calls at twenty ports in Europe and on the Atlantic and Gulf Coasts of North

America, three more than its closest competitor. ACL is the only carrier which offers the trade the ftexibility of container service on one hand and roll-on/roll-off service for non-containerizable cargo on the other. ACL is the only carrieroffering flatbed trailers as standard equipment to the trade. ACL is the only transat/antic carrier that offers direct weekly service between the East Coast of North America and both Gothenburg, Sweden and Liverpool, England. ACL is the only carrier that offers three sailings from Europe to Bermuda each week. ACL is the only carrieroffering weekly

roll-on/roll-off/breakbulk service between the North American East Coast and southeast Asia.

The list can go on.

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ACL has no intention to be the largest carrier in its trades. Being large in today's shipping world only means that the carrier is forced to transport a great amount of marginally priced,

base commodities to fillits ships. ACL has

positioned itself as the carrier of choice for the upper end of the cargo market, for those campanies who need and appreciate high quality service and ship

high quality products. The ability to carry unique cargo to unique places, more frequently than anyone else, has placed ACL in a class of its own. Because of these factors,

ACL is less vulnerable to the competition of lines who have large containerships bu t otherwise undifferentiated services.

Throughout its history, ACL has brought many innovations to intermodal transpartatian that have eventually become industry standards. ACL introduced coordinated intermodal transport with its "Route Code System." The electronic bill of lading was introduced with ACL's "Datafreight Receipt." The company has a tradition of being more than just an ocean carrier, but rather a group of professionals who are ab le to in tegrate sea, road and rail transpartatian inta seamless intermodal door-to-door service. That applies to both the movement of cargo and information. Today ACL hasEDIlinks with many of its customers, dealing with areas such as tracking and tracing, bookings,

bills of lading and invoicing.

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PEOPLE AND SYSTEMS

In order to support the process of continually upgrading service levets, ACL management have trained and coached their colleagues to become very sensitive to the requests of customers

as weil as to operational costs. Efficiency in intermodal transportation is only achieved when one can minimize the haulage of empty containers by making use of every

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possible inland combination. With seasonality and the

large number of customers, commodities and geography t

that ACL covers, it is a very complex task to find the right combinations in order to make a positive return.

This has required the development of sophisticated software tools to support the decisivn- making process in dealing with everything from selecting the "right" cargoes to tracking containers to their destination. It has also required the development of new internat accounting and audit systems to monitor revenue and cost performance on a frequent,

timely and accurate basis.

Every ACL salesperson is equipped with a laptop

computer, .linking them directly to Atlantic Container Line's mainframe systems on both sides of the Atlantic.

Not only can they communicate rapidly with a sales, logistics or eostomer service counterpart thousands

of kilometers away, but they can also check on the outtum of an export shipment arrival on the other side of the world, calculate the contribution on any intermodal movement, or check equipment availability. They can accomplish all of this in a matter of seeonds from ho me,

from their ear or from the customer's office.

Thanks to such technological tools, ACL can mobilize

its commercial resources at a moment's notice and point them in the directions where they can be most effective.

l Atlantic Container Line's computer systems consist of IBM hardware on each side of

the Atlantic, powering procedural

processes that are identical from

Chicago to Hamburg

to Moscow. Everyone in ACL today is connected through electronic mail (E-mail). In addition to speeding up

communications, E-mail has made it easy for ACL management to flatten the organizational structure and accelerate

the decision-making process. A large number of customers

are connected into the ACL E-mail and voice mail systems,

facilitating communications of everytbing from sailing schedules (

to regulatory updates.

Today, Atlantic Container Line is organized as one company

with one business plan and one profit center, even though the company does business on several

continents. As a result, there is no suboptimization by local offices. The key objective of every

departrnental and regional manager is total resource utilization in order to maximize earparate

profitability. In Europe, ACL bas its own full-service operation in each of its major markets,

with full-service agents in smaller markets. In North America, the company has maintained its own

commercial marketing and customer service operation, but bas outsourced back-office functions

such

as

documentation, computer operations, agency accounting and equipment dispatch.

The past few years have been very difficult for the people of Atlantic Container Line.

With every change, however, they have remained strong and resilient.

Today, the people of ACL are sharpened by new tools to monitor performance and east, are focused on the company's speciaity-the North Atlantic, are motivated by its successful financial turnaround,

and are encouraged by the loyal support from long-term customers. ACL relies

heavily on the excellence and experience

of its people to get the jo b done right the first time, to the satisfaction of each customer.

ON CUSTOMERS AND PERFORMANCE

In order to successfully maintain a leadership position, it is important to be always guided by the needs of your customers. A [ter numerous surveys and direct discussions,

ACL has found that European and North Americanshippers consistently look for the following service features:

service reliability; on-time pick-up and delivery; frequent sailings;

competitive pricing; simple administrative procedures; accurate documentation; state-of-the-art electronic communication;

the capability to track the transport of shipments to destination;

and the eonstant reporting and co"ection of any deviation from agreed-upon standards.

ACL has the goodfortune of having same of the best customers in the world.

They have remained loyal during good times and bad, and their demands for excellence have made Atlantic Container Line inta a much better company over the years.

The company has been able to keep a very loyal customer base thanks to the experience and continuity of the sales and customer service staff, who have been with Atlantic Container Line an average of over 12 years. These people know their customers weil, and many have become personal friends. More importantly, they know their customers' business requirements and how to solve the problems that would confound less-experienced people.

