A continuing reduction in cost of operations at Norgas, resulting in improved competitiveness.  Combining this with a reduction in idle time for the fleet and a high level of safety across our operations has resulted in an improved earnings trend throughout 2004 and into 2005;
	Integration of all the state-of-the-art new builds from China into the Norgas fleet - a fleet of ships that continually proves to be the best of its kind in our chosen business segments;
	A successful first full year of operations of our two major alliances - the MNGC pool for Norgas and with Teekay for SPT – has created great improvements in our business performance;
	Further positive development of our China operations, particularly:
	-	The success of TNGC in now carrying petro-chemical gases in addition to LPG;
	-	An expansion of our Wuhan Skaugen Training Centre (WSTC) in conjunction with Wuhan University of Technology.

We see a continuing improvement in the market outlook for our business units and, therefore, trading conditions for the Group in the next 12 months. Highlights anticipated include:

	Increased GDP growth as a driver of industrial production, yielding improved trading conditions and returns;
	An expected negative fleet growth in the Norgas gas vessels segment. This should keep fleet utilisation high and with a good contract base for the year,  giving acceptable returns to the capital employed;
	Further development in China.  This engine for growth and economic production is still increasing at a good pace and marine transportation is at the heart of global development;
	The very strong crude oil tanker markets reaching a peak, with perhaps less volatility in the year ahead.  This ought to create a more predictable environment for SPT and improve our ability to serve our customers.

We are now eyeing an unprecedented global situation where key phenomena can be seen.  Raw materials are located for the most part in certain areas of the world, with production capacity in another and consumption in a third location.  The key thing, from our perspective, is that marine transportation is necessary to bring all these elements together and this will certainly continue to be one of the key drivers of future global economic growth. Until now, we have never seen all sectors of the marine transportation business enjoying good times simultaneously. But with market indicators looking positive in the near-term, we hope that a new dawn is upon us.

Over the past several years we have managed to deliver ’yet another year’ with an acceptable return for our shareholders, bringing an average yield for the last three years of 47 per cent (share price including dividend payments). In the last twelve months the yield has been 13 per cent. If the dividend is approved it will give another year of about five per cent direct yield for the shareholders based on the share price at year end.  
 
When we look at our expectations for 2005, we consider that our share price has an upwards potential to reflect our true earnings capabilities. The price of the share is, however, a much more complex issue and, in my opinion, any public shipping company must be viewed in relation to:

	Its place in the global market;
	Its market share of the particular market in which it operates;
	The strength and length of its secured income contracts;
	The size and make-up of its new builds order book, as well as the growth in fleets in its market sectors;
	The size of its cash reserves when looked at against much lower market rates than presently exist;
	Its track record in previous markets – both high and low;
	Its ability to generate shareholder value through the turbulent markets.

When looking at these factors combined, I feel that we as shareholders of I.M. Skaugen can see a promising future.

At I.M. Skaugen we will maintain our efforts to create competitive shareholder value through:  

	Our emphasis on achieving ‘cost and service leadership’ positions in our market niches;
	Further development and growth of our core business units to enhance the future cash generating capability of the company;
	Adopting the philosophy of ‘making good even better’;
	Capitalising on our experiences in China to develop even more China business for the Group.

We will do all we can to further develop the Group into a multi-cultural entity with a global presence and truly international profile, ensuring our policy of ‘hiring the best people with the highest degree of enthusiasm, wherever we can find them’ is enhancing our strategic and financial achievements.

Our strategy of using leading-edge IT systems and solutions to improve co-operation within the global Group to enhance our business models, will also continue. By using state-of-the-art solutions we will be able to further develop communications that make it easier to work together with our customers, bringing mutual business advantage to us both.

At the same time, everybody at I.M. Skaugen recognises that the privilege of conducting business in our communities  
demands the best of us in our environmental, health and safety performance. We are committed to the safe operation of our vessels and facilities, the welfare of our employees and community, along with the protection of the environment.  
 
Not all things run as smoothly as we would expect, nor hope, but we see tremendous opportunities for a continued positive outlook because the entire workforce is constantly striving to do the best we can every day.  And here our creed fits for us all as a reminder: ‘Excellent firms do not believe in excellence - only in constant improvement and constant change’.
 
I wish to thank everybody at I.M. Skaugen, as a shareholder or fellow team member for their patience and support during the last 12 months and I look forward to working with everyone a great deal more in 2005.


Morits Skaugen, CEO
10th January, 2005