**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 20-F**

 
| **o**      | ** ** | **REGISTRATION  STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES  EXCHANGE ACT OF 1934**                                                               |
|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** |
| **OR**     |
| ** ** |
| **ý** | ** ** | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**                                                                                |
| ** ** | ** ** | ** **                                                                                                                                                                          |
| ** ** | ** ** | **For the fiscal year ended  February 28, 2005**                                                                                                                     |
| ** ** | ** ** | ** **                                                                                                                                                                          |
| **OR**     |
| ** ** |
| **o**      | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**                                                                            |
| ** ** | ** ** | ** **                                                                                                                                                                          |
| **OR**     |
| ** ** | ** ** | ** **                                                                                                                                                                          |
| **o**      | ** ** | **SHELL  COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT  OF 1934**                                                                                   |
| ** ** | ** ** | ** **                                                                                                                                                                          |
| ** ** | ** ** | **Date of event requiring this shell company report                     ** |

 

**Commission file number: 333-11948**

 

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**CONCORDIABUS AB (publ)**

(Exact Name of Registrant as Specified in itsCharter)

 

**SWEDEN**

(Jurisdiction of Incorporation orOrganization)

 

**Solna Strandväg 78, 171-54 Solna, Sweden**

(Address of Principal Executive Offices)

 

Securities registered or to be registered pursuant to Section 12(b) ofthe Act:

 

**NONE**

 

Securities registered or to be registered pursuant to Section 12(g) ofthe Act:

 

**NONE**

 

Securities for which there is a reporting obligation pursuant to Section 15(d) ofthe Act:

 

**Euro 160,000,000 11% Senior SubordinatedNotes due February 2010**

(Title of Class)

 

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Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act

 
| o  Yes | ý  No |
|------------------|----------------------|

 

If this report is an annual report or transition report, indicate bycheck mark if the registrant is not required to file reports pursuant to Section 13or 15(d) of the Securities Exchange Act of 1934.

 
| ý  Yes | o  No |
|-----------------------|-----------------|

 

 

Indicate by check mark whether the Registrant: (1) has filed allreports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past90 days.

 
| o  Yes | ý  No |
|------------------|----------------------|

 

Indicate by check mark which financial statement item the registranthas elected to follow:

 
| ý  Item 17 | o  Item 18 |
|---------------------------|----------------------|

 

 

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**TABLE OF CONTENTS**

 

 
| PART I  |   |
|--------------|--------|
| Item 1.      |   |   | Identity Of Directors, Senior Management And Advisors |   |
| Item 2.      |   |   | Offer Statistics And Expected Timetable |   |
| Item  3.     |   |   | Key  Information |   |
|         |   | A. | Selected  Financial Data |   |
|         |   | B. | Capitalization And Indebtedness |   |
|         |   | C. | Reasons For The Offer And Use Of Proceeds |   |
|         |   | D. | Risk  Factors |   |
| Item 4.      |   |   | Information On The Company |   |
|         |   | A. | History And Development Of The Company |   |
|         |   | B. | Business  Overview |   |
|         |   | C. | Organizational Structure |   |
|         |   | D. | Property, Plant And Equipment |   |
| Item 5.      |   |   | Operating And Financial Review And Prospects |   |
|         |   | A. | Operating  Results |   |
|         |   | B. | Liquidity And Capital Resources |   |
|         |   | C. | Research And Development, Patents,  Licences, Etc. |   |
|         |   | D. | Trend Information |   |
|         |   | E. | Off-Balance Sheet Arrangements |   |
|         |   | F. | Tabular Disclosure of Contractual Obligations |   |
| Item 6.      |   |   | Directors, Senior Management And Employees |   |
|         |   | A. | Directors And Senior Management |   |
|         |   | B. | Compensation |   |
|         |   | C. | Board Practices |   |
|         |   | D. | Employees |   |
|         |   | E. | Share Ownership |   |
| Item 7.      |   |   | Major Shareholders And Related Party  Transactions |   |
|         |   | A. | Major Shareholders |   |
|         |   | B. | Related Party Transactions |   |
|         |   | C. | Interests Of Experts And Counsel |   |
| Item 8.      |   |   | Financial Information |   |
|         |   | A. | Consolidated Statements And Other Financial  Information |   |
|         |   | B. | Significant Changes |   |
| Item 9.      |   |   | The Offer And Listing |   |
|         |   | A. | Market Price Information |   |
|         |   | B. | Markets |   |
| Item 10.     |   |   | Additional Information |   |
|         |   | A. | Share Capital |   |
|         |   | B. | Memorandum And Articles Of Association |   |
|         |   | C. | Material Contracts |   |
|         |   | D. | Exchange Controls |   |
|         |   | E. | Taxation |   |
|         |   | F. | Dividends And Paying Agents |   |
|         |   | G. | Statement By Experts |   |
|         |   | H. | Documents On Display |   |
|         |   | I. | Subsidiary Information |   |
| Item 11.     |   |   | Quantitative And Qualitative Disclosures  About Market Risk |   |
| Item 12.     |   |   | Description Of Securities Other Than Equity  Securities |   |
| PART II |
| Item 13.     |   |   | Defaults, Dividend Arrearages And  Delinquencies |   |
| Item 14.     |   |   | Material Modifications To The Rights Of  Security Holders And Use Of Proceeds |   |
| Item 15.     |   |   | Controls And Procedures |   |
| Item 16.     |   |   | [Reserved] |   |
| Item 16A.    |   |   | Audit Committee Financial Expert |   |
| Item 16B.    |   |   | Code Of Ethics |   |
| Item 16C.    |   |   | Principal Accountant Fees And Services |   |

 

i

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| Item 16D.     |   | Exemptions From The Listing Standards For  Audit Committees             |   |
|---------------|--------|-------------------------------------------------------------------------|--------|
| Item 16E.     |   | Purchases Of Equity Securities By The  Issuer And Affiliated Purchasers |   |
| PART III |
| Item 17.      |   | Financial Statements                                                    |   |
| Item 18.      |   | Financial Statements                                                    |   |
| Item 19.      |   | Exhibits                                                                |   |
|          |   | Signatures                                                              |   |

 

**CAUTIONARY NOTICE REGARDING FORWARD LOOKINGSTATEMENTS**

 

This annual report includes forward looking statements. We have basedthese forward looking statements on our current expectations and projectionsabout future events. These forward looking statements can be identified by theuse of forward looking terminology, including the terms “believe,” “estimate,” “anticipate,”“expect,” “intend,” “continue,” “may,” “will” or “should” or, in each case,their negative, or other variations or comparable terminology. These forwardlooking statements include all matters that are not historical facts. Theyappear under subheading “D. Risk Factors” of “Item 3. Key Information” and“Item 5. Operating and Financial Review and Prospects” and elsewhere in thisannual report and include statements regarding our intentions, beliefs orcurrent expectations concerning, among other things, our results of operations,financial condition, liquidity, prospects, growth, strategies and the industryin which we operate.

 

By their nature, forward looking statements involve risks anduncertainties because they relate to events and depend on circumstances thatmay or may not occur in the future. We caution you that forward lookingstatements are not guarantees of future performance and that our actual resultsof operations, financial condition and liquidity, and the development of theindustry in which we operate may differ materially from those made in orsuggested by the forward looking statements contained in this annual report. Inaddition, even if our results of operations, financial condition and liquidity,and the development of the industry in which we operate are consistent with theforward looking statements contained in this annual report, those results ordevelopments may not be indicative of results or developments in subsequentperiods. Important factors that could cause those differences include, but arenot limited to:

 

•                  our substantial leverage and our ability to meet ourdebt service obligations;

 

•                  our ability to win and/or renew public contracts;

 

•                  downward pressure on prices resulting fromcompetition in our industry;

 

•                  our exposure to cost increases that may not besufficiently accounted for by the indexation terms in our contracts;

 

•                  potential changes in the funding provided totransportation authorities by governments;

 

•                  our ability to win contracts with a margin andreturn on capital commensurate with our cost structure;

 

•                  our ability to forecast the costs associated withcontracts successfully;

 

•                  our ability to take advantage of terms in our leaseagreements;

 

•                  our relations with our employees;

 

•                  our exposure to fluctuations in fuel prices;

 

•                  possible financial losses pursuant to our hedgingstrategies; and

 

•                  our exposure to currency exchange rate fluctuations.

 

We undertake no obligation to update publicly or to revise any forwardlooking statements, whether as a result of new information, future events orotherwise. Furthermore, these forward looking statements may be materiallyimpacted by the factors listed under subheading “D. Risk Factors” of “Item3. Key Information”. In light of these risks, uncertainties and assumptions,the forward looking events discussed in this annual report might not occur. Youshould not interpret statements regarding past trends or activities asrepresentations that those trends or activities will continue in the future.

 

ii

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**ENFORCEMENT OF CERTAIN CIVIL LIABILITIES**

 

Concordia Bus AB (publ) (“Concordia”) is organized under the laws ofSweden. All of our directors, executive officers and our subsidiaries and theindependent auditors named in this prospectus are non-residents of the UnitedStates. As a result, it may not be possible for investors to effect service ofprocess within the United States upon us or such persons or to enforce againstany of them judgments of US courts predicated upon civil liabilities under USfederal securities laws. Although we agree under the terms of the indenturerelating to the senior subordinated notes to accept service of process in theUnited States by an agent designated for such purpose, it may not be possiblefor investors to (i) effect service of process within the United Statesupon our officers and directors and the independent auditors named herein andto (ii) realize in the United States upon judgments against such personsobtained in such courts predicated upon civil liabilities of such persons,including any judgments predicated upon US federal securities laws to theextent such judgments exceed such person’s US assets. There is also doubt as tothe enforceability in Sweden, in original actions or in actions forenforcement, of judgments of US courts predicted upon the civil liabilityprovisions of the federal securities laws of the United States.

 

**CURRENCY AND FINANCIAL STATEMENT PRESENTATION**

 

Unless otherwise indicated, references in this prospectus to “SEK,” “SwedishKrona” or “Swedish Kronor” are to the lawful currency of Sweden; references to “euro”or “€” are to the single currency of the participating Member States in theThird Stage of European Economic and Monetary Union of the Treaty Establishingthe European Community, as amended from time to time; references to “NorwegianKroner” or “NOK” are to the lawful currency of Norway; and references to “USdollars” or “$” are to the lawful currency of the United States of America.

 

The consolidated financial statements of Concordia are prepared inaccordance with accounting principles generally accepted in Sweden (“SwedishGAAP”), which differ in certain respects from generally accepted accountingprinciples in certain other countries. The significant differences betweenSwedish GAAP and accounting principles generally accepted in the United Statesof America (“US GAAP”) are discussed in Note 33 to the consolidatedfinancial statements of Concordia included elsewhere in this annual report.

 

iii

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**PART I**

 
| **Item 1.** |   | ***Identity of  Directors, Senior Management and Advisors*** |
|-------------|--------|--------------------------------------------------------------|
|        |   |                                                         |
|        |   | Not Applicable.                                              |
|        |   |                                                         |
| **Item 2.** |   | ***Offer Statistics  and Expected Timetable***               |
|        |   |                                                         |
|        |   | Not Applicable                                               |
|        |   |                                                         |
| **Item 3.** |   | ***Key Information***                                        |

 

**A.****                                    SelectedFinancial Data**

 

The following tables set forth selected consolidated financial datederived from audited financial statements as of and for the years endedFebruary, 28, 2001, February, 28, 2002, February 28, 2003, February 29,2004 and February 28, 2005.

 

This information should be read in conjunction with “Item 5.Operating and Financial Review and Prospects” and the consolidated financialstatements and the notes thereto included elsewhere in this annual report.

 

The consolidated financial statements of both Concordia have beenprepared in accordance with Swedish GAAP, which differ in certain significantrespects from US GAAP. The significant differences between Swedish GAAPand US GAAP are discussed in Note 33 to the consolidated financialstatements of Concordia included elsewhere in this annual report.

 
| ** **                                     | ** ** | **Concordia**                                                                | ** ** |
|------------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **                                     | ** ** | **As of and  for the  year ended  February 28,  2005**   | ** ** | **As of and  for the  year ended  February 29,  2004** | ** ** | **As of and  for the  year ended  February 28,  2003** | ** ** | **As of and  for the  year ended  February 28,  2002(5)(6)** | ** ** | **As of and  for the  year ended  February 28,  2001(1)(2)(6)** | ** ** |
| ** **                                     | ** ** | **(SEK in  millions, except share and per share amount and operating data)** | ** ** |
| **SWEDISH  GAAP**                              |       |                                                                         |       |   |   |   |   |   |   |   |   |
| **Income  Statement Data**                     |       |                                                                         |       |   |   |   |   |   |   |   |   |
| Net revenue                                    |       | 4,812                                                                        |       | 4,761 |   | 4,758 |   | 4,226 |   | 3,576 |   |
| Operating expenses                             |       | (4,747                                                                       | )          | (4,559 | ) | (4,522 | ) | (3,999 | ) | (3,299 | ) |
| Gain on sale of fixed assets                   |       | 4                                                                            |       | 6 |   | (4 | ) | 20 |   | 65 |   |
| Depreciation and amortization                  |       | (343                                                                         | )          | (363 | ) | (404 | ) | (383 | ) | (364 | ) |
| Write-down of fixed assets                     |       | (38                                                                          | )          | — |   | — |   | (11 | ) | — |   |
| Operating income (loss)                        |       | (312                                                                         | )          | (155 | ) | (172 | ) | (147 | ) | (22 | ) |
| Financial income (expenses), net               |       | (250                                                                         | )          | (308 | ) | (255 | ) | (217 | ) | (286 | ) |
| Income tax benefit (expense)                   |       | 2                                                                            |       | 54 |   | 83 |   | 78 |   | 83 |   |
| Net income (loss)                              |       | (560                                                                         | )          | (409 | ) | (344 | ) | (286 | ) | (225 | ) |
| Net (loss) per share  in thousands of SEK |       | (112,063                                                                     | )          | (81,721 | ) | (68,780 | ) | (57,171 | ) | (45,035 | ) |
| **Balance  Sheet Data**                        |       |                                                                         |       |   |   |   |   |   |   |   |   |
| Total fixed assets                             |       | 2,033                                                                        |       | 2,386 |   | 2,720 |   | 2,965 |   | 3,572 |   |
| Total current assets                           |       | 772                                                                          |       | 1,024 |   | 783 |   | 979 |   | 855 |   |
| Total assets                                   |       | 2,805                                                                        |       | 3,410 |   | 3,503 |   | 3,944 |   | 4,427 |   |
| Share capital                                  |       | 1                                                                            |       | 1 |   | 1 |   | 1 |   | 1 |   |
| Total shareholder’s equity (deficit)      |       | (873                                                                         | )          | (330 | ) | 78 |   | 422 |   | 723 |   |
| Total provisions                               |       | 111                                                                          |       | 146 |   | 171 |   | 236 |   | 299 |   |
| Total noncurrent liabilities                   |       | 1,188                                                                        |       | 2,689 |   | 2,318 |   | 2,480 |   | 2,504 |   |
| Total current liabilities                      |       | 2,379                                                                        |       | 905 |   | 936 |   | 806 |   | 901 |   |
| **Other  Financial Data**                      |       |                                                                         |       |   |   |   |   |   |   |   |   |
| Total capital expenditures                     |       | 112                                                                          |       | 32 |   | 216 |   | 43 |   | 336 |   |
| Capital expenditures on buses                  |       | 76                                                                           |       | 15 |   | 198 |   | 21 |   | 322 |   |
| Cash flow from operations (3)                  |       | (98                                                                          | )          | 7 |   | 11 |   | 95 |   | (72 | ) |
| Cash flow from investing activities(3)         |       | (63                                                                          | )          | (11 | ) | (136 | ) | 275 |   | 103 |   |
| Cash flow from financing activities (3)   |       | (8                                                                           | )          | 153 |   | (99 | ) | (194 | ) | 53 |   |
| Number of shares                               |       | 5,000                                                                        |       | 5,000 |   | 5,000 |   | 5,000 |   | 5,000 |   |

 

1

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| ** **                                               | ** ** | **Concordia**                                                                         | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------------------------------------------|------------|
| ** **                                               | ** ** | **As of and  for the  year ended  February 28,  2005**            | ** ** | **As of and for  the year  ended  February 29,  2004** | ** ** | **As of and for  the year  ended  February 28,  2003** | ** ** | **As of and for  the year  ended  February 28,  2002(5)(6)** | ** ** | **As of and for  the year  ended  February 28,  2001(1)(2)(6)** | ** ** |
| ** **                                               | ** ** | **(SEK in millions, except share and per share amounts, ratios and  operating data)** |
| **U.S.  GAAP**                                           | ** ** | ** **                                                                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Income  Statement Data**                               |       |                                                                                  |       |   |   |   |   |   |   |   |   |
| Operating income (loss)                                  |       | (274                                                                                  | )          | (80 | ) | (111 | ) | (108 | ) | (69 | ) |
| Net loss                                                 |       | (518                                                                                  | )          | (334 | ) | (301 | ) | (269 | ) | (260 | ) |
| Basic and diluted net loss per share                     |       | (103,600                                                                              | )          | (66,895 | ) | (60,180 | ) | (53,728 | ) | (51,920 | ) |
| **Balance  Sheet Data**                                  |       |                                                                                  |       |   |   |   |   |   |   |   |   |
| Total fixed assets                                       |       | 2,277                                                                                 |       | 2,588 |   | 2,882 |   | 3,086 |   | 3,505 |   |
| Total current assets                                     |       | 773                                                                                   |       | 1,024 |   | 783 |   | 979 |   | 827 |   |
| Total assets                                             |       | 3050                                                                                  |       | 3,612 |   | 3,665 |   | 4,065 |   | 4,332 |   |
| Share capital                                            |       | 1                                                                                     |       | 1 |   | 1 |   | 1 |   | 1 |   |
| Total shareholder’s equity (deficit)                |       | (753                                                                                  | )          | (247 | ) | 86 |   | 399 |   | 664 |   |
| Total noncurrent liabilities                             |       | 1,419                                                                                 |       | 2,945 |   | 2,644 |   | 2,876 |   | 2,779 |   |
| Total current liabilities                                |       | 2,387                                                                                 |       | 914 |   | 935 |   | 790 |   | 889 |   |
| **OPERATING  DATA**                                      |       |                                                                                  |       |   |   |   |   |   |   |   |   |
| Number of buses(4)                                       |       | 3,730                                                                                 |       | 3,908 |   | 3,949 |   | 4,021 |   | 4,137 |   |
| Average number of employees                              |       | 6,949                                                                                 |       | 7,512 |   | 7,484 |   | 6,924 |   | 6,696 |   |
| Number of kilometers of service provided  (in thousands) |       | 258,113                                                                               |       | 257,672 |   | 269,198 |   | 251,959 |   | 223,876 |   |

 

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(1)                                  InMarch/April 2000, Concordia Finland experienced a 3-day strike among itsemployees. This strike resulted in losses of SEK 1.2 million.

 

(2)                                  Followingthe acquisition of SBC by Concordia, which was effective from February 1,2001, the carrying value of the bus fleet used in the local public bustransportation business was increased by SEK 63 million to reflectits estimated fair value. The depreciation period was also extendedprospectively from 8.33 years to 10 years. As a result of thisacquisition, SBC’s fiscal year-end was changed from December 31 to thelast day of February.

 

(3)                                  Foradditional information about cash flow data for the years ended February 28,2003, February 29, 2004 and February 28, 2005, see the ConsolidatedCash Flow Statements included in this annual report.

 

(4)                                  Numberof buses includes operating and surplus buses in Sweden, Norway, and Finland.

 

(5)                                  Inearly 2002, Concordia launched a plan to close its regional offices. As aresult, termination costs for 80 employees are included as a provision which totaledSEK 17 million for the year ended February 28, 2002. These costsare included as a component of our operating loss.

 

(6)                                  Certainamounts as of and for the years ended February 28, 2002 and 2001 have beenrestated to give retroactive effect of a change in accounting policy underSwedish GAAP.  The change in accountingpolicy for Swedish GAAP had no impact on the results of operations or financialposition of Concordia under U.S. GAAP.

 

The table below sets forth, for the periods and dates indicated,certain information concerning the exchange rate for the Swedish Krona againstthe US dollar based upon the noon buying rate in the City of New York for cabletransfers in Swedish Krona as announced by the Federal Reserve Bank of New Yorkfor customs purposes (the “SEK Noon Buying Rate”).  We provide these rates for your convenienceonly, and they are not the rates of exchange we used to prepare ourconsolidated financial statements used elsewhere in this annual report.  We are not representing that Swedish Kronaamounts have been or would be converted into U.S. dollars at any of theexchange rates indicated.  The SEK NoonBuying Rate expressed in US dollars as of November 3, 2006 was 7.2096.

 

2

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| ** **                               | ** ** | **Period End** | ** ** | **Average** | ** ** | **High** | ** ** | **Low** | ** ** |
|------------------------------------------|------------|----------------|------------|-------------|------------|----------|------------|---------|------------|
| **Fiscal  Year**                         |       |           |       |        |       |     |       |    |       |
| Ended February 28, 2001             |       | 9.8150         |       | 9.3723      | (a)        | 10.3600  |       | 8.5330  |       |
| Ended February 28, 2002             |       | 10.4700        |       | 10.5832     | (a)        | 11.0270  |       | 9.6730  |       |
| Ended February 28, 2003             |       | 8.5050         |       | 9.3218      | (a)        | 10.500   |       | 8.4100  |       |
| Ended February 29, 2004             |       | 7.4330         |       | 7.8456      | (a)        | 8.7030   |       | 7.0850  |       |
| Ended February 28, 2005             |       | 6.8275         |       | 7.3002      | (a)        | 7.7725   |       | 6.5939  |       |
| **Month**                                |       |           |       |        |       |     |       |    |       |
| February 2005                       |       |           |       |        |       | 7.1114   |       | 6.8275  |       |
| March 2005                          |       |           |       |        |       | 7.0716   |       | 6.7312  |       |
| April 2005                          |       |           |       |        |       | 7.1627   |       | 7.0018  |       |
| May 2005                            |       |           |       |        |       | 7.4108   |       | 7.0850  |       |
| June 2005                           |       |           |       |        |       | 7.8114   |       | 7.4373  |       |
| July 2005                           |       |           |       |        |       | 7.9218   |       | 7.7225  |       |
| August 2005                         |       |           |       |        |       | 7.7121   |       | 7.4762  |       |
| September 2005                      |       |           |       |        |       | 7.8136   |       | 7.3936  |       |
| October 2005                        |       |           |       |        |       | 7.9695   |       | 7.687   |       |
| November 2005                       |       |           |       |        |       | 8.2434   |       | 7.9749  |       |
| December 2005                       |       |           |       |        |       | 8.1162   |       | 7.8323  |       |
| January 2006                        |       |           |       |        |       | 7.8097   |       | 7.6629  |       |
| February 2006                       |       |           |       |        |       | 7.9656   |       | 7.6487  |       |
| March 2006                          |       |           |       |        |       | 7.9604   |       | 7.7855  |       |
| April 2006                               |       |           |       |        |       | 7.7580   |       | 7.3579  |       |
| May 2006                                 |       |           |       |        |       | 7.3929   |       | 7.1975  |       |
| June 2006                                |       |           |       |        |       | 7.3864   |       | 7.0917  |       |
| July 2006                                |       |           |       |        |       | 7.4136   |       | 7.1401  |       |
| August 2006                              |       |           |       |        |       | 7.2448   |       | 7.1194  |       |
| September 2006                           |       |           |       |        |       | 7.3450   |       | 7.2410  |       |
| October 2006                             |       |           |       |        |       | 7.4200   |       | 7.2111  |       |
| November 2006 (through November 3, 2006) |       |           |       |        |       | 7.2096   |       | 7.1945  |       |

 

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(a)                                  Theaverage of the SEK Noon Buying Rate on the last day of each month duringthe applicable period.

 

**B.****                                   Capitalization andIndebtedness**

 

Not applicable.

 

**C.****                                   ReasonsFor the Offer and Use of Proceeds**

 

Not applicable.

 

**D.****                                    Risk Factors**

 

***Concordia andConcordia Bus Nordic are holding companies with no revenue generatingoperations of their own.***

 

Concordia and Concordia Bus Nordic AB (publ), Concordia’s wholly-ownedsubsidiary, (“Concordia Bus Nordic”) are holding companies whose principalassets are their investments in their subsidiaries. They conduct no business oroperations except through direct and indirect subsidiaries. Their ability toservice indebtedness, including the €45,000,000 mezzanine facility (the “MezzanineFacility”)  and the €130,000,000 9.125%Senior Secured Notes (the “Senior Secured Notes”), due August 1, 2009issued by Concordia Bus Nordic and guaranteed by the guarantors as defined infootnote (e) under subheading “C. Organisational Structure” under “Item 4.Information on the Company”, is entirely dependent upon the receipt of fundsfrom subsidiaries by means of dividends, interest, intercompany loans orotherwise. The ability of subsidiaries to make those funds available to them issubject to, among other things, applicable corporate and other laws andrestrictions contained in agreements to which such subsidiaries may be subject.We cannot assure you that those subsidiaries will be in a position to makefunds available. Although the indenture for the Senior Secured Notes and theMezzanine Facility limit the ability of such subsidiaries to enter intoconsensual restrictions on their ability to pay dividends and make otherpayments to us, such limitations are subject to a number of significantqualifications. This could have a material adverse effect on our financialcondition.

 

***Ability to ServiceDebt—to service our debt, we will require a significant amount of cash. Ourability to generate cash depends on many factors beyond our control.***

 

Our ability to make payments on and to refinance our debt, includingthe Mezzanine Facility and the Senior Secured Notes, will depend on oursubsidiaries’ ability to generate cash in the future and our subsidiaries’ability to generate distributable earnings or other funds available for thatpurpose. This, to a certain extent, is subject to general economic, financial,competitive and other factors that are beyond our control.

 

Based on our current level of operations and anticipated cost savingsand operating improvements, we believe our cash flow from operations andavailable cash will be adequate to meet our future liquidity and debt serviceneeds. However, we 

 

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cannot assure you that (1) our business will generate sufficientcash flow from operations, particularly if our bus fleet grows more rapidlythan anticipated, with the associated increase in operating lease costs, (2) currentlyanticipated cost savings, fleet management strategies and operatingimprovements will be realized on schedule, or at all or (3) futureborrowings will be available to us in an amount sufficient to enable us to makerequired payments on, and redemptions of, our debt, including the SeniorSecured Notes, or to fund our other liquidity needs.

 

We sustained operating losses of SEK 312 million for the yearended February 28, 2005, SEK 155 million for the year ended February 29,2004 and SEK 172 million for the year ended February 28, 2003.

 

We may need to refinance all or a portion of our and our subsidiaries’debt, the Mezzanine Facility or the Senior Secured Notes, on or beforematurity. We may not be able to refinance any of such debt, the Mezzanine Facilityor the Senior Secured Notes, on commercially reasonable terms or at all, whichcould have a material adverse effect on our business.

 

***Our substantialleverage could adversely affect our ability to run our business.***

 

We have now and will continue to have a significant amount of debt. Asof February 28, 2005, our total consolidated debt was approximately SEK2,644 million, of which total consolidated senior debt was approximatelySEK 2,624 million.  Ourshareholder’s deficit was SEK 873 million. We also have substantialcommitments in the form of our operating lease payments.  The present value of future lease paymentsfor our operating leases February 28, 2005 was SEK 875 million, SEK 957million as of February 29, 2004 and SEK 1,003 million as of February 28,2003.

 

Our and our subsidiaries’ substantial debt could have importantconsequences for you. For example, it could among other things:

 

 

•                  make it more difficult for us to satisfy ourobligations under the Mezzanine Facility or the Senior Secured Notes;

 

•                  limit our ability to fund our working capital,capital expenditures and general corporate requirements;

 

•                  limit our ability to borrow additional funds;

 

•                  limit our ability to enter into operating leases forbuses;

 

•                  require us to dedicate a substantial portion of ourcash flow from operations to payments on our debt, thereby reducing the fundsavailable to us for other purposes;

 

•                  make us more vulnerable to economic downturns; and

 

•                  reduce our flexibility to respond to changingbusiness and economic conditions.

 

In addition, we and our subsidiaries may be able to incur substantialadditional debt in the future. The terms of the Mezzanine Facility and theSenior Secured Notes restrict but do not fully prohibit us and our subsidiariesfrom borrowing, and some of those borrowings may be secured. Further, if newdebt is added to our and our subsidiaries’ current debt levels, the relatedrisks that we and they now face could intensify.

 

Any of the foregoing could have a material adverse effect on ourbusiness, our ability to make payments under the Mezzanine Facility and theSenior Secured Notes and our ability to continue presenting our financialstatements under the assumption that we are a going concern.

 

***The terms of ourindebtedness restrict our corporate activities.***

 

The Mezzanine Facility and the Senior Secured Notes restrict, and insome cases prohibit, among other things, our and our subsidiaries’ ability to:

 

•                  incur additional debt;

 

•                  make prepayments of certain debt;

 

•                  pay dividends;

 

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•                  make investments;

 

•                  engage in transactions with affiliates;

 

•                  issue capital stock;

 

•                  create liens;

 

•                  sell assets; and

 

•                  engage in mergers and consolidations.

 

A failure to comply with these covenants could result in a defaultunder the Mezzanine Facility or the Senior Secured Notes, which in turn couldresult in an event of default under our other indebtedness.

 

***If we or ourSwedish, Norwegian or Finnish operating subsidiaries incur substantial operatinglosses, we or they may be subject to liquidation under our respective nationalregimes.***

 

The respective companies acts and insolvency and reorganization laws ofSweden, Norway and Finland apply to Concordia and its operating subsidiaries.Under these regimes, if losses reduce the equity of these entities or any oftheir subsidiaries (including Concordia itself on a stand alone rather than aconsolidated basis) to an amount less than 50% of its registered share capital,or (in Norway only) if the equity becomes inadequate compared to the risks andthe size of its business, the directors of such entity would be obligated bylaw to convene a general shareholders meeting to resolve to liquidate suchentity unless the directors were able to balance the amount of such equity andthe registered share capital (in Sweden, within eight months of such meeting,and in Finland, within twelve months of such meeting) by (1) increasingthe equity in an amount sufficient to achieve such balance and, in theNorwegian scheme, to ensure that its equity becomes adequate compared to therisks and the size of its business, or (2) reducing the share capital topay off losses in an amount sufficient to achieve such balance. Due to theserequirements, Concordia Finland Oy Ab (“Concordia Finland”) convertedportions of its shareholder loan from Concordia into a subordinated loan in July 2001and in February 2003. In addition, if we are not successful in ourcost-cutting initiatives and our losses continue, this may cause our equity todecrease sufficiently to require an equity increase or share capital reductionas described above. If we are unable to procure such an equity increase orshare capital reduction, it would have an adverse effect on our ability tocontinue presenting our financial statements under the assumption that we are agoing concern. See Subheading “A. Operating Results—Critical AccountingPolicies—Going concern matters” under “Item 5. Operating and FinancialReview and Prospects.”

 

***If we lose manylocal public transportation authorities’ contracts as they are renewed or weare unable to win new contracts, our business will be adversely affected.Further, if we experience difficulties in operating under our existingcontracts, our business may be adversely affected.***

 

In the year ended February 28, 2005, our contracts with localpublic transportation authorities comprise approximately 89.5% of our revenue.In Sweden, Norway and Finland, we operate under 113, 10 and 37 contracts,respectively, with the largest contract accounting for 4.6% of our net revenueand the top 25 contracts accounting for approximately 43.8% of total revenue inthe year ended February 28, 2005. These contracts usually have a five toeight year term. Local public transport authorities conduct a competitivebidding process for each contract shortly before it terminates and the mostimportant criteria for determining the success of the bid is usually price. Seesubheading “B. Business Overview—Sweden—Regulation—Tendering Procedures” in “Item4. Information on the Company” for a discussion of the competitive biddingprocess in Sweden. If we fail to continue to renew our local publictransportation authorities contracts, our revenues will be adversely affectedas our older local public transportation authorities contracts expire. This mayaffect our ability to satisfy obligations under the Mezzanine Facility and theSenior Secured Notes.

 

During the year ended February 28, 2003, Swebus faced significantoperating difficulty in the Stockholm and Uppsala region, due largely to pooroperational planning of summer and winter traffic schedules, together with anexceptionally severe winter. Restrictions on our ability to manage inheritedbus drivers under the new contracts due to a grace period of one year from March 4,2002, and a shortage of drivers caused significant problems. This situationresulted in additional overtime, training costs, substantial payments due tothe inconvenience of working hours, increased subcontracting costs, loss ofrevenues and contractual penalties. If similar difficulties were to beexperienced under other contracts, our business would be adversely affected.

 

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***If we do not retainor gain local public transportation authority contracts, we may not benefitfrom the option to renew existing operating lease agreements at a lower cost.***

 

As of February 28, 2005, we have entered into operating leasingarrangements for 1,470 of our 3,730 buses. The contracts under which these buses are leased are classified asoperating leases which means that no asset values are recorded on our balancesheet. The term of any given lease is established to match as far as possiblewith the duration of the underlying contract with the local public transportationauthority, generally five to eight years.

 

The structure of the lease contract is such that at the inception of anew lease contract, the leasing fee is established based on the purchase pricepaid by the lessor and residual value agreed with the manufacturer for theperiod of the lease. At the end of each leasing contract period each leasingcontract can be renewed or terminated (and we have an obligation to renew thelease contracts for a certain aggregate number of buses). The lease paymentsfor the second leasing period, which are based on the agreed residual value atthe date of the extension, are lower than the payments during the initial term.If we are not successful in renewing or extending the local publictransportation authority contracts, or in efficiently redeploying our buseselsewhere, we may not gain the benefit of such lower costs.

 

Further, in the event of an acceleration under the Mezzanine Facilityor the Senior Secured Notes following a default, all or part of the leasingcontracts covering a significant portion of our leases may be terminated at theoption of the lessor. This could have a material adverse effect on ourbusiness.

 

***Competition on priceor other factors could adversely affect our business.***

 

It is our policy to focus on increasing our return on capital and cashgeneration. We believe that our change in focus toward more appropriatetendering levels has been adopted by other major operators, particularly since1998. Consolidation in the industry and this change in focus among the largercompetitors from a tendering strategy based on increasing market share to astrategy of seeking to maintain adequate margins have recently resulted in morefavorable pricing dynamics. We believe that this trend will continue. Forexample, during the period fiscal 2002 to fiscal 2005, CPTAs awarded contractsto us on renewal with prices between 10% and 54% above the prices in theprevious contracts. However, no assurance can be given that the more favorablepricing trends will continue in the future for new tenders. For moreinformation, see subheading “B. Business—Sweden—Competition in the SwedishBus Transportation Market” under “Item 4. Information on the Company”.

 

***If indices in ourcontracts do not reflect our cost increases, our business could be adverselyaffected.***

 

Local public transportation authorities contracts provide for a fee tobe paid to us in return for providing bus operations for the routes andschedules described in the contracts. The amount of the fee to be paid eachyear is adjusted annually based on an index, or on several indices, that isintended to account for changes in our costs. Historically, contracts withlocal public transportation authorities, which produce a substantial portion ofSwebus’ revenues in Sweden, have contained cost indices primarily based onconsumer price indices.

 

While, as tendered contracts expire and new contracts are tendered, itis now becoming increasingly common to include either (i) a priceadjustment index which reflects bus industry costs, or (ii) a combinationof a consumer price index, a labor cost index and a diesel fuel price index,there can be no assurance this trend will continue. Should price adjustmentindices contained in our future local public transportation authoritiescontracts fail to reflect our actual cost structure, changes in our costs thatare not reflected in the indices included in these contracts could adverselyaffect our operating margins.

 

***The local publictransport authorities rely on government subsidies. Removal of these subsidiescould drive down local public transportation authorities’ contract fees.***

 

In Sweden and Norway, management believes that approximately 50% and40%, respectively, of fees to bus operating companies paid by local publictransportation authorities under local public transportation authoritiescontracts in fiscal 2005 were funded by government subsidies (as opposed to busticket revenues). Many European countries have sought to reduce subsidies inrecent years. Should Sweden more aggressively seek to reduce subsidies, feesfrom local public transportation authorities contracts may decrease, and localpublic transportation authorities could seek to renegotiate the scope ofexisting contracts. A decision to reduce subsidies could have an adverse effecton potential fees under local public transportation authorities contracts.

 

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***Our employees areheavily unionized. Bargaining power and strikes can hurt our business.***

 

Personnel costs constituted approximately 55% of our total operatingexpenses (excluding depreciation and amortization) in the year ended February 28,2005. Our bus drivers and most of our other employees are unionized. Concordia’soperations could be adversely affected in the event that it were not able toreach agreement with any labor union representing Concordia’s employees or byan agreement with a labor union representing Concordia’s employees thatcontains terms that would prevent Concordia from competing effectively withother bus transportation companies. As in most labor intensive industries,strikes, work stoppages and other organized labor activities could alsohave significant adverse effects on operating and financial results. In thelast fiscal year, an industry wide strike in Finland interfered with theoperations of our Finnish operating company for several days.