Atlantic Container Line was one of the first transpartatian campanies to make quality

the cornerstone of its business, incorporating quality

inta every aspect of its operation. The company

is constantly assessing the effectiveness of its quality

improvement efforts, checking its own performance

versus that of its competitors on everytbing from

on time performance to telephone etiquette.

In North America, Atlantic Container Line's quality process is referred to as "Focus On Performance." This process has been in effect for several years.

A sampling of the 1994 scorecard shows the following:

The European offices monitor their performance via the ISO 9002 certification process, where ACL has established performance standards and systems to meet the demands

and expectations of customers. All of ACL's offices in Europe have received ISO 900:2 certification, and most of its agents are certified as well.

And while not every customer will acknowledge a job well done, the company takes great pride in the fact that each of Atlantic Container Line's customer service centers has a wall of quality awards from eostomers attesting to ACL's success in reaching one of its key goals:

Being the easiest carrier to work with.

OUTLOOK ON THE FUTURE

For our achievements in

1994,

we relied heavily on the dedication and expertise of our people, and I thank each and every one of them for their contributions to making Atlantic Container Line's tumaround a reality.

Based on our performance in

1994

and the

positive economic developments in Europe and North America, we look forward to an even better year in

1995

and continning improvement as we approach the 21st Century. Business requirements will certainly change. Government regulatory policy will change.

Cargo flows and commodity mixes

will change. Competitive factors will change.

But our enstomers have told us that there will always

be room for a carrier that differentiates its services from the rest and offers a high quality operation at a fair price. Confident of our ability to quickly adapt to a changing environment, we eagerly await a world of new apportunities in the coming years.

t~d

President

~~ ~

1c SERVICEs

Atlantic Container Line offers five weekly transatlantic services between North America and Europe. Making 50 port calls each week,

ACL:.SO transat/antic services are unsurpassed in this trade.

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'f..'i_ .. :.s_ ..

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SHIP NAME O W NER BUlL T YARD FLAG

ATLANTIC CARTIER CGM 1985 Ch. Normed Bahamas

ATLANTIC CONVEYOR Cunard 1985 Swan Hunter British

ATLANTIC COMPASS ACL 1984 Kockums Swedish

(ti

ATLANTIC COMPANION ACL 1984 Kockums Swedish

ATLANTIC CONCERT ACL 1984 Kockums Swedish

TECHNICAL SPECIFICATIONS

CONVERTED: LENGTHENED TO CURRENT GAPACITY IN 1987 AT HYUNDAI, SOUTH KOREA TONNAGE: 51,648 DWT AT MAX DRAFT, 57225 GRT, 21175 NRT

DIMENSIONS: LENGTH 292M, BREADTH, 32.26M, 0ESIGN DRAFT 9.75M, MAX DRAFT 11.64M CARGO CAPACITY: ÄPPROXIMATELY 3,100 TEU (DIVIDED INTO CONTAINER CAPACITY OF l ,850 TEU,

Ro Ro GAPACITY OF 1,000 TEU, AND DEDICATED ÄUTOMOBILE GAPACITY OF 300 TEU)

STRUCTURE AND NUMBER OF EMPLOYEES

ATLANTIC CONTAINER LINE Europe BV

Agency Functions Europe Center

ACL Deutschland GmbH

INCOTRANS Germany GmbH

INCOTRANS LINIENAGENTUR Gm bH

... ACL

ATLANTIC CONTAINER LINE AB

l

ATLANTIC CONTAINER LINE Sweden AB

Agency Functions

ATLANTIC CoNTAINER LINE AGENCIES

l

(UK> Ltd.

Agency Functions

NUMBER OF EMPLOYEES

00RMANT 5UBSIDIARIES:

OIRECT SUBSIOIARIES OF ACL:

ATLANTIC CONTAINER LINE LTD.

TRANSLANTIC CONTAINER MANAGEMENT AB ATLANTIC COMPANION AB

CANADAINC.

ATLANTIC CONTAINER INC.

ACL BAHAMAS INC.

SUBSIDIARIES OF ACL EUROPE:

INCOTRANS ASSURANTIEN BV INTERKADE BV INCOTRANS TRADING BV INCOTRANS HOLLAND BV SUBSIDIARIES OF ACL SWEDEN:

EUROCOMBI AB ATLANTIC CONTAINER UNEAIS SuesiDIARIES OF ACL AGENCIES cuK>:

ATLANTIC CONTAINER LINE SERVICES LTD.

o 100 200 300 _{400 500}

1990

1991

1992

1993

1994

North America EurOpe

600

NG INFORMATION

TOTAL SHARE CAPITALAND SHARES

After the newshare issue in 1994, the share capita! amounted to SEK 325 million and restricted reserves in the Group amounted to SEK 180 million. Total shareholders' equity was SEK 531

at the end of 1994.

The total number of

shares is 6,500,000 and total equity per share was thus SEK 81.70.

TRADING OF THE SHARES

The ACL shares are listed on the Oslo Stock Exchange's SMB list (Small and Mid-sized

Businesses). The share issue was priced at SEK 77 pershare and the initiallisting on September 19, 1994 was at NOK 70. The lowest

that the share has been traded in 1994 was NOK 60.

Total share tumover during 3.5 months in 1994 was 13% of the total number of shares Iisted in the Norwegian VPS. During the first two months of 1995, the share was traded between NOK 59 and NOK 52

(NOK 52 on one occasion).

MAJOR SHAREHOLDERS

The majority of the shares are Iisted in the Norwegian VPS system, bu t there are same shares held in custody in Sweden and Iisted in

t

he Swedish VPC system and, thus, not traded on the Oslo Stock Exchange.

