Another year has come to an end and another eventful year in our 'short modern history'. It will be another year of profit, and due to some good decisions, it will be a very profitable year. This year has also been rather full of accomplishments and most of the things that have happened have been beneficial for the company.

These accomplishments have not come easy and most of these are due to a long-term process that really resembles a marathon run. We can thus see our accomplishments as a company best if we sometimes turn around and look back. The last 10 years has shown dramatic improvements compared to a rather sad start of the 'new IM Skaugen' after the mergers in the early 90's. The company has made 'step by step' advances to reach the point where we now can enjoy some of the fruits from the process.

We have for the last few years followed a very consistent strategy and all our activities have been focused on achieving this. It is a strategy that seems to be paying off and can best be summarised as the combined strategy of:

• achieving the Cost and Service Leader ship position in our market niches, and
• making what is good even better.

We will continue to focus on the IMS strategy as per above; 'Cost and Service Leadership' and 'Making Good even better'. Most if not all our actions and plans are focused on this simple goal. It is difficult to achieve, but it is quite needed to stay committed to these simple goals. And there is a difference between 'interest' and 'commitment'. When you are interested in doing something, you do it only when it is convenient. When you are committed to something, you accept no excuses, only results.

As a point in case I am very pleased to say that we recently have announced that we have secured long term state of the art tonnage for SPT; through a newbuilding programme and also in alliance with others. It is a question of accomplishing both; both the cost leadership and service leadership. SPT has for a very long time envisioned a fleet of purpose designed and built lightering tankers to create improved safety and service towards our customers. These new tankers will be superior to conventional tankers in the trade that we currently use. The realisation of the Somargas project was also a key event that ensured the continued presence of Norgas in the petchem gas markets. The acquisition cost of these new vessels will hopefully prove to have been all time low and it has ensured a good strategic position for Norgas. Consolidation of the gas markets would not have happened without the very efficient and low cost Somargas vessels - and this consolidation issue has been a key objective for us for several years. Finally it arrived, but through the MNGC concept and by the AP Moller – Maersk cooperation.

The two alliances we formed on 1 October 2003 with Teekay and AP Moller, should further advance the strategy and enable us to capitalize even further on our past accomplishments. With these two alliances both of our key business units are considered to be in a world leadership position - and also with partners being recognised as world leaders. Making these alliances work to its full potential is a challenge for the coming periods. With the alliances we have in China (“Tianfa” re TNGC and WUT re the training center) and with GATX on Somargas - all our business activities are now in alliances and this requires a different behavioural pattern. It is imperative that we act in ways that these alliances do not slow us down too much, but at the same time we must be mindful of the needs of many others.

Our credo has been taken from Darwin and says; “It is not the strongest of the species who survive, but the most responsive to change”.

IMS share price has developed quite well since 1997 and the yield has been even better when you consider that IMS has paid out about US$55.9 million or equivalent of NOK 391 mill to its shareholders since 1997. This pay out is probably higher than any other shipping company on the Oslo Stock Exchange and as such the graph below indicates that the yield for an IMS shareholder has been better than the index.

     Norway I.M. Skaugen ASA, close daily [index 1997-01]
     Norway OSE Benchmark (OSEBX) Total Return Index Close [index 1997-01]
     Norway OSE Transportation Total Return Index [index 1997]

Our goals for 2004 are set out in this Annual Report and Business Review, but in short we remain committed to providing unparalleled customer service in all our business units and will continue to invest for the long-term throughout the Group.

I thank my talented colleagues, whose commitment and hard work have made the success of I.M. Skaugen possible – not just in 2003, but over many years in the past. The quality of our staff is the single most important factor in our company's success. Each year I meet as many as I can of my colleagues around the world and it is a privilege to work with so many excellent people.

'Steady as she goes' has long been our creed and it is the faithful adherence to this prudent principle that sees our company now in good shape and on course for the future.

Morits Skaugen
CEO
January 2004

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