 

***Fluctuation in priceand availability of diesel fuel could hurt our business.***

 

Significant changes in fuel availability or costs would materiallyimpact our business. Diesel fuel availability and prices are affected by anumber of factors, including environmental legislation and global economic andpolitical developments, over which we have little to no control. In addition,our costs are affected by annual increases in fuel taxes, which are largelyoffset by compensation from indexation. In the event of a shortage in dieselfuel supply resulting from a disruption of oil imports, reduction in productionor otherwise, we could face higher diesel fuel prices or the curtailment ofscheduled diesel fuel deliveries. We enter into hedging arrangements to fix thecost of diesel fuel before taxes, supplier and transportation costs.  Notwithstanding our hedging arrangements, inthe year ended February 28, 2005, our total cost of diesel fuel averagedSEK 6.27 per litre. For a further discussion of our response tofluctuations in prices or a decrease in fuel availability, including ourhedging policies, see subheading “B. Liquidity and CapitalResources—Market Risk” under “Item 5. Operating and Financial Review andProspects”.

 

***Variations inexchange rates may affect our performance.***

 

Ingenior Schoyens Bilcentraler A.S. (“SBC”), which comprisedapproximately 10% of our revenue in the year ended February 28, 2005,prepares its financial statements in, and its functional currency is, NorwegianKroner. In preparing our consolidated financial statements, we translate SBC’sfinancial statements into Swedish Kronor at each fiscal year end. Consequently,our results from operations are affected by fluctuations in the rate ofexchange between Swedish Kronor and Norwegian Kroner.

 

Concordia Finland, which comprised approximately 9% of our revenue inthe year ended February 28, 2005, prepares its financial statements in,and its functional currency is, the euro. In preparing our consolidatedfinancial statements, we translate Concordia Finland’s financial statementsinto Swedish Kronor at each reporting period. Consequently, our results fromoperations are affected by fluctuations in the rate of exchange between theSwedish Krona and the euro.

 

Further, we are also exposed to currency fluctuations on loans,primarily as a result of having to make interest and principal payments in euroon the Mezzanine Facility and Senior Secured Notes. We do not hedge ourinterest payments. See subheading “B. Liquidity and Capital Resources,”under “Item 5. Operating and Financial Review and Prospects.” We estimatethat, a 10% depreciation in the value of the Swedish Krona against the eurowould increase our interest costs relating to the Mezzanine Facility and SeniorSecured Notes by approximately SEK 7.2 million per annum (assuming aSEK 9,0475/€ 1.00 exchange rate and assuming that we successfully hedge 50% ofour exposure).  Furthermore, such adepreciation would increase our indebtedness by SEK 158 million. Any suchdepreciation could have a material adverse effect on our financial condition.

 

**Item 4. *Information on the Company***

 

**A.****                                    Historyand Development of the Company**

 

Our legal name is Concordia Bus AB (publ) and our commercial name isConcordia. We were incorporated on September 17, 1999. Concordia isdomiciled in Sweden and is a public limited liability company. We areincorporated in Sweden and our registered address is Solna Strandväg 78,SE 171 54, Solna, Sweden. Our financial year ends on the last day ofFebruary. Our authorized and issued share capital is SEK 500,000 dividedinto 5,000 shares of one class with a nominal value of SEK 100 each. Theshare capital is fully paid. Our telephone number is +46 8 546 300 00.Our agent for service of process is CT Corporation System, 111 EighthAvenue, New York, New York 10011.

 

In January 2000, Concordia, backed by SG (the then parent companyof SBC) and certain private equity funds affiliated with Goldman SachsInternational, acquired Concordia Bus Nordic. In February 2001, weacquired SBC.

 

On July 22, 2005, Concordia entered into a restructuring agreementwith, among others, an Ad Hoc Committee of holders of its €160,000,000 11%Senior Subordinated Notes due 2010 (the “Senior Subordinated Notes”) and aninformal group 

 

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of holders of Senior Secured Notes (the “Restructuring Agreement”).  Pursuant to the Restructuring Agreement, on October 4,2005, holders of 99.91% in aggregate principal amount of the SeniorSubordinated Notes received equity in Concordia in exchange for releasingConcordia for all claims they had under the Senior Subordinated Notes (the “Restructuring”).

 

Under the terms of the indenture governingthe Senior Subordinated Notes the Restructuring was a change of control andConcordia was required to make a change of control offer to all the holders ofSenior Subordinated Notes who did not participate in the Restructuring.  Holders of an aggregate principal amount of €87,000of Senior Subordinated Notes accepted the offer which means that only €58,000 inaggregate principal amount of Senior Subordinated Notes remain outstanding.

 

**B.****                                    BusinessOverview**

 

We provide public bus transportation services in Sweden, Norway andFinland, operating through our three main operating subsidiaries:  Swebus, SBC and Concordia Finland,respectively. We also provide express bus and coach hire services. In Sweden,as of February 28, 2005 we operated 2,989 buses, and are the largestoperator through Swebus, with an estimated market share of approximately 29% ofthe public bus transportation market (measured by the number of buses inoperation). Management believes that we are the largest operator in Sweden asmeasured by number of buses because it has reviewed and analysed publiclyavailable material describing how many buses our competitors operate. Thismarket share data has been calculated based on the share of total number ofbuses, as provided by the relevant CPTA. In Norway, as of February 28,2005 SBC operated approximately 379 buses and has an estimated 20% market shareof the public bus transportation market in southeastern Norway, which includesOslo and neighboring cities. This market share data has been calculated basedon the share of total number of buses, as provided by the relevant CPTA. InFinland, Concordia Finland as of February 28, 2005 operated 362 buses andis the second largest operator in the greater Helsinki area with a market shareof 24%. This market share data has been calculated based on the relativenumbers of contract kilometers. This information is made available at eachtendering which, as of February, 2005, showed that we were the second largestoperator in the greater Helsinki area.

 

For the year ended February 28, 2005, we had net revenue of SEK4,812 million. We sustained operating losses of SEK 312 million for the yearended February 28, 2005; SEK 155 million for the year ended February 29,2004 and SEK 172 million for the year ended February 28, 2003. Wesustained net losses of SEK 560 million for the year ended February 28,2005;  SEK 409 million for the year endedFebruary 29, 2004 and SEK 344 million for the year ended February 28,2003.

 

**General**

 

Our core business is providing bus services to local publictransportation authorities in Sweden, Norway and Finland. In our markets, thesubstantial majority of bus transportation services are provided underlong-term contracts (generally five to eight year terms) with local publictransportation authorities, according to which the bus operator providesservices for a specific set of bus routes for fixed annual fees (subject toperiodic adjustments based on price indices) which we refer to as “grossagreements.”  These contracts provide uswith steady revenue streams because we receive a fixed annual amount from therespective public transportation authorities rather than relying on passengerticket receipts. Certain contracts, called “net agreements,” include passengernumbers as part of their pricing. Public transportation authorities have shownan excellent record of payment and have in the past rarely faced bankruptcy orinsolvency. In the year ended February 28, 2005, we derived approximately 89.5%of our revenue from a combination of gross agreements and net agreements inSweden, Norway and Finland. We operate under approximately 160 contracts withlocal public transportation authorities, the largest of which accounted foronly 4.6% of our net revenue in the year ended February 28, 2005. The top25 contracts accounted for approximately 43.8% of net revenue in the year endedFebruary 28, 2005.

 

We also provide express bus services (scheduled intercity or longdistance bus services) and coach hire services.

 

Following deregulation in 1989, there was a wave of consolidation inthe Swedish bus market. This has resulted in three large operators who have acombined market share in the contractual public bus transportation market inSweden of approximately 60% (measured by the number of buses in operation).Swebus is the largest operator with a 29% market share. (Source: SvenskaLokaltrafikföreningen, the Swedish local traffic organization, or “SLTF”).Recent tenders for bus transportation contracts provide evidence thatconsolidation in the industry in Sweden has produced a more favorable pricingenvironment. We expect this trend to continue in the near term. We also believethat a similar pattern of pricing dynamics is now beginning to occur in Norwayand Finland.

 

To prepare the organization for continued need of cost efficiency andbattle for new contracts, a reorganization of the operating companies have beenperformed. This has lead to, among others, fewer management levels, keyperformance metrics, ranking lists among depot’s decentralized P&L andincreased resources on contract tendering. Further improvement focus will be ontender achievement, best practice efficiency, fleet management and financialsolutions.

 

We have rolled out the initial phase of the Hastus software planningsystem at all our locations. We augment our use of Hastus software with theSintopt software, our proprietary logistics system. The Sintopt software useshigher level algorithms to enable us to achieve increased levels ofoptimization with our bus and driver schedules. In addition, we have alsoidentified other 

 

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sources of cost savings, including fuel consumption organization,purchasing cost savings, and reductions of employee sickness and absences.

 

The improved planning and scheduling described above, combined with anintegrated plan for bus fleet utilization and maintenance, enable us todetermine with a higher degree of certainty the optimal number of buses neededfor our existing operations. We are focusing our efforts on utilizing ourexisting fleet to provide new revenues through alternative uses, such as localcoach and school bus hire.

 

We have developed and implemented a web-based system for our personnel(such as tracking absence for medical reasons) and a new Operational ManagementSystem (OMS). This system is the last phase of our IT strategy and bringstogether operational data residing in our centralized database and providesseveral new ways for us to track our business operations, such askilometer/fuel tracking, driver activity capture and daily productionstatistics. The system is now operational in a majority of our locations.

 

As the largest operator of buses in the Nordic region, we have achievedsignificant savings by centralizing more of our bulk/commodity purchasing.Management has concluded that we are the largest operator of buses in theNordic region by comparing and analyzing our revenues with those of ourcompetitors.

 

**Seasonality**

 

Our contracts with public transportation authorities are typicallystructured such that the level of monthly fees depends on the contractuallyagreed volume of operations, which varies from month to month, and in manycases declines in the summer months. In addition, our express bus and coachhire services businesses usually experience relatively high revenues from April toSeptember and during December in a given year, as customers tend touse these services during vacation periods and periods having more favorableweather. Furthermore, as a result of our collective bargaining agreements, ourpersonnel costs usually increase in the beginning of each calendar year.

 

**Sweden**

 

***General***

 

As of February 28, 2005, we operated 2,989 buses in three bustransportation markets in Sweden:

 

•                                          contractualpublic bus transportation;

 

•                                          expressbus services (scheduled intercity or long distance bus services); and

 

•                                          coachhire services.

 

Contractual public bus transportation services operated 2,825 buses,express bus services 97 buses and coach hire services in Sweden operated 67buses. Our Swedish operations generated revenue of SEK 3,924 million for theyear ended February 28, 2005.

 

***Contractual PublicBus Transportation Service***

 

As of February 28, 2005, we were operating 2,825 buses under 113public bus transportation contracts with local public transport authorities.

 

As of February 28, 2005, we had a market share of approximately29% (in terms of number of buses) of the Swedish contractual public bustransportation market. This market share data has been calculated based on theshare of total number of buses, as provided by the relevant CPTA. We have arelatively even distribution of our contract portfolio in terms of revenueamong the southern, eastern and western regions of Sweden. Due to the economicsof the bus industry in the northern region of Sweden, we have a smallerpresence in this region. We intend to focus on areas of high urbanconcentration and to review our contract portfolio critically with regard tosmaller, less profitable contracts, particularly those relating to areas ofrelatively low population density.

 

The greater city area of Stockholm, together with Halland, Malmö,Uppland and Västra Götaland, are our most important markets, and collectivelyaccount for approximately 65% of our total revenue in Sweden.

 

Bus services are provided in the Swedish public bus transportationmarket according to publicly tendered contracts entered into by bus operatorswith local public transport authorities. See “—Regulation—Sweden TenderingProcedures.”

 

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Most Swedish bus operators have similar cost bases, as most bus driversare in the same unions and most buses meet similar specifications. We believethe difference in competitive power comes from a bus operator’s ability tooptimize its depot structure, its skill in planning and scheduling, and itsability to solve the complex logistical issues involved in meeting therequirements of the contracts. Having access to a large fleet and being able toshift resources significantly benefit the larger operators.

 

***Regulation***

 

In Sweden, the administration of public transportation for a particularregion is delegated to the relevant local public transport authorities, whichplan, price and coordinate public transport within their geographical area andwhich enter into contracts with both public and private operators. There are 24independent local public transport authorities in Sweden, which cover the 21provinces of Sweden and its five largest cities.

 

Prior to 1989, public transportation contracts were not subject tocompetitive tendering procedures and operators typically monopolized aparticular public authority’s geographical area of responsibility. In 1989,Sweden began requiring, subject to specific exceptions, local public transportauthorities purchasing bus services to conduct competitive tender procedures.This deregulation and the resulting price competition led to a reduction incontract prices by an estimated 20% to 30% in real terms in the decade aftercompetitive tendering requirements were introduced in 1989. During this period,the underlying costs for bus operators increased significantly due to increasesin vehicle and diesel fuel taxes and diesel fuel costs. Although operators arecompensated based on a consumer price index which takes fuel costs intoaccount, overall, in recent years, this index has not risen sufficiently despitethe increase in the component based on fuel costs to reflect the increase inour costs. Therefore, operators have not been compensated in a manner allowingthem to cover their increased costs fully. This trend led to consolidation inthe industry and begun to produce a more favorable pricing environment. As aresult, commencing in 1998 and to a greater extent in 2000 through 2004, wehave renewed contracts at higher prices.

 

*Tendering Procedures*

 

Under Swedish law implementing European Union directives concerningpublic procurement, public bus transportation contracts must be awarded on acommercial basis and, subject to limited exceptions, must involve a competitivebidding process.

 

Typically, following a study of the community’s transportation needsand input from transportation providers, the local public transportationauthorities determine the required bus routes, schedules, fares and otherrequirements. Invitations to tender contain bid information packages whichstate the specific routes and timetables to be covered by the operator andusually contain requirements regarding bus types, technical standards (seats,age, design, etc.), exterior appearance requirements, the environmentalstandards (such as types of fuel, emissions standards and requirements forexhaust filters) and quality requirements.

 

The local public transport authorities are required to followestablished criteria for awarding contracts, of which the single most importantis typically price. Other factors may be considered, including the cost ofadapting to a new operator and the level of service quality. In many cases,local public transport authorities choose to subdivide procurement into aseries of contracts, each with a specified portion of a community’s routes toavoid having a single operator dominating a large area.

 

*Contracts*

 

While each public transportation contract is different, there are manyterms common to virtually all of them. These contracts, other than contractsfor school bus transportation, are generally for five to eight year terms,although many have recently provided for the extension of the term. In somecases, there are options which may be exercised by either Swebus or the localtransportation authority, but other options are exercisable only by the localtransportation authority. Extension options exercisable only by the localtransportation authorities generally provide for one or two year extensions.

 

The various criteria set forth in the bid information package, asdescribed in the heading “Tendering Procedures” in this section, become part ofthe contracts. Bus operators must then seek to comply with these requirementsas efficiently as possible. In isolated cases, there are provisions that anincoming operator must purchase used buses from the outgoing operator.

 

Public transportation contracts in Sweden usually provide for fixedfees to be paid to the operator in return for the contracted bus services,which fees are subject to monthly, quarterly, semi-annual or annual feeadjustments intended to account for changes in costs incurred. At present,contracts with local public transportation authorities that produce asubstantial portion of Swebus’ revenues in Sweden contain cost indices based ona consumer price index, although it is becoming increasingly common tonegotiate indices which reflect bus industry costs or an index which contains alabor or fuel cost component. Although management believes that Swebus’ indiceswill match bus operation industry costs more closely than in the past, there 

 

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can be no assurance this will be the case. See the subheading “RiskFactors—Risks Related to the Company—If indices in our contracts do not reflectour cost increases, our business could be adversely affected.”

 

Over 90% of the public transport contracts subject to competitivebidding are gross agreements, which means the operator receives a fixed amount(usually per vehicle kilometer) for operating the routes and there is no directfinancial benefit to the operator for increasing passenger volumes. The localpublic transportation authorities retain all ticketing revenues and set thefares.

 

***Express Bus Services***

 

We operate an extensive network of express bus services under the tradename “Swebus Express” which operates under a separate legal entity called “SwebusExpress AB” and provides public long distance transportation. In the year endedFebruary 28, 2005, we employed approximately 97 buses on a full time basisfor express bus services in Sweden. We operate daily and weekend servicesthroughout Sweden, as well as international routes between Stockholm andCopenhagen. Our express buses covered in aggregate approximately 354,000kilometers per week during the year ending February 28, 2005, andtransported more than 3.0 million passengers last year.

 

For the year ended February 28, 2005, express bus services inSweden had total revenue of SEK 337 million. Providing an extensive nationalnetwork and a seamless mode of transport between a large number of destinationshas become Swebus’ main competitive advantage. Swebus Express sells tickets onthe buses as well as in advance through ticket agencies. Swebus’ policy is toprovide coaches for any passengers who want to travel and who arrive at theapplicable embarkation points at scheduled departure times. We do not allocateparticular seats for passengers. We offer discounts for children, students andpensioners as well as for all passengers travelling on Mondays to Thursdaysinclusive (subject to some exceptions). Management believes that the increasein the amount of pensioner travel on Swebus Express reflects pensioners’growing demand for inexpensive flexibly scheduled travel.

 

Express bus services in Sweden are generally deregulated so that anexpress bus service operator has full responsibility for all aspects of theservice, including route planning, schedules and fares. In some regions,express bus services are combined with regional or local public bus services.In these circumstances the local public transportation authorities compensatesthe express bus operators for making a number of stops in proximity to aregular local public bus service within a region.

 

We believe that the express bus service industry will enjoy continuedgrowth as more routes are developed and more passengers appreciate the pricecompetitive service as compared to rail and airline services and, moreimportantly, the high costs of driving private cars. Based on currentdemographic trends, we expect that the potential passenger base for express busservices will expand as the number of people engaged in long distanceemployment or studies increases.

 

***Coach Hire Services***

 

We also operate a coach hire service under the name “Interbus,” whichoperates under a separate legal entity called “Interbus AB.”  The coach hire market involves providingchartered bus services, as well as daily and weekend excursions, sightseeingtours and special events. Interbus operates a coach hire service business inthe Stockholm, Gothenburg and Malmö areas. As of February 28, 2005,Interbus operated approximately 67 full-time coaches and additional expressbuses as needed.

 

For the year ended February 28, 2005, we had total third partyrevenue of SEK 117 million from coach hire services in Sweden. The Swedishcoach hire market is concentrated primarily in densely populated areas, such asStockholm, Gothenburg and Malmö. The customer base for the coach hire market isdiverse, ranging from small groups organizing private outings to organizers ofmajor sporting events. During the year we acquired the business FO Resor inorder to provide package tours for both groups and individuals.

 

Interbus’ typical customers include major event planners, corporationsand travel agencies. Swebus’ coach fleet size enables it to meet the requirementsof a wide range of customers and to manage bus transportation for both smalland large events. We are one of a few major operators in Sweden which has thecapacity to satisfy larger customers. A significant and growing portion of thecoach hire service is related to cruise line operations. Our fleet sizeimproves our competitiveness in this market because cruise ships requireoperators with significant carrying capacity to ferry people between the shipand the relevant city, or to provide sightseeing tours.

 

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***Competition in theSwedish Bus Transportation Market***

 

*Contractual Public Bus Transportation*

 

Deregulation has changed the nature of competition in the Swedish busindustry. Over the past several years, the Swedish contractual public bustransportation market has experienced intense price competition. In thiscompetitive pricing environment benefited, large companies with advantages ofeconomies of scale such as Swebus and Connex, have enjoyed expansion at theexpense of relatively inefficient larger carriers (including operators owned bythe local public transport authorities) and smaller bus operators. As a resultof this competition there are currently three large private bus operators.

 

The Swedish contractual public bus transportation market features a fewoperators that hold large shares of the market and many small local operators.Management believes that the relative market shares of the three largestSwedish bus operators are Swebus (with approximately 29% of the market),Busslink, (with approximately 16% of the market) and Connex (with approximately17% of the market). This market share data has been calculated based on theshare of total number of buses, according to the SLTP. Swebus, Busslink andConnex are the only national competitors.

 

In rural markets, and, in particular, in the northern region of Sweden,large bus companies face stiff competition from small, privately owned localoperators, who have formed into loose cooperative ventures in which bus fleetsare pooled and who can operate very flexible schedules and are not heavilyunionized. These factors, combined with the lower levels of operations innorthern areas that do not benefit large scale operators, allow these smalleroperators to bid for services at prices that are often not economically viablefor larger operators such as Swebus.

 

In general, we believe that we face more competition on tenders thatrequire fewer than 50 buses, as there are more operators capable of servicingsuch requirements. In the tenders for larger contracts, such as in the majorcities, there is generally a maximum of four operators tendering.

 

*Express Bus Services*

 

The express bus market in Sweden is fully open to competition and ishighly fragmented. In the year ending February 28, 2005, we had more than50% market share of the Swedish express bus service market, as measured bykilometers served, according to the SLTF. We operate 97 buses in this market.The next largest operator is Säfflebussen, which operates primarily betweenGothenburg and Stockholm and to Oslo. Säfflebussen has a market share exceeding20%, according to the SLTF. This market share data has been calculated based onthe share of total number of buses.

 

The third largest operator is Svenska Buss, which is a joint ventureamong seven privately owned bus companies and operates primarily in the southof Sweden. Svenska Buss has a market share of about 10% and operates primarilybetween Stockholm and several northern cities.

 

*Coach Hire Services*

 

The coach hire market is fully open to competition, and is morefragmented than the contractual public bus transportation market. While wededicate approximately 67 buses to coach hire services, the market ischaracterized primarily by small to medium sized operators. The medium sizedoperators typically have between 10 and 20 buses. The small operators areusually private companies operating up to four buses, where the owners of thebuses both drive and maintain the buses themselves. The small operators arecost efficient and highly competitive, but cannot bid for larger contracts dueto their limited resources. Within the bus industry, the coach hire market isthe segment that is most sensitive to general economic conditions, as tourismand attendance of special events are more directly affected by economicconditions than the basic transportation requirements provided by publiccontractual bus operators.

 

Nevertheless, we have been able to adjust the scale of our coach hireoperations, so that our operating margins in this segment have been lessvolatile than revenues in times of downturns.

 

***Insurance***

 

Swebus carries the following types of insurance:  general legal and product liability, propertyand business travel insurance. Those types of insurance do not cover damages toour own bus fleet. Swebus believes that it carries types and levels ofinsurance that are consistent with the types and levels carried by other majorbus operating companies in Europe. Swebus does not carry business interruptioninsurance, but this is common for many European businesses, particularly those(like Swebus) in which the risk of major interruption of business is small.

 

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***EnvironmentalMatters and Other Regulations***

 

We are required to comply with a series of Swedish and EUenvironmental, health, and safety regulations. These regulations includerequirements regarding emission standards, safe storage of diesel fuel, andproper maintenance for the buses. In addition, public transportation contractsstipulate additional environmental standards relating to emission standards andthe maintenance of the bus fleet. We believe that Swebus materially complieswith these regulations and contract requirements.

 

***Intellectual Property***

 

Swebus has six registered trademarks in Sweden:  “Swebus Express,” “Nepal Resor,” “Resecentrum,”“Fjällexpressen,” “Helsingborgstrafiken,” “Swebus” and our company logo. Inaddition, “Swebus” is a registered trademark in the European Union.

 

***Legal Proceedings***

 

Swebus has a claim on the CPTA in Stockholm regarding compensation forunfair indexes in some of the contracts, starting from the year 2001. The CPTAhas rejected the claim and the case will be tried in the city court inStockholm.

 

***Drivers and OtherPersonnel***

 

For the year ended February 28, 2005, we had an average of 5,572full-time employees in Sweden. Should a company lose a public transportationauthorities contract, it is often the case that drivers will move to thecompany that wins the contract. The incoming operator generally does not needto employ any of these drivers. However, under some circumstances, such as ifthe new operator hires additional drivers to service the routes on thecontract, it must offer to hire from the pool of drivers previously employed bythe outgoing operator before hiring elsewhere.

 

***Collectivebargaining agreements***

 

The majority of our drivers and maintenance personnel in Sweden aremembers of trade unions. The principal union to which the drivers andmaintenance personnel belong is Svenska Kommunalarbetareföbundet (the SwedishMunicipal Workers Union). A small minority of drivers belong to SvenskaTransportarbetareföbundet (the Swedish Transportation Workers Union).

 

In Sweden, wages and general working conditions are generally thesubject of nationally negotiated collective bargaining agreements. Thecollective bargaining agreement generally applicable to our blue collaremployees expires on May 31, 2008. A separate collective bargainingagreement normally applies to operations under public tenders.

 

We believe that our relationships with our employees and unions aregood. Swebus has only experienced one industrial disruption in the last fiveyears, in February 1999. This strike was industry-wide in Sweden and lastedfor 13 days. See “Risk Factors—Risks Related to the Company—Our employees areheavily unionized. Bargaining power and strikes can hurt our businesses.”

 

***Pensions***

 

In addition to the state sponsored pension scheme, we provide pensionbenefits, under the terms of our collective bargaining agreements, through twoplans:  a defined benefit plan withAlecta covers the majority of our white collar employees; our blue collaremployees are covered under a defined contribution plan with Fora.

 

**Property, Plant and Equipment**

 

We currently lease our facilities, the majority of them for use bySwebus. Swebus conducts its bus operations out of a system of 45 depots and 74parking areas located throughout Sweden. These divide as follows:

 

•                                      45depots, which include garages with full maintenance facilities, washingfacilities, parking, administrative offices and eating and changing facilitiesfor drivers and mechanics;

 

•                                      20sub-depots, which include washing facilities, parking, small administrativeoffices for payroll disbursement and limited facilities for drivers; and

 

•                                      74parking areas with limited staff facilities.

 

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Some of the larger depots are located adjacent to bus stations andSwebus rents portions of parking capacity to some external customers. However,Swebus does not operate bus stations.

 

We generally select our depot sites according to their proximity to ourroutes. We intend to examine ways to use sales and leasebacks of depots withflexible lease terms as a way for Swebus to change depots to adjust to itschanging needs as public transportation contracts are won and lost.

 

**Norway**

 

***Contractual PublicBus Transportation***

 

SBC is the seventh largest bus operator in Norway, with 379 buses and amarket share in southeastern Norway of 20%, based on results of competitivetenders. This market share data has been calculated based on the share of totalnumber of buses, as provided by the relevant CPTA. SBC’s operations generatedrevenue of SEK 466 million (SEK 379 million) for the year ended February 28,2005.

 

SBC operates principally in the contractual public bus transportationsector in the city of Oslo and the greater Oslo area of Akershus. SBC alsooperates in the counties of Vestfold, Oppland and Østfold in Southern Norway,SBC primarily operates under four traffic agreements, of which two have beenrenewed and amended on several occasions since their inception. In 1976, SBCentered into an agreement with Stor-Oslo Lokaltrafikk AS for publictransportation outside the city of Oslo. Stor-Oslo Lokaltrafikk AS iscontrolled by the local public transportation authorities in the county ofAkershus. In the last two years we have won two contracts and have increasedour geographic presence in southern Norway. In addition, we have lost a numberof contracts, including one in Slemmestad and one in Romerike.

 

In 2005, management estimates that the Norwegian market for contractualpublic bus transportation employed approximately 7,000 buses and amounted toNOK 8.9 billion (SEK 9.9 billion). There are 19 local public transportauthorities in Norway each of which is responsible for public bustransportation in one of Norway’s 19 counties.

 

*Regulation*

 

The administration of public transportation in Norway for a particularregion is delegated to the relevant local public transportation authorities,which are responsible for planning, pricing and coordinating public transportwithin their geographical area. Local public transport authorities in Norwaymay subject bus service procurement to a competitive bidding process, but arenot required by law to do so. As of February 28, 2005, only 11 of the 19local public transport authorities in Norway had opted to use competitivebidding methods as their means of distributing public transportation contracts.SBC expects, however, that further local public transport authorities willfollow suit because of the significant cost savings associated with putting acontract up for competitive tender. If competitive bidding is not used, busoperators negotiate with local public transport authorities to provideexclusive service for specific routes for specified periods (up to ten years).Bus operators are aware that if they do not offer competitive prices, theauthorities will open bidding either in a formal tendering process or by simplyrequesting competitors to approach them with offers. The threat of competitivebidding has also increased the bargaining power of the public authorities andcaused prices to decrease. The level of public subsidies varies largely fromprovince to province in Norway, and management estimates that the average levelof subsidies in Norway is approximately 40%. SBC believes that the generaltrend is that the level of subsidies is generally decreasing. For furtherinformation relating to subsidies, see the subheading “Risk Factors—RisksRelated to the Company—The local public transport authorities rely ongovernment subsidies. Removal of these subsidies could drive down local publictransportation authorities’ contract fees.”

 

*Competition*

 

In Norway, the public transportation market has begun to experiencedevelopments similar to those that have occurred in Sweden. These developmentsinclude price competition and consolidation. Nevertheless, the Norwegian busindustry remains fragmented with approximately 227 bus companies operating atotal of approximately 7,600 buses in 2004. Almost 60% of Norwegian busoperators had fleets averaging fewer than ten buses. In contrast to Sweden,competitive bidding is not prevalent and has instead been used for smallercontracts to obtain a “signal price,” which is then used as a target forrenegotiating the entire contract portfolio.

 

SBC is a major operator in Southeastern Norway. On a national level,both Norgesbuss AS and Nettbuss AS (owned by Norges Statsbaner BA, the staterailway operator) have significantly larger fleets than SBC, but neither ofthem are dominant in any single region.

 

Since 1989, contracts with public transport authorities in Norway toprovide bus services have been potentially subject to competitive biddingprocedures. The ability to compel competitive bidding has increased thebargaining power of the public 

 

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authorities, particularly in recent periods, and they have been able toobtain price reductions in their contracts with SBC and increased the risk thatSBC will lose its contracts for bus routes. For further information about risksrelating to our current contracts see “Risk Factors—Risks Related to theCompany—If we lose many local public transportation authorities’ contracts asthey are renewed or we are unable to win new contracts, our business will beadversely affected. Further, if we experience difficulties in operating underour existing contracts, our business may be adversely affected.”

 

*Operating leases*

 

In order to meet SBC’s requirements for new buses, SBC intends tocontinue to enter into operating leases. In addition, SBC benefits from aresidual value guarantee arrangement for buses purchased from the SchØyen Groupon July 1, 1999. SchØyen Group entered into an agreement with Evobuspermitting the SchØyen Group to return buses to Evobus according to stipulatedresidual value schedules (which are subject to adjustments). Evobus has madeavailable all the benefits under this agreement to SBC. The arrangementprovides for limitations in specific circumstances on the number of buses thatmay be returned in any year and on the aggregate number of buses that may bereturned in a multi-year period.

 

***Drivers and OtherPersonnel***

 

For the year ended February 28, 2005, SBC had an average of 611full-time employees.

 

Nearly all of SBC’s employees are represented by unions under the termsof industry-wide collective bargaining agreements. All union agreements are renegotiatedevery two years. The largest collective bargaining agreement, which coversdrivers and maintenance personnel, expires on March 31, 2006.

 

SBC considers its relations with its employees and the unions to begood.

 

***EnvironmentalMatters and Other Regulations***

 

All persons and entities governed by Norwegian law are obliged tocomply with the Norwegian environmental, health and safety acts, regulationsand public orders. Health and safety requirements are to a large extent theimplementation into Norwegian law of various European Union regulations. Therelevant legislation for our operations includes the Pollution and Waste Act1981, the Worker Protection and Working Environment Act 1977, the Planning andConstruction Act 1985, the Fire and Explosion Protection Act 2002 and theNeighbouring Properties Act 1961. These acts, and the connected provisions oforders based on these acts, include provisions regarding environmental permits,emission standards, storage and handling of fuels and other hazardous substances,waste management, technical provisions regarding maintenance of buses andrequirements regarding the environmental safety standards of fuel distributionstations.

 

***Legal Proceedings***

 

SBC is not currently involved in any material legal proceedings.

 

**Finland**

 

***Contractual PublicBus Transportation***

 

We operate a Finnish public bus transportation business through ourprincipal subsidiary in Finland, Concordia Finland. Concordia Finland is amajor bus operator in Finland with approximately 362 buses in operation as of February 28,2005, and approximately 37 public bus transportation contracts with localpublic transport authorities. Our Finnish operations generated revenue of SEK422 million for the year ended February 28, 2005. Concordia Finlandoperates only in the Finnish contractual public bus transportation sector inthe greater Helsinki area in the cities of Helsinki, Vantaa and Espoo, and doesnot offer either express bus or coach hire services.

 

Management estimates that in 2004, the Finnish bus market employedapproximately 8,800 buses and included approximately 400 operators. The Finnishbus market is well developed in both rural and urban areas. Finland’s geographyand low population density make bus transportation very competitively priced ascompared to railway services. Additionally, the passenger railway network iscentered on Helsinki and is being reduced in rural areas. This situationprovides an advantage to bus operators because they can offer bus passengersthe possibility to make more convenient cross country trips than on therailways.

 

The greater Helsinki area, with a total population of approximately onemillion, is Finland’s largest market for contractual public bus transportation.The greater Helsinki area and Turku are the only markets currently subject tocompetitive 

 

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bidding. Significant price pressure has led to consolidation in theseareas. Except for the greater Helsinki and Turku areas, local traffic in mostcities is largely provided by local operators.

 

*Regulation*

 

As in Sweden, the administration of public transportation in Finlandfor a particular region is the responsibility of the local transportationauthority. In greater Helsinki and Turku, public transportation authoritieshave opened their local public transportation contracts to competitive bidding.In 1994, the Helsinki Metropolitan Area Council (commonly known as the YTV),which is the authority that regulates inter region public transport trafficbetween the three cities of Helsinki, Espoo, and Vantaa, was the first toinitiate competitive bidding in Finland. Although the YTV and the publictransport authorities regulating public transport traffic within the cities ofHelsinki, Espoo, Vantaa and Turku represent the only regions currently open tocompetition, the EU directives concerning public procurement, along with theprospect of cost savings for local authorities, is expected to increase thenumber of regions open to competitive bidding. Concordia Finland expects anincrease in the number of regions subject to competitive tendering in the nearfuture.

 

Currently, in areas other than those referenced above, the local publictransport authorities have granted independent operators licenses to run busservices, which essentially gives each operator a monopoly position. Licensesare normally granted for a three to ten year period and are usually renewedwith the same operator. We do not have any contractual public bus servicesagreements in areas not subject to competitive bidding.

 

*Contracts and Contract Tendering*

 

In the YTV region, and other areas in which competitive bidding hasbeen instituted, the contract structure and bidding and procurement proceduresclosely resembles that of the local public transportation authorities contractsin Sweden described in the subheading “Sweden—Tendering Procedures” and “Sweden—Contracts”in this section. Typically, the public transportation contracts have four tofive year terms and under these contracts all ticket revenues are forwarded tothe local public transportation authorities and the operator receives fixedfees. The compensation is adjusted periodically by reference to an indexintended to cover cost items that relate to the bus transportation industrysuch as drivers’ wages, cost of buses and fuel.

 

***Drivers and OtherPersonnel***

 

For the year ended February 28, 2005, Concordia Finland had anaverage of 766 employees.

 

All of Concordia Finland’s employees are represented by unions underthe terms of industry-wide collective bargaining agreements. The largestcollective bargaining agreement, which covers drivers and maintenancepersonnel, expires on February 1, 2006.

 

Concordia Finland considers its relations with its employees and theunions to be good. See “Risk Factors—Risks Related to the Company—Our employeesare heavily unionized. Bargaining power and strikes can hurt our business.”

 

***EnvironmentalRegulation and Other Regulations***

 

Concordia Bus Finland is required to comply with the Finnishenvironmental, health and safety regulation, a large part of which originatesfrom the European Union regulations implemented into Finnish law. Theapplicable legislation (i.e. the Environmental Protection Act and theEnvironmental Protection Decree, the Chemicals Act and the related regulations,and the Waste Act) and other regulations include provisions regardingenvironmental permits, emission standards, storage and handling of fuels andother hazardous substances, waste management, technical provisions regardingmaintenance of buses and requirements regarding the environmental safetystandard of fuel distribution stations.

 

In addition, the public transportation contracts entered into withvarious public entities in the Helsinki area provide that the buses have tofulfil, certain technical and other requirements.

 

***Legal Proceedings***

 

Concordia Finland is not currently involved in on-going legalproceedings.

 

**Business Management**

 

In Sweden we have structured autonomous operations for each businessline—the contractual public bus transportation business, the express busbusiness and coach hire. Each operating unit is responsible for preparing andsecuring and integrating new business, operational management, and long termplanning. We provide overall business direction policies and control 

 

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systems, and financial, information technology, and property and assetmanagement services and funding. In addition, we are responsible for StrategicBusiness Development of each unit and responsible for key investment decisions.

 

We are the largest operator of buses in the Nordic region. Our sizepermits us to seek favorable terms from suppliers in the Nordic region andelsewhere. Consequently, we are not dependent on any one supplier to meet ourbus requirements. We have entered into framework agreements with Volvo andEvobus for the supply of our buses going forward. As far as possible, we willcontinue to acquire vehicles under operating lease arrangements to meet our busfleet needs. Our fleet investments are dependent on compliance with fleet agerequirements under our existing contracts and fleet specification changes atthe time of retendering.

 

We have entered into operating lease agreements to finance a portion ofour bus fleet. As of February 28, 2005, 1,470 of our 3,730 buses werefinanced through operating lease arrangements. The net present value ofoutstanding obligations for buses as of February 28, 2005, was SEK 829million (the net present value of our outstanding obligations under leasesrelating to real estate as of February 28, 2005, was SEK 46 million).