This table shows the major sharehold-

ers as of December 31, 1994 and known

subsequentchanges

as of March l, 1995.

There was a total of 75 shareholders, of which 45 were

Norwegian.

RY OF GROUP PERFORMANGE

(SEK millions) 1994 1993 1992 1991 1990

INCOME STATEMENTS

Operating income 2,427 2,450 2,016 2,2297 2,725 Operating expense (2,071) (2, 177) (2,285) (2,300) (2,489)

Depreciation (154) (171) (159) (158) (171)

Operatin~ profit .20.2 10.2 (428) (161) 65

Interest income 32 20 5 14 50

Interest expense (169) (259) (204) (157) (153)

)

Exchange gains/losses (28) (56) (10) 14 34

lncome before taxes 37 (193) (637) (.290) (4)

Taxes (3) 63 117 143 (8)

Net profit/loss 34 (130) (520) (147) (12}

)

^{BALANCE SHEETS}

Cash and investments 294 149 54 3 16

Other current assets 211 539 434 539 750

Long term receivables 180 27 462 304 185

Other fixed assets 1,601 1,735 1,922 1,969 2,217 Total assets 2,286 2,450 .2,87.2 .2,815 3,168

Current liabilities 417 408 1,121 480 410

Long term liabilities 1,216 1,854 1,570 1,828 2,078

Provisions 122 124 114 96 106

Shareholders' equity 531 64 67 411 574

Total liabilities and shareholders' equity 2,286 2,450 2,872 2,815 3,168

The accounts 1990 - 1993 are adjusted to reflect the same accounting principles as adopted for 1994.

KEY RATIOS

Interest cover ratio 1.2 0.4 (2.0) (l. O) l. O

Equity/assets ratio 23% 3% 2% 15% 18%

Return on capita! employed 12% 6% -18% -6% 4%

Operating margin $207 $153 ($171) ($2) $127

USD/SEK average 7.72 7.78 5.81 6.06 5.91

USD/SEK at 31 December 7.46 8.33 7.10 5.55 5.70 NOKISEK at 31 December 1.10

.. ^; _Total littings thousands of TEUs 223 230 270 300 314

...

DEFINITIONS;

Interest cover ratio Operating ~rofit + Interest income Interest expense + Exchange gainsllosses Equity/assets ratio Shareholders' equity as a percentags of total assets Return on capital employed O~ratins ~rofit + Interest income

Total assets - operating liabilities

Operating margin The profit before depreciation divided by the average rate of exchange USD/SEK divided by the total littings

expressed in TEUs.

TEUS Twenty-foot Equivalent Units, all cargo segments, LoLo, RoRo, Automobiles converted to TEUs.

INFORMATION

TOTAL SHARE CAPITAL AND SHARES

After the newshare issue in 1994, the share capital amounted to SEK 325 million and restricted reserves in the Group amounted to SEK 180 million. Total shareholders' equity was SEK 531 at the end of

1994.

The total number of shares is 6,500,000 and total equity pershare was thus SEK

81.70.

TRAOING OF THE SHARES

The ACL shares are Iisted on the Oslo Stock Exchange's SMB list (Small and Mid-sized

Businesses).

The share issue was priced at SEK 77 pershare and the initiallisting on September 19, 1994 was at NOK 70. The lowest that the share has been traded in 1994 was NOK 60. Total share tumover during 3.5 months in 1994 was 13% of the total number of shares listed in the Norwegian VPS. During the first two months of 1995, the share was traded between NOK 59 and NOK 52 (NOK 52 on one occasion).

MAJOR SHAREHOLDERS

The majority of

the shares are Iisted in the Norwegian VPS system, b ut there are some shares

beld in custody in Sweden and listed in the Swedish VPC system and, thus, not traded on the Oslo Stock Exchange.

This table shows

the major sharehold- ers as of December 31, 1994 and known

subsequentchanges as of March 1, 1995.

There was a total of

75 shareholders, of

wbich 45 were

Norwegian.

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OF GROUP PERFORMANGE

(SEK millions) 1994 1993 1992 1991 1990

INCOME STATEMENTS

Operating income 2,427 2,450 2,016 2,2297 2,725

Operating expense (2,071) (2, l 77) (2,285) (2,300) (2,489)

Depreciation (154) (171) (159) (158) (171)

Operating profit 202 102 {428) (161} 65

Interest income 32 20 5 14 50

Interest expense (169) (259) (204) (157) (153)

)

Exchange gains/losses (28) (56) (10) 14 34

lncome before taxes 37 (193) (637) (290) (4)

Taxes (3) 63 117 143 (8)

Net profit/loss 34 (130) (520) (147) (12)

)

^{BALANCE SHEETS}

Cash and investments 294 149 54 3 16

Other current assets 211 539 434 539 750

Long term receivables 180 27 462 304 185

Other fixed assets 1,601 1,735 1,922 1,969 2,217

Total assets 2,286 2,450 2,872 2,815 3,168

Current liabilities 417 408 1,121 480 410

Long term liabilities 1,216 1,854 1,570 1,828 2,078

Provisions 122 124 114 96 106

Shareholders' equity 531 64 67 411 574

Total liabilities and shareholders' equity 2,286 2,450 2,872 2,815 3,168 The accounts 1990 - 1993 are adjusted to reflect the same accounting principles as adopted for 1994.

