Summary

For the year, I.M. Skaugen Group (IMS) reported a net result of USD28.9 million in 2005 (pre-tax and before variances on derivative on convertible bonds) vrs USD4 million in 2004. The result on an EBITDA basis is USD46.3 million in 2005 (USD24.9 million in 2004).

In 2005 IMS enjoyed good trading conditions for our main business, Norgas, the gas carrier activity. This was tempered by the challenges we faced in other parts of our operations. SPT’s lightering business saw marked fluctuations in demand across the year - due to poor weather and markedly variable time charter costs. We do, however, consider the SPT results acceptable under the difficult trading conditions experienced.

With IMS into its second decade of operation in China - and the country continuing its robust economic performance - the company is beginning to reap significant benefits from its efforts. In addition to improved turnover, the company is seeing other benefits from its presence in China.

IMS placed significant orders in China during the year for a number of new gas carrier vessels and we will be working very closely with the yard to ensure these vessels are completed on schedule, to its exact requirements and at the favourable quoted prices for these.

The newbuilding order book for the IMS Group, if all materialise, now stands at 21 ships with a gross value of about USD570 million (on a 100 per cent basis). All 21 ships (15 gas carriers and six Aframax-sized tankers for SPT) are, however, made at price levels that we consider very attractive compared to prevailing markets and thus fits our ‘lowest cost provider’ strategy.

The IMS share price rose by a substantial 52 per cent during 2005, closing at the end of the year at NOK235 per share. The yield over the year was 64 per cent, including a dividend of NOK7.5 per share paid in March 2005 and NOK10 per share paid in December 2005. The dividend paid in December is for all of 2005. The payment was made in 2005 rather than in March 2006, as would be normal course of business, due to changes in Norwegian tax regulations.

The Norgas Carriers has been in a close cooperation with AP Møller/Maersk since October 2003 in an alliance named ‘MNGC’. AP Møller/Maersk has controlled a number of ethylene capable gas carriers of similar configuration to Norgas’ vessels, but will after December 2006 no longer exercise control of most of these gas carriers. The present cooperation will thus come to an end in 2006. Camillo Eitzen & Co ASA and I.M. Skaugen ASA have in February 2006 agreed to restructure and continue their cooperation and have decided to establish a joint gas carrier pool to improve the marketing of their fleet of 5-12,000 cbm ethylene gas carriers. The revenue sharing pool will be known to the industry by the trade name 'Eitzen - Norgas Gas Carriers' (ENGC).

Overall market conditions appear encouraging for both segments of I.M. Skaugen’s operations and with a focus on retaining a tight hold on costs across the company, the next 12 months should see a continuation of its 2005 performance.