 

The large majority of lease terms for buses include residual valueguarantees from the bus manufacturer, whereby we retain an option to return thebuses to the manufacturer without cost to us. The number of buses that can bereturned under these agreements is subject to certain limitations.

 

The structure of the lease contract is such that at the inception of anew lease contract, the leasing fee is established based on the purchase pricepaid by the lessor and the residual value agreed with the manufacturer for theperiod of the lease. At the end of each leasing contract period each leasingcontract can be renewed or terminated. The lease payments for the secondleasing period are always at terms based on the fair value at the date of theextension which are usually lower than the payments during the initial term. Ifwe are successful in renewing or extending a local public transportationauthority contract, our leasing contract can be renewed at terms based on thefair value at the date of the extension. This is likely to result in leasepayments which are substantially lower than the payments during the initialterm.

 

We centralize our fuel purchases in order to benefit from bulk purchases.We obtain most of our diesel fuel requirements from a single major petroleumcompany in the Nordic region. In the year ended February 28, 2005, we usedapproximately 97 million litres of diesel fuel. Our contract with this suppliercurrently ends June 30, 2006, but will automatically renew for two yearsunless notice is provided by either party three months prior to the end date.The price is based on the prevailing spot price for diesel fuel at the time ofpurchase. In addition, we hedge a portion of our diesel fuel purchases.

 

See “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Quantitative and Qualitative Disclosures About MarketRisk—Fuel Prices”. We believe that, if necessary, we could find an alternativesupplier for our diesel fuel requirements. However during the quarter ended February 28,2005, none of Concordia’s fuel usage was hedged through diesel swaps.

 

We rent our tires from Michelin. Rental fees are charged on a perkilometer basis. Michelin provides all necessary maintenance with respect tothe tires. Our current contract with Michelin expires December 31, 2008.Under the contract, Michelin is required to supply us with all the tires thatwe may require for our buses. We believe that, if necessary, we could find analternative supplier of tires for our buses.

 

**Information Technology**

 

We have standardized, modernized and centralized our hardware andsoftware applications across our operations, and the complete function is nowrun internally (after previously being outsourced). We currently have fourstandardized core applications covering financial reporting, traffic planning,fleet maintenance, and administrative planning. Our Finnish and Norwegianoperations and the vast majority of our locations in Sweden are connected tothe Stockholm head office by permanent, high-speed connections. We haveestablished a training center in the head office to ensure a smooth roll-out ofthe system.

 

We are in the final stages of implementing OMS, our Operational ManagementSystem. We have in place a “production barometer,” a system which enables us toexamine production activity at each of our locations on a day by day basisagainst budgeted hours.

 

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**C.****                                    OrganizationalStructure**

 

The following chart sets forth the current corporate structure ofConcordia.

 

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| (a)    | Prior to the Restructuring and during the fiscal year ended February  28, 2005, 51.00% of the shares of Concordia Bus Holding AB (publ) were owned by  Bus Holdings sarl, an affiliate of Goldman Sachs International, 1.85% were  owned by management and 47.15% were owned by the Schøyen Group.  Furthermore, prior to the Restructuring, underthe terms of a management services  agreement, Concordia Bus Management AS agreed with Concordia Bus BV to  provide specific management services to Concordia Bus BV and its subsidiaries  until February 28, 2005. That agreement ended on February 28, 2005 and since  then we have been managed by our own employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (b)    | Pursuant to an intercompany loan agreement entered into on February 28,  2002, as amended and restated on January 16, 2004 and again on July 22,  2005, Concordia provides a shareholder loan (the “Subordinated Shareholder  Loan”) to Concordia Bus Nordic originally in the amount of SEK 501 million in  aggregate principal amount, comprising a portion of the net proceeds of the  Senior Subordinated Notes issued in 2002. The most recent amendment novated  the Subordinated Shareholder Loan to Concordia Bus Nordic Holding and as of February 28,  2005, the outstanding amount was SEK 167 million. The terms of this  Subordinated Shareholder Loan, as so amended and restated, provide that (i) interest  accrues at a rate of 11% per annum, (ii) the loan is payable on demand and  (iii) payments are subordinated to Concordia Bus Nordic’s obligations  under the Senior Secured Notes. In addition to the Subordinated Shareholder  Loan, Concordia Bus Nordic owes Concordia SEK 125 million in connection with  other liabilities for a net outstanding liability of SEK 292 million.  All intercompany loans have been eliminated  in the consolidated accounts of Concordia Bus AB. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (c)    | The Senior Secured Notes benefit from (i) a pledge by Concordia  Bus Nordic Holding of the shares in Concordia Bus Nordic, (ii) a pledge  by Concordia Bus Nordic of the shares of all of its operating subsidiaries, (iii) certain  other security, including a pledge by Swebus Busco AB of all of the buses it  owns (with a book value at February 28, 2005, of approximately SEK 1  billion), which represents substantially all of the tangible fixed assets of  Concordia and its                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

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|   | operating subsidiaries, and a pledge by Swebus AB of a floating  charge over its assets securing an amount up to SEK 115 million and (iv) a  pledge by Concordia Bus Nordic of certain secured intercompany loans to  Swebus AB and Swebus Busco AB, in the amounts of SEK 200 million and SEK 800  million, respectively, pursuant to which a second ranking security interest  over certain assets of those Guarantors has been granted to Concordia Bus  Nordic. The indenture in respect of the Senior Secured Notes includes certain  intercreditor arrangements between Concordia Bus Nordic and the trustee with  respect to the collateral securitising such intercompany loans. The laws of  certain jurisdictions may limit recovery over security constituting the  collateral. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (d)    | Holding, Swebus AB, Swebus Busco AB, Swebus Express AB, Interbus AB,  Ingeni or M.O., Schoyens Bilcentraler AS, Concordia Bus Finland Oy Ab, Swebus  Fastigheter AB, Alpus AB, Malmfältens Omnibus AB and Enköping-Bõlsta  Fastighetsbolag AB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (e)    | These companies are dormant and have no material assets. As Concordia  has designated Arlanda Buss AB, Billingens Trafik AB, Enköping-Bõlsta Trafik  AB, Gälve Trafik AB, Hälsinge Wasatrafik AB, AB Härnösandsbuss, Karlstadsbuss  AB, AB Kristinehamns Omnibusstrafik, Saltsjöbuss AB, Swebus Service AB,  Swebus Västerõs AB, Tumlare Buss AB, Wasabuss AB and Wasatrafik AB as unrestricted  subsidiaries these companies do not guarantee the Senior Secured Notes.                                                                                                                                                                                                                                                                           |

 

**D.****                                    Property,Plants and Equipment**

 

Concordia operated 3,730 buses at February 28, 2005, of which1,470 were operated under operating lease agreements with the other 2,260 busesbeing either legally owned by Concordia or operated under financing leaseagreements. At February 28, 2005 we operated 2,989 buses, 379 buses and362 buses in Sweden, Norway and Finland, respectively.

 

At February 29, 2004, we operated 3,156 buses, 405 buses (of these405 buses, 94 had been purchased pursuant to a contract entered into in January of2004 and included in the February 2004 year end totals, though these 94buses were not delivered to SBC until March of 2004) and 347 buses inSweden, Norway and Finland, respectively.

 

As of February 28, 2003 Concordia’s bus fleet consisted of a totalof 3,949 buses, of which 1,156 buses were under operating leasing arrangementsand 2,793 were owned or under finance leases.

 

The average age of our fleet was ten years for buses owned by Concordiaor operated under finance lease agreements and four years for buses operatedunder operating lease agreements for the fiscal year ended February 28,2005, ten years for buses owned by Concordia or operated under finance leaseagreements and three years for buses operated under operating lease agreementsfor the fiscal year and ended February 29, 2004 and nine years for busesowned by Concordia or operated under finance lease agreements and two years forbuses operated under operating lease agreements for the fiscal year ended February 28,2003.

 

Those of our buses which are subject to operating lease agreements arealso subject to residual value guarantees from our bus suppliers, Volvo andMercedes/SETRA. The residual value guarantees enable Concordia to return thosebuses to our suppliers at no further cost to us at the end of the first leaseperiod of the operating lease agreement. The first lease period must be atleast 48 months for Mercedes/SETRA buses and at least 60 months for Volvobuses.

 

The return conditions, stated in the residual value guarantees, includethat the buses must be in roadworthy condition and fulfill a kilometerallowance. If the buses do not meet these conditions, Concordia may have tocompensate the suppliers for the extra cost.

 

The residual value guarantees also include a limitation regarding thenumber of buses that can be returned to the suppliers. For Volvo buses, thereturn is limited to a total number of vehicles per calendar year correspondingto 30 percent of the average purchases of new Volvo buses during the past threecalendar years. For Mercedes/SETRA buses the return of buses is limited to theannual average (20% of the overall amount) per year of the deliveries ofMercedes/SETRA buses between 2000 and 2004. The Mercedes/SERTA buses areprovided pursuant to the Evobus framework agreement.

 

We currently lease our facilities, the majority of them for use bySwebus. Swebus conducts its bus operations out of a system of 45 depots and 74parking areas located throughout Sweden. These divide as follows:

 

•                                        45depots, which include garages with full maintenance facilities, washingfacilities, parking, administrative offices and eating and changing facilitiesfor drivers and mechanics;

 

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•                                        20sub-depots, which include washing facilities, parking, small administrativeoffices for payroll disbursement and limited facilities for drivers; and

 

•                                        74parking areas with limited staff facilities.

 

Some of the larger depots are located adjacent to bus stations andSwebus rents portions of parking capacity to some external customers. However,Swebus does not operate bus stations.

 

We generally select our depot sites according to their proximity to ourroutes. We intend to examine ways to use sales and leasebacks of depots withflexible lease terms as a way for Swebus to change depots to adjust to itschanging needs as public transportation contracts are won and lost.

 

Concordia has no material properties in Norway or Finland.

 

**Item 4A. Unresolved Staff Comments**

 

None.

 

**Item 5. *Operating and Financial Review andProspects***

 

**A.****                                    OperatingResults**

 

*The following should be read in conjunctionwith our consolidated financial statements included in this annual reportstarting on page F-1. Our consolidated financial statements are preparedin accordance with Swedish GAAP, which differ in various significant respectsfrom US GAAP. The significant differences between Swedish GAAP and US GAAP arediscussed in Note 33 to the consolidated financial statements of Concordiaincluded elsewhere in this annual report.*

 

**Overview**

 

Concordia was incorporated on September 17, 1999. In January 2000,Concordia, backed by SG (the then parent company of SBC) and certain privateequity funds affiliated with Goldman Sachs International, acquired ConcordiaBus Nordic. In connection with the acquisition, SG agreed to contribute its busoperating subsidiary, SBC, to Concordia by no later than March 1, 2002,pursuant to mutual options. In February 2001, Concordia Bus Nordicacquired SBC.

 

The Restructuring of Concordia’s Senior Subordinated Notes occurred on October 4,2005.  Holders of 99.91% in aggregateprincipal amount of the Senior Subordinated Notes received equity in Concordiain exchange for releasing Concordia from all claims they had under the SeniorSubordinated Notes.  As a result, as of October 4,2005, 97.5% of the issued ordinary share capital of Concordia is held by formerholders of Concordia’s Senior Subordinated Notes.  In connection with the Restructuring,Cocncordia has borrowed €45,000,000 under the Mezzanine Facility, of whichapproximately €38,000,000 has been contributed to Concordia Bus Nordic as anequity capital contribution to pay for the expenses of the Restructuring and tocover its capital needs.  The remainingamount has been used to cover restructuring expenses.

 

We provide public bus transportation services in Sweden, Norway andFinland, through our three main operating subsidiaries:  Swebus, SBC and Concordia Finland,respectively. We also provide express bus and coach hire services. In Sweden,as of February 28, 2005, we operated 2,989 buses, and are the largestoperator through Swebus, with an estimated market share of approximately 29% ofthe public bus transportation market (measured by the number of buses inoperation). This market share data has been calculated based on the share oftotal number of buses, as provided by the CPTA. In Norway, as of February 28,2005, SBC operated approximately 379 buses and has an estimated 20% marketshare of the public bus transportation market in southeastern Norway, whichincludes Oslo and neighboring cities. This market share data has been calculatedbased on the share of total number of buses, as provided by the CPTA. InFinland, as of February 28, 2005, Concordia Finland operated 362 buses andis the second largest operator in the greater Helsinki area with a market shareof 24%. This market share data has been calculated based on the relativenumbers of contract kilometers. This information is made available at eachtendering.

 

The operating results for Concordia during the fiscal years 2003 to2005 have been negative, mostly due to loss making contracts in the CPTAsegment. The consolidated statements of operations for Concordia for the yearended February 28, 2005 shows that earnings generated by the underlyingbusinesses during the period March 1, 2004–February 28, 2005 have notbeen sufficient to cover costs. Concordia and its subsidiaries are continuingto implement changes in the operations, changes to the administrative structureand certain changes in the capital structures. Changes in operations and administrativestructure are made to improve traffic planning and make the usage of buses andstaff more efficient.

 

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Our contracts with public transportation authorities are typicallystructured such that the level of monthly fees depends on the contractuallyagreed volume of operations, which varies from month to month, and in manycases declines in the summer months. In addition, our express bus and coachhire services businesses usually experience relatively high revenues from April toSeptember and during December in a given year, as customers tend touse these services during vacation periods and periods having more favorableweather. Furthermore, as a result of our collective bargaining agreements, ourpersonnel costs usually increase in the beginning of each calendar year.

 

***Critical AccountingPolicies***

 

The preparation of our consolidated financial statements requiresmanagement to make certain estimates and assumptions that affect the reportedamounts of assets and liabilities at the date of the consolidated financialstatements and the reported amounts of revenues and expenses during the periodspresented. The following paragraphs include descriptions of some accountingareas that require a higher degree of complexity and/or judgment in makingestimates.

 

*Recoverability of tangible and intangiblefixed assets including goodwill.*

 

Impairment reviews of tangible and intangible fixed assets, includinggoodwill, are performed whenever there is an indication of possible impairment.The carrying values of fixed assets, including goodwill related to thoseassets, are not considered to be recoverable when the expected discounted cashflows from those assets are less than their carrying values. An impairment lossis determined based on the amount by which the carrying value exceeds the fairvalue of those assets. Losses on fixed assets to be disposed of are determinedin a similar manner, taking into account the selling price reduced by the costsof disposal.

 

One of our significant assets is our goodwill in our subsidiary SBC. Iffuture cash flows do not develop favorably, there is a risk that goodwill maybe impaired and need to be written-down. Goodwill is accounted for inaccordance with Swedish GAAP which in certain areas differs from US GAAP.Please see Note 32 item (a), “Goodwill amortization,” to the consolidatedfinancial statements of Holding filed as part of this annual report for adescription of those differences.

 

In addition to goodwill, we also have significant investments in buses.As of February 28, 2005, the carrying value of buses was SEK 1,228million. The depreciation of these buses is based on a straight-line basis overtheir estimated useful lives, which range from three to 14 years depending on thetype of bus. Recoverability of these assets being held and used is measured bya comparison of the carrying amount of the asset to the future net cash flowsexpected to be generated by the asset. If such assets are considered impaired,the impairment loss recognized is measured as the amount by which the carryingvalue of the asset exceeds the fair value of the asset. If we are notsuccessful in renewing our contracts at a level that keeps our buses inservice, we may have excess bus capacity and therefore may desire to sell thesebuses to third parties. In such a situation the carrying value of these busesmay exceed the amount that can be recovered in a sales transaction.

 

*Loss making contracts.*

 

Most of our contracts are five to eight year contracts withmunicipalities to provide bus services in a particular area. Under the terms ofthese contracts, revenues are generally indexed at a rate corresponding to aconsumer price index or a price index which more closely corresponds to thecompany’s actual cost structure in providing its services, such as an indexthat considers the significance of changes in diesel prices, payroll costs andother expenses. Due to the fact that the contracted price level on some of ourolder contracts has proven to be too low to fully cover the costs of thosecontracts, certain contracts have become loss making. Provisions have beenrecorded on an individual CPTA basis. We may be required to record additionalprovisions for loss making contracts in the future if the increase in revenuefrom the underlying contracts does not offset the actual increase in costs.

 

*Deferred income taxes.*

 

Considering our recent history of losses, we have not recorded anydeferred tax asset for our operating loss carry forward, or temporary tax differences.

 

**Going Concern Matters**

 

Concordia has over time accumulated significant losses, wherebyshareholder equity has become negative and cash and bank balances havedecreased, even though additional cash was contributed through the refinancingproject consummated in February 2004 and through the Restructuring.  The Concordia Bus group long-term ability tocontinue its operations is dependent on a successful tendering process andcontinuing cost cutting initiatives as well as an improvement in cash flows.  The consolidated statements of operations forthe year ended February 28, 2005 

 

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shows that earnings generated by the underlying businesses during theperiod March 1, 2004 - February 28, 2005 have not been sufficient tocover Concordia’s costs. The management of Concordia believes that now that theRestructuring has been consummated Concordia will be able to continue as agoing concern primarily as a result of reduction of the Concordia Bus group’stotal indebtedness and consequently improvement in Concordia’s cash flow used in financing activities.Furthermore, Concordia and its subsidiaries are continuing to implement changesin the operations, changes to the administrative structure as well as certainchanges in the capital structures. In addition, the improvements incompensation levels in new tenders with public transport authorities arecontinuing. 

 

Prior to the Restructuring, and for thefiscal year ending February 28, 2005, the Company was highly leveraged as aresult of the Senior Subordinated Notes and the Senior Secured Notesoutstanding.  However, on October 4, 2005holders of 99.91% in aggregate principal amount of the Senior SubordinatedNotes received equity in Concordia in exchange for releasing Concordia from allclaims they had under the Senior Subordinated Notes as part of the Restructuring.As a result, as of October 4, 2005, 97.5% of the issued ordinary share capitalwas held by former holders of Concordia’s Senior Subordinated Notes. Inconnection with the Restructuring, Concordia Bus AB has borrowed €45,000,000under the Mezzanine Facility of which approximately €38,000,000 has beencontributed to Concordia Bus Nordic as an equity capital contribution to payfor the expenses of the Restructuring and to cover its capital needs. Theremaining amount has been used to cover restructuring expenses.

 

Since the Restructuring, the Company remains highlyleveraged as a result of the Senior Secured Notes outstanding, the MezzanineFacility and significant operational lease obligations. This leverage has andwill put additional pressure on the Company’s cash flows and limits the Company’sability to seek additional external funds. Existing cash and bank balances arenot expected to be sufficient to cover future cash needs for potentialoperating losses, normal capital expenditures, mandatory interest payments andamortization on debt owed. 

 

 

As of February 28, 2005, Concordia had approximately SEK 1.188 millionof long-term debt due to third parties, including the Senior Secured Notes andlong term finance lease obligations but excluding operating lease obligationsand excluding Senior Subordinated Notes of SEK 1.448 million, which areclassified as short term. As of November 30, 2005, Concordia had approximatelySEK 1.691 million of long-term debt due to third parties, including the SeniorSecured Notes, the Mezzanine Facility and long term finance lease obligationsbut excluding operating lease obligations. Its ability to service the existingdebt, including amortization and interest, is dependent on the underlyingbusinesses generating sufficient cash flow and distributable earnings.Furthermore its ability to service its existing debt is dependent on theability to transfer profit from Concordia Bus Nordic to Concordia. Thenon-restricted equity in the underlying companies, available for dividends, hasbeen reduced during the year due to losses, which furthermore limits itsability to receive dividends from subsidiaries. 

 

 

 

The accompanying financial statements of Concordia (included elsewherein this Annual Report on Form 20-F) have been prepared assuming that Concordiaand its subsidiaries will be successful in their initiatives and, consequently,they have been prepared assuming that Concordia will continue as a goingconcern. These accompanying financial statements have also been prepared underthe assumption that during the 12 month period following the release of thesefinancial statements: (i) Concordia Bus Nordic will be in compliance withits covenants associated with its Senior Secured Notes, and (ii) Concordiawill not become insolvent or bankrupt. If Concordia Bus Nordic were to be inbreach of one or more of those covenants, and if the lenders so elected, the€130,000,000 Senior Secured Notes, which are classified as long term as of February 28,2005, would become immediately due and payable.

 

Further, in the event of an acceleration under the Senior Secured Notesfollowing a default, all or part of the leasing contracts covering asignificant portion of Concordia’s leases may be terminated at the option ofthe lessor. This could have a material adverse effect on Concordia’s business.

 

**New Accounting Principles in 2005 for SwedishGAAP**

 

During the year ended February 28, 2005, the recommendationEmployee Benefits (RR 29) issued by the Swedish Financial Accounting StandardsCouncil, became effective. The change has positively affected consolidatedequity as of March 1, 2004 by SEK 5 million, net of deferred taxes.

 

**International Financial Reporting Standards**

 

Effective January 1, 2005, all listed European Union companies arerequired to present their consolidated financial statements in accordance withInternational Financial Reporting Standards (“IFRS”). The latest date fortransitioning for Concordia will be the year ended February 28, 2007,which means that the first full set of financial statements will be the Company’sfinancial reports for the year ending February 29, 2008.

 

22

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Concordia is currently in the process of assessing the implications ofthe adoption of IFRS. The impact that these new standards will have on theCompany’s net loss and financial position has not yet been assessed.

 

Major disclosure differences based on the current IFRS status relate tothe following areas:  judgments,assumptions, risks and information regarding acquisition of companies. Majoraccounting differences based on the current IFRS status includes, but are notlimited to, the following areas:

 

•                  Intangible assets—Goodwill amortization will nolonger be allowed;

 

•                  Share based payment—The fair value of awards isrecognized in equity at the grant date and expensed during the vesting period;

 

•                  Financial instruments—In general, to be reported atfair value and depending on classification, to be taken either through theincome statement or directly to shareholders’ equity;

 

•                  Component method of depreciation.

 

**New Accounting Principles in 2005 for US GAAP**

 

***Consolidation ofVariable Interest Entities***

 

In December 2003, the U.S. Financial Accounting Standards Board (“FASB”)issued FASB Interpretation No. 46 (revised December 2003), “Consolidationof Variable Interest Entities,” (“FIN 46R”) which addresses the consolidationof variable interest entities by business enterprises. Variable interestentities are entities in which either the equity investment at risk is notsufficient to absorb the probable losses without additional subordinatedfinancial support from other parties, or the investors with equity at risk lackcertain essential characteristics of a controlling interest. Under FIN 46R, anentity must consolidate any variable interest entity in which the entity holdsvariable interests and is deemed the primary beneficiary. Portions of therequirements of FIN 46R were required to be adopted during the year ended February 29,2004, while other portions were required to be adopted during the year ended February 28,2005 under the transition rules. The adoption of the remaining provisions ofFIN 46R during the year ended February 28, 2005 did not have a significanteffect on our consolidated financial position or results of operations reportedin accordance with US GAAP.

 

In May 2003, the Emerging Issues Task Force of the FASB reached aconsensus on Issue No. 00-21 “Revenue Arrangements with MultipleDeliverables” (“EITF 00-21”), providing further guidance on how to account formultiple element contracts. EITF 00-21 was effective for all arrangementsentered into by us on or after March 1, 2004. The adoption of the EITF 00-21during the year ended February 28, 2005 did not have a significant effecton our consolidated financial position or results of operations reported inaccordance with US GAAP.

 

In December 2004, the FASB issued SFAS No. 153, “Exchanges ofNon-Monetary Assets—an amendment of APB Opinion No. 29” (“SFAS 153”).Accounting Principles Board (“APB”) Opinion No. 29, “Accounting forNonmonetary Transactions” provided an exception to the basic fair-valuemeasurement principle for exchanges of similar productive assets. Thatexception required that some nonmonetary exchanges, although commerciallysubstantive, be recorded on a carryover basis. SFAS 153 eliminates theexception to fair value for exchanges of similar productive assets and replacesit with a general exception to fair-value measurement for exchange transactionsthat do not have commercial substance—that is, transactions that are notexpected to result in significant changes in the cash flows of the reportingentity. SFAS 153 is effective prospectively for us in accounting fornonmonetary asset exchanges which occur on or after March 1, 2006 for USGAAP purposes.

 

In May 2005, the FASB issued SFAS No. 154, “AccountingChanges and Error Corrections—a replacement of APB Opinion No. 20 and FASBStatement No. 3” (“SFAS 154”). SFAS 154 applies to all voluntary changesin accounting principle, and changes the requirements for accounting for andreporting of a change in accounting principle. SFAS 154 requires retrospectiveapplication to prior periods’ financial statements of a voluntary change inaccounting principle unless it is impracticable. APB Opinion No. 20, “AccountingChanges” previously required that most voluntary changes in accountingprinciple be recognized by including in net income of the period of the changethe cumulative effect of changing to the new accounting principle. SFAS 154 iseffective for accounting changes and corrections of errors made by us on orafter March 1, 2006 for US GAAP purposes, except that SFAS 154 does notchange the transition provisions of any existing accounting pronouncement,including those that are in a transition phase as of March 1, 2006.

 

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**Results of Operations**

 

The following table sets forth Concordia’s results of operations forthe years indicated in terms of amounts as well as a percentage of netrevenues.

 
| ** **                          | ** ** | **Year ended  February 28, 2005**       | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-------------------------------------|------------|----------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| ** **                          | ** ** | **Amount**                                   | ** ** | **%**                                  | ** ** | **Amount**                             | ** ** | **%** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                          | ** ** | **(in millions of SEK, except percentages)** | ** ** |
| Net revenue                         |       | 4,812                                        |       | 100.0                                  |       | 4,761                                  |       | 100.0 |   | 4,758 |   | 100.0 |   |
| Operating costs (a)                 |       | (4,747                                       | )          | 98.6                                   |       | (4,559                                 | )          | 95.8 |   | (4,522 | ) | 95.0 |   |
| Depreciation and amortization       |       | (381                                         | )          | 7.9                                    |       | (363                                   | )          | 7.6 |   | (404 | ) | 8.5 |   |
| Gain (loss) on sale of fixed assets |       | 4                                            |       | 0.1                                    |       | 6                                      |       | 0.1 |   | (4 | ) | 0.1 |   |
| Operating loss                      |       | (312                                         | )          | 6.5                                    |       | (155                                   | )          | 3.3 |   | (172 | ) | 3.6 |   |
| Financial expenses, net             |       | (250                                         | )          | 5.2                                    |       | (308                                   | )          | 6.5 |   | (255 | ) | 5.4 |   |
| Income tax benefit                  |       | 2                                            |       | 0.0                                    |       | 54                                     |       | 1.1 |   | 83 |   | 1.7 |   |
| Net loss                            |       | (560                                         | )          | 11.6                                   |       | (409                                   | )          | 8.6 |   | (344 | ) | 7.2 |   |

 
| ** **                        | ** ** | **As at and for the   Year ended  February 28, 2005** | ** ** | **As for the Year  ended  February 29, 2004** | ** ** | **As for the Year  ended  February 28, 2003** | ** ** |
|-----------------------------------|------------|------------------------------------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|
|                              |       |                                                       |       | **SEK**                                            | ** ** | **SEK**                                            | ** ** |
| Fuel, tires and other consumables |       | (989                                                       | )          | (929                                               | )          | (919                                               | )          |
| Other external costs              |       | (1,152                                                     | )          | (1,019                                             | )          | (1,006                                             | )          |
| Personnel costs                   |       | (2,606                                                     | )          | (2,611                                             | )          | (2,597                                             | )          |
| Total operating expenses          |       | (4,747                                                     | )          | (4,559                                             | )          | (4,522                                             | )          |

 

The following table sets forth Concordia’s revenues, in terms ofamounts as well as a percentage of total revenues, and operating income (loss),in terms of amounts and as a percentage of total operating loss, on the basisof each of its businesses:

 
| ** **                                                | ** ** | **Year ended  February 28, 2005**       | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-----------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| ** **                                                | ** ** | **Amount**                                   | ** ** | **%**                                  | ** ** | **Amount**                             | ** ** | **%** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                                                | ** ** | **(in millions of SEK, except percentages)** | ** ** |
| **Revenues:**                                             |       |                                         |       |                                   |       |                                   |       |   |   |   |   |   |   |
| Bus services for local public transportation  authorities |       | 4,306                                        |       | 89.5                                   |       | 4,279                                  |       | 89.9 |   | 4,294 |   | 90.2 |   |
| Express bus operations                                    |       | 337                                          |       | 7.0                                    |       | 327                                    |       | 6.9 |   | 295 |   | 6.2 |   |
| Coach hire operations                                     |       | 142                                          |       | 2.9                                    |       | 137                                    |       | 2.9 |   | 153 |   | 3.2 |   |
| Other                                                     |       | 27                                           |       | 0.6                                    |       | 18                                     |       | 0.3 |   | 16 |   | 0.3 |   |
| **Total  revenues**                                       |       | 4,812                                        |       | 100.0                                  |       | 4,761                                  |       | 100.0 |   | 4,758 |   | 100.0 |   |
| **Operating  income (loss):**                             |       |                                         |       |                                   |       |                                   |       |   |   |   |   |   |   |
| Bus services for local public  transportation authorities |       | (201                                         | )          | —                                 |       | (119                                   | )          | — |   | (113 | ) | — |   |
| Express bus operations                                    |       | 26                                           |       | —                                 |       | 31                                     |       | — |   | 22 |   | — |   |
| Coach hire operations                                     |       | 3                                            |       | —                                 |       | 2                                      |       | — |   | 4 |   | — |   |
| Other                                                     |       | (139                                         | )          | —                                 |       | (69                                    | )          | — |   | (85 | ) | — |   |
| **Total  operating loss**                                 |       | (312                                         | )          | —                                 |       | (155                                   | )          |   |   | (172 | ) | — |   |

 

Y**ear ended February 28, 2005compared to year ended February 29, 2004**

 

The following section provides an analysis of our results ofoperations between the actual numbers for the year March 1, 2004 - February 28,2005 as compared with year March 1, 2003 - February 29, 2004.

 

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***Revenues***

 

Revenues increased SEK 51 million or 1% from SEK 4,761 million for theyear ended February 29, 2004 to SEK 4,812 million for the year ended February 28,2005.

 

Revenues from the provision of bus services for local publictransportation authorities increased by SEK 30 million, or 1%, from SEK 4,242million for the year ended February 29, 2004 to SEK 4,272 million for theyear ended February 28, 2005. The increase in revenue is principally dueto our winning of new contracts, which provided an increase of SEK 411 millionwhich was offset by the impact from lost contracts of SEK 410 million and astrike in Finland in November 2004 that caused a loss of revenues of SEK13 million during the year ended February 28, 2005. In the fiscal year2004 we had a retroactive compensation from the Stockholm CPTA in May 2003of SEK 28 million as a result of a law requiring more frequent breaks fordrivers, which had a positive impact on the year ended February 29, 2004.The net impact from the volume and price changes on the existing contracts waspositive by SEK 70 million during the year ended February 28, 2005.

 

Revenues from express bus services increased by SEK 10 million, or 3%,from SEK 327 million for the year ended February 29, 2004 to SEK 337million for the year ended February 28, 2005. This increase is largely dueto a higher yield from passenger tickets of SEK 5 million, attributable to anincrease in passenger traffic of SEK 2 million and an increase in prices of SEK3 million.

 

Revenues from coach hire services increased by SEK 7 million, or 6%,from SEK 110 million for the year ended February 29, 2004 to SEK 117million for the year ended February 28, 2005. The revenue increase ismainly due to the acquisition of the companies FO Resor and Marstrand HermansbyBuss, which increased revenue by SEK 9 million.

 

Other revenue increased by SEK 4 million from SEK 82 million for theyear ended February 29, 2004, to SEK 86 million for the year ended February 28,2005. Other revenue largely consist of sales of diesel fuel, and maintenanceand repair services to third parties.

 

***Operating Costs***

 

Operating costs consist primarily of personnel costs (which includeswages, salaries, social security fees and pension costs for bus drivers,mechanics and other employees), fuel, tires and other consumables costs, andother external costs, which include depot costs and head office administrativecosts. Operating other external costs also include operating lease charges.Operating costs increased by SEK 188 million, or 4%, from SEK 4,554 for theyear ended February 29, 2004 to SEK 4,747 million for the year ended February 28,2005. This increase was due to a number of factors, which are explained below.

 

Fuel, tires and other consumable costs have increased by SEK 60 millionor 6% to SEK 989 million for the year ended February 28, 2005 from SEK 929million for the year ended February 29, 2004. The increase is largely dueto a high diesel price during the second and third quarter resulting inincreased fuel costs of SEK 50 million, partially offset by reduced number ofkilometers driven causing a reduced cost of SEK 17 million. The increase wasalso due to higher maintenance costs of total SEK 22 million and due to a SEK 5million increase in costs of washing and cleaning.

 

Personnel costs decreased by SEK 5 million or 0.2% to SEK 2,606 millionfor the year ended February 28, 2005 compared to SEK 2,611 million for theyear ended February 29, 2004. The decrease mainly resulted from areduction of drivers due to net loss of number of contracts and productivityimprovements of SEK 108 million and a reduction of pension costs due to lowerpension premiums of SEK 22 million. This was offset by an effective increase insalary of SEK 83 million and social charges of SEK 35 million. In addition, therestructuring of Concordia Bus resulted in a provision for personnel costs ofSEK 7 million.

 

Operating lease charges increased by SEK 40 million, or 10%, from SEK388 million for the year ended February 29, 2004 to SEK 428 for the yearended February 28, 2005. This increase was principally a result of ourincreased use of operating leases for buses. The total number of buses underoperating leases was 1,470 as of February 28, 2005, compared to 1,317 asof February 29, 2004.

 

Other external costs increased by SEK 95 million to SEK 724 million forthe year ended February 28, 2005 from SEK 629 million for the year ended February 29,2004. This was mainly due to costs related to the restructuring of ConcordiaBus which accounted for other external costs of SEK 133 million. The costsconnected to the proposed restructuring of Concordia Bus contain provision forclaim on CPTA of SEK 73 million, bad debt provision of receivable due fromparent and management company of SEK 33 million and professional fees of SEK 27million. We also had increased damage and other operational costs of SEK 18million. This was offset by utilization of provisions for loss making contractswhich was lower by SEK 59 million for the year ended February 28, 2005.

 

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***Depreciation;Amortization and Write-down***

 

Depreciation and amortization charges comprise principally thedepreciation of buses and other vehicles but also relate to the depreciation oftools, fixtures and fittings, buildings and computer equipment. In addition,amortization of goodwill resulting from acquisitions of bus operations is alsoincluded. Depreciation and amortization costs increased by SEK 18 million, or5%, from SEK 363 million for the year ended February 29, 2004 to SEK 381million for the year ended February 28, 2005 principally as a result ofthe write-down of buses in the year-end of SEK 42 million, offset by a shiftfrom owned buses to a larger number of leased buses. Total goodwillamortization remained constant at SEK 45 million for the year ended February 28,2005 and for the year ended February 29, 2004.

 

***Operatingprofit/loss***

 

Operating loss was SEK 312 million for the year ended February 28,2005, compared to an operating loss of SEK 155 million for the year ended February 29,2004.

 

Operating loss from bus operations for local public transportationauthorities was SEK 201 million for the year ended February 28, 2005,compared to an operating loss of SEK 119 million for the year ended February 29,2004, mainly due to higher fuel costs, increased operating lease charges andcosts in connection with the restructuring of Concordia Bus.

 

Operating profit from express bus services decreased by SEK 5 millionto SEK 29 million for the year ended February 28, 2005 compared to SEK 33million for the year ended February 29, 2004.

 

Operating profit from coach hire services was SEK 3 million for theyear ended February 28, 2005, compared to an operating profit of SEK 2million for the year ended February 29, 2004.

 

Head office costs and other items increased from SEK 69 million for theyear ended February 29, 2004, to SEK 139 million for the year ended February 28,2005, mainly due to costs in connection with the restructuring of ConcordiaBus.

 

***Financial Income andExpenses***

 

Financial income and expenses includes interest income from cash andcash equivalents and interest expense from loans made by banks and otherfinancial indebtedness. Financial income and expenses decreased by SEK 58million from a financial income and expense of SEK 308 million for the yearended February 29, 2004 to SEK 250 million for the year ended February 28,2005.

 

This decrease was due to increased foreign exchange gains of SEK 68million and a write-off of deferred financing costs by SEK 23 million and exitcosts for EUR-hedges by SEK 13 million related to senior debt and therefinancing of syndicated loans with secured senior notes at 9.125% in January 2004.  This was offset by higher interest costs ofSEK 41 million and other financial charges of SEK 5 million.

 

***Taxes***

 

The standard rate of taxation is 28%. Concordia Bus did not pay anytaxes for the year ended February 28, 2005 .  The effective tax rate for the year ended February 28,2005 was 0%. This effective tax rate resulted from amortization of goodwill(8%) and valuation allowance of net operating losses (20%).

 

**Year ended February 29, 2004, comparedto Year ended February 28, 2003**

 

***Revenues***

 

Revenues increased SEK 3 million, or 0.1%, from SEK4,758 million for the year ended February 28, 2003 to SEK4,761 million for the year ended February 29, 2004.