KEY RATIOS

Interest cover ratio 1.2 0.4 (2.0) (l. O) l. O

Equity/assets ratio 23% 3% 2% 15% 18%

Return on capita! employed 12% 6% -18% -6% 4%

Operating margin $207 $153 C$171) ($2) $127

USD/SEK average 7.72 7.78 5.81 6.06 5.91

USD/SEK at 31 December 7.46 8.33 7.10 5.55 5.70

NOK/SEK at 31 December 1.10

.;.,. Total liftings thousands of TEUs 223 230 270 300 314

DEFINITIONs:

Interest cover ratio 0Qerating Qrofit + Interest income Interest expense + Exchange gains/losses Equity/assets ratio Shareholders' equity as a percentaga of total assets Return on capita! employed OQerating Qrofit + Interest income

Total assets -operating liebiiities

Operating margin The profit before depreciation divided by the average rate of exchange USD/SEK divided by the total liftings

expressed in TEUs.

TEUS Twenty-foot Equivalent Units, all cargo segments, LoLo, RoRo, Automobiles converted to TEUs.

THE BOARD OF 01RECTORS

Olav Rakkenes

Gothenburg, born 1945 Chairman

Board member and chairman since 1989 Chairman and Chief Executive Officer of ACL AB

Cbainnan ofTACA and Chairman ofCENSA U.S. Affairs section.

Shareholding: 300 shares

Peter Carlsson

Gothenburg, bom 1937 Board member since 1994

Chief Executive Officer and member of the Board of Rederi AB Transmark Chairman of the Board of Transatlantic Bulk Shipping AB

Mernber of the Board of AB Wilb. Becker ao.d Througb. Transport Mutual Ins. Assoc. Ltd.

Håkan Larsson

Partill e, bom 194 7 Board rnember since 1990

Chief Executive Officer and member of the Board of Bilspedition AB Member of the Board of B&N, By lock & Nordsjöfrakt AB,

Cool Carriers AB, Frontline AB and Swedish Road Employers' Assoc.

Christer Olsson

Stockbolm, bom 1945 Board member since 1994

Chief Executive Officer and member of the Board of Wallenius Lines AB Chairman of the Board of Stolt Partner SA Member of the Board of Bilspedition AB, Swedish. Shipowners' Assoc. (Vice Chairman) and Stolt-Nielsen SA

Bernhard Ryding

New York, born 1937 Board member since 1991 President of ACL AB Shareholding: 300 shares

Jon-Aksel Torgersen

Oslo, bom 1952 Board member since 1994

THE ExEcUTIVE CoMMITTEE

Andrew Abbott

born 1952

Executive Vice President-Trades

Conrad De Zego bom 1940

Executive Vice President-Operations

Olav Rakkenes

bom 1945

Chairman and Cb.ief Executive Officer Shareholding: 300 shares

Dan Axel Rosen

bom 1947

Chief Financial Officer Sharebolding: 300 shares

Bernhard Ryding born 1937

President

Shareholding: 300 sbares

Chief Executive Officer of Astrup Fearnley AJS Chairman of Den norske Amerikalinje AS

Member of the Board of Transocean AS Bernhard Ryding Olav Rakkenes Andrew Abbo ¹

DEPUTY BOARD MEMBER Thomas Sjöström

Marstrand, bom 1943 Board member since 1994

Group Director of Administration, Bilspedition AB

Peter Carlsson Olav Rakkenes Jon-Aksel Torgersen Christer Olsson Bernhard Ryding Håkan Larsson

Conrad De Zego DanAxel Ro.sen

ÄUDITOR

Coopers & Ly brand AB, Gothenborg Authorized Public Accountants

Individual Auditor in charge: Gunnar Hjalmarsscr

DEPUTY ÄUDITOR:

Olle Gunnarsson

Authorized Public Accountant Coopers & Lybrand AB, Gothenborg

)

)

'REPORT

Atlantic Container Line provides liner services in the Atlantic basin, between ports in Europe and the North American Atlantic and Gulf coasts. Five rrwdem liner vessels are operated by ACL. The vessels are purpose-bui/t for ACL's traffic pattem and cargo composition, and carry a combination of containerized cargo, that is handled lift-on, lift-off (LoLo), rollab/e cargo, that is handled roll-on, roll-off (RoRo) and autorrwbiles that are also handled RoRo. The vessels have a unique design with a high flexibility

to

easily handie many different types of cargo.

Three of the vessels are fully owned and two are long-term chartered with purchase options.

The vessels are employed in ACL's long-established weekly service pattern.

Through slot exchanges with other Iines, Atlantic Container Line is able to offer, in total, five sailings per week for LoLo cargo, which not only supplements ACL's port coverage

on the North Atlantic, but also offers alternative day-of-the-week sailings and improved transit times.

A small portion of ACL's LoLo capacity is chartered out to Polish Ocean Lines on a fixed basis.

In cooperation with other regional carriers, ACL is able to offer shipments via Europe to other parts of the world such as the Bastern Mediterranean, the Black Sea, the Arabian Gulf,

the Canary Islands, East Africa and West Africa, as well as to southeast Asia for RoRo cargoes.

In addition to the seaborne transportation, ACL offers integrated road, rail and feeder combinations in order to provide intennodal, door-to-door transportation. This complementary

transpartatian is purchased as outside services in open and competitive markets.

ACL emphasizes total transpartatian solutions for cargo, as weil as information, and focuses

on seeking outbound cargo flows that fit the pattern of inbound flows.

THE MARKET

A stable and expanding U.S. economy and economic recovery in Canada and Northern Europe led to an overall trade growth of 10.4% in the westbound direction (American imports)

and 3.6% in the eastbound direction (European imports) on the North Atlantic.

The trade returned back to its traditional pattern of westbound volumes darninating over eastbound, which was reversed in 1991 and 1992 during the recession in Europe.