 

The SEK 3 million increase is due to new contracts worth SEK202 million. This was offset by lost contracts worth SEK 276 million.The remaining increase of SEK 77 million is due to a combination of avolume and price movements upon renewal of contracts, increase from indexationadjustments and changes in existing contracts.

 

Revenues from the provision of bus services for local publictransportation authorities decreased by SEK 15 million, from SEK4,294 million for the year ended February 28, 2003 to SEK4,279 million for the year ended February 29, 2004.

 

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Revenues from express bus services increased by SEK 32 million, or11%, from SEK 295 million for the year ended February 28, 2003 to SEK327 million for the year ended February 29, 2004. The revenueincrease derives primarily from an increase in the number of passengerscarried, from 2.7 million passengers during the year ended February 28,2003 to 3.0 million passengers during the year ended February 29,2004 and from a per-passenger price increase of 4% effective from July 1,2003.

 

Revenues from coach hire services declined by SEK 16 million, or10%, from SEK 153 million for the year ended February 28, 2003 to SEK137 million for the year ended February 29, 2004. The revenue declineis a direct result of a lower level of business activities and decreasedtourism, mainly due to the general recession in the economy.

 

Other revenues increased by SEK 2 million, or 12.5%, from SEK16 million for the year ended February 28, 2003 to SEK18 million for the year ended February 29, 2004.

 

During the year ended February 29, 2004, revenues of SEK3,986 million were generated in Sweden, revenues of SEK 379 millionwere generated in Norway, and revenues of SEK 396 million were generatedin Finland. During the year ended February 28, 2003, revenues of SEK3,902 million were generated in Sweden, revenues of SEK 457 millionwere generated in Norway, and revenues of SEK 399 million were generatedin Finland.

 

***Gain on Sale ofFixed Assets***

 

The gain on sale of fixed assets is comprised of sales of buses andother assets. The gain on sale of fixed assets increased from a loss of SEK4 million for the year ended February 28, 2003 to a gain of SEK6 million for the year ended February 29, 2004.

 

***Operating Costs***

 

Operating costs consist primarily of personnel costs (which includes wages,salaries, social security fees and pension costs of bus drivers, mechanics andother employees), fuel, tires and other consumables costs, and other externalcosts, which include depot costs and head office administrative costs.Operating costs also include operating lease charges. Operating costs increasedby SEK 37 million, or 0.8%, from SEK 4,522 million for the year endedFebruary 28, 2003 to SEK 4,559 million for the year ended February 29,2004. The increase of SEK 35 million is due to a number of factors, whichare outlined below.

 

Fuel, tires and other consumable costs have increased by SEK10 million, or 1%, to SEK 929 million for the year ended February 29,2004 from SEK 919 million for the year ended February 28, 2003. Theincrease is largely due to a high diesel price during the first quarterresulting in increased costs by SEK 14 million and higher maintenancecosts in the first quarter of SEK 10 million. This has been offset by thelower volumes as a result of lost contracts, which resulted overall in a lowercost of SEK 13 million.

 

Personnel costs have increased by SEK 14 million, or 0.5%, fromSEK 2,597 for the year ended February 28, 2003 to SEK 2,611 for the yearended February 29, 2004.

 

The increase of SEK 14 million is due to a reduction of drivers inour lost contracts resulting in lower wage costs of SEK 171 million,productivity gains in Stockholm of SEK 16 million and other reductions ofSEK 6 million. This was offset by an effective pay increase of 4.0%resulting in higher wage costs of SEK 95 million and higher wage costs dueto impact of operating new contracts of SEK 112 million.

 

Operating lease charges increased by SEK 38 million, or 11%, fromSEK 350 million for the year ended February 28, 2003 to SEK 388 millionfor the year ended February 29, 2004. This increase was principally aresult of our increased use of operating leases for buses. The total number ofbuses under operating leases was 1,317 as of February 29, 2004, comparedto 1,156 as of February 28, 2003.

 

Other external costs decreased by SEK 25 million to SEK631 million for the year ended February 29, 2004 from SEK656 million for the year ended February 28, 2003. The decrease wasmainly due to a reduction of subcontractors of SEK 38 million anddecreased administration costs of SEK 9 million due to normalization ofStockholm operations. This was partly offset by higher operational costs suchas insurance and marketing costs of SEK 18 million.

 

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***Depreciation andAmortization***

 

Depreciation and amortization charges comprise principally thedepreciation of buses and other vehicles but they also relate to thedepreciation of tools, fixtures and fittings, buildings and computer equipment.In addition, amortization of goodwill resulting from acquisitions of busoperations is also included. Depreciation and amortization costs decreased bySEK 41 million, or 10%, from SEK 404 million for the year ended February 28,2003 to SEK 363 million for the year ended February 29, 2004principally as a result of the shift towards increased operational leasing ofbuses and away from ownership. Total goodwill amortization was SEK45 million for the year ended February 29, 2004, which remainedconstant as compared to the year ended February 28, 2003.

 

***Operating loss***

 

Operating loss decreased by SEK 17 million, or 9.8% from a loss ofSEK 172 million for the year ended February 28, 2003 to a loss of SEK155 million for the year ended February 29, 2004 due to overhead costreductions and higher contribution from the new and renewed contracts.

 

Operating loss from bus operations for local public transportationauthorities increased by SEK 6 million, or 5.3% from a loss of SEK113 million for the year ended February 28, 2003 to a loss of SEK 119 millionfor the year ended February 29, 2004. Operating profit from express busservices increased by SEK 9 million, or 40.9%, to SEK 31 million forthe year ended February 29, 2004 compared to SEK 22 million for theyear ended February 28, 2003. Operating profit from coach hire servicesdecreased by SEK 2 million, or 50% from SEK 4 million for the yearended February 28, 2003, to SEK 2 million for the year ended February 29,2004.

 

Head office costs and other items decreased by SEK 16 million, or18.8% from SEK 85 million for the year ended February 28, 2003, toSEK 69 million for the year ended February 29, 2004 due largely totermination compensation payments in the year ended February 28, 2003 ofSEK 7 million and overall reduction in professional charges and reductionin heads during the year ended February 29, 2004.

 

***Financial Income andExpenses***

 

Financial income and expenses includes interest income from cash andcash equivalents and interest expense from loans made by banks and otherfinancial indebtedness. Financial expenses increased by SEK 49 million, or18.5% from a financial expense of SEK 265 million for the year ended February 28,2003 to SEK 314 million for the year ended February 29, 2004. Theincrease can be partly explained by an increase of depreciation of deferredfinancing costs by SEK 23 million due to the write-off of costs related tosenior debt and the refinancing of syndicated loans with secured senior notesat 9.125%. The refinancing resulted both in higher effective interest ratesand an increased debt balance.

 

Our foreign exchange losses were also SEK 21 million highercompared to the year ended February 28, 2003.

 

***Taxes***

 

No income taxes were paid during the years ended February 29, 2004and February 28, 2003. The statutory rate of taxation in Sweden is 28%.However, Concordia recorded income tax benefits of SEK 54 million for theyear ended February 29, 2004, reflecting an effective tax rate 12%,compared to income tax benefits of SEK 83 million for the year ended February 28,2003, reflecting an effective tax rate of 19%. The reason for the change in theeffective tax rate between the two fiscal years is due to the fact thatConcordia was forced to record lower tax benefits for the year ended February 29,2004 due to Concordia’s inability to use these tax benefits in the future.

 

The effective tax rate of 12% for the year ended February 29, 2004differed from the statutory rate of 28% due to the fact that goodwillamortization was not tax deductible, decreasing the effective tax rate by 3%and valuation allowances recognized on tax loss carryforwards of 13%.

 

**Market Risk**

 

We currently have no hedges in place for diesel fuel costs for theperiod from March 1, 2005, to February 28, 2006. However someprotection is provided through the diesel fuel price indexation provisions inmany of our contracts, covering approximately 55% of our projected diesel fuelcosts in fiscal year 2006. See “—Quantitative and Qualitative Disclosure AboutMarket Risk—Fuel Prices.”

 

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As of the date hereof, SEK 1,691 million of our loans were denominatedin euros. See “—Quantitative and Qualitative Disclosures About MarketRisk—Interest Rates” and “—Foreign Exchange.”

 

Many of our contracts are with local public transport authorities whichrely on government subsidies for funding. Many European countries have soughtto reduce subsidies in recent years. Should Sweden, Norway or Finland moreaggressively seek to reduce subsidies, fees from local public transportationauthorities contracts may decrease, and local public transportation authoritiescould seek to renegotiate the scope of existing contracts. A decision to reducesubsidies could have an adverse effect on potential fees under local publictransportation authorities contracts.

 

Inflation had no material impact on our operations during the yearended February 28, 2005. However, due to the nature of our contractualbusiness where cost increases are compensated through movements in agreedindices (elements of total inflation) we are currently subject to undercompensation due to a mismatch between our industry costs and our relativelevel of compensation from the indices which the local transportationauthorities use to compensate us.

 

**B.****                                    Liquidityand Capital Resources**

 

Historically, our liquidity requirements arise primarily from our needto fund lease payments, purchase buses, service our debt obligations, fund ourworking capital requirements and expand our business.

 

For the next twelve months, beginning March 1, 2005, our expectedfunds needed for lease payments (financial and operational) amount to SEK 418million, for bus purchases SEK 33 million and for interest payments on our owndebt of SEK 108 million. Furthermore, we have significant cash requirements inorder to service our indebtedness, including the Mezzanine Facility and theSenior Secured Notes.  Concordia expectsthat its working capital requirements during the 2006 fiscal year will not bematerially significant. However, our short-term liquidity requirements canfluctuate by up to SEK 200 million from month-to-month. We have historicallyrelied upon cash generated from operations and capital contributions from ourparent Holding. As we are a holding company, our principal asset is our investmentin our subsidiaries. We conduct no business or operations except through directand indirect subsidiaries.

 

Following the issuance of the Senior Secured Notes in January 2004,our indebtedness and debt service obligations increased significantly.  Although the Restructuring, in which 99.91%of our Senior Subordinated Notes on October 4, 2005 were converted intoequity, reduced our indebtedness, in connection with that Restructuring weacquired €45,000,000 of indebtedness under the Mezzanine Facility.

 

***Historical Cash Flow***

 

*Net cash flows provided by/used in operations*

 

Net cash flows from operating activities was negative SEK 98 millionfor the year ended February 28, 2005, compared to positive cash flow fromoperating activities of SEK 7 million for the year ended February 29,2004. The difference was mainly due to higher fuel prices in operations of SEK33 million, payment of SEK 15 million in restructuring fees in the lastquarter. We also had a retroactive compensation adjustment from the Stockholm CPTAin May 2003 of SEK 28 million as a result of a law requiring more frequentbreaks for drivers, which had a positive impact on the year ended February 29,2004.

 

Net cash flows from operating activities decreased to SEK 7 million forthe year ended February 29, 2004 compared with SEK 15 million for the yearended February 28, 2003.

 

*Net cash flows provided by/used in investingactivities*

 

Net cash flows from investing activities was negative SEK 63 millionfor the year ended February 28, 2005, compared with negative SEK 11million for the year ended February 29, 2004. Investments in tangiblefixed assets were SEK 112 million for the year ended February 28, 2005,compared to SEK 32 million for the year ended February 29, 2004. Of thetotal capital expenditure SEK 29 million was attributable to purchase of usedbuses in relation to a new tender in Hedmark, which started in April 2004,SEK 23 million relate to purchase of used buses for the Skaraborg region, andSEK 13 million are attributable to buses we have purchased and sold during theyear. SEK 11 million was attributable to purchase of buses within a newbusiness in Interbus. The remaining capital expenditure was for purchase ofequipment in Sweden and Norway. During the year ended February 28, 2005 wesold buses for SEK 44 million, of which SEK 13 million were purchased and soldduring the same year. We have also sold apartments in Finland for SEK 10million.

 

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Net cash flows from investing activities increased to negative SEK 11for the year ended February 29, 2004 compared with negative SEK 136million for the year ended February 28, 2003. Investments in tangiblefixed assets were SEK 32 million for the 2004 financial year, compared to SEK216 million for the 2003 financial year. The high capital expenditures in the2003 financial year are primarily due to a SEK 151 million investment in busesfor the new Stockholm contracts during the first quarter of that financialyear. During the financial year ended February 29, 2004, asset salesproceeds of SEK 21 million were generated from the sale of used buses.

 

*Net cash flows provided by/used in financingactivities*

 

Net cash flows from financing activities decreased to negative SEK 8million for the year ended February 28, 2005 from SEK 153 million for theyear ended February 29, 2004. This decrease was primarily the result ofreceiving the proceeds of the Senior Notes in the 2004 financial year, net ofrepaying the senior bank facilities. Except for paying costs incurred inconnection with the refinancing, the net proceeds were used to invest inadditional buses in fiscal year 2005.

 

Net cash flows from financing activities increased to SEK 153 millionfor the financial year ended February 29, 2004 from negative SEK 99million for the year ended February 28, 2003. This increase was primarilythe result of receiving the proceeds of the Senior Notes discussed above.

 

***Debt***

 

As of February 28, 2005 we had total net indebtedness, as definedin footnote 21 of the financial statement, of SEK 2,644 million.

 

The outstanding amount of the Senior Secured Notes and the SeniorSubordinated Notes as of February 28, 2005 was €130 million (SEK 1,176million), and €160 million (SEK 1,448 million), respectively. The Senior SecuredNotes will mature on August 1, 2009 and carry a fixed interest rate of9.125% per annum, the Senior Subordinated Notes will mature on August 15,2010, and carry a fixed interest rate of 11% per annum.  However, as a result of the Restructuring,99.91% of the aggregate principal amount of the Senior Subordinated Notes wasconverted into equity and only €145,000 in aggregate principal amount remainsoutstanding.  In connection with theRestructuring, Concordia acquired €45,000,000 of indebtedness under the MezzanineFacility.

 

The Senior Secured Notes and the Mezzanine Facility restrict, and insome cases prohibit, among other things, our and our subsidiaries’ ability toincur additional debt, make prepayments of certain debt, pay dividends, makeinvestments, engage in transactions with affiliates, issue capital stock,create liens, sell assets, significantly alter the focus and structure of theirbusiness and engage in mergers and consolidations. Certain of these limitationscould impair our operations and limit our ability to implement certain of ourstrategies. Concordia and its subsidiaries may not incur additional debt,except in certain limited circumstances, unless it meets a coverage ratio testthat has not been met by the Concordia group for several years. Continuedinability to meet this test inhibits our ability to acquire funding, which maylimit our ability to take advantage of possible opportunities. Concordia andits subsidiaries may not prepay or retire indebtedness, except in certainlimited circumstances, which could inhibit our ability to take advantage ofchanges in market interest rates or other favorable market conditions. Othercovenants narrow the scope of investments Concordia and its subsidiaries maymake, which could inhibit our ability to pursue possible opportunities.Concordia and its subsidiaries also face certain restrictions on their abilityto create liens on or sell its assets, further limiting access to possiblefunding sources. Concordia and its subsidiaries may not significantly alter thefocus and structure of its business, which could limit our ability to diversifyour lines of business. Lastly, failure to comply with these covenants couldresult in a default under the Senior Secured Notes, which in turn could resultin an event of default under our other indebtedness, or an event of defaultunder the Mezzanine Facility.

 

We have entered into foreign exchange hedging arrangements inaccordance with the terms of its hedge policy. See the sub-heading “ForeignExchange” in the section ”Quantitative and Qualitative Disclosure aboutMarket Risk.”

 

We have applied our hedges for SEK interest rates towards exposure onthe operating lease debt. We estimate approximately 6% of the operating leaseexposure is covered by our interest caps and swaps.

 

***Leases***

 

We have entered into operating lease agreements covering a portion ofour bus fleet. As of February 28, 2005, 1,470 of our 3,730 buses wereunder operating lease arrangements. The net present value of outstandingobligations for buses as of February 28, 2005, was SEK 829 million (thenet present value of our outstanding obligations under leases relating to realestate as of February 28, 2005, was SEK 46 million).

 

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The large majority of lease terms for buses include residual valueguarantees from the bus manufacturer, whereby we retain an option to return thebuses to the manufacturer without cost to us. The number of buses that can bereturned under these agreements is subject to limitation.

 

The structure of the lease contract is such that at the inception of anew lease contract, the leasing fee is established based on the purchase pricepaid by the lessor and the residual value agreed with the manufacturer for theperiod of the lease. At the end of each leasing contract period each leasingcontract can be renewed or terminated. The lease payments for the secondleasing period are always at terms based on the fair value at the date of theextension which are lower than the payments during the initial term. If we aresuccessful in renewing or extending a local public transportation authoritycontract, our leasing contract can be renewed at terms based on the fair valueat the date of the extension. This is likely to result in lease payments whichare substantially lower than the payments during the initial term.

 

In a situation where we are not able to pay outstanding lease fees, thelessor has the right to retain the buses at our expense and also obtainadditional compensation based on the outstanding leasing fees at the time whenthe non-payment situation occurred. Further, in the event of an accelerationunder the Senior Notes following a default, all or part of the leasingcontracts covering a significant portion of our leases may be terminated at theoption of the lessor. This could have a material adverse effect on ourbusiness.

 

We have applied our hedges for SEK interest rates towards exposure onthe operating lease debt. We estimate approximately 6% of the operating leaseexposure is covered by our interest caps and swaps.

 

**C.****                                    Researchand Development, Patents, Licences, etc.**

 

Not applicable.

 

**D.****                                    TrendInformation**

 

During the year ended February 28, 2005, we submitted tenders for1,027 out of the 1,442 buses that were open for competitive tenders, whichincluded contracts for routes where we already operated 421 buses. We haveretained 78 buses out of the 421 buses we operated and won 143 from ourcompetitors. Lost units include our Oslo contract, which was for 65 buses,  Helsinborg contract, which was for 52 busesand several small contracts in southern Sweden amounting to 79 buses. Inaddition we won a total of 143 units from our competitors.

 

We anticipate tenders for approximately 2,043 buses during thefinancial year ending February 28, 2006, of these buses we operate 369buses in Sweden, 60 buses in Norway and 68 buses in Finland.

 

We believe that the favorable pricing environment in Sweden in urbancity areas and moderate price increases in Finland will continue in the nextfiscal year. Pricing development in Norway is still irrational with somecontracts still being tendered at uneconomical prices.

 

**E.****                                      Off-balanceSheet Arrangements**

 

Except for the guarantee disclosed in Note 24, subnote (e) tothe consolidated financial statements of Concordia included in this Annual Report,and which is further discussed in “Item 4. Information on the Company—B.Business Overview—Finland—Legal Proceedings,” Concordia does not have anyoff-balance sheet arrangements (as defined in the rules to this Item 5.E.)which have or are reasonably likely to have a current or future effect onConcordia’s financial condition, changes in financial condition, revenues orexpenses, results of operations, liquidity, capital expenditures, or capitalresources that is material to investors.

 

**F.****                                      TabularDisclosure of Contractual Obligations**

 

The following table summarizes our contractual obligations and theexpected settlement dates for the different obligations as of February 28,2005, i.e. before the Restructuring had been consummated:

 

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| ** **                    | ** ** | **Payments due by period:**   | ** ** |
|-------------------------------|------------|-------------------------------|------------|
| ** **                    | ** ** | **Total**                     | ** ** | **less than 1 year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **after 5 years** | ** ** |
| ** **                    | ** ** | **(in millions of SEK)** | ** ** |
| **Contractual obligations:**  |       |                          |       |   |   |   |   |   |   |   |   |
| Long-term debt(a)(c)          |       | 1,176                         |       | — |   | — |   | 1,176 |   | — |   |
| Short-term debt(b)(c)         |       | 1,448                         |       | 1,448 |   | — |   | — |   | — |   |
| Operating leases (d)          |       | 1,935                         |       | 393 |   | 608 |   | 440 |   | 494 |   |
| Interest on notes             |       | 491                           |       | 109 |   | 218 |   | 164 |   | — |   |
| Financial leases              |       | 20                            |       | 8 |   | 8 |   | 3 |   | 1 |   |
| Total contractual obligations |       | 5,231                         |       | 1,958 |   | 834 |   | 1,783 |   | 1,495 |   |

 

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(a)                                  Thisamount represents the Senior Secured Notes (€130 million) translated into SEKat the rate of €1.00 = SEK 9.0475, the rate published by the Swedish centralbank for February 28, 2005.  Thedebt bears interest at an annual rate of 9.125 %.

 

(b)                                 Thisamount represents the Senior Subordinated Notes (€160 million) translated intoSEK at the rate of €1.00 = SEK 9.0475, the rate published by the Swedishcentral bank for February 28, 2005. The debt bears interest at an annual rate of 11%.

 

(c)                                  Asdescribed in “Operating and Financial Review and Prospects - Operating Results- Going Concern Matters”, violations of related debt covenants could cause theentire amount of debt to become due and payable in any period earlier thanshown in this table.  For this reason,the Senior Subordinated Notes (€160 million) have been classified as short termdebt, due and payable within 1 year.

 

(d)                               Thisamount also includes the non-binding possible extension period at the end ofthe contract.

 

The following table summarizes our contractual obligations and theexpected settlement dates for the different obligations as of October 30,2005, i.e. after the Restructuring had been consummated:

 
| ** **                               | ** ** | **Payments due by period:**   | ** ** |
|------------------------------------------|------------|-------------------------------|------------|
| ** **                               | ** ** | **Total**                     | ** ** | **less than 1 year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **after 5 years** | ** ** |
| ** **                               | ** ** | **(in millions of SEK)** | ** ** |
| **Contractual obligations:**             |       |                          |       |   |   |   |   |   |   |   |   |
| Long-term debt(a)(c)                     |       | 1,671                         |       | — |   | — |   | 1,671 |   | — |   |
| Short-term debt(b)                       |       | 1                             |       | 1 |   | — |   | — |   | — |   |
| Operating leases                         |       | 1,935                         |       | 393 |   | 608 |   | 440 |   | 494 |   |
| Interest on notes and Mezzanine Facility |       | 676                           |       | 146 |   | 292 |   | 238 |   | — |   |
| Financial leases                         |       | 20                            |       | 8 |   | 8 |   | 3 |   | 1 |   |
| Total contractual obligations            |       | 4,303                         |       | 548 |   | 908 |   | 2,352 |   | 1,671 |   |

 

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(a)                                  Thisamount represents the Senior Secured Notes (€130 million) and the MezzanineFacility (€45 million) translated into SEK at the rate of €1.00 = SEK 9.5465,the rate published by the Swedish central bank for, and the Mezzanine Facility(€45 million) October 30, 2005.  TheSenior Secured Notes bear interest at an annual rate of 9.125% and theMezzanine Facility at an annual rate of 8.5%. The Mezzanine Facility is payable within maximum 5 years, but can beamortized earlier.  It contains aninterest of 6.5%, which is capitalized annually, this table is made from theassumption that the Mezzanine Facility is repaid after 5 years at the amount of€62 million.

 

(b)                                 Thisamount represents the Senior Subordinated Notes (€145,000) translated into SEKat the rate of €1.00 = SEK 9.5465, the rate published by the Swedish centralbank for October 30, 2005.  TheSenior Subordinated Notes bear interest at an annual rate of 11%.

 

(c)                                  Asdescribed in “Operating and Financial Review and Prospects - Operating Results- Going Concern Matters”, violations of related debt covenants could cause theentire amount of debt to become due and payable in any period earlier thanshown in this table.  For this reason,the Senior Subordinated Notes (€160 million) have been classified as short termdebt, due and payable within 1 year.

 

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**Item 6. *Directors, Senior Management andEmployees***

 

**A.****                                    Directorsand Senior Management**

 

**Board of Directors**

 

Under the Swedish Companies Act of 1975, our Board of Directors hasultimate responsibility for our organization and the management of our affairs.Our Articles of Association provide for a Board of Directors elected by ourshareholders of not fewer than four nor more than ten directors. Under Swedishlaw, the chief executive officer of a company and at least half of the membersof the Board of Directors must be resident in an European Economic Area countryunless the Swedish government or an authority appointed by the Swedishgovernment grants an exemption. In a public limited liability company, likeConcordia, the chief executive officer may not also serve as the Chairman ofthe Board of Directors.

 

Information concerning the Directors of Concordia is set forth below.

 
| **Name**             | ** ** | **Age** | ** ** | **Position**          | ** ** |
|----------------------|------------|---------|------------|-----------------------|------------|
| Jan Sjöqvist(1) |       | 57      |       | Chairman and Director |       |
| Jan Sundling         |       | 58      |       | Director              |       |
| Rolf Lydahl          |       | 60      |       | Director              |       |
| Gina Germano         |       | 39      |       | Director              |       |

 

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*Jan Sjöqvist*, born1948. Chairman of the Board

Chairman of the Board of ODEN Anläggningsentreprenad, Board member ofStora Enso, Green Cargo and Lannebo Fonder. Former CEO of NCC.  B Sc (Econ).

 

*Jan Sundling*, born1947

CEO of Green Cargo Sweden since 2001. Former CEO of ASG and Linjeflyg. President of The Swedish International Freight Association, member ofthe Board of SIQ.

 

*Rolf Lydahl*, born1945

Chairman of the Board of Jernhusen and IndeCap, member of the Board ofSardus, SwedCarrier and Electra Finans. Former CEO of Probo, vice CEO of Nordstjernan and Head of Credit Suisse’srepresentative office in Stockholm.  BSc.

 

*Gina Germano*, born1966, US Citizen

Senior portfolio manager of BlueBay Asset Management since 2002.  Former portfolio manager of Lazard AssetManagement, equity analyst at Morgan Stanley. Master from the University of Lund, degree from Boston University andNorthwestern University.

 

**Senior Management**

 

Our management is comprised of the following persons:

 
| **Name**            | ** ** | **Age** | ** ** | **Position**                      | ** ** | **Year First Employed** | ** ** |
|---------------------|------------|---------|------------|-----------------------------------|------------|-----------------------------------|------------|
| Ragnar Norbäck |       | 49      |       | Chief Executive Officer |       | 2004                              |       |
| Per Skargard        |       | 48      |       | Chief Financial Officer |       | 2004                              |       |

 

*Ragnar Norbäck* was appointed Chief Executive Officer of Concordia Bus and director ofConcordia on June 30, 2004. He initially joined Concordia Bus’s senior management as Chief Operating Officer in February 2004. His mostrecent position was with American Express as Head of Corporate Travel Nordicand Country Manager Nordic, a position he had held since October 2000.From 1990 to 1996, he was COO of Linjebuss. He then joined Volvo Aero as aBusiness Area Manager from 1996 through 1999. He holds a Master of ScienceDegree from Chalmers University.

 

*Per Skargard* joined Concordia’s Executive Management team as Chief FinancialOfficer in November 2004. His recent position was at DHL/Danzas/ASG Nordicas CFO since 2001. Per has a Bachelor of Business Administration and haspractice CFO and Finance Director in transportation, telecom and retailbusiness.

 

The following are members of our senior management that are not membersof Concordia Bus BV’s management board:

 
| **Name**    | ** ** | **Age** | ** ** | **Position**                  | ** ** | **Year First Employed** | ** ** |
|-------------|------------|---------|------------|-------------------------------|------------|-------------------------|------------|
| Jan Bosaeus |       | 45      |       | Managing Director (Swebus AB) |       | 2002                    |       |

 

*Jan Bosaeus* is theManaging Director of Swebus AB. He has been the Managing Director of Swebussince mid October 2002. From May 2002 he worked as Director of AssetManagement in Swebus. From 1999 to 2002 he was in the senior 

 

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management team of Kalmar LMV Sweden AB, with responsibility forafter sales. He received a Business Degree from IHM Business School in1997.

 
| **Name**           | ** ** | **Age** | ** ** | **Position**                          | ** ** | **Year First Employed** | ** ** |
|--------------------|------------|---------|------------|---------------------------------------|------------|-------------------------|------------|
| Stefan Carlén |       | 48      |       | Managing Director (Swebus Express AB) |       | 1983                    |       |

 

*Stefan Carlén* is theManaging Director of Swebus Express AB. Stefan has extensive experiencewithin the bus industry. He joined SJ Buss in 1983 and has held differentpositions both within SJ  Buss and Swebus. In 1999 Stefan became directorof Express Division in Swebus.

 
| **Name**         | ** ** | **Age** | ** ** | **Position**                    | ** ** | **Year First Employed** | ** ** |
|------------------|------------|---------|------------|---------------------------------|------------|-------------------------|------------|
| Per Erik Ericson |       | 59      |       | Managing Director (Interbus AB) |       | 1975                    |       |

 

*Per-Erik Ericson* isthe Managing Director of Interbus AB. Per-Erik joined Interbus in 1975 andhas been Managing Director since 1983. He has 31 years of bus industryexperience.

 
| **Name** | ** ** | **Age** | ** ** | **Position**                              | ** ** | **Year First Employed** | ** ** |
|----------|------------|---------|------------|-------------------------------------------|------------|-------------------------|------------|
| Tom Ward |       | 49      |       | Managing Director (Concordia Bus Finland) |       | 2004                    |       |

 

*Tom Ward*is theManaging Director of Concordia Bus Finland. He has been the Managing Directorsince December 2004.  Mr. Wardhas a long career in transportation industry. He previously worked as a Director of a profit centre in Oy Scan-AutoAb.

 

The senior management of SBC is composed of the following person:

 
| **Name**     | ** ** | **Age** | ** ** | **Position**            | ** ** | **Year First Employed** | ** ** |
|--------------|------------|---------|------------|-------------------------|------------|-------------------------|------------|
| Sjur Brenden |       | 44      |       | Managing Director (SBC) |       | 2001                    |       |

 

*Sjur Brenden* receivedan MBA in 1989 in Sundsvall, Sweden. He became the Managing Director of SBC in2001, prior to which he was Managing Director of Sporveisbussene AS. From 1989to 1997, Mr. Brenden held different management positions in LinjebussSverige AB in Sweden.

 

The address of the members of our senior management is c/o ConcordiaBus Nordic AB, Solna Strandväg 78, SE 171 54, Solna,Sweden.

 

**B.****                                    Compensation**

 

During the year ended February 28, 2005, our board of directorsreceived from us an aggregate remuneration of approximatelySEK 0.8 million. During the year ended February 28, 2005,members of our senior management received from us an aggregate remuneration ofapproximately SEK 8.9 million.

 

In addition, our directors and senior management may receive optionsunder our share option plan. This option plan provides that Concordia grantshare options to its subsidiary, Saltsjöbuss AB, which in turn grants them toofficers, directors or employees of any of Concordia or its subsidiaries,including Concordia, at market value on their date of issue.  The stock options may be converted toordinary Concordia shares three years after granting and relating to a total of6.5% of the issued ordinary share capital of Concordia.

 

We also have a bonus plan for our senior executives based on achievingannual objectives, and established by the Board of Directors.

 

**C.****                                    BoardPractices**

 

Our directors are elected for a period of one year, with thepossibility for re-election each year at the annual general shareholdersmeeting. There are no benefits upon termination of employment. Our Board ofDirectors receives monthly reports from management as to financial conditionand a sub-group of our Board meets with management approximately every twomonths to discuss the financial results. In addition, our auditors presenttheir findings and discuss any material audit issues with our Board ofDirectors at least annually.

 

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**D.****                                    Employees**

 

The average number of persons (including executive directors) employedby us during each of the last three fiscal years was:

 
| ** **                                | ** ** | **Sweden** | ** ** | **Finland** | ** ** | **Norway** | ** ** |
|-------------------------------------------|------------|------------|------------|-------------|------------|------------|------------|
| For the year ended February 28, 2003 |       | 5,950      |       | 759         |       | 775        |       |
| For the year ended February 29, 2004 |       | 6,182      |       | 750         |       | 580        |       |
| For the year ended February 28, 2005 |       | 5,572      |       | 766         |       | 611        |       |

 

There was a significant decrease in the number of our employees inSweden for the year 2005 financial year. One of the reasons for this decrease was the reduction in number ofemployees as a result of the loss of the Gothenburg contract servingapproximately 140 buses in 2004.

 

Concordia considers its relations with its employees and unions to begood.

 

**E.****                                      ShareOwnership**

 

No member of the Board of Directors or of Management beneficially ownsat least one percent of the ordinary shares. See “Compensation” above, for adiscussion of the share option plan available to our directors and seniormanagement.

 

**Item 7. *Major Shareholders and Related PartyTransactions***

 

**A.****                                    MajorShareholders**

 

Prior to the Restructuring, an affiliate of Goldman Sachs Internationalwas the ultimate beneficial owner of approximately 51.00% of Concordia’sordinary shares, the Schoyen Group was the ultimate beneficial owner of 47.15%of Concordia’s ordinary shares and members of management and others held 1.85%.

 

After the Restructuring, which took place on October 4, 2005, theissued ordinary shares of Concordia became owned approximately 97.5% by formerholders of our Senior Subordinated Notes and 2.5% by our pre-Restructuringshareholders.

 

To our knowledge, we are not directly or indirectly owned or controlledby another corporation or by any government. The table below shows, to Concordia’s knowledge, the current beneficialowners of more than 5% of its issued ordinary shares as of October 4,2005:

 
| **Name**                             | ** ** | **Percentage held** | ** ** |
|--------------------------------------|------------|---------------------|------------|
| BlueBay High Yield (Master) Fund Ltd |       | 22.92               |       |
| Bear, Stearns & Co Inc      |       | 16.79               |       |
| Lone Star International Finance      |       | 8.13                |       |
| Hillside Apex Fund Limited           |       | 7.73                |       |
| Avenue Europe International Ltd      |       | 6.08                |       |
| Fidelity Funds SICAV                 |       | 5.49                |       |

 

The voting rights or holders of 5% or more of our ordinary shares donot differ from those of other shareholders. As of October 4, 2005, there were 34 registered holders of ourordinary shares of whom 8 registered holders of a total of 7,714,854 ordinaryshares had addresses in the United States. The combined holdings of these U.S. shareholders constituted 39% of thetotal number of ordinary shares outstanding. As certain of the ordinary sharesare held by brokers and other nominees, these numbers may not be representativeof the actual number of beneficial owners in the United States or the number ofordinary shares beneficially held by U.S. persons.

 

**Shareholders’ Agreement**

 

In conjunction with a shareholders’ agreement, entered into inconnection with the Restructuring, Concordia Bus Holding AB and the accedingnew shareholders have agreed, among other things, to implement the option plandescribed above under “Compensation”.

 

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**B.****                                    RelatedParty Transactions**

 

Erik Linnarsson is a partner at AdvokatfirmanLindahl HB, which acts as legal counsel to Concordia and is a director ofcertain of Concordia’s operating subsidiaries.

 

Under a lease arrangement between Schøyen Group and Ingeniør M.O.Schøyens Bilcentraler A/S, Schøyen Group has leased depots and other realproperty to SBC AB, a subsidiary of Concordia, for a period of ten years endingin 2009.  The rentals paid were SEK 14million, SEK 13 million and SEK 15 million for the years ended February 28,2005, February 29, 2004, and February 28, 2003 respectively.

 

Concordia Bus Management A/S, a previously affiliated company 100%owned by Concordia Bus BV, formerly provided management services toConcordia and its subsidiaries. A management fee has been charged to Concordiaand their subsidiaries for these services amounting to SEK 11 million,SEK 15 million, and SEK 23 million for years ended February 28,2005, February 29, 2004, and February 28, 2003, respectively.

 

In connection with the termination of certain key employees during theyears, Concordia Bus Nordic AB has transferred funds to the Schøyen Group, oneof Concordia’s owners before the Restructuring, at an amount of NOK 1,005thousand to settle certain shareholder loans. In August 2005 theseshareholder loans have been repaid at their nominal amount by the SchøyenGroup.

 

On February 28, 2005 we made a valuation allowance of an aggregateof SEK 33,000,000 for loans that Concordia Bus BV and Concordia Bus ManagementAS owed to Concordia.  The receivablesstill exist and actions will be taken to collect them; however given thefinancial status of these two companies Concordia has chosen a prudent viewwhen determining collectability.

 

**C.****                                    Interestsof Experts and Counsel**

 

Not applicable.

 

**Item 8. *Financial Information***

 

**A.****                                    ConsolidatedStatements and Other Financial Information**

 

See Item 17.

 

**Legal Proceedings**

 

None, except as set forth under subheading “B. BusinessOverview—Finland—Legal Proceedings” under “Item 4. Information on theCompany.”

 

**Dividend Distribution Policy**

 

Not applicable.

 

**B.****                                    SignificantChanges**

 

None.

 

**Item 9. *The Offer and Listing***

 

Not applicable.

 

**A.****                                    MarketPrice Information**

 

Not applicable.

 

**B.****                                    Markets**

 

Not applicable.

 

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**Item 10. *Additional Information***

 

**A.****                                    ShareCapital**

 

Not applicable.

 

**B.****                                    Memorandumand Articles of Association**

 

Incorporated by reference from the registration statement on Form F-4filed with the Commission on May 15, 2000 byCB Bus AB (publ). In May 2000,CB Bus AB (publ) changed its name to Concordia Bus AB (publ).

 

**C.****                                    MaterialContracts**

 

(a)                                  Indenture,dated February 7, 2000 between CB Bus AB (publ)* and BankersTrust Company, in respect of Concordia Bus AB’s Euro 160,000,000 11%Senior Subordinated Notes due February 15, 2010. On February 7, 2000we issued Euro 100,000,000 in aggregate principal amount of 11% SeniorSubordinated Notes due 2010. The net proceeds from this offering wereapproximately Euro 94.5 million including expenses incurred in connectionwith the offering. On February 27, 2002, we issued Euro 60,000,000 inaggregate principal amount of 11% Senior Subordinated Notes due 2010. The netproceeds from this offering were approximately Euro 57.4 millionincluding expenses incurred in connection with the offering. The SeniorSubordinated Notes mature on February 15, 2010. On October 4, 2005,holders of 99.91% in aggregate principal amount of the Senior Subordinatednotes received equity in exchange for releasing Concordia for all claims theyhad under the Senior Subordinated Notes. As of October 4, 2005, only€145,000 in aggregate principal amount of the Senior Subordinated Notesremained outstanding. Interest on the Senior Subordinated Notes accrues at therate of 11% per annum and is payable every six months. They rank behind all ourpresent and future senior debt and they rank equal with or senior to all ourother current and future debts. The Senior Subordinated Notes are redeemable atour option in whole or in part at any time, on and after February 15,2005, at the following redemption prices (expressed as percentages of theprincipal amount) if redeemed during the twelve month period commencing on February 15of the year set forth below, plus, in each case, accrued and unpaid interestthereon to the date of redemption:

 
| **Year**            | ** ** | **Percentage** | ** ** |
|---------------------|------------|----------------|------------|
| 2005                |       | 105.500        | %          |
| 2006                |       | 103.667        | %          |
| 2007                |       | 101.833        | %          |
| 2008 and thereafter |       | 100.000        | %          |

 

In addition, on or prior to February 15, 2003, we may on one ormore occasions redeem the Senior Subordinated Notes in an aggregate principalamount not to exceed 35% of the aggregate principal amount of the notesoriginally issued with the net cash proceeds of one or more public equityofferings (as defined in the indenture) at a redemption price of 111.0% of theprincipal amount thereof, plus accrued and unpaid interest to the redemptiondate; provided, however, that after any such redemption at least 65% of theaggregate principal amount of the Senior Subordinated Notes originally issuedmust be outstanding and the redemption must occur within 90 days of thedate of the closing of such public equity offering.

 

Under the indenture, in the event of a change of control event (asdefined in the indenture) each holder of Senior Subordinated Notes will havethe right to require us to repurchase, in whole or in part, such holder’s SeniorSubordinated Notes at a purchase price equal to 101.0% of their principalamount, plus accrued and unpaid interest, if any, to the date of repurchase.

 

Upon the happening of certain events of default specified in theindenture, the trustee for the Senior Subordinated Notes or the holders of atleast 25% in principal amount of the then outstanding Senior Subordinated Notesmay declare the Senior Subordinated Notes to be due and payable immediately.Upon the happening of certain other events of default specified in theindenture, the outstanding Senior Subordinated Notes will automatically becomedue and payable without any action by the trustee or the holders of the SeniorSubordinated Notes.

 

We may terminate our obligations under the indenture except as to anysurviving rights of registration of transfer or exchange of the SeniorSubordinated Notes, by (i) irrevocably depositing with the trustee astrust funds in trust for the purpose an amount sufficient to pay and dischargethe entire indebtedness on such Senior Subordinated Notes not previouslydelivered to the trustee or any paying agent for cancellation, and which havebecome due and payable, for all sums payable by us under the indenture, or tothe stated maturity or redemption date, as the case may be, together withirrevocable instructions from us directing the trustee to apply such funds tothe payment thereof at maturity or redemption, as the case may be, or by (ii) paying

 

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all other sums payable under the indenture and delivering to thetrustees an officer’s certificate and opinion of counsel, each stating that allconditions in the indenture relating to satisfaction and discharge have beencomplied with.

 

On October 4, 2005, a supplemental indenture with respect to theindenture was entered into.  Thesupplemental indenture amended certain terms and conditions of the indentureand removed certain negative covenants.

 

(b)                                 Indenture,dated January 22, 2004 between Concordia Bus Nordic and Deutsche BankTrust Company Americas in respect of Concordia Bus Nordic’s Euro 130,000,0009.125% Senior Secured Notes due August 1, 2009 issued on January 16,2004. The net proceeds from this offering were approximately Euro124 million including expenses incurred in connection with the offering.The Senior Secured Notes mature on August 1, 2009. Interest on the SeniorSecured Notes accrues at the rate of 9.125% per annum and is payable every sixmonths. They rank senior to existing and future indebtedness that is expresslysubordinated in right of payment to the Senior Secured Notes and will rank atleast *pari passu* with allexisting and future unsecured liabilities that are not so subordinated. Theywill effectively rank senior in right of payment to Concordia Nordic’sunsecured liabilities with respect to the value of the collateral securing theSenior Secured Notes and the guarantees securing the Senior Secured Notes(subject to any priority rights for such unsecured liabilities pursuant toapplicable law). The guarantees rank senior in right of payment to any existingand future indebtedness that is expressly subordinated in right of payment tothe guarantors and will be at least *paripassu* to existing and future unsubordinated unsecured liabilities ofthe respective Guarantors. They will rank effectively senior in right ofpayment to the unsecured liabilities of those guarantors with respect to thevalue of the collateral securing the Senior Secured Notes (subject to anypriority rights for such unsecured liabilities pursuant to applicable law). TheSenior Secured Notes are redeemable at Concordia Nordic’s option in whole or inpart at any time, on and after February 1, 2007, at the followingredemption prices (expressed as percentages of the principal amount) ifredeemed during the twelve month period commencing on February 1 of theyear set forth below, plus, in each case, accrued and unpaid interest thereonto the date of redemption:

 
| **Year**            | ** ** | **Percentage** | ** ** |
|---------------------|------------|----------------|------------|
| 2007                |       | 104.563        | %          |
| 2008                |       | 102.281        | %          |
| 2009 and thereafter |       | 100.000        | %          |

 

In addition, on or prior to February 1, 2007, Concordia Nordic mayon one or more occasions redeem the Senior Secured Notes in an aggregateprincipal amount not to exceed 35% of the aggregate principal amount of thenotes originally issued with the net cash proceeds of one or more public equityofferings (as defined in the indenture) at a redemption price of 109.125% ofthe principal amount thereof, plus accrued and unpaid interest and any specialinterest or additional amounts (as defined in the Exchange and RegistrationRights Agreement) to the redemption date; provided, however, that after anysuch redemption at least 65% of the aggregate principal amount of the SeniorSecured Notes originally issued must be outstanding and the redemption must occurwithin 90 days of the date of the closing of such public equity offering.

 

Under the indenture, in the event of a change of control event (asdefined in the indenture) each holder of Senior Secured Notes will have theright to require Concordia Nordic to repurchase, in whole or in part, suchholder’s Senior Secured Notes at a purchase price equal to 101.0% of theirprincipal amount, plus accrued and unpaid interest and any special interest oradditional amounts, if any, to the date of repurchase.

 

The indenture contains certain restrictive covenants which, among otherthings, impose limitations (subject to certain exceptions) on Concordia Nordicand certain restricted subsidiary (as defined in the indenture) with respectto, inter alia, the payment of dividends or other distributions on capital, thepurchase, redemption, or the acquisition or retiring for value of share capitalor any warrants, options or other rights for share capital, the incurrence,repayment or otherwise acquisition of or retirement for value of certainindebtedness, sales of assets, sales and leasebacks by us or our subsidiariesand various matters in respect of the conduct of Concordia Nordic business,including the merger or sale of all or substantially all of Concordia Nordic assets.

 

Upon the happening of certain events of default specified in theindenture, the trustee for the Senior Secured Notes or the holders of at least25% in principal amount of the then outstanding Senior Secured Notes maydeclare the Senior Secured Notes to be due and payable immediately. Upon thehappening of certain other events of default specified in the indenture, theoutstanding Senior Secured Notes will automatically become due and payablewithout any action by the trustee or the holders of the Senior Secured Notes.

 

We may terminate Concordia Nordic’s obligations under the indentureexcept as to any surviving rights of registration of transfer or exchange ofthe Senior Secured Notes, by (i) irrevocably depositing with the trusteeas trust funds in trust for the purpose an amount sufficient to pay anddischarge the entire indebtedness as well as any special interest or additionalamounts

 

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on such Senior Secured Notes not previously delivered to the trustee orany paying agent for cancellation, and which have become due and payable, forall sums payable by us under the indenture, or to the stated maturity orredemption date, as the case may be, together with instructions from usdirecting the trustee to apply such funds to the payment thereof at maturity orredemption, as the case may be, and by (ii) paying all other sums payableunder the indenture and delivering to the trustees an officer’s certificate andopinion of counsel, each stating that all conditions in the indenture relatingto satisfaction and discharge have been complied with and opinions from counselwith respect to certain tax matters.

 

On August 25, 2005, Concordia Nordic entered into a supplementalindenture with respect to the above-described indenture.  The supplemental indenture amends certainterms and conditions of the indenture and removes several negative covenants.

 

(c)                                  Exchangeand Registration Rights Agreement dated January 22, 2004, betweenConcordia Bus Nordic, Goldman Sachs International, J.P. MorganSecurities, Ltd. and the Guarantors for the purpose of registering theSenior Secured Notes with the Securities and Exchange Commission in the UnitedStates.

 

(d)                                 SecurityTrustee Agreement, dated January 22, 2004, by and among Deutsche TrusteeCompany Limited as security trustee, Deutsche Bank Trust Company Americas astrustee and the Guarantors for the purpose of defining the rights, duties,authority and responsibilities of the security trustee with respect to thecollateral securing the Senior Secured Notes.

 

(e)                                  Amendedand Restated Subordinated Loan Agreement, signed on February 28, 2002,replaced by agreement dated December 22, 2003 and amended and restated on January 22,2004, between Concordia Bus, as the lender, Concordia Bus Nordic and DeutscheBank Trust Company amended for the purpose of subordinating the subordinatedloan to the Senior Secured Notes.

 

(f)                                    AgreementRelating to First Ranking Pledge of Buses, dated January 22, 2004, betweenSwebus Busco AB as pledgor and Deutsche Trustee Company Limited assecurity trustee for the purpose of securing the Senior Secured Notes.

 

(g)                                 AgreementRelating to Second Ranking Pledge of Buses, dated January 22, 2004,between Swebus Busco AB as pledgor and Concordia Bus Nordic for thepurpose of securing the Senior Secured Notes.

 

(h)                                 SharePledge Agreement, dated January 22, 2004, between SwebusFastigheter AB as pledgor and Deutsche Trustee Company Limited as securitytrustee regarding shares in Alpus AB, Enköping Bõlsta Fastighetsbolag ABand Malmfältens Omnibus AB for the purpose of securing the Senior SecuredNotes.

 

(i)                                     SharePledge Agreement, dated January 22, 2004, between Concordia Bus NordicHolding AB as pledgor and Deutsche Trustee Company Limited as securitytrustee in respect of shares in Concordia Bus Nordic for the purpose ofsecuring the Senior Secured Notes.

 

(j)                                     SharePledge Agreement, dated January 22, 2004, between Concordia Bus Nordic aspledgor and Deutsche Trustee Company Limited as security trustee in respect ofshares in Swebus Express AB, Interbus AB, Swebus AB, SwebusFastigheter AB and Swebus Busco AB for the purpose of securing theSenior Secured Notes.

 

(k)                                  SharePledge Agreement, dated January 22, 2004, between Concordia Bus Nordic aspledgor and Deutsche Trustee Company Limited as security trustee in respect ofshares in Concordia Bus Finland for the purpose of securing the Senior SecuredNotes.

 

(l)                                     FirstPriority Pledge of Shares, dated January 22, 2004, between Concordia BusNordic as pledgor and Deutsche Trustee Company Limited as security trustee inrespect of shares in SBC for the purpose of securing the Senior SecuredNotes.

 

(m)                               PledgeAgreement, dated January 22, 2004, between Concordia Bus Finland aspledgor and Deutsche Trustee Company Limited as security trustee in respect offloating charge and bearer notes for the purpose of securing the Senior SecuredNotes.

 

(n)                                 FirstRanking Pledge of Floating Charge, dated January 22, 2004, betweenAlpus AB as pledgor and Deutsche Trustee Company Limited as securitytrustee in respect of floating charge for the purpose of securing the SeniorSecured Notes.

 

(o)                                 FirstRanking Pledge of Floating Charge, dated January 22, 2004, betweenEnköping Bõlsta Fastighetsbolag AB as pledgor and Deutsche Trustee CompanyLimited as security trustee in respect of floating charge for the purpose ofsecuring the Senior Secured Notes.

 

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(p)                                 FirstRanking Pledge of Floating Charge, dated January 22, 2004, betweenMalmfältens Omnibus AB as pledgor and Deutsche Trustee Company Limited assecurity trustee in respect of floating charge for the purpose of securing theSenior Secured Notes.

 

(q)                                 FirstRanking Pledge Agreement, dated January 22, 2004, between Swebus ABas pledgor and Deutsche Trustee Company Limited as security trustee in respectof floating charge for the purpose of securing the Senior Secured Notes.

 

(r)                                    SecondPledge of Floating Charge, dated January 22, 2004, between Swebus ABas pledgor and Concordia Bus Nordic in respect of floating charge for thepurpose of securing the Senior Secured Notes.

 

(s)                                  Pledgeof Accounts, dated January 22, 2004, between SBC as pledgor and DeutscheTrustee Company Limited as security trustee in respect of floating charge forthe purpose of securing the Senior Secured Notes.

 

(t)                                    IntragroupLoan Pledge Agreement, dated January 22, 2004, between Concordia BusNordic as pledgor and Deutsche Trustee Company Limited as security trustee forthe purpose of securing the Senior Secured Notes.

 

(u)                                 Declarationof Pledge of SBC of certain trade receivables, dated January 22, 2004for the purpose of securing the Senior Secured Notes.

 

(v)                                 Shareholders’Agreement, dated October 4, 2005, by and among Concordia Bus, Concordia BusHolding AB and certain other signatories named therein.  This agreement provides, inter alia, that,subject to certain exceptions and conditions, (i) no signing shareholdercan dispose of its shares without requiring the transferee to adhere toShareholders’ Agreement, (ii) if any shareholder or any group ofshareholders holding a majority of the total number of shares propose to selltheir shares they must offer each of the other shareholders the right to sellall of its shares to the purchaser on the same terms and conditions and (iii) ifone or more shareholders propose to sell not less than a majority of theoutstanding shares (other than pursuant to an underwritten public offering) theproposing shareholders have the right exercisable upon ten days prior writtennotice to the other shareholders, to require the other shareholders to sell alltheir shares to such third party upon the same terms and conditions.  Signing shareholders also have pre-emptiverights in the event that Concordia or any of its subsidiaries proposes to sellor issue shares or equity.

 

(w)                               MezzanineFacility Agreement, dated July 22, 2005, among Concordia, Concordia BusNordic Holding AB and certain lenders specified therein.  The Mezzanine Facility Agreement includesinformation covenants, events of default and other provisions based on theindenture for the Senior Secured Notes. The facility is divided into two tranches.  Tranche C, for €25,000,000 was borrowed inJuly, 2005 and repaid in October 2005 with the proceeds of Tranche A.  The total principal amount of Tranche A is€45,000,000.  There is no tranche B.  The maturity date is February 1,2010.  The loan is secured by a pledge byConcordia over its entire shareholding in Concordia Bus Nordic Holding AB, afirst ranking pledge by Concordia of its rights under the SubordinatedShareholders’ Agreement and a first ranking pledge by Concordia of its rightsand interest in a SEK 80 million capital contribution owed to it by ConcordiaBus Nordic.  Tranche A borrowings rank assenior secured debt of Concordia.  Interestis payable on the principal amount of the loan outstanding in two components: acash component calculated on the basis of the interest rate equal to the sum of(i) 6 month EURIBOR and (ii) 650 bps; and a compounded component calculated onthe basis of the interest rate of 650 bps. Interest is paid semi-annually in arrears on each June 15 and December 15,commencing December 15.

 

No voluntary prepayment of Tranche A may be made during the period 12months from the first time a loan is made.  During the period commencing 12 months from the first time the loan ismade until 24 months thereafter, the loan may be prepaid at a premium equal tothe product of (a) the amount being prepaid and (b) an annual ratewhich is equal to the sum of (x) 6 months EURIBOR and (y) 650 bps.  In the period from 24 months to 36 months theprepayment premium payable is the product of (a) the amount being prepaidand (b) 50% of an annual rate which is equal to the sum of (x) 6 monthsEURIBOR and (y) 650 bps.  In the periodfrom 36 months to 48 months the product is (a) the amount being prepaidand (b) 25% of an annual rate which is equal to the sum of (x) 6 monthsEURIBOR and (y) 650 bps.  Afer 48 monthsthe premium is zero.

 

The facility must be redeemed in the event of a change of control, asdefined in the Mezzanine Facility Agreement.

 

(x)                                   OnJuly 22, 2005, Concordia entered into a restructuring agreement with theOfferors. The agreement provided for holders of the Senior Subordinated Noteswho signed the restructuring agreement to release Concordia from any claimsthat they had under the Senior Subordinated Notes in exchange for equity inConcordia.  On October 4, 2005,holders of 99.91% in aggregate principal amount of the Senior SubordinatedNotes received equity in Concordia.

 

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*                                         InMay 2000, CB Bus AB (publ) changed its name to ConcordiaBus  AB (publ).

 

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**D.****                                    ExchangeControls**

 

There are currently no Swedish laws or regulations that restrict theimport or export of capital or the remittance of dividends or interest tonon-resident holders of our securities.

 

**E.****                                      Taxation**

 

The following discussion summarizes certain Swedish and United Statestax consequences of the ownership and disposition of the senior subordinated notes.This discussion is based on laws currently in force, as interpreted and appliedas of the date of this annual report. Those laws are subject to change afterthe date of this annual report, possibly with retroactive effect. Thisdiscussion does not purport to describe all of the tax considerations that maybe relevant to you in light of your particular circumstances. You are advisedto consult with your own tax advisors as to the Swedish and United States taxconsequences to you of the purchase, ownership and disposition of the seniorsubordinated notes, including the effect of any state or local tax laws or thelaws of any other country.

 

**Swedish Tax Considerations**

 

The following is a summary of certain principal Swedish income, wealth,inheritance and gift tax considerations for purchasers of the seniorsubordinated notes. The purpose of the summary is to generally outline certainSwedish tax consequences to Non-Swedish Holders (defined below). This summarydoes not discuss all aspects of Swedish income, wealth, inheritance and gifttaxation that may apply to particular investors because of their individualinvestment circumstances. In addition, this summary does not discuss anyforeign tax considerations. As used herein, a “Non-Swedish Holder” is a beneficialowner of a senior subordinated note that is:

 

•                  an individual who is not a resident of Sweden andwho has no connection to Sweden under Swedish law other than his or herinvestment in the senior subordinated notes; or

 

•                  an entity not organized under the laws of Sweden.

 

Under Swedish law, payments of any principal or interest to aNon-Swedish Holder will not be subject to Swedish income tax unless theNon-Swedish Holder carries on a trade or business in Sweden where the paymentsof principal or interest are attributable to a permanent establishment. Inaddition, neither the senior subordinated notes nor any Non-Swedish Holderthereof will be subject to Swedish inheritance or gift tax unless theNon-Swedish Holder:

 

•                  at the time of his or her death or the gift was acitizen of Sweden or was married to a Swedish citizen; and

 

•                  was a resident of Sweden at any time within tenyears preceding his or her death, or the time of receipt of the gift,respectively.

 

Sweden does not levy any inheritance tax on the estate of a Non-SwedishHolder. No Non-Swedish Holder of the senior subordinated notes will be subjectto Swedish wealth tax.

 

Swedish law does not impose withholding tax on payments of principal orinterest to a Non-Swedish Holder of any senior subordinated note.

 

Under Swedish law, capital gains realized on a sale of a seniorsubordinated note by a Non-Swedish Holder will not be subject to Swedish incometax unless the Non-Swedish Holder carries on a trade or business in Swedenwhere the capital gains are attributable to a permanent establishment.

 

**United States Federal Tax Considerations**

 

The following discussion is a summary of certain US federal incometax consequences of the purchase, ownership and disposition of the seniorsubordinated notes by US Holders (as defined below). This summary is not acomplete analysis or description of all potential tax consequences to USHolders and does not address all tax considerations that may be relevant to allcategories of potential purchasers (such as banks, financial institutions,insurance companies, dealers in securities or commodities, tax-exemptinvestors, investors whose functional currency is not the US dollar, investorsthat hold senior subordinated notes as part of a “straddle” or “conversiontransaction” and other investors subject to special rules).

 

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You are urged to consult your own tax advisors concerning theUS federal, state and local tax consequences, as well as any applicableforeign tax consequences, of the purchase, ownership and disposition of thesenior subordinated notes.

 

This summary is based on the Internal Revenue Code of 1986, asamended, judicial decisions, administrative pronouncements, and existing andproposed Treasury regulations, changes or differing interpretations to any ofwhich after the date of this annual report could apply on a retroactive basisand affect the tax consequences described herein.

 

As used herein, “US Holder” is a beneficial owner of a seniorsubordinated note that (1) holds the senior subordinated note as a capitalasset and (2) is, for US federal income tax purposes:

 

•                  a citizen or resident of the United States,

 

•                  a corporation (or other entity treated as acorporation for US federal income tax purposes) created or organized in orunder the laws of the United States or any political subdivision thereof,

 

•                  an estate the income of which is subject to USfederal income taxation regardless of its source, or

 

•                  a trust the administration of which is subject to theprimary supervision of a court within the United States and for which one ormore US persons have the authority to control all substantial decisions or thathas a valid election in effect under applicable U.S. Treasury Regulations to betreated as a United States person.

 

In the case of any partnership (or other entity treated as apartnership for US federal income tax purposes), it will be considered aUS Holder to the extent that its partners are described above.

 

***Payments of Interest***

 

Subject to the discussion under “Amortizable Bond Premium” below,payments of interest on a senior subordinated note will be includible in thegross income of a US Holder as ordinary income from foreign sources at thetime it is received or accrued, in accordance with the US Holder’s methodof accounting for US federal income tax purposes, under the followingrules:

 

In the case of a US Holder that is not required to accrue interestincome prior to the receipt thereof (for example, an individual US Holderwho uses a cash method of accounting), the amount of interest income in respectof any interest payment will be determined by translating such payment intoUS dollars at the spot exchange rate in effect on the date such interestpayment is received. No exchange gain or loss will be realized with respect tothe receipt of such interest payment, other than exchange gain or loss that isattributable to the actual disposition of the euros received.

 

In the case of a US Holder that is required to accrue interestincome prior to receipt thereof (for example, because the US Holder usesan accrual method of accounting), the amount of any interest income accruedduring any accrual period will generally be determined by translating theaccruals into US dollars at the average spot exchange rate applicable to theaccrual period. Such US Holder will additionally realize exchange gain orloss with respect to any interest income accrued on the date such interestincome is received (or on the date the senior subordinated note is disposed of)in an amount equal to the difference between (x) the amount determined byconverting the amount of the payment received into US dollars at the spotexchange rate in effect on the date such payment is received and (y) theamount of interest income accrued in respect of such payment according to the rule setforth in the prior sentence. Notwithstanding the prior two sentences, aUS Holder that is required to accrue interest income prior to receiptthereof may alternatively make an election to apply a “spot accrual convention”that effectively allows the US Holder to translate accrued interest intoUS dollars at a single spot exchange rate, as set forth in Treasuryregulations section 1.988-2(b)(2)(iii)(B). Exchange gain or loss istreated as ordinary income or loss for US federal income purposes.

 

***Amortizable BondPremium***

 

A US Holder that purchased a senior subordinated note for anamount greater than the senior subordinated note’s stated principal amount willbe considered to have purchased the senior subordinated note with “amortizablebond premium” equal to the excess of the purchase price over the statedprincipal amount. Such US Holder may elect to amortize such premium as anoffset to payments of interest on the senior subordinated note, effectivelyreducing the amount of interest income in the hands of such US Holder.

 

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If a US Holder makes this election, the US Holder mustamortize the premium using a “constant yield method” (i.e., a fixedyield-to-maturity) to determine the amount of premium that offsets its interestincome each year. This results in the amount of deductible premium steadilygrowing over the term of the senior subordinated note. Because Concordia mayredeem the senior subordinated notes under certain circumstances, an electingUS Holder must amortize the premium based on the expected term of thesenior subordinated notes assuming that Concordia will exercise or not exerciseits right to redeem senior subordinated notes in a manner that will minimizethe yield on the senior subordinated notes. Each time a premium reduces an electing US Holder’s taxable income,the holder must decrease its tax basis in the senior subordinated note by theamount of such premium.

 

A US Holder makes this election by claiming a deduction (orinterest offset) on its US federal income tax return for the acquisitionpremium for the first taxable year to which the US Holder wishes theelection to apply, and by attaching a statement to the return to the effectthat the holder is making the election under Treasury regulation section 1.171-4.Once made, the election applies to all taxable debt obligations held by theUS Holder during or after the taxable year for which the election is madeand may be revoked only with the consent of the US Internal RevenueService.

 

Bond premium on a Senior Subordinated Note will be computed in theapplicable foreign currency. With respect to a US Holder that elects toamortize the premium, the amortizable bond premium will reduce interest incomein the applicable foreign currency. At the time bond premium is amortized,exchange gain or loss (which is generally ordinary income or loss) will berealized based on the difference between spot rates at such time and at thetime of acquisition of the Senior Subordinated Note. A US Holder that does notelect to amortize bond premium will translate the bond premium, computed in theapplicable foreign currency, into U.S. dollars at the spot rate on the maturitydate and such bond premium will constitute a capital loss which may be offsetor eliminated by exchange gain.

 

You should consult your own tax advisors regarding the applicabilityand effect of the amortizable bond premium rule described above.

 

**Market Discount**

 

If a US Holder purchased a Senior Subordinated Note for an amount thatis less than its stated redemption price at maturity, the amount of thedifference will be treated as “market discount” for United States federalincome tax purposes, unless such difference is less than a specified *de minimis* amount. Under the marketdiscount rules, a US holder will be required to treat any principal payment on,or any gain on the sale, exchange, retirement or other disposition of, theSenior Subordinated Note, as ordinary income to the extent of the marketdiscount which has not previously been included in income and is treated ashaving accrued on such Senior Subordinated Note at the time of such payment ordisposition. In addition, the US Holder may be required to defer, until thematurity of the Senior Subordinated Note or its earlier disposition in ataxable transaction, the deduction of all or a portion of the interest expenseon any indebtedness incurred or continued to purchase or carry such note.

 

Any market discount will be considered to accrue ratably during theperiod from the date of acquisition to the maturity date of the seniorsubordinated note, unless the US Holder elects to accrue on a constant interestmethod. This election to accrue market discount on a constant interest method isto be made for the taxable year in which the US Holder acquired the seniorsubordinated note, applies only to that senior subordinated note, and may notbe revoked without the consent of the IRS. A US Holder of a note may elect toinclude market discount in income currently as it accrues (on either a ratableor constant interest method), in which case the rule described aboveregarding deferral of interest deductions will not apply. This election toinclude market discount in income currently, once made, applies to all marketdiscount obligations acquired on or after the first day of the first taxableyear to which the election applies and may not be revoked without the consentof the IRS. As discussed above, an electing US Holder should use the entire scheduledterm of the senior subordinated note as the expected term of the seniorsubordinated notes for purposes of accruing market discount.

 

The amount of market discount includible in income will generally bedetermined by translating the market discount determined in the foreigncurrency into U.S. dollars at the spot rate on the date the senior subordinatednote is retired or otherwise disposed of. If the US Holder has elected toaccrue market discount currently, then the amount which accrues is determined inthe foreign currency and then translated into U.S. dollars on the basis of theaverage exchange rate in effect during such accrual period. A US Holder willrecognize exchange gain or loss with respect to market discount which isaccrued currently using the approach applicable to the accrual of interestincome as described above.

 

***Sale, Exchange,Retirement and Other Disposition of the Notes***

 

Upon the sale, exchange, retirement or other disposition of a seniorsubordinated note, a US Holder will generally recognize taxable gain orloss equal to the difference between the amount realized, generally based onthe spot rate on the date of

 

43

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sale, exchange or retirement (not including any amounts received that areattributable to accrued and unpaid interest or market discount, which will betaxable as ordinary interest income, and exchange gain or loss as set forthabove) and the US Holder’s tax basis in the senior subordinated note. AUS Holder’s tax basis in a senior subordinated note generally will be itscost in U.S. dollars as determined using the spot rate on the date ofacquisition (as adjusted to account for any amortizable bond premium, as setforth above). Gain or loss will be capital gain or loss and will be long-termcapital gain or loss if the senior subordinated note was held from more thanone year at the time of the disposition. Gain or loss recognized by aUS Holder generally will be treated as US source income or loss.

 

***Backup Withholdingand Information Reporting***

 

US backup withholding and information reporting requirements generallywill apply to certain payments to certain non-corporate US Holders ofsenior subordinated notes. Information reporting requirements will apply tointerest on, and to proceeds from the sale, redemption or other disposition ofsenior subordinated notes paid to a US Holder (other than an “exemptrecipient,” including a corporation and certain other persons who, whenrequired, demonstrate their exempt status). We will be required to backupwithhold a portion (currently at a rate of 28%) of interest on, and theproceeds from the sale, redemption or other disposition of, senior subordinatednotes paid by a US paying agent or other US intermediary to a US Holder(other than an “exempt recipient”) if such US Holder fails to furnish itscorrect taxpayer identification number or otherwise fails to comply withapplicable backup withholding requirements.

 

Backup withholding is not a separate tax. The amount of any backupwithholding from a payment to a US Holder will be allowed as a credit againstthe US Holder’s US federal income tax liability and may entitle theUS Holder to a refund, provided that the required information is providedto the US Internal Revenue Service. US Holders of the senior subordinatednotes should consult their own tax advisors regarding the application of thebackup withholding and information reporting requirements.

 

***Tax ReturnDisclosure and Investor List Requirements***

 

U.S. Treasury regulations (the “Tax Shelter Regulations”) intendedto address so called tax shelters and other potentially tax motivatedtransactions require participants in a “reportable transaction” to disclosecertain information about the reportable transaction on IRS Form 8886 andretain information relating to the reportable transaction. Organizers andsellers of a reportable transaction are required to maintain lists identifyingthe investors participating in the reportable transaction and furnish to theIRS upon demand such investor information as well as detailed informationregarding the reportable transaction. A transaction may be a “reportabletransaction” based upon any of several indicia (including the existence ofconfidentiality agreements, certain indemnity arrangements, and certain losstransactions) and require reporting of transactions that are generally notconsidered tax shelters, including certain foreign currency transactions.Investors should consult their tax advisors concerning any possible disclosureobligation with respect to their investment in the senior subordinated notesand should be aware that Concordia intends to comply with the disclosure andlist maintenance requirements under the Tax Shelter Regulations as theydetermine apply to them with respect to any such reportable transaction.

 

**F.****                                      Dividendsand Paying Agents**

 

Not applicable.

 

**G.****                                    Statementby Experts**

 

Not applicable.

 

**H.****                                    Documentson Display**

 

The annual report, its exhibits and schedules, reports and otherinformation that we have filed with or furnished to the Commission may beinspected and copied at the public reference facilities maintained by theCommission at 100 F Street, N.E., Washington, D.C. 20549.  You can obtain copies of this material bymail from the public reference facilities of the Commission at prescribedrates.  You may obtain information on theoperation of the Commission public reference facilities by calling theCommission in the United States at 1-800-SEC-0330.

 

**I.****                                         SubsidiaryInformation**

 

Not applicable.

 

44

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**Item 11. *Quantitative and QualitativeDisclosures About Market Risk***

 

The principal market risks (i.e., the risk of loss arising from adversechanges in market rates and prices) to which we are exposed are:

 

•                  interestrates on debt;

 

•                  foreignexchange rates;

 

•                  fuelprices; and

 

•                  inflation.

 

The following risk management discussion and the estimated amountsgenerated from analytical techniques are forward looking statements of themarket risk assuming certain market conditions occur. Our actual results in thefuture may differ materially from these projected results due to actualdevelopments in the global financial markets.

 

***Interest Rate Risk***

 

Interest rate risk refers to the risk that changes in the market rateof interest adversely affects Concordia’s interest cost. How fast a change inthe interest rate will influence the net interest depends on the borrowingsfixed interest term.

 

Concordia is mainly exposed to interest rate risk in its operationalleases which are based on among other things a floating market interest rate.We currently hedge parts of our exposure to interest rate fluctuations on ourlease debt through the use of derivative instruments. We have entered intoSwedish Kronor interest rate swaps and caps to fix a portion of the interestwithin the lease payments we make under the lease debt.

 

Based on the nominal value of the operational lease debt includingoptional extension terms at February 28, 2005 of SEK 1,935 million, a 1%change in interest rates would increase lease charges and thereby reduceearnings by approximately SEK 19.3 million per annum. Senior secured notes andsubordinated shareholder loan outstanding at February 28, 2005 with acarrying value of SEK 1,176 million, and SEK 167 million respectively, havebeen excluded from the above interest rate sensitivity analysis because theexpected cash outflows related to those financial instruments will not changein response to changes in interest rates as they bear a fixed rate of interest.Our future interest expenses will however change depending on currencyfluctuations between Swedish Kronor and the Euro (see section aboutForeign Exchange).

 

***Foreign Exchange***

 

We are exposed to currency fluctuations on loans, as a result of havingto make interest payments in Euro on our senior note loan and because ouroutstanding long-term liabilities (primarily the Senior Note loan) aredenominated in Euro. We estimate that a 10% depreciation in the value of theSwedish Krona against the Euro would increase our interest costs and reduceearnings by approximately SEK 26.6 million per annum (not considering theeffects of off-setting financial instruments). A 10% depreciation in the valueof the Swedish Krona against the Euro would increase our long-term liabilitiesby approximately SEK 118 million, affecting both net income and Total Equity.

 

Our foreign subsidiaries in Norway and Finland are consolidated usingthe current rate method. Fluctuation in NOK and Euro against SEK is notconsidered to have a material effect on the consolidated financial statementsof the company, considering the level of profits/losses made by thesecompanies.

 

***Fuel Prices***

 

We are exposed to commodity price risk through its requirements fordiesel fuel. Diesel fuel is priced in the international commodity markets in USdollars. We purchase our diesel fuel requirements out of our operating revenue,which is largely denominated in Swedish Kronor. Therefore, we are exposed tocurrency fluctuation risk between the dollars and the Swedish Kronor. We currentlyhave no diesel derivatives in place; however, Concordia Bus has hedged 55% ofits diesel consumption through index compensation in the agreements with theCPTA’s. We estimate that a 10% depreciation in the value of the Swedish Kronoragainst the dollar would increase our diesel fuel costs and thereby reduceearnings by approximately SEK 9 million per annum. We estimate that a dieselprice increase of 1 dollar per ton would increase our diesel fuel costs by SEK0.2 million per annum. The net result of the diesel hedging contracts havepositively affected the diesel expenses for the fiscal year 2005, the fiscalyear 2004 and fiscal year 2003 with SEK 17.4, SEK 0.2 million and SEK 6.2million respectively.

 

45

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***Inflation***

 

Inflation had no material impact on our operations during the yearended February 28, 2005 or the year ended February 29, 2004. However,due to the nature of our contractual business where cost increases arecompensated through movements in agreed indices (elements of total inflation)we are subject to under-compensation due to a mismatch between our industrycosts and our relative level of compensation from the indices which the localtransportation authorities use to compensate us.

 

**Item 12. *Description of Securities other thanEquity Securities***

 

Not applicable.

 

**PART II**

 

**Item 13. *Defaults, Dividend Arrearages andDelinquencies***

 

Not applicable.

 

**Item 14. *Material Modifications to the Rightsof Security Holders and Use of Proceeds***

 

Not applicable.

 

**Item 15. *Controls and Procedures***

 

**Evaluation of Disclosure Controls andProcedures**

 

As of the end of our fiscal year, we carried out an evaluation, underthe supervision and with the participation of our chief executive officer andchief financial officer, of the effectiveness of the design and operation ofour disclosure controls and procedures. Based on this evaluation, our chiefexecutive officer and chief financial officer have concluded that ourdisclosure controls and procedures are effective in timely alerting them tomaterial information required to be included in our periodic reports to theSecurities and Exchange Commission.

 

There are inherent limitations to the effectiveness of any system ofdisclosure controls and procedures, including the possibility of human errorand the circumvention or overriding of such controls and procedures. Inaddition, we have limited influence over the controls and procedures ofentities in which we hold a minority interest. Accordingly, even effective disclosurecontrols and procedures can only provide reasonable assurance of achievingtheir control objectives.

 

**Changes in Internal Controls**

 

There were no significant changes in our internal control overfinancial reporting during the fiscal year that have materially affected, orare reasonably likely to materially affect, our internal control over financialreporting.

 

**Item16.  *[Reserved*]**

 

**Item 16A. *Audit Committee Financial Expert***

 

The independent members of our Supervisory Board of Directors act as ourAudit Committee. Our Audit Committee does not include a financial expertbecause we are not required to have one under Swedish law.

 

**Item16B.  *Codeof Ethics***

 

We have not adopted a formal corporate code of ethics regardingConcordia’s chief executive officer, chief financial officer and controllerbecause we are not required to have one under Swedish law.