The members of the Trans-Atlantic Agreement (TAA) implemented rate increases of

approximately 5% for containers at the beginning of the year.

Price levels were far from satisfactory for container transportation, but remained stable during the year. Average rates in ACL's cargo mix were samewhat higher eastbound than westbound. ACL carried a total of 223,000 TEUs (Twenty-foot Equivalent Units) (last year 230,000 TEUs)

of

which 140,000 TEUs were LoLo cargo, 29,000 TEUs RoRo cargo, 44,000 TEUs

automobiles and 10,000 TEUs coastal

LoLo cargo and cars.

In linewith its strategy of

focusing

on the core business, ACL withdrew from its all-water Mexican service during the first quarter of 1994.

In this connection, ACL's Mexican agency company was sold to the local management.

The Italian agency was also sold to the local

management during the first half of the year.

OPERATIONs

Average utilization achieved during 1994 was 85%

in the container segment,

75% in the RoRo segment and 65%

in the automobile segment.

In February and March, winter storms in North America eaused some disruptions to ACL's service schedules, as well as to the

schedules of

ACL's competitors, primarily in the form of snowhound marine terminals

(/)

z o

:J

~ ..J

~

w

(/)

GROUP OPERATING PROFIT

300 200 100

o

-100 -200

-300 -400

-500

1990 1991 1992 1993 1994

Operating Profit

and delayed cargo delivery on the land side, but also in the form of delays to vessels.

There were no major incidents or accidents invalving company staff or equipment

during the year.

All five vessels were dry-docked and underwent renewal of their five-year classification

during the summer.

Bunker prices firmed through the year and the average price in

1994

was USD

84

per ton, campared to USD

63

in

1993.

GEM (Global Equipment Management), the container pool cooperation where only Wilhelmsen Lines and Atlantic Container Line remained, was wound down by the end of the year

at no cost to ACL.

As a further result of rationalization and focusing, the operating equipment fleet could be reduced by about 10%.

In order to support the growing traffic inta the former Soviet Union, an office was opened in Moscow in cooperation with ACL's Finnish agent.

All of ACL's offices in Europe had received ISO

9002

certification by

1994.

SYSTEMS AND

NUMBER OF EMPLOYEES

By

1994,

all of the European

2500

2000

5

UJ ¹⁵⁰⁰ :J .J

~

m

¹⁰⁰⁰

(f)

500

o

RA TIO

NET DEBT & EQUITY

1990 1991 1992 1993 1994

4.1 4.4 28.6 29.3 2.3

Net Debt Equity

offices were running on the same systems platform that was established for North America

(Net Debt equals current and long·term Ilabillties minus cash, short-term lnvestments and financlal receivables.)

in

1992.

For the first time in ACL's history, a single information system linked tagether every office and local salesperson.

The enhanced systems enabled the organization to reap further rationalization and efficiency gains in many operational areas.

Rationalization and systems, as weil as some divestments as mentioned above, reduced the average number of personnel to

386

persons in

1994

from

461

in

1993.

THE TRANS-ÄTLANTIC CONFERENCE ÄGREEMENT

During

1994,

the Trans-Atlantic Agreement (TAA) between the conference lines on the North Atlantic was withdrawn. The successor conference, the Trans-Atlantic Conference Agrcement

(TACA), which was established to accommodate the EU Commission's objections as well as complaints

from shippers, is still under review in Brussels.

In November, the EU Commission ruled that

inland ratemaking authority for the TACA conference lines (and indeed all other conferences) was not in compliance with EU competition rules. Eventually, in March 1995, The Court of First Instance in Luxembourg granted the Conference's request to suspend the Commission's ruling pending a decision by the European Court which is expected to take several years.

There are several other issues that are still pending between the TACA and the EU Commission which are expected to be resolved during 1995.

Both the TAA and TACA agreements had been approved by the Federal Maritime Commission (FMC) in Washington. However, towards the end

of 1994, the FMC la unehed an investigation of w hether certain aspects of the old TAA agreement

or the new TACA agreement in any way contravened the Shipping Act of 1984. Eventually, the TACA Iines finalized a settlement agreement with the FMC in March 1995, whereby the FMC terminated the ongoing

investigations. Time-consurning document

collection and heavy legal costs could thus be avoided.

The settlement agreement calls for a number

of amendments to the TACA agreement and proeectures and requires the TACA Iines to roll back the ocean portion of tariff and contract rates for containers to 1994 levels as from the end of March.

However, as only a third of ACL's container volume

OPERATING INCOME

is generated within the TACA trading area

, and as the total trade is expected to grow about 6%

in each direction in 1995, the company estimatesthat it will be able toreplace the revenue lost due to the roll back provided for in the FMC settlement agreement.

0PERAnNG INCOME

The operating income for the Group was SEK 2,427 million, down from SEK 2,450 million the year before, mainly due to lower liftings as a consequence of withdrawing from Mexico and to a stronger Swedish Krona.

Approximately 66% of the total tumover was generated by revenues from Lo Lo cargoes, 20% from RoRo cargoes, 6% from automobiles, and 8% by revenues from other activities.

o

OPERATING PROFIT

Operating profit improved to SEK 202 million (last year, SEK 102 million).

Rate restoration was only one part of this improvement. Other parts were continued rationalization, no restructuring costs in 1994, as weil as, cost awareness and focusing on the core business that is now hearing fruit. Staff in the entire organization have contributed to this turnaround.

INCOME BEFORE TAX

lncome before tax was SEK 36.5 million,

an improvement of SEK 229 million

campared to last year. This can be

attributed to the improved operating profit and an improvement in financial net of

SEK 130 million, as a result of the financial reconstruction of the company.

The financial net includes a currency

exchange loss of SEK 28 million following

amortizations on vesseltoans and leasing

commitments in USD.

THE NEW ^{SHARE lssuE}

25

20

[!1, 15

... tll

c ~

~

¹⁰

5

o

EQUITY/ÄSSETS RATIO

1990 1991 1992 1993

The single most important event for ACL in 1994 was the share issue to institutional investors

in August-September, establishing Atlantic Container Line as a separate company outside the Bilspedition Group, and the subsequent application for and listing of ACL's shares on the Oslo Stock Exchange, which

is

the prominent exchange for shipping shares in Seandinavia The initial offering of 5,000,000 shares was oversubscribed, and the Board agreed to raise the

issue to 5,500,000 shares, giving a new total of

6,500,000 shares. The share capita! now amounts to SEK 325 million and restricted reserves in the Group amount to SEK 180 million.

1994

,,.

TRANSACTIONS IN RELATION TO THE NEW SHARE ISSUE

The vessel, Atlantic Companion, which was owned by the previous parent company,

Transatlantic, and chartered by ACL, was acquired and the charter party terminated. The vessel was taken over at terms equivalent to the bareboat commitment.

The two long-term chartered, full container vessels, Gulf Speed and Gulf Spirit,

that are sub-chartered in the market, were transferred to Transatlantic at no profit or loss to ACL.

The one time amortization of USD 20 million for the vessel financing as described

in the offering circular has been replaced by a SEK 200 million deposit pledged to the vessel loans, which is more favorable for ACL. The pledge will be reduced in paraHel

with the vesseltoan amortizations.

RELATIONS TO BILSPEDITIQN(fRANSATLANTIC

ACL was 100% owned by Rederiaktiebolaget Transatlantic, a wholly-owned subsidiary of Bilspedition AB, from 1990 to September 1994. Due to this previous ownership, certain relations remain between ACL and Bilspedition/Transatlantic as follows

:

The charter commitments for Atlantic Cartier and Atlantic Conveyor are glUJranteed by Bilspedition/Transatlantic. ·

Transatlantic provides a financial guarantee for A CL

^1S

fulfillment of contractual obligations with a third party agent in the amount of approximately USD 5 million.

Transatlantic has an undertak/ng to compensate ACLfor potential additional tax payments from 1988.

ACL's liabilities to Svensk Export Kredit which are secured through bank guarantees, are ultimate/y guaranteed by Bi/spedition.

ACL has a Ilability of SEK 111 million to Bilspedition at 7.25% interest, to be amortized before the end of 1998.

For these reasons, Bilspedition has the right to appoint three of the six directors,

including the chairman of the board, until the shareholders annual general meeting in 1997.

)

FINANCIAL PosiTION OF THE GROUP ÄFTER THE NEW SHARE ISSUE

As a result of the newshare issue during 1994 which generated SEK 423.5 million, the financial position of the company is strong.

The operation generated a positive net cash flow of SEK 347 million after operational investments.

Cash and short-term investments amounted to SEK 294 million and interest hearing receivables amounted to SEK 222 million

as of December 31. RETURN ON CAPITAL EMPLOYED

Total equity was SEK 531 million

as of December 31, and the equity/asset ratio im proved to 23%. The net interest hearing debt amounted to SEK 920 million

(SEK 1,784 million in 1993). The interest cover ra tio was 1.19.

FINANCIAL RISKS

15 10

5 .l9 ~

o

c (l) ()

Qj -5

Q_

-10

-15

The operation in Atlantic Container Line

_₂₀

is exposed to various types of financial risks,

i.e., interest risks, credit risks and currency risks.

1990 1991 1992 1993 1994

A potential deviation from budgeted interest costs is verylimitedas the majority of the financing is made at fixed interest rates.

Historically, bad debts in ACL have been insignificant, due to a stringent credit evaluation.

The currency risks are primarily due to flows of payments in currencies other than USD.

From 1995 and onwards, ACL will actively be managing these risks using forward currency contracts.

The strategic currency risk in ACL is defined as conversion differences emanating from balance

sheet items in different currencies. Since the USD denominated value of the vessels is being hedged

by a financing in USD, this currency risk is considerably reduced.

VESSEL VALUATION

Atlantic Container Line's vessels are purpose built for the company's type of operation and designed for the trade where they are operated. They are an integral part

of the total transportation service that ACL offers. The average book value expressed in USD would be 43 million each, when also considering an unrecognized exchange loss on the USD loans at the rate of exchange as of December 31, 1994.

The lack of comparable vessels and market transactions invalving this type of ves:!iel and the fact that no similar vessels have been built during the last 10 years, makesamarket valuation difficult. However, recent new building orders allow a possibility for comparison.

Based on the reported contract price, the company's ship broker in London conservatively estimates the new building price for an ACL vessel to be approximately USD 85 million, which would indicate a straight depreciated replacement value of USD 51 million.

Based on the average earnings in 1994 of USD 20, 600 per day per vessel, a theoretical present value of one vessel would be USD 57 million, at an assumed economic Iife span of 15 years.

The present value has been discounted at 10%.

INVESTMENTS

The net operational investments amounted to SEK 22 million, comprising the buy-out and purchase of various leases of cargo-carrying equipment, investments in information technology, dry-docking and disposal of vessel purchase options as described under

"Transactions in connectionwith the issue of new shares."

In the beginning of 1995, alease of 600 older 20-foot chassis will be replaced with a new seven-year lease of 500 new units, at a total value of approximately USD 3.5 million.