 

**Item 16C. *Principal Accountant Fees andServices***

 

The selection of our independent external auditors was approved by theaudit committee. Following is a summary of the fees to our independent externalauditors for the years ended February 28, 2005 and February 29, 2004in millions of SEK:

 

46

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| ** **         | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|--------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Audit Fees         |       | 3                                      |       | 3                                      |       |
| Audit-Related Fees |       | 1                                      |       | 2                                      |       |
| Tax Fees           |       | —                                 |       | —                                 |       |
| All Other Fees     |       | —                                 |       | —                                 |       |
| Total Fees         | ** ** | **4**                                  | ** ** | **5**                                  | ** ** |

 

Concordia’s Audit Committee has adopted pre-approval policies andprocedures in compliance with paragraph (c)(7)(i) of Rule 2-01of Regulation S-X that require the Audit Committee to approve theappointment of the independent auditor of Concordia before such auditor isengaged and approve each of the audit and non-audit related services to beprovided by such auditor under such engagement by Concordia. All servicesprovided by the principal auditor during the year ended February 28, 2005were approved by the Audit Committee pursuant to the pre-approval policy.

 

**Item 16D. *Exemptions from the Listing Standardsfor Audit Committees***

 

Not applicable.

 

**Item 16E. *Purchases of Equity Securities by theIssuer and Affiliated Purchasers***

 

Not applicable.

 

**PART III**

 

**Item 17. *Financial Statements***

 

See pages F-1 to F-37.

 

47

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**Item 18. *Financial Statements***

 

Not applicable.

 

**Item19.  *Exhibits***

 
| 1.        |   | Articles of Association of CB Bus AB (publ).*†                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2(c)(1).  |   | Indenture, dated February 7, 2000, between CB Bus AB (publ)† and  Bankers Trust Company, in respect of Concordia Bus AB’s Euro 100,000,000  11% Senior Subordinated Notes due February 15, 2010.*                                                                                                                                                                                                                                                                                                                                                         |
| 2(c)(2).  |   | Indenture, dated January 22, 2004, between Concordia Bus Nordic  AB (publ), Swebus Express Bus AB, Interbus AB, Ingeniør M.O.  Schøyens Bilcentraler A.S., Concordia Bus Finland Oy Ab, Swebus Fastigheter  AB, Alpus AB, Enköping-Bålsta Fastighetsbolag AB, and Malmfältens  Omnibus AB and Deutsche Bank Trust Company Americas, in respect of Concordia  Bus Nordic AB’s€130,000,000 9.125% Senior Secured Notes due August 1,  2009.****                                                                          |
| 4(a)(1).  |   | Subscription and Shareholders’ Agreement, dated October 27,  1999, by and among Concordia Bus B.V., Schøyen Gruppen A/S, Bus Holdings  S.a.r.l., and Goldman Sachs International.*                                                                                                                                                                                                                                                                                                                                                                             |
| 4(a)(2).  |   | Call Option Assignment Agreement, dated January 14, 2000 between  CB Bus AB (publ)† as assignor and Christiania Bank og Kreditkasse ASA as  security agent.*                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4(a)(3).  |   | Security Agent Agreement, dated February 7, 2000, by and among  Christiania Bank og Kreditkasse ASA as senior agent and security agent, CB  Bus AB (publ)†, and Bankers Trust Company, as Trustee.*                                                                                                                                                                                                                                                                                                                                                                      |
| 4(a)(4).  |   | Declaration of Pledge dated January 14, 2000 between Schøyen  Gruppen and Christiania Bank og Kreditkasse ASA, as security agent.*                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4(a)(5).  |   | Addendum No. 1 to Declaration of Pledge Dated February 4,  2000 between Schøyen Gruppen and Christiania Bank og Kreditkasse ASA, as  security agent.*                                                                                                                                                                                                                                                                                                                                                                                                               |
| 4(a)(6).  |   | Deed for the Sale and Purchase of Ingeniør M.O. Schøyens Bilcentraler  A.S. dated October 27, 1999 by and among Schøyen Gruppen A/S, as seller,  Concordia Bus BV, Goldman Sachs International as senior agent and mezzanine  agent, and AB Grundstenen 85302, as buyer.*                                                                                                                                                                                                                                                                                      |
| 4(a)(7).  |   | Supplemental Deed to Original Deed for the Sale and Purchase of  Ingeniør M.O. Schøyens Bilcentraler A.S., dated January 14, 2000, by and  among Schøyen Gruppen A/S, as seller, Concordia Bus BV, CB Bus AB (publ)†,  Goldman Sachs International, and Christiania Bank og Kreditkasse ASA.*                                                                                                                                                                                                                                                             |
| 4(a)(8).  |   | Deed of Accession and Adherence and Supplemental Deed to Deed for  Sale and Purchase of Ingeniør M.O. Schøyens Bilcentraler A.S., dated  February 4, 2000 by and among Schøyen Gruppen A/S, Concordia Bus BV, CB  Bus AB (publ)†, Goldman Sachs International, Christiania Bank og Kreditkasse  ASA, and Bankers Trust Company.*                                                                                                                                                                                                                          |
| 4(a)(9).  |   | Supplemental Deed No. 3 to Deed for the Sale and Purchase of  Ingeniør M.O. Schøyens Bilcentraler A.S., dated February 24, 2000,  by and among Schøyen Gruppen A/S, Concordia Bus BV, CB Bus AB (publ)†,  Goldman Sachs International Christiania Bank Og Kreditkasse ASA, and Bankers  Trust Company.*                                                                                                                                                                                                                                         |
| 4(a)(10). |   | Acquisition Facility Agreement, dated January 14, 2000, by and  among CB Bus AB (publ)†, as borrower, Christiania Bank og Kreditkasse ASA and  Den norske Bank ASA as arrangers and banks, and Christiania Bank og  Kreditkasse ASA as agent.*                                                                                                                                                                                                                                                                                                                           |
| 4(a)(11). |   | Swebus Facility Agreement, dated January 14, 2000, by and among  Concordia Bus Nordic AB††, as borrower, Christiania Bank og Kreditkasse ASA  and Den norske Bank ASA as arrangers and banks, and Christiania Bank og  Kreditkasse ASA as agent.*                                                                                                                                                                                                                                                                                                                   |
| 4(a)(12). |   | Framework Leasing Agreement, dated October 28, 1998, between  Ingeniør M.O. Schøyens Bilcentraler A.S. and Den norske Bank Finans.*                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 4(a)(13). |   | Amended Senior Facilities Agreement, dated February 15, 2002, by  and among Concordia Bus Nordic AB, as borrower, Nordea Bank Norge ASA and Den  Norske Bank ASA, as arrangers and banks, and Nordea Bank Norge ASA, as  agent.***                                                                                                                                                                                                                                                                                                                                            |
| 4(a)(14). |   | Exchange and Registration Rights Agreement dated January 22,  2004, between Concordia Bus Nordic AB (publ), Goldman Sachs International,  J.P. Morgan Securities, Ltd., Swebus AB, Swebus Busco AB, Swebus Express  Bus AB, Interbus AB, Ingeniør M.O. Schøyens Bilcentraler A.S., Concordia Bus  Finland Oy Ab, Swebus Fastigheter AB, Alpus AB, Enköping-Bålsta  Fastighetsbolag AB, and Malmfältens Omnibus AB in respect of €130,000,000  9.125% Senior Secured Notes due August 1, 2009, of Concordia Bus Nordic  AB (publ).**** |
| 4(a)(15). |   | Security Trustee Agreement, dated January 22, 2004, by and among  Deutsche Trustee Company Limited as security trustee, Deutsche Bank Trust  Company Americas as trustee, Concordia Bus Nordic Holding AB, Swebus AB,  Swebus Busco AB, Swebus Express Bus AB, Interbus AG, Ingeniør M.O. Schøyens  Bilcentraler A.S., Concordia Bus Finland Oy Ab, Swebus Fastigheter AB, Alpus  AB, Enköping-Bålsta Fastighetsbolag AB, and Malmfältens Omnibus AB.*****                                                                                           |
| 4(a)(16). |   | Amended and Restated Subordinated Loan Agreement, signed on February 28,  2002, replaced by agreement dated December 22, 2003 and amended and  restated on January 22, 2004, between Concordia Bus AB (publ) as the  lender, Concordia Bus Nordic AB (publ) and Deutsche Bank Trust Company.*****                                                                                                                                                                                                                                                                   |

 

48

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| 4(a)(17). |   | Agreement Relating to First Ranking Pledge of Buses, dated  January 22, 2004 between Swebus Busco AB as pledgor and Deutsche Trustee  Company Limited as security trustee.*****                                                                                                                                                                                                                       |
|-----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4(a)(18). |   | Agreement Relating to Second Ranking Pledge of Buses, dated  January 22, 2004, between Swebus Busco AB as pledgor and Concordia Bus  Nordic AB (publ).*****                                                                                                                                                                                                                                      |
| 4(a)(19). |   | Share Pledge Agreement, dated January 22, 2004, between Swebus  Fastigheter AB as pledgor and Deutsche Trustee Company Limited as security  trustee regarding shares in Alpus AB, Enköping-Bålsta Fastighetsbolag AB, and  Malmfältens Omnibus AB.*****                                                                                                                                |
| 4(a)(20). |   | Share Pledge Agreement, dated January 22, 2004, between  Concordia Bus Nordic Holding AB as pledgor and Deutsche Trustee Company  Limited as security trustee in respect of shares in Concordia Bus Nordic AB  (publ).*****                                                                                                                                                                           |
| 4(a)(21). |   | Share Pledge Agreement, dated January 22, 2004, between  Concordia Bus Nordic AB (publ) as pledgor and Deutsche Trustee Company as  security trustee in respect of shares in Swebus Express AB, Interbus AB,  Swebus AB, Swebus Fastigheter AB and Swebus Busco AB.*****                                                                                                                              |
| 4(a)(22). |   | Share Pledge Agreement, dated January 22, 2004, between  Concordia Bus Nordic AB (publ) as pledgor and Deutsche Trustee Company  Limited as security trustee in respect of shares in Concordia Bus Finland Oy  Ab.*****                                                                                                                                                                               |
| 4(a)(23). |   | First Priority Pledge of Shares, dated January 22, 2004, between  Concordia Bus Nordic AB (publ) as pledgor and Deutsche Trustee Company  Limited as security trustee in respect of shares in Ingeniør M.O. Schøyens  Bilcentraler A.S.*****                                                                                                                                                |
| 4(a)(24). |   | Pledge Agreement, dated January 22, 2004, between Concordia Bus  Finland Oy Ab as pledgor and Deutsche Trustee Company Limited as Security  Trustee in respect of floating charge and bearer notes.*****                                                                                                                                                                                              |
| 4(a)(25). |   | First Ranking Pledge of Floating Charge, dated January 22, 2004,  between Alpus AB as pledgor and Deutsche Trustee Company Limited as security  trustee in respect of floating charge.*****                                                                                                                                                                                                           |
| 4(a)(26). |   | First Ranking Pledge of Floating Charge, dated January 22, 2004,  between Enköping-Bålsta Fastighetsbolag AB as pledgor and Deutsche Trustee  Company Limited as security trustee in respect of floating charge.*****                                                                                                                                                                       |
| 4(a)(27). |   | First Ranking Pledge of Floating Charge, dated January 22, 2004,  between Malmfältens Omnibus AB as pledgor and Deutsche Trustee Company  Limited as security trustee in respect of floating charge.*****                                                                                                                                                                                        |
| 4(a)(28). |   | First Ranking Pledge Agreement, dated January 22, 2004, between  Swebus AB as pledgor and Deutsche Trustee Company Limited as security trustee  in respect of floating charge.*****                                                                                                                                                                                                                   |
| 4(a)(29). |   | Second Pledge of Floating Charge, dated January 22, 2004,  between Swebus AB as pledgor and Concordia Bus Nordic AB (publ) in respect of  floating charge.*****                                                                                                                                                                                                                                       |
| 4(a)(30). |   | Pledge of Accounts, dated January 22, 2004, between Ingeniør  M.O. Schøyens Bilcentraler A.S. as pledgor and Deutsche Trustee Company  Limited as security trustee in respect of floating charge.*****                                                                                                                                                                                      |
| 4(a)(31). |   | Intragroup Loan Pledge Agreement, dated January 22, 2004,  between Concordia Bus Nordic AB (publ), as pledgor, and Deutsche Trustee  Company Limited, as security trustee.*****                                                                                                                                                                                                                       |
| 4(a)(32). |   | Declaration of Pledge of Ingeniør M.O. Schøyens Bilcentraler A.S. of  Trade Receivables, dated January 22, 2004.*****                                                                                                                                                                                                                                                                       |
| 4(c)(1).  |   | Management services agreement, dated January 14, 2000, by and  among, Concordia Bus Management A/S, Concordia Bus BV, CB Bus AB (publ) and  Ingeniør M.O. Schøyens Bilcentraler A/S.**                                                                                                                                                                                                      |
| 4.1.      |   | Intercompany Funds Flow Deed dated as if July 20, 2005 between  Concordia Bus AB, Concordia Bus Nordic Holding AB and Concordia Bus Nordic  AB. ******                                                                                                                                                                                                                                                |
| 4.2.      |   | First Ranking Pledge Agreement of a shareholders’ contribution loan  dated as of July 18, 2005 between Concordia Bus Nordic Holding AB (as  Pledgor) and Citicorp Trustee Co. Limited (as Security Agent). ******                                                                                                                                                                                |
| 4.3.      |   | First Ranking Pledge Agreement of a shareholder’s contribution loan,  dated as of July 18, 2005 between Concordia Bus Nordic Holding AB and  Citicorp Trustee Co. Ltd. ******                                                                                                                                                                                                                    |
| 4.4.      |   | Second Ranking Pledge Agreement of a subordinated shareholder loan,  dated as of July 18, 2005 between Concordia Bus Nordic Holding AB and  Concordia Bus AB (publ). ******                                                                                                                                                                                                                           |
| 4.5.      |   | Second Ranking Pledge Agreement of a shareholder’s contribution loan,  dated as of July 18, 2005 between Concordia Bus Nordic Holding AB and  Concordia Bus AB (publ). ******                                                                                                                                                                                                                    |
| 4.6.      |   | Sale and Assignment Agreement and limited recourse Note, dates as of  July 18, 2005 between Concordia Bus AB, Concordia Bus Nordic Holding AB  and Concordia Bus Nordic AB (publ). ******                                                                                                                                                                                                             |
| 4.7.      |   | Amendment Restated Subordinated Shareholder Loan Amendment dated as  of July 18, 2005 between Concordia Bus Nordic AB, Concordia Bus Nordic  Holding AB and Deutsche Bank Trust Company Americas (as Trustee). ******                                                                                                                                                                                 |
| 4.8.      |   | Subordination statement of a Subordinated shareholder loan, dated as  of July 18, 2005 between Concordia Bus Nordic Holding AB, Concordia Bus  Nordic AB, Concordia Bus AB (publ) and Deutsche Bank Trust Company Americas  (as Trustee). ******                                                                                                                                                      |
| 4.9.      |   | Sale and Assignment Agreement of a Shareholder’s Contribution Loan  Agreement dated as of July 18, 2005, between Concordia Bus AB (publ),  Concordia Bus Nordic AB (publ) and Concordia Bus Nordic Holding AB. ******                                                                                                                                                                            |
| 4.10      |   | Shareholder’s Contribution Loan Agreement dated as of July 18, 2005,  between Concordia Bus Nordic AB, Concordia Bus Holding AB. ******                                                                                                                                                                                                                                                               |
| 4.11.     |   | Restructuring Agreement dated as of July 22, 2005 between Concordia  Bus AB, Concordia Bus Nordic AB, Concordia Bus Holding AB, Concordia Bus BV,  GS Capital Partners III Offshore, L.P., Goldman Sachs and Co. Verwaltungs,  GMbH, Schoyen Gruppen AS, Centaurous Capital Limited, Citigroup Global  Markets Limited, JP Morgan Chase, N.A. as Agent and The Consenting  Noteholders signatories. ****** |
| 4.12      |   | First Supplemental Indenture (copy) dated as of October, 2005, among  Concordia Bus AB (publ), with Deutsche Bank Trust Company Americas as  trustee.                                                                                                                                                                                                                                                      |
| 4.13      |   | Deed of Pledge darted as of July 18, 2005, between Concordia Bus  Nordic Holding AB and Citigroup Trustee Company Limited. ******                                                                                                                                                                                                                                                                          |
| 8.        |   | Subsidiaries of registrant.                                                                                                                                                                                                                                                                                                                                                                                |
| 10.1      |   | Mezzanine Facility Agreement dated as of July 20, 2005 among  Concordia Bus AB (publ), Concordia Bus Nordic Holding AB, Deutsche Bank  Luxembourg S.A. (acting as facility agent) & Citigroup Trustee Company  Limited (as Security Agent).******                                                                                                                                                      |
| 10.2      |   | Shareholders’ Agreement dated as of October 4, 2005 among Concordia  Bus AB, Concordia Bus Holding AB and certain other signatories.                                                                                                                                                                                                                                                                  |
| 12.1      |   | Certificate of Per Skärgård, Chief Financial Officer, pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                |
| 12.2      |   | Certificate of Ragnar Norback, Chief Executive Officer, pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                        |
| 13.1.     |   | Certificate of  Per Skärgård,  chief financial  officer, pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                              |
| 13.2.     |   | Certificate of Ragnar Norback, chief executive  officer, pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                             |
| 14.       |   | Letter concerning Arthur Andersen.****                                                                                                                                                                                                                                                                                                                                                                     |

 

----

| *            |   | Incorporated by reference from the Registrant’s Registration  Statement on Form F-4, filed with the Commission on May 15, 2000.                       |
|--------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **           |   | Incorporated by reference from the Registrant’s Annual Report on  Form 20-F, filed with the Commission on June 27, 2001.                              |
| ***          |   | Incorporated by reference from Amendment No. 1 to the  Registrant’s Annual Report on Form 20-F, filed with the Commission on  February 19, 2002. |
| ****         |   | Incorporated by reference from the registrants Annual Report on  Form 20-F, filed with the Commission on June 27, 2002.                                    |
| *****        |   | Incorporated by reference from Concordia Bus Nordic AB (publ)’s  Registration Statement on Form F-4, filed with the Commission on  May 28, 2004.      |
| ******       |   | Incorporated by reference from Concordia Bus Nordic AB (publ)’s  Annual Report on Form 20-F, filed with the commission on September 1, 2005.                    |
| †       |   | In May 2000 the Registrant changed its name from CB Bus AB  (publ) to Concordia Bus AB (publ).                                                                  |
| †† |   | In May 2001 Swebus AB changed its name to Concordia Bus Nordic  AB.                                                                                             |

 

49

----

 

**SIGNATURES**

 

The registrant hereby certifies that it meets all of the requirementsfor filing on Form 20-F and that it has duly caused and authorized theundersigned to sign this annual report on its behalf.

 
|                   | CONCORDIA BUS AB (publ) |
|------------------------|-------------------------|
|                   | By:                     | /s/ Per Skärgård |   |
|                   |                    |   | Per Skärgård*Chief Financial Officer and Director* |
| Date: November 7, 2006 |                    |   |
|                        |                         |  |  |  |

 

 

50

----

 

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

 
| **Financial Statements of Concordia Bus AB  (publ)**                                                                                                            | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Report of Independent Registered Public  Accounting Firm                                                                                                        | F-1        |
| Consolidated Statements of Operations for the years ended February 28,  2005, February 29, 2004 and February 28, 2003                            | F-2        |
| Consolidated Balance Sheets as of February 28,  2005 and February 29, 2004                                                                            | F-3        |
| Consolidated Statements of Changes in  Shareholder’s Equity for the years ended February 28, 2005, February 29,  2004 and February 28, 2003 | F-5        |
| Consolidated Statements of Cash Flows for the years ended February 28,  2005, February 29, 2004 and February 28, 2003                            | F-6        |
| Notes to Consolidated Financial Statements                                                                                                                      | F-7        |

 

51

----

 

**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

 

To the Board of Directors and Shareholder of Concordia Bus AB (publ):

 

We have audited the accompanying consolidated balance sheets ofConcordia Bus AB (publ) and subsidiaries (the “Company”) as of February 28,2005 and February 29, 2004, and the related consolidated statements ofoperations, changes in shareholder’s equity and cash flows for the years ended February28, 2005, February 29, 2004 and February 28, 2003.  These consolidated financial statements arethe responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements based on ouraudits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting.  Ouraudit included consideration of internal control over financial reporting as abasis for designing audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

 

In our opinion, such consolidated financial statements present fairly,in all material respects, the financial position of ConcordiaBus AB (publ) and subsidiaries as of February 28, 2005 and February 29,2004, and the results of their operations and their cash flows for the yearsended February 28, 2005, February 29, 2004 and February 28, 2003 in conformitywith accounting principles generally accepted in Sweden.

 

The accompanying consolidated financial statements have been preparedassuming that the Company will continue as a going concern.  As discussed in Note 30 to the consolidatedfinancial statements, the Company’s recurring operating losses, stockholder’scapital deficiency, negative cash flows from operations, inability to makecertain interest payments on outstanding borrowings, and violations of borrowingcovenants raise substantial doubt about its ability to continue as a goingconcern.  Management’s plans concerningthese matters are also described in Note 30. The consolidated financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.

 

Accounting principles generally accepted in Sweden vary in certainsignificant respects from accounting principles generally accepted in theUnited States of America.  Informationrelating to the nature and effect of such differences is presented in Note 33to the consolidated financial statements.

 

 

Deloitte AB

Stockholm, Sweden

November 7, 2006

 

F-1

----

 

**CONCORDIA BUS AB (PUBL) AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(all amounts in millions of SEK, except pershare amounts)**

 
| ** **                                 | ** ** | **Note**   | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|--------------------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Net revenue                                | ** ** | **2,3,4**  |       | 4,812                                  |       | 4,761                                  |       | 4,758                                  |       |
| Fuel, tires and other consumables          | ** ** | **5**      |       | (989                                   | )          | (929                                   | )          | (919                                   | )          |
| Other external costs                       | ** ** | **5,6**    |       | (1,152                                 | )          | (1,019                                 | )          | (1,006                                 | )          |
| Personnel costs                            | ** ** | **5,7**    |       | (2,606                                 | )          | (2,611                                 | )          | (2,597                                 | )          |
| Gain (loss) on sale of fixed assets        |       |       |       | 4                                      |       | 6                                      |       | (4                                     | )          |
| Depreciation, amortization and write downs | ** ** | **5,8**    |       | (381                                   | )          | (363                                   | )          | (404                                   | )          |
| **Operating loss**                         | ** ** | **2**      | ** ** | **(312**                               | **)**      | **(155**                               | **)**      | **(172**                               | **)**      |
| Interest income                            |       |       |       | 4                                      |       | 6                                      |       | 10                                     |       |
| Interest expense and similar items         | ** ** | **10**     |       | (254                                   | )          | (314                                   | )          | (265                                   | )          |
| **Financial income and expenses**          | ** ** | ** ** | ** ** | **(250**                               | **)**      | **(308**                               | **)**      | **(255**                               | **)**      |
| **Loss before income taxes**               | ** ** | ** ** | ** ** | **(562**                               | **)**      | **(463**                               | **)**      | **(427**                               | **)**      |
| Income taxes                               | ** ** | **11**     |       | 2                                      |       | 54                                     |       | 83                                     |       |
| **Net loss**                               | ** ** | ** ** | ** ** | **(560**                               | **)**      | **(409**                               | **)**      | **(344**                               | **)**      |
| Weighted number of shares outstanding      |       |       |       | 5,000                                  |       | 5,000                                  |       | 5,000                                  |       |
| **Net loss per share (SEK)**               | ** ** | **27**     |       | (112,063                               | )          | **(81,721**                            | **)**      | **(68,780**                            | **)**      |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

F-2

----

 

**CONCORDIA BUS AB (PUBL) AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(all amounts in millions of SEK)**

 
| ** **                                         | ** **   | **Note**     | ** **   | **February 28, 2005** | ** **   | **February 29, 2004** | ** **   |
|----------------------------------------------------|--------------|--------------|--------------|----------------------------|--------------|----------------------------|--------------|
| **ASSETS**                                         | ** **   | ** **   | ** **   | ** **                 | ** **   | ** **                 | ** **   |
| ***Fixed assets***                                 |         |         |         |                       |         |                       |         |
| Goodwill                                           | ** **   | **12**       |         | 684                        |         | 721                        |         |
| **Total intangible fixed assets**                  | ** **   | ** **   | ** **   | **684**                    | ** **   | **721**                    | ** **   |
| Buildings and land                                 | ** **   | **13**       |         | 2                          |         | 2                          |         |
| Equipment, tools, fixtures and fittings            | ** **   | **13**       |         | 27                         |         | 34                         |         |
| Vehicles                                           | ** **   | **13**       |         | 1,229                      |         | 1,491                      |         |
| **Total tangible fixed assets**                    | ** **   | ** **   | ** **   | **1,258**                  | ** **   | **1,527**                  | ** **   |
| Receivables due from affiliated companies          | ** **   | **14**       |         | —                     |         | 29                         |         |
| Other long-term financial fixed assets             | ** **   | **15**       |         | 91                         |         | 109                        |         |
| **Total financial fixed assets**                   | ** **   | ** **   | ** **   | **91**                     | ** **   | **138**                    | ** **   |
| **Total fixed assets**                             | ** **   | ** **   | ** **   | **2,033**                  | ** **   | **2,386**                  | ** **   |
| ***Current assets***                               | *** *** | *** *** | *** *** | *** ***               | *** *** | *** ***               | *** *** |
| **Inventories**                                    | ** **   | **16**       | ** **   | **33**                     | ** **   | **30**                     | ** **   |
| Accounts receivables                               | ** **   | **17**       |         | 345                        |         | 310                        |         |
| Other current receivables                          |         |         |         | 76                         |         | 100                        |         |
| Accrued income and prepaid expenses                | ** **   | **18**       |         | 143                        |         | 238                        |         |
| **Total receivables, accrued income and prepaids** | ** **   | ** **   | ** **   | **564**                    | ** **   | **648**                    | ** **   |
| **Cash and bank balances**                         | ** **   | **19**       | ** **   | **175**                    | ** **   | **346**                    | ** **   |
| **Total current assets**                           | ** **   | ** **   | ** **   | **772**                    | ** **   | **1,024**                  | ** **   |
| **TOTAL ASSETS**                                   | ** **   | **2,3**      | ** **   | **2,805**                  | ** **   | **3,410**                  | ** **   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

F-3

----

 

**CONCORDIA BUS AB (PUBL) AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(all amounts in millions of SEK, except shareand per share amounts)**

 
| ** **                                              | ** ** | **Note**   | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|---------------------------------------------------------|------------|------------|------------|----------------------------|------------|----------------------------|------------|
| **SHAREHOLDER’S EQUITY (DEFICIT) AND LIABILITIES** |       |       |       |                       |       |                       |       |
| **Shareholder’s equity (deficit)**                 | ** ** | **26**     |       |                       |       |                       |       |
| ***Restricted equity***                                 |       |       |       |                       |       |                       |       |
| Share capital (5,000 shares at par value SEK 100)  |       |       |       | 1                          |       | 1                          |       |
| **Total restricted equity**                             | ** ** | ** ** | ** ** | **1**                      | ** ** | **1**                      | ** ** |
| ***Non-restricted equity (deficit)***                   |       |       |       |                       |       |                       |       |
| Retained earnings                                       |       |       |       | (314                       | )          | 78                         |       |
| Net loss for the year                                   | ** ** | **27**     |       | (560                       | )          | (409                       | )          |
| **Total non-restricted equity (deficit)**               | ** ** | ** ** | ** ** | **(874**                   | **)**      | **(331**                   | **)**      |
| **Total shareholder’s equity (deficit)**           | ** ** | ** ** | ** ** | **(873**                   | **)**      | **(330**                   | **)**      |
| **Liabilities**                                         |       |       |       |                       |       |                       |       |
| ***Provisions***                                        |       |       |       |                       |       |                       |       |
| Provisions for pensions and similar commitments         | ** ** | **20**     |       | 51                         |       | 60                         |       |
| Other provisions                                        | ** ** | **25**     |       | 60                         |       | 86                         |       |
| **Total provisions**                                    | ** ** | ** ** | ** ** | **111**                    | ** ** | **146**                    | ** ** |
| ***Non-current liabilities***                           |       |       |       |                       |       |                       |       |
| Notes payable                                           | ** ** | **21**     |       | 1,176                      |       | 2,673                      |       |
| Other long-term debt                                    | ** ** | **21**     |       | 12                         |       | 16                         |       |
| **Total non-current liabilities**                       | ** ** | ** ** | ** ** | **1,188**                  | ** ** | **2,689**                  | ** ** |
| ***Current liabilities***                               |       |       |       |                       |       |                       |       |
| Notes payable                                           | ** ** | **21**     |       | 1,448                      |       | —                     |       |
| Short-term portion of long-term liabilities             | ** ** | **21**     |       | 8                          |       | 7                          |       |
| Accounts payable                                        |       |       |       | 217                        |       | 292                        |       |
| Other current liabilities                               | ** ** | **23**     |       | 153                        |       | 159                        |       |
| Accrued expenses and deferred income                    | ** ** | **22**     |       | 553                        |       | 447                        |       |
| **Total current liabilities**                           |       |       | ** ** | **2,379**                  | ** ** | **905**                    | ** ** |
| **TOTAL SHAREHOLDER’S EQUITY AND LIABILITIES**     |       |       | ** ** | **2,805**                  | ** ** | **3,410**                  | ** ** |
| **PLEDGED ASSETS AND CONTINGENT LIABILITIES**           |       |       |       |                       |       |                       |       |
| Pledged assets                                          | ** ** | **24**     |       | 1,613                      |       | 2,238                      |       |
| Contingent liabilities                                  | ** ** | **24**     |       | —                     |       | 81                         |       |
| **TOTAL  PLEDGED ASSETS AND CONTINGENT LIABILITIES**    | ** ** | ** ** | ** ** | **1,613**                  | ** ** | **2,260**                  | ** ** |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

F-4

----

 

**CONCORDIA BUS AB (PUBL) AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CHANGES INSHAREHOLDER’S EQUITY (DEFICIT)**

**(all amounts in millions of SEK)**

 
| ** **                                                       | ** ** | **Share capital** | ** ** | **Restricted  equity** | ** ** | **Non-restricted  equity** | ** ** | **Total  shareholder’s  equity (deficit)** | ** ** |
|------------------------------------------------------------------|------------|-------------------|------------|------------------------|------------|----------------------------|------------|-------------------------------------------------|------------|
| **Balance,  February 28, 2002 (restated, see Note 1)** | ** ** | **1**             | ** ** | **—**             | ** ** | **421**                    | ** ** | **422**                                         | ** ** |
| Transfer between restricted and  non-restricted equity           |       | —            |       | 27                     |       | (27                        | )          | —                                          |       |
| Net loss for the year                                            |       | —            |       | —                 |       | (344                       | )          | (344                                            | )          |
| **Balance, February 28, 2003**                              | ** ** | **1**             | ** ** | **27**                 | ** ** | **50**                     | ** ** | **78**                                          | ** ** |
| Translation adjustments                                          |       | —            |       | —                 |       | 1                          |       | 1                                               |       |
| Net loss for the year                                            |       | —            |       | —                 |       | (409                       | )          | (409                                            | )          |
| **Balance, February 29, 2004**                              | ** ** | **1**             | ** ** | **—**             | ** ** | **(331**                   | **)**      | **(330**                                        | **)**      |
| Translation adjustments                                          |       | —            |       | —                 |       | 12                         |       | 12                                              |       |
| Effect of change in accounting principles                        |       | —            |       | —                 |       | 5                          |       | 5                                               |       |
| Net loss for the year                                            |       | —            |       | —                 |       | (560                       | )          | (560                                            | )          |
| **Balance, February 28, 2005**                              | ** ** | **1**             | ** ** | **—**             | ** ** | **(874**                   | **)**      | **(873**                                        | **)**      |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

F-5

----

 

**CONCORDIA BUS AB (PUBL) AND SUBSIDIARIES**

**CONSOLIDATED CASH FLOW STATEMENTS**

**(all amounts in millions of SEK)**

 
| ** **                                                                            | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Cash flows from operations**                                                        |       |                                   |       |                                   |       |                                   |       |
| Loss before income taxes                                                              |       | (562                                   | )          | (463                                   | )          | (427                                   | )          |
| Depreciation and amortization and write-downs                                         |       | 381                                    |       | 363                                    |       | 404                                    |       |
| Amortization of deferred financing costs                                              |       | 19                                     |       | 41                                     |       | 8                                      |       |
| (Gain)/loss on sale of fixed tangible assets                                          |       | (4                                     | )          | 1                                      |       | 4                                      |       |
| Foreign currency exchange (gains) losses                                              |       | (41                                    | )          | 23                                     |       | 6                                      |       |
| Change in provision for loss-making contracts and restructuring                       |       | (26                                    | )          | 40                                     |       | 15                                     |       |
| Change in pension provision                                                           |       | (2                                     | )          | (9                                     | )          | 1                                      |       |
| Change in interest receivable                                                         |       | 0                                      |       | 1                                      |       | 3                                      |       |
| Change in interest liability                                                          |       | 76                                     |       | 6                                      |       | 4                                      |       |
| Income taxes received (paid)                                                          |       | (1                                     | )          | 0                                      |       | 2                                      |       |
| **Change in working capital**                                                         |       |                                   |       |                                   |       |                                   |       |
| (Increase) decrease in inventory                                                      |       | (2                                     | )          | 5                                      |       | (4                                     | )          |
| (Increase) decrease in current receivables                                            |       | 118                                    |       | (108                                   | )          | (3                                     | )          |
| Increase (decrease) in current liabilities                                            |       | (54                                    | )          | 107                                    |       | 2                                      |       |
| **Net cash flows provided by (used in) operating activities**                         | ** ** | **(98**                                | **)**      | **7**                                  | ** ** | **15**                                 | ** ** |
| **Cash flows from investing activities**                                              |       |                                   |       |                                   |       |                                   |       |
| Investments in buildings and land,  vehicles, equipment, tools, fixtures and fittings |       | (112                                   | )          | (32                                    | )          | (216                                   | )          |
| Sales of buildings and land, vehicles,  equipment, tools, fixtures and fittings       |       | 44                                     |       | 21                                     |       | 75                                     |       |
| Sale of financial fixed assets                                                        |       | 5                                      |       | 0                                      |       | 5                                      |       |
| **Net cash flows used in investing activities**                                       | ** ** | **(63**                                | **)**      | **(11**                                | **)**      | **(136**                               | **)**      |
| **Cash flows from financing activities**                                              |       |                                   |       |                                   |       |                                   |       |
| Payment of financial lease obligation                                                 |       | (6                                     | )          | (5                                     | )          | (9                                     | )          |
| Proceeds from borrowings                                                              |       | 3                                      |       | 1,191                                  |       | —                                 |       |
| Repayment of long-term borrowings                                                     |       | —                                 |       | (984                                   | )          | (86                                    | )          |
| Costs incurred in connection with debt refinancing                                    |       | (5                                     | )          | (49                                    | )          | (4                                     | )          |
| **Net cash flows provided by (used in) financing activities**                         | ** ** | **(8**                                 | **)**      | **153**                                | ** ** | **(99**                                | **)**      |
| **NET  INCREASE (DECREASE) IN CASH AND BANK BALANCES**                                | ** ** | **(169**                               | **)**      | **149**                                | ** ** | **(220**                               | **)**      |
| **CASH AND  BANK BALANCES AT THE BEGINNING OF THE YEAR**                              | ** ** | **346**                                | ** ** | **199**                                | ** ** | **422**                                | ** ** |
| **Translation  difference on cash and bank balances held in foreign currencies**      | ** ** | **(2**                                 | **)**      | **(2**                                 | **)**      | **(3**                                 | **)**      |
| **CASH AND BANK BALANCES AT THE END OF THE YEAR**                                     | ** ** | **175**                                | ** ** | **346**                                | ** ** | **199**                                | ** ** |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

F-6

----

 

**CONCORDIA BUS AB (PUBL) AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(all amounts in millions of SEK unlessotherwise stated)**

 

Note 1.  Organization andaccounting principles

 

**Organization**

 

Concordia Bus AB (publ) and its subsidiaries (“Concordia BusGroup” or “Concordia”) is a Swedish registered limited liability company,wholly owned by Concordia Bus Holding AB (reg no 556574-8240)with its registered office in Stockholm, Sweden. The ultimate parent company ofthe Concordia Bus Group as of February 28, 2005 is Concordia Bus BV, acompany domiciled in the Netherlands.

 

The operations of Concordia consist of providing regular bus servicesunder contract through its subsidiaries to transit authorities in Sweden,Norway and Finland. In addition to contracted services, Concordia also suppliesextensive express bus services over major portions of Sweden, as well ascharter and tour bus services, mainly in Gothenburg and Stockholm.  In addition to the contracted services,Concordia also operates extensive intercity express bus services between majorcities of Sweden, as well as charter and tour bus services, mainly in the Gothenburg,Malmö and Stockholm regions.  Theoperations of the Concordia Bus Group are conducted through wholly-owned subsidiariesof Concordia Bus Nordic AB.  ConcordiaBus Nordic AB has no independent assets or operations other than its shares inthese subsidiaries.

 

**Accounting principles**

 

The consolidated financial statements of the Concordia Bus Group havebeen prepared in accordance with generally accepted accounting principles inSweden (“Swedish GAAP”) and thus have been prepared in accordance withrecommendations issued by the Swedish Financial Accounting Standards Council(“Redovisningsrådet”). The Concordia Bus Group reconciles its net loss andcapital deficiency to accounting principles generally accepted in the UnitedStates of America (“U.S. GAAP”). Significant differences between SwedishGAAP and U.S. GAAP are described in Note 33.

 

The same accounting policies and methods of computation are followedfor the year ended February 28, 2005 consolidated financial statements ascompared with the most recent annual financial statements except that theCompany as of March 1, 2004 has adopted the Swedish Accounting StandardsCouncil’s recommendation RR29 - Employee benefits.

 

There has been a gradual transition in recent years to new Swedishrecommendations of the Swedish Financial Accounting Standards Council which arebased on and comply with IFRS.  From March 1,2007, Concordia is required to present its consolidated financial statementsfully in accordance with International Financial Reporting Standards(IFRS).  Concordia has not yet assessedthe financial implications of adopting these new standards.

 

***Currency***

 

These financial statements have been prepared in SEK. References to“SEK”, “Swedish krona” or “Swedish kronor” are to Swedish currency.

 

***ConsolidatedFinancial Statements***

 

The Consolidated Financial Statements have been prepared in accordancewith the recommendations of the Swedish Financial Accounting Standards Board(“Redovisningsrådet”) concerning consolidated financial statements.  The consolidated Statement of Operations andBalance Sheets of Concordia include all companies in which Concordia Bus AB(publ), directly or indirectly, holds more than 50 percent of the votingrights.

 

Acquisitions have been accounted for using the purchase method. Thismeans that the assets and liabilities, including deferred taxes, of acquiredsubsidiaries are recorded at fair value at the date of the acquisition. If thepurchase price exceeds the estimated fair value of the company’s net assets,the difference is reported as goodwill, which is amortized over its estimateduseful life. Income from companies acquired during the year is included in theConsolidated Financial Statements from the date of acquisition. Net income fromcompanies sold is included up to the date of the sale.

 

Internal profits and inter-company transactions within the group areeliminated in the Consolidated Financial Statements.

 

F-7

----

 

***Translation ofinvestments in foreign subsidiaries***

 

Concordia uses the current rate method to translate the financialstatements of foreign subsidiaries, in accordance with the suggestedrecommendations of the Swedish Financial Accounting Standards Board(“Redovisningsrådet”). In applying this method, subsidiaries are reported asindependent units with operations conducted in foreign currencies and in whichthe Company has a net investment. This means that the assets and liabilities ofthe foreign subsidiaries are translated at the exchange rate as of the BalanceSheet date. The Statements of Operations are translated at the average rate forthe year.

 

***Revenue recognition***

 

The majority of Concordia’s revenues arise from contracts with localpublic transportation authorities having contract terms of 5-8 years(“CPTA contracts”).

 

CPTA contracts generally provide Concordia with fixed fee revenue inreturn for the contracted bus services. Accordingly, all ticket revenuescollected by Concordia on such contracts, referred to as gross agreements, are remittedto the local public transportation authorities, and Concordia receives itsfixed fees regardless of the number of passengers transported. Under somecontracts, Concordia receives fees from the local transportation authorityafter providing services. Under other contracts, Concordia receives fees inadvance of providing services. Regardless of the timing of receiving the feesfrom the local public transportation authorities, Concordia recognizes revenueon a straight-line basis over the period of the contract and, accordingly,accrues for earned fee revenue or defers unearned fee revenue as appropriate.Such fixed fees are generally subject to periodic adjustment for certainchanges in costs incurred or cost indices. In recognizing the fee revenue overthe period of the contract, Concordia records adjustments to the fee revenueduring the contract period based on the agreed cost adjustment mechanismcontained in the contracts.  Revenuesearned by Concordia on certain other CPTA contracts, referred to as netagreements, are based on or consider the number of passengers transported.  Revenues for these contracts are recognizedon the date of travel by the passenger.

 

Revenues from express bus services are derived from passenger ticketrevenue received, and revenues from coach hire services are derived from theagreed price for hire of the buses. Concordia recognizes express bus servicerevenue and coach hire service revenue as services are provided. Express busservice revenues are recognized on the date of travel by the passenger. Coachhire service revenues are recognized on a straight-line basis over the periodof hire.

 

Revenue also includes rental income, sale of fuel and diesel and fromengineering services. The revenue resulting from other operating activities isrecognized when the product is delivered or the service is performed or, interms of revenues from leasing arrangements under operating leases, on astraight-line basis over the term of lease.

 

Where appropriate, revenue amounts are shown net of value-added taxes.

 

***Income Taxes***

 

The total tax expense of the Concordia Bus Group consists of currentand deferred taxes. Deferred tax primarily consists of estimated tax on changesin untaxed reserves for the year and unused portion of income tax loss carryforwards to the extent that these losses can be used in the near future fortaxable reduction of future taxable income. The deferred income tax position iscalculated using the enacted tax rate for each country respectively.

 

In the consolidated Statements of Operations taxes are reported as ifthe group companies were separate taxable legal entities, in accordance withcurrent taxation legislation for all periods reported.

 

***Depreciation***

 

Depreciation and amortization is computed based on an asset’s expecteduseful life and its depreciable amount. The depreciable amount is computed asthe difference between cost of acquisition and the expected residual value ofthe asset at the end of its useful life. Depreciation is computed using astraight-line method based on the following percentages:

 
| Goodwill                                                    |   | 5-20    | % |
|-------------------------------------------------------------|--------|---------|---|
| Equipment, tools, fixtures and fittings |   | 10-33   | % |
| Public Service Vehicles (“PSV”)                   |   | 7.15-33 | % |
| Buildings                                                   |   | 3.33-5  | % |
| Land improvements                                           |   | 3.75-5  | % |

 

F-8

----

 

Goodwill pertaining to the acquisition of Ingenior M.O SchoyensBilcentraler A/S is amortized over 20 years, which is based on thecompany’s strong strategic position in the Norwegian marketplace and its wellestablished brand in this market.

 

Deferred financing fees are amortized straight-line over the life ofthe debt.

 

***Tangible fixedassets***

 

Tangible fixed assets are valued at cost, less accumulated depreciationand impairment charges.

 

***Impairment oftangible and intangible fixed assets***

 

Impairment reviews of tangible and intangible fixed assets, includinggoodwill, are performed whenever there is an indication of possible impairment.The carrying values of fixed assets, including goodwill related to thoseassets, are not considered to be recoverable when the expected discounted cashflows from those assets are less than their carrying values. An impairment lossis determined based on the amount by which the carrying value exceeds the fairvalue of those assets. Losses on fixed assets to be disposed of are determinedin a similar manner, taking into account the selling price reduced by the costsof disposal.

 

***Receivables andpayables***

 

Receivables and payables are recorded on an individual basis at theamounts, which is estimated to be received/paid.

 

***Receivables andpayables in foreign currencies***

 

Receivables and payables in foreign currencies are valued using therate at the balance sheet date. Gains and losses on trade receivables andpayables are reported under operating profit (loss). Gains and losses relatedto other receivables and payables are reported under financial income andexpenses.

 

***Inventories***

 

Inventory is valued at the lower of cost, using the first in first outmethod, and market value after provision for obsolescence.

 

***Loss makingcontracts***

 

A significant portion of Concordia’s revenues are derived from five- toeight-year contracts with municipalities to provide bus services in aparticular area. Under the terms of the contracts, the revenues are generallyindexed at a rate corresponding to a consumer price index or a net price index.Due to changes in circumstances and because costs have generally increased morequickly than revenues, such contracts may become loss making. Concordia recordsa provision for such loss making contracts at the lowest level for which thereare separate identifiable cash flows. Losses are recognized in the period inwhich management determines that cumulative losses will be incurred on aparticular contract. The loss is computed after taking into account direct andindirect costs related to the service provided under the contract includingdepreciation on the related buses which will be used to meet the serviceobligation.  Concordia Bus normally hasmultiple contracts with the CPTAs (Contract Public TransportationAuthority).  In most of the cases thedifferent contracts with the same CPTA are closely connected to eachother.  The contracts share the sameresources (staff, equipment, vehicles and premises).  Often the contracts also are related forother reasons.  Concordia sign severalcontracts at the same time where some are loss making and some are profitmaking.  In instances where the cash flowsfrom such contracts are interrelated, provisions for loss making contracts aremeasured by group contracts, however in no instance on a higher level than byCPTA.  Concordia also sign contracts tomaximize the usage of the capacity in the resources.  The provision is calculated as the differencebetween the estimated costs to fulfill the contractual commitment and thecontractual revenues.

 

***Derivative contracts***

 

Currency derivatives (currency forwards and currency swaps) enteredinto in order to secure the currency exposure in interest payable for issueddebt are accounted for as hedging securities, that is, the gains and lossesattributed to these derivatives are recorded when the currency exchange ratedifferences on the underlying commercial flows are realised. Derivatives thatdo not qualify for hedge accounting are accounted for at the lower ofacquisition cost or market value, where unrealised losses are accounted for asa financial cost in the statement of operations.

 

F-9

----

 

Interest rate derivatives (interest rate swaps) entered into in orderto obtain a fixed interest rate with the preferred maturity in the leaseobligation are accounted for as hedging securities, that is, the gains andlosses attributed to these derivatives is recorded at the same time as thehedged item is recorded. Interest rate derivatives that do not qualify forhedge accounting are accounted for at the lower of acquisition cost or marketvalue, where unrealised losses are accounted for as a financial cost in thestatement of operations.

 

Diesel derivatives entered into in order to obtain a more secure pricelevel are accounted for as hedging securities, that is, the gains and lossesattributed to these derivatives are recorded at the same time as the hedgeditem is recorded. Diesel derivatives that do not qualify for hedge accountingare accounted for at the lower of acquisition cost or market value, whereunrealised losses are accounted for as an operating cost in the statement ofoperations.

 

***Restructurings***

 

Concordia records provisions for restructurings and related activitiesonly after the detailed formal plan for the restructuring has been formulatedand either the implementation commences or the main features of the plan havebeen announced to those affected by it. Provisions for restructurings includeonly the direct expenditures arising from the restructuring, which are thosethat are both necessarily entailed by the restructuring and not associated withthe continuing activities of the enterprise.

 

***Leasing***

 

Leases are classified in the consolidated financial statements aseither financial leases or operating leases. A finance lease transfers to thelessee the significant economic risks and rewards of ownership. If this is notthe case, the lease is an operating lease. For each finance lease, a fixedasset is reported in the balance sheet and a corresponding lease obligation isrecorded as a liability. In the statement of operations, the costs of financialleases are reported as depreciation and interest expense. Under operatingleases no asset or liability is recorded in the balance sheet. In the statementof operations, the costs of operating leases are charged to the incomestatement on a straight-line basis.

 

***Cash flow statement***

 

The cash flow statement is derived from the statement of income andother changes between the opening and closing balance sheets, eliminating theeffect of currency translation differences. The cash and bank balances in thecash flow statement include securities, time deposits and other short-termdeposits.

 

***Retirementindemnities***

 

Concordia has both defined contribution plans (covering mostly activeemployees) and defined benefit plans (covering mostly former employees).  The costs under the defined contributionplans are calculated based on agreed contributions specified under the terms ofeach plan while costs under defined benefit plans are actuarially determinedand recognized when services are rendered.

 

***Use of estimates***

 

The preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities to the date of the financialstatements and the reported amounts of revenues and expense during thereporting period. Actual results could differ from those estimates.

 

**Segment information**

 

Concordia operates within three bus transportation markets which areConcordia’s main reportable segments: contractual public bus transportation“CPTA”, scheduled intercity bus services (express bus services); and coach hireservices. In Norway and Finland the group operates within the contractualpublic bus transportation segment only.

 

F-10

----

 

 

The contractual public bus transportation division operates throughoutSweden and in the major urban areas in Norway and Finland. The majority ofrevenues are generated from contractual agreements with municipalities wherebyConcordia receives fixed revenues for providing the contracted services.

 

SwebusExpress conducts its business on certain routes all over Sweden. Revenues arederived from ticket sales to passengers. Coach hire services (Interbus) operatehire and excursion engagements, primarily in the three major cities in Sweden,Stockholm, Gothenburg and Malmö, but also in other bigger cities in the Nordiccountries.

 

The management and reporting of results of Concordia’s operations isbased upon the reportable segments rather than the legal structure. Concordia’soperating decision-making group is the Board of Directors. Each segment ismanaged separately because each business requires specialized industryknowledge and strategies. The accounting policies for the reportable segmentsare the same as those used in the consolidated financial statements.

 

Concordia evaluates performance based upon the operating profit or lossbefore tax of each reportable segment and generally accounts for inter-segmentsales and transfers as if the sales or transfers were to third parties atcurrent market prices. Sales are attributed to geographical areas based on thelocation of the assets producing the revenue.

 

**Note 2.  Primarysegments—market type**

 

Revenueby segment:

 
| ** **                                 | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|--------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| CPTA—Sweden                           |       | 3,407                                  |       | 3,486                                  |       | 3,407                                  |       |
| CPTA—Sweden,  sales to other segments |       | 34                                     |       | 37                                     |       | 51                                     |       |
| *Total  CPTA—Sweden*                  | * *   | *3,441*                                | * *   | *3,523*                                | * *   | *3,458*                                | * *   |
| CPTA—Norway                           |       | 450                                    |       | 365                                    |       | 442                                    |       |
| CPTA—Finland                          |       | 415                                    |       | 391                                    |       | 394                                    |       |
| *Total CPTA*                               |       | 4,306                                  | * *   | *4,279*                                | * *   | *4,294*                                | * *   |
| Express                                    |       | 337                                    |       | 327                                    |       | 295                                    |       |
| Interbus—external  customers          |       | 117                                    |       | 110                                    |       | 127                                    |       |
| Interbus—sales  to other segments     |       | 25                                     |       | 27                                     |       | 26                                     |       |
| *Total bus  operations*                    |       | 4,785                                  | * *   | *4,743*                                | * *   | *4,742*                                | * *   |
| Other  revenue and group eliminations      |       | 27                                     |       | 18                                     |       | 16                                     |       |
| **Total  net revenue**                     | ** ** | **4,812**                              | ** ** | **4,761**                              | ** ** | **4,758**                              | ** ** |

 

Operatingprofit (loss) by segment:

 
| ** **                      | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|---------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| CPTA—Sweden*(1)            |       | (187                                   | )          | (81                                    | )          | (52                                    | )          |
| CPTA—Norway**(2)           |       | 6                                      |       | (11                                    | )          | (36                                    | )          |
| CPTA—Finland(3)            |       | (20                                    | )          | (27                                    | )          | (23                                    | )          |
| *Total CPTA*                    | * *   | *(201*                                 | *)*        | *(119*                                 | *)*        | *(113*                                 | *)*        |
| Express                         |       | 26                                     |       | 31                                     |       | 22                                     |       |
| Interbus                        |       | 3                                      |       | 2                                      |       | 4                                      |       |
| *Total Express and Interbus*    |       | 29                                     | * *   | *33*                                   | * *   | *26*                                   | * *   |
| *Total bus operations*          | * *   | *(173*                                 | *)*        | *(86*                                  | *)*        | *(87*                                  | *)*        |
| Head office items and others(4) |       | (139                                   | )          | (69                                    | )          | (85                                    | )          |
| **Total operating loss**        | ** ** | **(312**                               | **)**      | **(155**                               | **)**      | **(172**                               | **)**      |

 

----

Totaloperating loss, above, includes costs for loss making contracts andrestructuring costs of SEK 140, SEK 40 and SEK 15, respectively, for the yearsended February 28, 2005, February 29, 2004 and February 28,2003.

 

(1)           Includes SEK 90, SEK 47 and SEK 6,respectively, costs for loss making contracts and restructuring costs for theyears ended February 28, 2005, February 29, 2004 and February 28,2003.

 

(2)           Includes SEK (7), SEK (8) andSEK 5, respectively, of costs for loss making contracts for the years ended February 28,2005, February 29, 2004 and February 28, 2003.

 

F-11

----

 

(3)           Includes SEK (3), SEK 1 and SEK 4,respectively, of costs for loss making contracts for the years ended February 28,2005, February 29, 2004 and February 28, 2003.

 

(4)           Includes SEK 60 of restructuringcosts for the year ended February 28, 2005.

 

Identifiableassets by segment:

 
| ** **                                 | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| CPTA—Sweden                           |       | 1,670                      |       | 2,313                      |       |
| CPTA—Norway                           |       | 354                        |       | 310                        |       |
| CPTA—Finland                          |       | 223                        |       | 264                        |       |
| *Total  CPTA*                              | * *   | *2,247*                    | * *   | *2,887*                    | * *   |
| Express                                    |       | 202                        |       | 203                        |       |
| Interbus                                   |       | 75                         |       | 78                         |       |
| *Subtotal  Express and Interbus*           | * *   | *277*                      | * *   | *281*                      | * *   |
| *Total bus  operations*                    | * *   | *2,524*                    | * *   | *3,168*                    | * *   |
| Real estate                                |       | 1                          |       | 2                          |       |
| Head office  assets and group eliminations |       | 280                        |       | 240                        |       |
| **Total  assets**                          | ** ** | **2,805**                  | ** ** | **3,410**                  | ** ** |

 

Identifiableliabilities by segment:

 
| ** **                                 | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| CPTA—Sweden                           |       | 655                        |       | 653                        |       |
| CPTA—Norway                           |       | 59                         |       | 59                         |       |
| CPTA—Finland                          |       | 78                         |       | 84                         |       |
| *Total  CPTA*                              | * *   | *792*                      | * *   | *796*                      | * *   |
| Express                                    |       | 40                         |       | 41                         |       |
| Interbus                                   |       | 29                         |       | 22                         |       |
| *Total  Express and Interbus*              |       | 69                         | * *   | *63*                       | * *   |
| *Total bus  operations*                    | * *   | *861*                      | * *   | *859*                      | * *   |
| Head office  assets and group eliminations |       | 2,817                      |       | 2,881                      |       |
| **Total  liabilities**                     | ** ** | **3,678**                  | ** ** | **3,740**                  | ** ** |

 

Investments in intangible, tangible and financial fixed assets bysegment:

 
| ** **                                                                | ** ** | ** **     | ** ** | **Year**     | ** ** | **Year**     | ** ** |
|---------------------------------------------------------------------------|------------|----------------|------------|--------------|------------|--------------|------------|
| ** **                                                                | ** ** | **Year ended** | ** ** | **ended**    | ** ** | **ended**    | ** ** |
| ** **                                                                | ** ** | **February**   | ** ** | **February** | ** ** | **February** | ** ** |
| ** **                                                                | ** ** | **28, 2005**   | ** ** | **29, 2004** | ** ** | **28, 2003** | ** ** |
|                                                                      |       |           |       |         |       |         |       |
| Investments                                                               |       |           |       |         |       |         |       |
| CPTA—Sweden                                                          |       | 55             |       | 19           |       | *202*        |       |
| CPTA—Norway                                                          |       | 35             |       | 3            |       | 1            |       |
| CPTA—Finland                                                         |       | 0              |       | 0            |       | 0            |       |
| *Total  CPTA*                                                             |       | *90*           | * *   | *22*         | * *   | *203*        | * *   |
| Express                                                                   |       | 4              |       | 1            |       | 1            |       |
| Interbus                                                                  |       | 11             |       | 0            |       | 16           |       |
| *Total  Express and Interbus*                                             |       | *15*           | * *   | *1*          | * *   | *17*         | * *   |
| *Total bus  operations*                                                   |       | 105            |       | *23*         |       | *220*        |       |
| Head office assets and group eliminations                                 |       | 12             |       | 58           |       | 0            |       |
| **Total  investments in intangible, tangible and financial fixed assets** |       | **117**        | ** ** | **81**       | ** ** | **220**      | ** ** |

 

Reconciliation to statements of cash flows:

 
| ** **                                                                         | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **February 28,** | ** ** | **February 29,** | ** ** | **February 28,** | ** ** |
| ** **                                                                         | ** ** | **2005**              | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Investments in buildings, land, vehicles, equipment,  tools, fixtures and fittings |       | 112                   |       | 32                    |       | 216                   |       |
| Costs incurred and capitalized in  connection with debt refinancing                |       | 5                     |       | 49                    |       | 4                     |       |
|                                                                               |       | **117**               | ** ** | **81**                | ** ** | **220**               |       |

 

Depreciationby segment:

 
| ** **                                | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| CPTA—Sweden                          |       | 274                                    |       | 256                                    |       | 271                                    |       |
| CPTA—Norway                          |       | 42                                     |       | 29                                     |       | 37                                     |       |
| CPTA—Finland                         |       | 32                                     |       | 30                                     |       | 33                                     |       |
| *Total CPTA*                              | * *   | *348*                                  | * *   | *315*                                  | * *   | *341*                                  | * *   |
| Express                                   |       | 16                                     |       | 18                                     |       | 15                                     |       |
| Interbus                                  |       | 11                                     |       | 10                                     |       | 12                                     |       |
| *Total Express and Interbus*              | * *   | *27*                                   | * *   | *28*                                   | * *   | *27*                                   | * *   |
| *Total bus operations*                    | * *   | *375*                                  | * *   | *343*                                  | * *   | *368*                                  | * *   |
| Buildings                                 |       | 0                                      |       | 0                                      |       | 0                                      |       |
| Head office assets and group eliminations |       | 6                                      |       | 20                                     |       | 36                                     |       |
| **Total depreciation**                    | ** ** | **381**                                | ** ** | **363**                                | ** ** | **404**                                | ** ** |

 

F-12

----

 

**Note 3.  Secondarysegments—marketing areas**

 

Revenueby country:

 
| ** **        | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Sweden            |       | 3,924                                  |       | 3,986                                  |       | 3,902                                  |       |
| Norway            |       | 466                                    |       | 379                                    |       | 457                                    |       |
| Finland           |       | 422                                    |       | 396                                    |       | 399                                    |       |
| **Total revenue** | ** ** | **4,812**                              | ** ** | **4,761**                              | ** ** | **4,758**                              | ** ** |

 

Assetsby country:

 
| ** **       | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|------------------|------------|----------------------------|------------|----------------------------|------------|
| Sweden           |       | 2,227                      |       | 2,836                      |       |
| Norway           |       | 354                        |       | 310                        |       |
| Finland          |       | 224                        |       | 264                        |       |
| **Total assets** | ** ** | **2,805**                  | ** ** | **3,410**                  | ** ** |

 

Investmentsin intangible, tangible and financial fixed assets by country:

 
| ** **                                                                | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|---------------------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Sweden                                                                    |       | 82                                     |       | 78                                     |       | 215                                    |       |
| Norway                                                                    |       | 35                                     |       | 3                                      |       | 1                                      |       |
| Finland                                                                   |       | —                                 |       | 0                                      |       | 0                                      |       |
| **Total investments in intangible, tangible  and financial fixed assets** | ** ** | **117**                                | ** ** | **81**                                 | ** ** | **216**                                | ** ** |

 

Reconciliation to statements of cash flows:

 
| ** **                                                                         | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** | **Year Ended**        | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **February 28,** | ** ** | **February 29,** | ** ** | **February 28,** | ** ** |
| ** **                                                                         | ** ** | **2005**              | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Investments in buildings, land, vehicles,  equipment, tools, fixtures and fittings |       | 112                   |       | 32                    |       | 216                   |       |
| Costs incurred and capitalized in  connection with debt refinancing                |       | 5                     |       | 49                    |       | 4                     |       |
|                                                                               |       | **117**               | ** ** | **81**                | ** ** | **220**               |       |

 

**Note 4.  Netrevenue**

 

Netrevenue is comprised of revenue from bus services, rental income, sale of fuelincluding diesel and revenues from engineering services provided to externalcustomers.

 
| ** **                                      | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Revenue by type**                             |       |                                   |       |                                   |       |                                   |       |
| Revenue from regular bus services               |       | 4,726                                  |       | 4,663                                  |       | 4,665                                  |       |
| Rent, external engineering and diesel  revenues |       | 34                                     |       | 47                                     |       | 40                                     |       |
| Other revenues                                  |       | 52                                     |       | 51                                     |       | 53                                     |       |
| **Total net revenue**                           |       | 4,812                                  | ** ** | **4,761**                              | ** ** | **4,758**                              | ** ** |

 

F-13

----

 

**Note 5.  Cost ofservices provided**

 

Directcosts of services provided are included, along with other costs, in thefollowing cost categories in the statements of operations: fuel, tires andother consumables; other external costs; personnel costs; depreciation andamortization.  The direct costs ofservices included in these cost categories were as follows:

 
| ** **                                             | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|--------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Drivers’ costs                                    |       | 2,287                                  |       | 2,290                                  |       | 2,265                                  |       |
| Depreciation of PSV and operating lease  charges       |       | 736                                    |       | 676                                    |       | 676                                    |       |
| Fuel, tires, other consumables and other  direct costs |       | 1,254                                  |       | 1,170                                  |       | 1,165                                  |       |
| **Total cost of services provided**                    | ** ** | **4,277**                              | ** ** | **4,136**                              | ** ** | **4,106**                              | ** ** |

 

**Note 6.  Otherexternal costs**

 
| ** **                    | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Audit  fees**               | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                             | ** ** |
| **Deloitte AB**          |       |                                   |       |                                   |       |                                   |       |
| Audit and  audit related fees |       | 3                                      |       | 5                                      |       | 4                                      |       |
| Other  services               |       | —                                 |       | —                                 |       | —                                 |       |
| **Total**                     |       | **3**                                  | ** ** | **5**                                  | ** ** | **4**                                  | ** ** |

 

Auditand audit related fees represent the independent auditors’ examination of thefinancial statements and quarterly reports. The audit and audit related feesalso represents fees in conjunction with the auditor’s examination ofsignificant decisions, actions taken and circumstances of Concordia in order tobe able to determine the possible liability to the Company of any Board Memberor the Managing Director or whether they have in some other way acted incontravention of the Companies Act, the Annual Accounts Act or the Articles ofAssociation. Audit and audit related fees also include professional services inconnection with the offering of debt securities of Concordia. All otherservices provided are included in “other services”.

 
| ** **                      | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|---------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Leasing  charges**            |       |                                   |       |                                   |       |                                   |       |
| Operating  lease rental expense |       | 428                                    |       | 388                                    |       | 350                                    |       |
| **Total**                       | ** ** | **428**                                | ** ** | **388**                                | ** ** | **350**                                | ** ** |

 

Forthe years ended February 28, 2005, February 29, 2004 and February 28,2003, Concordia had 1,470, 1,317, and 1,156 buses, respectively, underoperational leasing contracts. Future lease payments for these buses amounts toSEK 1,934 for the year ended February 28, 2005, SEK 1,952 for theyear ended February 29, 2004, and SEK 1,849 for the year ended February 28,2003. Concordia also has properties under operational leasing contracts inwhich it conducts business.

 

Totalfuture minimum lease payments discounted for each period as follows:

 
| ** **             | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|------------------------|------------|----------------------------|------------|----------------------------|------------|
| Vehicles               |       | 829                        |       | 905                        |       |
| Real estate  and other |       | 46                         |       | 52                         |       |
| **Total**              |       | **875**                    | ** ** | **957**                    | ** ** |

 

Thepresent value of the future leasing payments at February 28, 2005 ispayable as follows:

 
| ** ** | ** ** | **Total** | ** ** | **Less than  a year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **More than  5 years** | ** ** |
|------------|------------|-----------|------------|-----------------------|------------|---------------|------------|---------------|------------|-----------------------------|------------|
| Vehicles   |       | 829       |       | 322                   |       | 369           |       | 129           |       | 9                           |       |
| Properties |       | 46        |       | 7                     |       | 15            |       | 17            |       | 7                           |       |
| **Total**  | ** ** | **875**   | ** ** | **329**               | ** ** | **384**       | ** ** | **146**       | ** ** | **16**                      | ** ** |

 

Thefollowing is a schedule, by years, of future gross rental payments underoperating leases as of February 28, 2005, should we keep our currentoperational bus leases through all contractual terms.

 

F-14

----

 
| **Years Ending:**       | ** ** | ** ** | ** ** |
|-------------------------|------------|------------|------------|
| February 28,  2006 |       | 393        |       |
| February 28,  2007 |       | 336        |       |
| February 29,  2008 |       | 272        |       |
| February 28,  2009 |       | 231        |       |
| February 28,  2010 |       | 209        |       |
| Later years             |       | 494        |       |
| **Total**               | ** ** | **1,935**  | ** ** |

 

**Note 7.  Personnelcosts**

 
| ** **                                                              | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **AVERAGE NUMBER OF EMPLOYEES**                                         | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                             | ** ** |
| **Total company of which**                                              | ** ** | **6,949**                              | ** ** | **7,512**                              | ** ** | **7,484**                              | ** ** |
| Men                                                                     |       | 6,101                                  |       | 6,467                                  |       | 6,603                                  |       |
| Women                                                                   |       | 848                                    |       | 1,045                                  |       | 881                                    |       |
| **Finland of which**                                                    | ** ** | **766**                                | ** ** | **750**                                | ** ** | **759**                                | ** ** |
| Men                                                                     |       | 725                                    |       | 723                                    |       | 722                                    |       |
| Women                                                                   |       | 41                                     |       | 27                                     |       | 37                                     |       |
| **Norway of which**                                                     |       | 611                                    | ** ** | **580**                                | ** ** | **775**                                | ** ** |
| Men                                                                     |       | 577                                    |       | 531                                    |       | 728                                    |       |
| Women                                                                   |       | 34                                     |       | 49                                     |       | 47                                     |       |
| **Sweden of which**                                                     | ** ** | **5,572**                              | ** ** | **6,182**                              | ** ** | **5,950**                              | ** ** |
| Men                                                                     |       | 4,799                                  |       | 5,213                                  |       | 5,153                                  |       |
| Women                                                                   |       | 773                                    |       | 969                                    |       | 797                                    |       |
| **SALARIES AND OTHER REMUNERATIONS**                                    |       |                                   |       |                                   |       |                                   |       |
| Board of Directors and President*                                       |       | 5                                      |       | 5                                      |       | 4                                      |       |
| Other employees in Sweden                                               |       | 1,450                                  |       | 1,476                                  |       | 1,454                                  |       |
| ** **                                                              | ** ** | **1,455**                              | ** ** | **1,481**                              | ** ** | **1,458**                              | ** ** |
| **Subsidiaries abroad**                                                 |       |                                   |       |                                   |       |                                   |       |
| Finland, Board of Directors and President                               |       | 2                                      |       | 1                                      |       | 1                                      |       |
| Finland, other employees                                                |       | 205                                    |       | 197                                    |       | 195                                    |       |
| Norway, Board of Directors and President                                |       | 2                                      |       | 2                                      |       | 1                                      |       |
| Norway, other employees                                                 |       | 232                                    |       | 183                                    |       | 204                                    |       |
| **TOTAL**                                                               | ** ** | **1,896**                              | ** ** | **1,864**                              | ** ** | **1,859**                              | ** ** |
| **Employer’s contribution for national social  security purposes** | ** ** | **672**                                | ** ** | **708**                                | ** ** | **700**                                | ** ** |
| Of which pension costs to other employees                               |       | 124                                    |       | 161                                    |       | 132                                    |       |
| Of which pension costs to Board of  Directors and President             |       | 2                                      |       | 2                                      |       | 5                                      |       |

 

----

*              Numbers for the group representBoard of Directors and presidents in all Swedish subsidiaries. Remunerations tothe former president of Concordia Bus Nordic AB was paid out by ConcordiaBus Management AS and was included as corporate costs charged to ConcordiaBus Nordic AB, and therefore not included in the above table as personnelcosts for the years ended in February 2003 and 2004.  As of June 2004, the president wasemployed by Concordia Bus Nordic AB and therefore included in the above tableas personnel costs for the year ended February 28, 2005.  The former CFO resigned from Concordia Bus onJune 30, 2004.  He received atermination payment of SEK 2 million.

 
| ** **                                                 | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                                                 | ** ** | **Number**                 | ** ** | **Thereof men**            | ** ** | **Number** | ** ** | **Thereof men** | ** ** |
| **Board members and senior management**                    |       |                       |       |                       |       |   |   |   |   |
| Members of the board                                       |       | 25                         |       | 92                         | %          | 13 |   | 100 | % |
| Managing directors and other members of  senior management |       | 31                         |       | 90                         | %          | 21 |   | 90 | % |

 

**Note 8. Depreciation and amortization expense**

 
| ** **                               | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Goodwill                                 |       | 45                                     |       | 45                                     |       | 44                                     |       |
| Buildings  and land                      |       | —                                 |       | —                                 |       | —                                 |       |
| Equipment,  tools, fixtures and fittings |       | 17                                     |       | 20                                     |       | 23                                     |       |
| Vehicles                                 |       | 319                                    |       | 298                                    |       | 337                                    |       |
| **Total**                                | ** ** | **381**                                | ** ** | **363**                                | ** ** | **404**                                | ** ** |

 

F-15

----

 

Forinformation concerning the useful lives of the assets, please see Note 1,Organization and Accounting Principles - Depreciation.

 

**Note 9.  Interestincome**

 
| ** **            | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-----------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Affiliated  companies |       | —                                 |       | —                                 |       | 3                                      |       |
| Other                 |       | 4                                      |       | 6                                      |       | 7                                      |       |
| **Total**             | ** ** | **4**                                  | ** ** | **6**                                  | ** ** | **10**                                 | ** ** |

 

Ofthe above, SEK 4, SEK 7, and SEK 13 were received during the yearsended February 28, 2005, February 29, 2004 and February 28,2003, respectively.

 

**Note 10.  Interestexpense and other similar items**

 
| ** **                                          | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-----------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Interest expense on loans from credit  institutions |       | (1                                     | )          | (70                                    | )          | (73                                    | )          |
| Interest expense on notes payable                   |       | (268                                   | )          | (172                                   | )          | (161                                   | )          |
| Amortization of deferred financing fees             |       | (19                                    | )          | (18                                    | )          | (17                                    | )          |
| Write-off of unamortized deferred financing  fees   |       | —                                 |       | (24                                    | )          | —                                 |       |
| Other financial costs                               |       | (12                                    | )          | (7                                     | )          | (11                                    | )          |
| Exchange rate gain and losses, net                  |       | 46                                     |       | (23                                    | )          | (3                                     | )          |
| **Total**                                           | ** ** | **(254**                               | **)**      | **(314**                               | **)**      | **(265**                               | **)**      |

 

Ofthe above, SEK (201), SEK (308) and SEK (261) were during theyears ended February 28, 2005, February 29, 2004 and February 28,2003, respectively.

 

**Note 11.  Incometaxes**

 
| ** **                    | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|-------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Income taxes  repaid          |       | 0                                      |       | 0                                      |       | 2                                      |       |
| Deferred  income taxes        |       | 2                                      |       | 54                                     |       | 81                                     |       |
| **Total  income tax benefit** | ** ** | **2**                                  | ** ** | **54**                                 | ** ** | **83**                                 | ** ** |

 

Differencebetween statutory income tax rate and effective rate of income tax benefit:

 
| ** **                                                                                        | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Loss before income taxes**                                                                      |       | (562                                   | )          | (463                                   | )          | (427                                   | )          |
| Tax at Swedish statutory rate of 28%                                                              |       | 157                                    |       | 130                                    |       | 120                                    |       |
| Tax effect regarding non-taxable items                                                            |       | (1                                     | )          | 1                                      |       | 1                                      |       |
| Tax effect regarding goodwill amortization                                                        |       | (13                                    | )          | (13                                    | )          | (13                                    | )          |
| Tax loss carry forwards for which no  deferred tax asset has been recognized in the balance sheet |       | (141                                   | )          | (64                                    | )          | (25                                    | )          |
| **Total income tax benefit**                                                                      | ** ** | **2**                                  | ** ** | **54**                                 | ** ** | **83**                                 | ** ** |

 

Theincome tax rates in Sweden, Norway and Finland are 28%. The taxes are based onthe loss before tax with adjustments for non deductible/non-taxablerevenues/costs. Concordia Bus AB and Swedish subsidiaries had unrecognizeddeferred taxes related to its accumulated tax loss carry forwards amounting toSEK 538,203 and SEK 111 at February 28, 2005, February 29,2004 and February 28, 2003 respectively. The losses can only be used inthe countries where they arise and in Sweden they can be used indefinitely. Concordia’sindirect subsidiary Concordia Bus Finland Oy Ab has accumulated taxloss carry forwards of SEK 50 of which

 

F-16

----

 

SEK 10can be used until 2011, SEK 4 until 2012, SEK 14 until 2013 andSEK 22 until 2014. Concordia’s indirect subsidiary Ingenior M.O. SchoyensBilcentraler AS has no accumulated tax loss carry forwards.