We anticipate significant savings in maintenance and repair costs from this new lease.

OUTLOOK FOR 1995

The first quarter's positive development is expected to continue, and an im proved result for the full year is anticipated.

In order to further s trengthen the financial position of the company, the Board of Directors

proposes that no dividend will be paid for 1994. However, for 1995 and onwards, the policy

of the company is to pay the shareholders a dividend.

•

CONSOLIDATED INCOME STATEMENTS

Year Ended Year Ended

(SEK millions) No tes Dec. 31 1994 Dec. 31 1993

Sales 2 2,421.1 2,448.1

Other operating income 5.5 2.0

•.

Operating expenses 2,3,4 (2,070.7) (2,177.0}

Gross operating profit 355.9 273.1

Amortization and depreciation

Vessels 13 (93.4) (93.6)

Other 13 (60.7) (77.3)

Operating profit 201.8 102.2

Financial income and expense

Interest income 5 32.3 20.2

Interest expense 5 ^{(169.2) (259.1)}

Foreign exchange gains/losses, net 21 (28.4) (56.0)

lncome before taxes 36.5 (192.7)

Taxes 7 ^(2.6) 62.5

Minority interests

- -

^(0.1)

Net profitJ(Ioss) 33.9 (130.3)

i~

CONSOLIDATED BALANCE SHEETS

(SEK millions) Notes Dec. 31 1994 Dec. 31 1993

ASSETS

Current assets

Cash 93.5 49.1

Short-term investments 8 200.2 99.6

Accounts receivable 9 115.4 147.1

Prepaid expenses and accrued income 46.0 51.5

Financial receivables 6 41.9 334.3

lnventories 8.1 6.1

Total current assets 505.1 687.7

Fixed assets

•

Financialfixedassets 10, 12 181.6 90.1

Deferred taxes 7 20.5 23.1

Deferred. development c osts 13, 14 3.5 1.9

Deferred dry-docking costs 13, 15 19.8 4.3

Vessels 13, 16 1,403.9 1,497.6

•

Equipment 13, 17 143.5 131.4

Buildings 13, 18 8.3 13.7

Total fixed assets 1,781.1 1,762.1

Total assets 2,286.2 2,449.8

LIABILITIES, PROVISIONS AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable 19 94.9 95.5

Accrued expenses and deferred income 101.8 116.3

Current portion of loans and finance

lease obligations 20, 21 220.8 195.9

Total current liabilities 417.5 407.7

Long-term liabilities

Loans and finance lease obligations 20,21 1,215.9 1,854.2

Provisions 22,23 121.9 124.0

Minority interests 0.3

Shareholders' equity 24

Share capital 325.0 100.0

Restricted reserves 179.7 18.0

Accumulated deficitlretained earnings (7.7) 75.9

Net profitl(loss) for the year 33.9 (130.3)

Total shareholders' equity 530.9 63.6

Total liabilities, provisions

and shareholders' equity 2,286.2 2,449.8

PLEDGED ASSETS 25 1,684.7 1,602.1

CONTINGENT LIABILITIES 26 192.6 532.4

PARENT COMPANY INCOME STATEMENTS

Year Ended Year Ended

(SEK millions) No tes Dec. 31 1994 Dec. 31 1993

Sales 2,406.5 2,396.4

Other operating income 5.5 2.0

Operating expenses 3, 4 (2,049.3) (2,168.0)

Gross operating profit 362.7 230.4

Amortization and depreciation

Vessels 13 (93.4) (93.6)

Other 13 (56.1) (63.1)

Operating profit 213.2 73.7

Financial lncome and expense

lncome from investments in subsidiaries 15.1 6.1

Interest income 5 18.4 54.5

Interest expense 5 (162.0) (259.5)

Foreign exchange gains/losses, net 21 (28.2) (60.7)

lncome before taxes 56.5 (1 85.9)

Appropriations 27 13.0 191.7

Taxes 7 (6.0) 4.6

Net profit 63.5 10.4

PARENT COMPANY BALANCE SHEETS

(SEK millions) Notes

ASSETS

Current assets Cash

Short-term investments 8

Accounts receivable 9

Prepaid expenses and accrued income

Financial receivables 6

lnventories

Total current assets

Fixed assets

Financial fixed assets 10, 11

Deferred taxes 7

Deferred development costs 13, 14 Deferred dry-docking costs 13, 15

Vessels 13, 16

Equipment 13, 17

Total fixed assets Total assets

LIABILITIES, PROVISIONS AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable 19

Accrued expenses and deferred income Current portion of loans and finance

lease obligations 20,21

Total current liabilities

Long-term liabilities

Loans and finance lease obligations 20,21

Provisions 22,23

Untaxed reserves 27

Shareholders' equity 24

Share capita!

Legal reserve Accumulated deficit Net profit for the year Total shareholders' equity

Total liabilities, provisions and shareholders' equity

PLEDGED ASSETS 25

CONTINGENT LIABILITIES 26

Dec. 31 1994

57.5 200.2 66.4 33.3 41.5 8.1 407.0

224.7 20.7 19.8 1,403.9 137.4 1,806.5 2,213.5

115.4 71.0 220.1 406.5

1,212.1

66.0 0.8

325.0 177.4 (37.8) 63.5 528.1

2,213.5

1,684.7 180.2

Dec. 31 1993

19.4 99.6 62.4 39.3 25.6 6.1 252.4

(

324.1 26.7 1.9 4.3

•

1,497.6 120.9

1,975.5 2,227.9

209.5 89.6 382.6 681.7

1,436.0 66.1

~

12.9

100.0

(79.2) 10.4 31.2

2,:.2:.27.9

1,600.8 515.1

STATEMENTS OF CHANGES IN FINANCIAL POSITION

Consolidated Paren t

Year Ended December 31

(SEK millions) 1994 1993 1994 1993

Operation

Cash from gross operating profit 351.2 291.1 357.2 230.1

Change in working capital 17.7 10.8 (112.8) 153.0

lncome taxes paid 0.0 (0.6) 0.0 0.0

Operating cash flow 368.9 301.3 244.4 383.1

Operating lnvestments

Purehasas of equipment (69.6) (17.2) (66.0) (7.7)

Dry-docking costs (19.9) 0.0 (19.9) 0.0

Proceeds from sale of assets 67.7 83.4 62.4 13.2

Contributions to/dividends from subsidiaries 0.0 0.0 36.2 (13.9)

Net cash from operating investments (21.8) 66.2 12.7 (8.4)

Net flow from operations 347.1 367.5 257.1 374.7

Rnancing and financial investments

Proceeds from newshare issue 402.4 0.0 402.4 0.0

Shareholders contributlon 31.0 175.0 31.0 175.0

Amortizations on vesseliDans and

finance leases (214.6) (216.4) (213.6) (221.1)

Other changes in financial receivables

and liabilities (284.0) 7.5 (194.6) (14.1)

lnterest, net (136.9) (238.9) (143.6) (205.0)

Net cash from financing and

financial investments (202.1) (272.8) (118.4) (265.2)

Net increase in cash and

short-term investments 145.0 94.7 138.7 109.5

Cash and short-term investments at January l 148.7 54.0 119.0 9.5 Cash and short-term investments at December 31 293.7 148.7 257.7 119.0

NOTES TO THE FINANCIAL STATEMENTS

NOTE l. ÄCCOUNTING POLICIES

The directors' report and the financial statements have been preparad in accordance with Swedish accounting regulations and practices. In addition, expected future changes in the Swedish regulations on the format of the financial statements and disciasure requirements have, to same extent, been recognized, and finance leases have been reflected in the balance sheets.

The following changes in accounting policies were made during 1994:

• The International Accounting standard regarding Accounting for Leases (IAS 17) was adopted. Previously lease rental payments under finance leases were charged to income over the lease term and finance leases were not reflected in the balance sheets.

• Deferred tax assets and liabilities have been recognized, meaning that deferred taxes have been included in the reported tax expense. Previously the tax effects of temporary differences were not consequently reflected in the financial statements.

• Revenues for inland transportations, slets and charters have been included in sales during 1994. Previously, this revenue and the corresponding costs were offset andreportedon a net basis.

a

Certain items, previously classified as extraordinary, are now considered ordinary actlvities in order to conform to a new Swedish recommendation as weil as to the applicable

International Accounting standard.

• For employees in the USA, the Company has now adopted the statement of Financial Accounting standards No. 87 (Accounting for Pensions). Previously pension funding payments were expensed in the year incurred.

The comparative statements for 1993 have been restated to conform to the 1994

presentation. In spite of the fact that the charter parties related to the vessels Gulf Speed and Gulf Spirit meet the criteria to be considered as finance leases, these charter parties have not been classified as such since they were transferred to a company within the Bilspedition group during 1994.

The above described changes give rise to the following effects on retained earnings/accumulated deficit:

Financial Statements

Consolidated Parent Company

(SEK millions) 1994 1993 1994 1993

Opening retained earnings/accumulated deficit as previously reported

Change in accounting policy with respect to - finance leases

- taxes -pensions

Opening accumulated deficit as restated

14.4

(95.5) 26.7 0.0 (54.4)

(293.0)

(73.8) 22.1 0.0 (344.7)

0.0 (307.6)

(95.5) (73.8) 26.7 22.1

0.0 0.0

(68.8) (359.3)

-

Significant accounting policies applied by Atlantic Container Line AB (ACLJ are as follows:

Consolidatian Principles

The consolidated financial statements are prepared according to the recommendations of the Swedish Financial Accounting standards Council regarding Consolidated accounts.

These recommendations are substantially the same as International Accounting standards.

The purchase accounting method is used.

The consolidated accounts are comprised of Atlantic Container Line AB and all the campa- nies in which Atlantic Container Line AB controls more than 50% of the votlng rights, either directly or indirectly. Shareholdings in associated companies, in which the Group's voting rights amount to at least 20% and a maximum of 50% and over which the Group exercises considerable influence, are reported according to the equity method.

Fixed Assets

Tangible fixed assets are stated at historical cost. Costs incurred for dry-docking vessels are capitalized and amortized ·over the normal dry-docking interval. Certain EDP development costs are capitalized, and amortized over three years.

Depreciation is recorded on the straight Iine basis over the estimated economic Iifetimes of the various classes of assets.

Leases

Assets leased under agreements that transfer to ACL substantially all the risks and rewards incident to ownership (finance leases) have been capitalized. At the inception of the lease, both the asset and the liability are recorded in the balance sheet at present value of the future rentals. The asset is depreciated using the depreciation policy for similar fixed assets.

Lease rental payments are treated as comprising a capita! element, which is applied to reduce the liability outstanding, and an interest element, which is charged to income.

Rental costs for lease agreements other than finance leases (i.e. operating leases) are charged to income over the period of the lease on a straight-line basis.

Short-term investments

Short-term investments, acquired as an investment of funds exceeding the current working capita! requirements, are stated at the lower of cost or market value detenmined on

a portfolio basis.