 

Temporarydifferences arise in instances where assets or liabilities are valueddifferently for tax purposes. Temporary differences have resulted in deferredtax liabilities and assets as follows:

 
| ** **                                 | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** | **February 28, 2003** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|----------------------------|------------|----------------------------|------------|
| Deferred income tax liabilities:           |       |                       |       |                       |       |                       |       |
| Accelerated depreciation for tax purposes  |       | —                     |       | 28                         |       | 96                         |       |
| Other                                      |       | —                     |       | —                     |       | 2                          |       |
| Deferred income tax assets:                |       |                       |       |                       |       |                       |       |
| Income tax loss carry forward              |       | (151                       | )          | (76                        | )          | (59                        | )          |
| Provision for loss contracts               |       | (16                        | )          | (22                        | )          | (13                        | )          |
| Other                                      |       | (25                        | )          | (5                         | )          | (1                         | )          |
| Valuation allowance on deferred tax assets |       | 192                        |       | 75                         |       | 31                         |       |
| **Total deferred income tax liability**    | ** ** | **0**                      | ** ** | **0**                      | ** ** | **56**                     | ** ** |

 

**Note 12. Intangible assets**

** **
| ** **                          | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|-------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Goodwill**                        |       |                                   |       |                                   |       |
| **Acquisition  cost**               |       |                                   |       |                                   |       |
| Beginning  balance                  |       | 940                                    |       | 940                                    |       |
| Ending  balance                     |       | 940                                    |       | 940                                    |       |
| **Accumulated  amortization**       |       |                                   |       |                                   |       |
| Beginning  balance                  |       | (219                                   | )          | (175                                   | )          |
| Translation  difference             |       | 8                                      |       | 1                                      |       |
| Amortization  for the year          |       | (45                                    | )          | (45                                    | )          |
| Ending  balance                     |       | (256                                   | )          | (219                                   | )          |
| **Net book  value, ending balance** | ** ** | **684**                                | ** ** | **721**                                | ** ** |

 

**Note 13.  Tangibleassets**

 
| ** **                         | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Buildings and land**             | ** ** | ** **                             | ** ** | ** **                             | ** ** |
| **Acquisition cost**               |       |                                   |       |                                   |       |
| Beginning balance                  |       | 3                                      |       | 3                                      |       |
| Purchases                          |       | 0                                      |       | 1                                      |       |
| Sales/disposals                    |       | 0                                      |       | (1                                     | )          |
| Ending balance                     |       | 3                                      |       | 3                                      |       |
| **Accumulated depreciation**       |       |                                   |       |                                   |       |
| Beginning balance                  |       | (1                                     | )          | (1                                     | )          |
| Sales/disposals                    |       | 0                                      |       | —                                 |       |
| Depreciation for the year          |       | 0                                      |       | 0                                      |       |
| Ending balance                     |       | (1                                     | )          | (1                                     | )          |
| **Net book value, ending balance** |       | 2                                      | ** ** | **2**                                  | ** ** |
| Tax assessment value               |       | —                                 |       | —                                 |       |

 

The tax assessment value is the basis used by the tax authorities forcomputing property taxes. Several of the subsidiary Swebus Fastigheter AB’sbuildings are classified as transportation buildings and as such are exemptfrom property taxes.

 

F-17

----

 
| ** **                                  | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|---------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Equipment, tools, fixtures and fittings** | ** ** | ** **                             | ** ** | ** **                             | ** ** |
| **Acquisition cost**                        |       |                                   |       |                                   |       |
| Beginning balance                           |       | 245                                    |       | 232                                    |       |
| Purchases                                   |       | 12                                     |       | 16                                     |       |
| Sales/disposals                             |       | (22                                    | )          | (1                                     | )          |
| Translation difference                      |       | 0                                      |       | (2                                     | )          |
| Ending balance                              |       | 235                                    |       | 245                                    |       |
| **Accumulated depreciation**                |       |                                   |       |                                   |       |
| Beginning balance                           |       | (211                                   | )          | (194                                   | )          |
| Sales/disposals                             |       | 20                                     |       | 1                                      |       |
| Depreciation for the year                   |       | (17                                    | )          | (20                                    | )          |
| Translation difference                      |       | (1                                     | )          | 2                                      |       |
| Ending balance                              |       | (208                                   | )          | (211                                   | )          |
| **Net book value, ending balance**          | ** ** | **27**                                 | ** ** | **34**                                 | ** ** |

 
| ** **                         | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Vehicles**                       |       |                                   |       |                                   |       |
| **Acquisition cost**               |       |                                   |       |                                   |       |
| Beginning balance                  |       | 3,526                                  |       | 3,707                                  |       |
| Purchases                          |       | 100                                    |       | 15                                     |       |
| Sales/disposals                    |       | (306                                   | )          | (183                                   | )          |
| Translation difference             |       | (2                                     | )          | (13                                    | )          |
| Ending balance                     |       | 3,318                                  |       | 3,526                                  |       |
| **Accumulated depreciation**       |       |                                   |       |                                   |       |
| Beginning balance                  |       | (2,035                                 | )          | (1,914                                 | )          |
| Sales/disposals                    |       | 265                                    |       | 168                                    |       |
| Depreciation for the year          |       | (319                                   | )          | (298                                   | )          |
| Translation difference             |       | (0                                     | )          | 9                                      |       |
| Ending balance                     |       | (2,090                                 | )          | (2,035                                 | )          |
| **Net book value, ending balance** | ** ** | **1,229**                              | ** ** | **1,491**                              | ** ** |

 

Includedas purchases during the year ended February 28, 2005, are SEK 4 andduring the year ended February 29, 2004 are SEK 0.8, of additions thathave been financed under financial lease arrangements.

 

**Note 14. Receivables from affiliates**

 
| ** **               | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|--------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Beginning  balance       |       | 29                                     |       | 25                                     |       |
| Changes  during the year |       | (29                                    | )          | 4                                      |       |
| **Ending balance**       | ** ** | **—**                             | ** ** | **29**                                 | ** ** |

 

**Note 15.  Otherlong-term investments**

 
| ** **                   | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Investments                  |       | —                     |       | 5                          |       |
| Operating  lease deposit     |       | 5                          |       | 5                          |       |
| Capitalized  financing costs |       | 86                         |       | 99                         |       |
| **Total**                    | ** ** | **91**                     | ** ** | **109**                    | ** ** |

 
| ** **                | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|---------------------------|------------|----------------------------|------------|----------------------------|------------|
| **Investments**           |       |                       |       |                       |       |
| Co-operative  real estate |       | —                     |       | 5                          |       |
| **Total**                 |       | —                     |       | 5                          |       |

 

F-18

----

 
| ** **            | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|-----------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Acquisition  cost** |       |                                   |       |                                   |       |
| Beginning  balance    |       | 5                                      |       | 5                                      |       |
| Sales                 |       | (5                                     | )          | —                                 |       |
| **Ending  balance**   | ** ** | **—**                             | ** ** | **5**                                  | ** ** |

 

Investmentscomprise shares and participations in various cooperative companies. None ofthe participations exceed 20% ownership.

 
| ** **                   | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Operating  lease deposit** |       |                                   |       |                                   |       |
| **Acquisition  cost**        |       |                                   |       |                                   |       |
| Beginning  balance           |       | 5                                      | ** ** | **—**                             | ** ** |
| Increase  during the year    | ** ** | **—**                             |       | 5                                      |       |
| **Ending  balance**          | ** ** | **5**                                  | ** ** | **5**                                  | ** ** |

 
| ** **                                     | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Capitalized  financing costs**               |       |                                   |       |                                   |       |
| **Acquisition  cost**                          |       |                                   |       |                                   |       |
| Beginning  balance                             |       | 135                                    |       | 139                                    |       |
| Write-off  for early repayment of debt         |       | —                                 |       | (53                                    | )          |
| Costs  incurred in connection with refinancing |       | 5                                      |       | 49                                     |       |
| **Ending  balance**                            |       | 140                                    | ** ** | **135**                                | ** ** |
| **Accumulated  depreciation**                  |       |                                   |       |                                   |       |
| Beginning  balance                             |       | (36                                    | )          | (47                                    | )          |
| Write-off  for early repayment of debt         |       | —                                 |       | 29                                     |       |
| Depreciation                                   |       | (18                                    | )          | (18                                    | )          |
| Ending  balance                                |       | (54                                    | )          | (36                                    | )          |
| **Net book  value, ending balance**            | ** ** | **86**                                 | ** ** | **99**                                 | ** ** |

 

**Note 16. Inventories**

 
| ** **      | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|-----------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Finished  goods |       | 33                                     |       | 30                                     |       |

 

Finishedgoods are primarily comprised of fuel and spare-parts.

 

**Note 17. Accounts receivables**

 
| ** **               | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|--------------------------|------------|----------------------------|------------|----------------------------|------------|
| Accounts  receivables    |       | 361                        |       | 318                        |       |
| Allowance  for bad debts |       | (16                        | )          | (8                         | )          |
| **Total**                | ** ** | **345**                    | ** ** | **310**                    | ** ** |

 

Theallowance for bad debts has changed as follows:

 
| **Balance February 28, 2002**  | ** ** | **(5**  | **)**  |
|-------------------------------------|------------|---------|--------|
| Write-offs                          |       | 2       |   |
| Provision  for the year             |       | —  |   |
| **Balance  February 28, 2003** | ** ** | **(3**  | **)**  |
| Write-offs                          |       | —  |   |
| Provision  for the year             |       | (5      | )      |
| **Balance  February 29, 2004** | ** ** | **(8**  | **)**  |
| Write-offs                          |       | 1       |   |
| Provision  for the year             |       | (9      | )      |
| **Balance  February 28, 2005** | ** ** | **(16** | **)**  |

 

F-19

----

 

**Note 18.  Accruedincome and prepaid expenses**

 
| ** **                                 | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Accrued  income—CPTA                  |       | 87                         |       | 156                        |       |
| Other  prepaid expenses and accrued income |       | 56                         |       | 82                         |       |
| **Total**                                  | ** ** | **143**                    | ** ** | **238**                    | ** ** |

 

**Note 19.  Cash andbank balances**

 

Includedas cash and bank balances is the outstanding balance for the cheque accountconnected to the group cheque account, where Concordia Bus Nordic AB is thecontracting part with the bank.

 
| ** **              | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|-------------------------|------------|----------------------------|------------|----------------------------|------------|
| Cash and  bank balances |       | 124                        |       | 292                        |       |
| Restricted  cash*       |       | 51                         |       | 54                         |       |
| **Total**               | ** ** | **175**                    | ** ** | **346**                    | ** ** |

 

----

*              Restricted cash consists ofrefundable deposits in relation to guarantees made by a bank as security forthe pension liability of Concordia Bus Nordic AB and Ingenior M.O. Schoyenscommitments for three traffic contracts in Oslo, Norway.

 

**Note 20. Provisions for pensions and other commitments**

** **
| ** **                      | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|---------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Beginning  balance              |       | 60                         |       | 69                         |       |
| Change in  accounting principle |       | (7                         | )          | —                     |       |
| Change in  provision            |       | (2                         | )          | (9                         | )          |
| **Ending  balance**             | ** ** | **51**                     | ** ** | **60**                     | ** ** |

 
| ** **                   | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Accrued  pension obligations |       | 48                         |       | 54                         |       |
| Other  pensions commitments  |       | 3                          |       | 6                          |       |
| **Total**                    | ** ** | **51**                     | ** ** | **60**                     | ** ** |

 

TheConcordia Bus Group funds pension obligations based on the advice of external actuariesand makes payments to a segregated fund managed by a specialist financialinstitution.

 

Pensionplans for active personnel are funded under a multiemployer plan and throughdefined contribution plans. The total pension costs were SEK 126, SEK 163 andSEK 137 for the years ended February 28, 2005, February 29, 2004, andFebruary 28, 2003, respectively, of which SEK 10, SEK 12 and SEK 11relates to costs of defined benefit pension plans for the years ended February 28,2005, February 29, 2004, and February 28, 2003, respectively.

 

Concordia’semployees in Norway and for certain retired employees of the subsidiary SwebusAB received pension benefits under a defined benefit plan. Such plans areunfunded and, accordingly, pension benefits paid to such employees in 2005,2004 and 2003 respectively were charged against the related provision.

 

Forthis financial year, a discount rate of 5.25 - 5.5% (5.4 - 6%) has been used tocalculate the accrued benefit obligation depending on in which country theobligations are held.

 

Pensionexpense has been included in staff costs and is comprised of the following:

 
| ** **                                 | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|
| Current  service cost                      |       | 5                          |       |
| Interest  cost                             |       | 10                         |       |
| Expected  return on plan assets            |       | (7                         | )          |
| Net  actuarial losses (gains)              |       | 1                          |       |
| Past service  cost                         |       | —                     |       |
| Employers  contribution to social security |       | 1                          |       |
| Net pension  cost                          | ** ** | **10**                     | ** ** |

 

F-20

----

 

Thefollowing table reconciles the funded status of defined benefit plans to theamounts recognised in the balance sheet:

 
| ** **                                 | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------------|------------|----------------------------|------------|
| Present  value of funded obligations       |       | 176                        |       |
| Present  value of unfunded obligations     |       | 20                         |       |
| Unrecognised  actuarial losses             |       | (20                        | )          |
| Unrecognised  past service cost            |       | —                     |       |
| Fair value  of plan assets                 |       | (127                       | )          |
| Employers  contribution to social security |       | 1                          |       |
| Other                                      |       | 1                          |       |
| Amount at  end of the year                 | ** ** | **51**                     | ** ** |

 

Themovements in the liability recognised in the balance sheet were as follows:

 
| ** **                                  | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------|------------|----------------------------|------------|
| At the  beginning of year                   |       | 53                         |       |
| Exchange  differences                       |       | (3                         | )          |
| Net periodic  cost                          |       | 9                          |       |
| Expected  pension payments                  |       | (10                        | )          |
| Employment  contribution to social security |       | 0                          |       |
| Other                                       |       | 2                          |       |
| At the end  of year                         | ** ** | **51**                     | ** ** |

 

Principalactuarial assumptions used to determine pension obligations were as follows:

 
| ** **                         | ** ** | **February 28, 2005** | ** ** |
|------------------------------------|------------|----------------------------|------------|
| Discount  rates                    |       | 5.25-5.5                   | %          |
| Expected  return on plan assets    |       | 6.5                        | %          |
| Expected  rate of salary increases |       | 2.0-3.0                    | %          |
| Future  pension increase           |       | 2.0                        | %          |

 

**Note 21. Long-term liabilities for notes payable and capital lease obligations**

 

Amountsoutstanding under Concordia’s senior debt facilities, senior subordinatednotes, senior secured notes and finance leases were as follows:

 
| ** **                                             | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|--------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Senior Secured Notes (Euro 130 million)                |       | 1,176                      |       | 1,198                      |       |
| Senior Subordinated Notes (Euro 160 million)           |       | 1,448                      |       | 1,475                      |       |
| **Total borrowings before finance lease  obligations** | ** ** | **2,624**                  | ** ** | **2,673**                  | ** ** |
| Other liabilities - finance lease  obligations         |       | 20                         |       | 23                         |       |
| **Total borrowings**                                   | ** ** | **2,644**                  | ** ** | **2,696**                  | ** ** |
| Less : short-term portion                              |       | (1,456                     | )          | (7                         | )          |
| **Total**                                              | ** ** | **1,188**                  | ** ** | **2,689**                  | ** ** |

 

***Senior Subordinated Notes***

 

TheSenior Subordinated Notes were issued by Concordia Bus AB (publ) and have afixed annual interest rate of 11%, which is paid semi-annually (February 15and August 15). The bonds mature in August 2010.  Subsequent to February 28, 2005, holdersof an aggregate principal amount of 99.91% of the senior subordinated notesrelinquished their rights under their senior subordinated notes in exchange forequity in Concordia Bus AB.  As aconsequence of that exchange and a subsequent change of control tender offer,only €58,000 in aggregate principal amount of the Senior Subordinated Notesremains outstanding.

 

***Senior Secured Notes***

 

TheSenior Secured Notes were issued by Concordia Bus Nordic AB (publ), awholly-owned subsidiary. The Senior Secured Notes have a fixed annual interestrate of 9.125%, which is payable semi-annually (February 1 and August 1).The bonds mature in August 2009.

 

F-21

----

 

Asa consequence of the Euro 130 million of Senior Secured Notes, ConcordiaBus Nordic Holding AB (publ) and its subsidiaries are obligated to followcertain financial restrictions which limit entering financial lease agreementsor sale and lease back agreements, making certain kinds of investments,disposing of assets and paying dividends to Concordia Bus AB (publ) except, in certaininstances, to enable or Concordia Bus Nordic Holding (publ) to fulfill its owndebt service obligations.

 

Thelegal issuer of the Senior Secured Notes, Concordia Bus Nordic AB (publ),is a 100% owned subsidiary of Concordia Bus Nordic Holding AB, which iswholly owned by Concordia Bus AB (publ). Concordia Bus NordicHolding AB has fully and unconditionally guaranteed the payment of thenotes. Concordia Bus Nordic AB (publ) is the company owning 100% of theshares in the operating subsidiaries of the Concordia Bus Group. Concordia BusNordic AB (publ) has no independent assets or operations. All subsidiariesof Concordia Bus Nordic AB (publ), other than minor dormant subsidiaries,have also fully and unconditionally guaranteed the payment of the SeniorSecured Notes.

 

Theguarantees of the subsidiaries and of Concordia Bus Nordic Holding AB arejoint and several. As described in more detail in Note 24, thesubsidiaries have also given pledges of certain collateral (both specific andfloating charge certificates) as security for the Senior Secured Notes.

 

TheSenior Secured Notes are classified as long-term liabilities because they arenot in default.  The Senior Subordinated Notesissued by Concordia Bus AB are classified as a current liability becauseConcordia Bus AB did not make its latest interest payment.

 

Subsequent toFebruary 28, 2005, Concordia has borrowed €45 million under a mezzaninefacility agreement.

 

*Swedish Subsidiary Guarantees and Collateral*

 

Enforcementof the senior secured note guarantees and collateral may, in whole or in part,be limited to the extent that the undertaking by each respective subsidiary isdeemed to be in conflict with the corporate interest of the respectivesubsidiary. The corporate interest shall be determined on the basis of whetherthe undertaking was made for business reasons so as to involve corporatebenefit for the subsidiary and whether the guaranteed party is solvent forrepayment of the secured amount at the time of providing the security. Theabsence of business reasons and corporate benefit would have the effect thatthe performance of the undertaking, or part thereof, would violate the SwedishCompanies Act to the extent that it would result in a payment exceeding thedistributable profit of the respective subsidiary at the time of providing thesecurity. Upon such violation, the note guarantees and collateral would beinvalid and any payments made there under would be subject to recovery at leastto the extent they violate the above mentioned rules on corporateinterest.

 

*Finnish Subsidiary Guarantee and Collateral*

 

Thegranting of guarantees and security is restricted under the Finnish CompaniesAct. Enforcement of the note Guarantees and Collateral issued or granted byConcordia Finland may, in whole or in part, be limited to the extent that theundertaking by such subsidiary is deemed to be in conflict with the limitationsset out in the Finnish Companies Act, including the corporate interest ofConcordia Finland. The determination shall be made, *inter alia*, on the basis of whether the undertaking was madefor reasons so as to involve corporate benefit for (and be justified withgrounds relating to the operations of) Concordia Finland and whether theguaranteed party is solvent for repayment of the guaranteed amount during theterm of the undertaking. The absence of business reasons and corporate benefitwould have the effect that the performance of the undertaking, or a partthereof, would violate the Finnish Companies Act. Any such violation wouldrender the note guarantees and collateral invalid and any payments made thereunder would be subject to recovery at least to the extent that they violate theFinnish Companies Act.

 

*Norwegian Subsidiary Guarantee and Collateral*

 

Theissuance of the subsidiary guarantee and the granting of the relevant securityby the Norwegian subsidiary may be invalid under Norwegian law if such issuanceand granting are not motivated by a legitimate business reason or corporatebenefit for that subsidiary. In determining the sufficiency of the businessreason or corporate benefit, a Norwegian court will consider whether or not thegranting of the guarantee or security supported the object and the operationsof that subsidiary. We have been advised by Norwegian counsel that they believesufficient corporate benefit exists with respect to the note guarantee andcollateral granted by the Norwegian subsidiary. However, there can be nocertainty as to the sufficiency of the corporate benefit.

 

F-22

----

 

**Other liabilities**

 
| ** **                       | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|----------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **Financial  lease obligations** |       |                       |       |                       |       |
| Payable  within 2-5 years        |       | 12                         |       | 15                         |       |
| Payable  after five years        |       | 0                          |       | 1                          |       |
| **Total  long-term**             | ** ** | **12**                     | ** ** | **16**                     | ** ** |
| Short-term  portion              |       | 8                          |       | 7                          |       |
| **Total**                        | ** ** | **20**                     | ** ** | **23**                     | ** ** |

 

Duringthe financial year ended February 28, 2005, Interbus AB has entered intofinancial lease arrangements regarding two buses. The duration of theagreements is 25 months and 61 months respectively. The lease cost isbased on the depreciation according to an annuity method and a floating rate ofinterest.

 

Thefollowing is a schedule by years of future minimum gross lease paymentsunder finance leases together with the present value of the net minimum leasepayments as of February 28, 2005:

 
| **Year ending**                              | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|------------|------------|
| February 28,  2006                      |       | 8          |       |
| February 28,  2007                      |       | 5          |       |
| February 28,  2008                      |       | 4          |       |
| February 29,  2009                      |       | 2          |       |
| February 28,  2010                      |       | 2          |       |
| Later years                                  |       | 1          |       |
| **Total  minimum gross lease payments**      | ** ** | **22**     | ** ** |
| Less: Amount  representing interest          |       | (2         | )          |
| **Present  value of minimum lease payments** | ** ** | **20**     | ** ** |

 
| ** **                                                | ** ** | **SEK Equivalent** | ** ** | **Weighted-average floating  interest rate** | ** ** |
|-----------------------------------------------------------|------------|--------------------|------------|----------------------------------------------|------------|
| **Currency**                                              |       |               |       |                                         |       |
| Euro                                                      |       | 2,624              |       | 10.16                                        | %          |
| Swedish krona                                             |       | 20                 |       | 4.23                                         | %          |
| **Total borrowings including finance lease  obligations** | ** ** | **2,644**          |       |                                         |       |

 

**Note 22.  Accruedexpenses and deferred income**

 
| ** **                                              | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|---------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Deferred  income—CPTA                              |       | 125                        |       | 90                         |       |
| Accrued  employee costs (payroll, social charges, etc.) |       | 235                        |       | 278                        |       |
| Accrued  interest expenses                              |       | 94                         |       | 18                         |       |
| Other  accrued expenses                                 |       | 99                         |       | 61                         |       |
| **Total**                                               | ** ** | **553**                    | ** ** | **447**                    | ** ** |

 

**Note 23.  Othercurrent liabilities**

 
| ** **                       | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|----------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Employee—withholding  taxes |       | 55                         |       | 58                         |       |
| Other  short-term liabilities    |       | 98                         |       | 101                        |       |
| **Total**                        | ** ** | **153**                    | ** ** | **159**                    | ** ** |

 

**Note 24.  Pledgedassets and contingent liabilities**

 
| ** **                                                              | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **Pledged shares and contingent liabilities  for senior secured notes** |       |                       |       |                       |       |
| Pledged shares in subsidiaries(a)                                       |       | 382                        |       | 709                        |       |
| Other pledged assets                                                    |       | 1,099                      |       | 1,351                      |       |
| Floating charge certificates(b)                                         |       | 132                        |       | 119                        |       |
| **Other pledged shares and contingent  liabilities**                    |       |                       |       |                       |       |
| Other pledged assets                                                    |       | —                     |       | 59                         |       |
| Guarantees and other contingent liabilities                             |       | —                     |       | 22                         |       |
| **Total**                                                               | ** ** | **1,613**                  | ** ** | **2,260**                  | ** ** |

 

F-23

----

 

InJanuary 2004 a refinancing of the Concordia Bus Group’s then existingcredit facilities was completed through the issuance of EUR 130 million ofbonds. The proceeds received when issuing the bonds was used to repay existingcredit facilities. In connection with the refinancing, Concordia wrote offSEK 25 million of unamortized capitalized financing costs and terminatedthe related euro interest rate derivatives at a cost of SEK 14 million.

 

Assecurity for the Senior Secured Notes, Concordia has pledged the shares in theoperating subsidiaries, the foreign subsidiaries and the real-estate companies,the buses owned by Swebus Busco AB and IngeniØr M.O. SchØyens Bilcentraler AS (“SBC”),the operating receivables and fixed assets of SBC, and two internal loans toSwebus Busco AB and Swebus AB amounting to € 87 million and €22 million respectively. The subsidiaries have pledged floating chargecertificates amounting to SEK 119 million and have given guaranteesrelating to the bonds. See Note 21 regarding certain limitations on the enforcementof such guarantees and collateral pledges.

 

Additionallyto the table above Concordia Bus AB is a guarantor of Swebus AB’s trafficobligation towards SL.

 

----

(a)           The following securities exist as of February 28,2005:

 

Thecompany has pledged the shares of Concordia Bus Nordic Holding AB;

 

ConcordiaBus Nordic Holding AB has pledged the shares of Concordia Bus Nordic AB;

 

ConcordiaBus Nordic AB has pledged the shares of

SwebusFastigheter AB,

SwebusAB,

ConcordiaBus Finland Oy AB,

SwebusBus Co AB,

IngeniorM.O. Schoyens Bilcentraler A/S;

SwebusExpress AB;

InterbusAB;

 

SwebusFastigheter AB has pledged the shares of

Alpus AB,

Enköping-Bålsta Fastighetsbolag AB, and

MalmfältensOmnibus AB;

 

(b)           Alpus AB has granted pledge overfloating charge certificates in an aggregate amount of SEK 0.6 million;

 

Enköping-BålstaFastighetsbolag AB has granted pledge over floating charge certificates inaggregate amount of SEK 2.4 million;

 

MalmfältensOmnibus AB has granted pledge over floating charge certificates in anaggregate amount of SEK 2.5 million;

 

ConcordiaBus Finland Oy AB has granted pledge over floating chargecertificates in an aggregate amount of € 1.2 million

 

Swebus ABhas granted pledge over floating charge certificates in an aggregate amount ofSEK 115 million

 

GävleTrafik AB has granted pledge over floating charge certificates in anaggregate amount of SEK 0.8 million

 

SwebusBusco AB has granted pledge for its buses in an aggregate amount of 1.001million.

 

IngeniorM.O. Schoyens Bilcentraler A/S has granted pledge for its assets in anaggregate amount of 98 million.

 

Thefollowing shares (at unconsolidated carrying values) have been pledged forexisting long-term liabilities:

 

F-24

----

 
| ** **                                             | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|--------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Concordia Bus Nordic AB                           |       | 0                          |       | 44                         |       |
| Shares in Swebus Fastigheter AB                   |       | 21                         |       | 26                         |       |
| Shares in Swebus AB                               |       | 31                         |       | 253                        |       |
| Shares in Swebus Express AB                       |       | 14                         |       | 15                         |       |
| Shares in Interbus AB                             |       | 20                         |       | 20                         |       |
| Shares in Concordia Bus  Finland Oy Ab       |       | 50                         |       | 34                         |       |
| Shares in Swebus Busco AB                         |       | 1                          |       | 68                         |       |
| Shares in Ingenior M.O. Schoyens  Bilcentraler AS |       | 245                        |       | 249                        |       |
| Dormant companies                                      |       | —                     |       | —                     |       |
| **Total**                                              | ** ** | **382**                    | ** ** | **709**                    | ** ** |

 

**Note 25.  Otherprovisions**

 
| ** **                                | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|-------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Provisions  for loss-making contracts** |       |                                   |       |                                   |       |
| Beginning  balance                        |       | 80                                     |       | 46                                     |       |
| Change in  provision during the year      |       | (27                                    | )          | 34                                     |       |
| **Ending  balance**                       | ** ** | **53**                                 | ** ** | **80**                                 | ** ** |

 

Provisionsfor loss making contracts have been made on an individual or aggregated basisdepending on interdependency of cash flows for the contracts where contractualrevenues do not cover the estimated costs. The provision is calculated as thedifference between the estimated costs to fulfill the contractual commitmentand the contractual revenues.

 
| ** **                                | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|-------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Restructuring costs**                   |       |                                   |       |                                   |       |
| Beginning balance                         |       | 6                                      |       | —                                 |       |
| Release of previous year’s provision |       | (6                                     | )          | —                                 |       |
| Provision this year                       |       | 7                                      |       | 6                                      |       |
| **Ending balance**                        | ** ** | **7**                                  | ** ** | **6**                                  | ** ** |

 

Restructuringcosts during financial year ended February 28, 2004 were primarily foremployee termination benefits relating to the Gothenburg, Sweden depots whichwere closed during the financial year ended February 28, 2005.

 

Endingbalance of SEK 7 million relates to costs for employees that have beenterminated and for services rendered during the financial year ended February 28,2005.

 

F-25

----

 

**Note 26.  Changesin shareholder’s equity (deficit)**

 
| ** **                                                      | ** ** | **Share capital** | ** ** | **Restricted  equity** | ** ** | **Non-restricted  equity** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------------|------------|-------------------|------------|------------------------|------------|----------------------------|------------|-----------|------------|
| **Balance February 28, 2002 (Restated,  see Note 1)** | ** ** | **1**             | ** ** | **—**             | ** ** | **422**                    | ** ** | **422**   | ** ** |
| Translation adjustments                                         |       | —            |       | —                 |       | (0                         | )          | (0        | )          |
| Transfers between restricted and  non-restricted equity         |       | —            |       | 27                     |       | (28                        | )          | —    |       |
| Net loss                                                        |       | —            |       | —                 |       | (344                       | )          | (344      | )          |
| **Balance February 28, 2003**                              | ** ** | **1**             | ** ** | **27**                 | ** ** | **50**                     | ** ** | **78**    | ** ** |
| Translation adjustments                                         |       | —            |       | —                 |       | 0                          |       | 0         |       |
| Transfers between restricted and  non-restricted equity         |       | —            |       | (27                    | )          | 28                         |       | —    |       |
| Net loss                                                        |       | —            |       | —                 |       | (409                       | )          | (409      | )          |
| **Balance February 29, 2004**                              | ** ** | **1**             | ** ** | **—**             | ** ** | **(331**                   | **)**      | **(330**  | **)**      |
| Translation adjustments                                         |       | —            |       | —                 |       | 11                         |       | 11        |       |
| Effect of Change in accounting principle,  net of tax           |       | —            |       | —                 |       | 5                          |       | 5         |       |
| Net loss                                                        |       | —            |       | —                 |       | (560                       | )          | (560      | )          |
| **Balance February 28, 2005**                              | ** ** | **1**             | ** ** | **—**             | ** ** | **(874**                   | **)**      | **(873**  | **)**      |

 

Restrictedreserves refer to equity, which according to the Swedish Companies Act is notdistributable. Annual transfers between restricted and unrestricted reservesrepresent annual changes in the reserves and relate mainly to annual changes instatutory untaxed reserves of individual companies within the Concordia BusGroup.

 

Concordia Bus AB received as part of establishing the group in 2000 aconditional shareholders contribution of SEK 648 million. The repayment of suchcontributions is conditional on the company and the group having sufficient futuredistributable earnings.

 

**Note 27.  Net lossper share**

 
| ** **                       | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|----------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Shares  issued and outstanding   |       | 5,000                                  |       | 5,000                                  |       | 5,000                                  |       |
| Net loss  (millions of SEK) |       | (560                                   | )          | (409                                   | )          | (344                                   | )          |
| **Net loss  per share (SEK)**    | ** ** | **(112,063**                           | **)**      | **(81,721**                            | **)**      | **(68,780**                            | **)**      |

 

Netloss per share is computed by dividing net loss by the weighted-average numberof shares outstanding during the year. There were no dilutive securitiesoutstanding during the years presented and the number of shares has been unchanged.

 

**Note 28. Financial risk management and financial derivatives**

 

Theprincipal market risks (i.e., the risk of loss arising from adverse changes inmarket rates and prices) to which we are exposed are:

 

•                  Interest rates on debt;

 

•                  Credit- and counterparty-risk;

 

•                  Foreign exchange rates;

 

•                  Fuel prices; and

 

•                  Inflation.

 

F-26

----

 

Risk management is conducted centrally in accordance with the financepolicy adopted by the board. The Concordia Bus Group uses derivatives as partof its financial risk management in order to limit the foreign exchange,interest rate and diesel price exposure. As of February 28, 2005, we havenot complied with this policy, due to lack of credit facilities. As of February 28,2005 we have not complied with this policy concerning the items foreignexchange contracts and diesel hedges. The reason is that the company, due toits weak financial situation during the financial year ending February 28,2005, has not been able to get the necessary credit facilities in place inorder to enter derivatives contracts.

 

***Interest Rates Risk***

 

Interest rate risk refers to the risk that changes in the market rateof interest will adversely affect Concordia’s interest cost. How fast a changein the interest rate will influence the net interest depends on the borrowingsfixed interest term.

 

Concordia is mainly exposed to interest rate risk in its leases whichare based on among other things a floating market interest rate. To reduce theinterest exposure in the lease portfolio, Concordia has entered into interestrate derivatives which hedge the interest for a portion of the leasecommitment. The outstanding interest rate derivatives have notional amountstotaling SEK 77.5 million at February 28, 2005. All interest ratederivatives mature in 2005.

 

Based on the nominal value of the operational lease commitment atFebruary 28, 2005, of SEK 1,935 million, a one basis point change ininterest rates would increase lease charges by approximately SEK 19.3 millionper annum.

 

***Credit- andcounterparty-risk***

 

Concordia’s financial transactions lead to credit risks towardsfinancial counterparties. Concordia’s financial policy states that credit riskshall be reduced through only accepting counterparties with high credit ratingand through fixed credit limits. On February 28, 2005, Concordia hadlimited counterparty exposure concerning its derivatives, since they do nothave any material outstanding contracts.

 

Commercial credit risks are limited through a diversified customer basewith high credit ratings. A provision has been recorded for accountsreceivables, which have been estimated to be doubtful of collection.

 

***Foreign ExchangeRisk***

 

Foreign exchange risk arises through cash flows in foreign currency(transaction exposure) and through the recalculation of outstanding debt,issued in other currencies than the Swedish Krona (foremost the secured Notesof €130 million and unsecured Notes of €160 million) and of the foreignsubsidiaries’ balance sheets and statements of operations to Swedish kronor(translation difference exposure).

 

*Transaction exposure—*TheConcordia Bus Group is exposed to foreign exchange differences relating to theEUR 130 million senior secured notes and €160 million unsecured. To limit thetransaction risk, which arises from the interest rate payments on the notes,Concordia has entered into currency derivatives having a notional amount of EUR4.4 million. Concordia has hedges in place for 15% of the total interestpayable during the financial year ending February 28, 2006.

 

Based on Concordia Bus Nordic’s interest payments of EUR29.5 million for the 12-month period beginning March 1, 2005, theinterest cost would increase by SEK 27.3 million if the Swedish currencywould depreciate 10 percent against the euro compared to the rate ofexchange at February 28, 2005. The calculation includes the outstandingcurrency derivatives.

 

Concordia is also exposed to foreign exchange rate changes through thepurchase of diesel fuel. Diesel fuel is priced in the international commoditymarkets in US dollars. Concordia receives compensation for a portion of changesin diesel prices through revenue indexes in the contracts with the CPTA’s. Itis estimated that this index compensation reduces 55% of the exposure to dieselprice changes. Based on the budgeted diesel consumption, a 10 percentdepreciation of the Swedish crown against the US dollar would increase thediesel costs by SEK 9.1 million for the coming financial year beginningMarch 1, 2005. The calculation includes the effects of the computed indexcompensation.

 

*Translation difference exposure—*Concordia’sexposure to translation differences has historically not been hedged.

 

F-27

----

 

***Fuel Price Risk***

 

Concordia is also exposed to commodity price risk through itsrequirements for diesel fuel. Diesel fuel is priced in the internationalcommodity markets in US dollars. Concordia receives compensation for aportion of changes in diesel prices through revenue indexes in the contractswith the CPTA’s. It is estimated that this index compensation reduces 55% ofthe exposure to diesel price changes.

 

Based on the budgeted diesel consumption, an increase of oneUS dollar/ton would increase diesel costs by SEK 0.2 million for the12-month period beginning March 1, 2005.

 

***Inflation***

 

Inflation had no material impact on our operations during the yearended February 28, 2005. However, due to the nature of our contractualbusiness where cost increases are compensated through movements in agreedindices (elements of total inflation) we are currently subject tounder-compensation due to a mismatch between our industry costs and ourrelative level of compensation from the indices which the local transportationauthorities use to compensate us.

 

**Note 29. Fair value of financial instruments**

 

Outstanding interest rate swaps on February 28 2005

 

*Group*

 
| ** **              | ** ** | **Notional  amount** | ** ** | **Fixed  interest rate** | ** ** | **Maturity  date** | ** ** | **Market  value** | ** ** |
|-------------------------|------------|----------------------|------------|--------------------------|------------|--------------------|------------|-------------------|------------|
| ** **              | ** ** | **(SEK)**            | ** ** | ** **               | ** ** | ** **         | ** ** | **(KSEK)**        | ** ** |
| Interest  rate swap SEK |       | 18,750,000           |       | 5.68                     | %          | May 19, 2005  |       | (161              | )          |
| Interest  rate cap SEK  |       | 40,000,000           |       | 6.00                     | %          | June 20, 2005 |       | 0                 |       |
| Interest  rate swap SEK |       | 18,750,000           |       | 5.73                     | %          | July 19, 2005 |       | (332              | )          |
| ** **              |       |                 |       |                     |       |               |       | **(493**          | **)**      |

 

The market value of these financial instruments has been expensed inthe statement of operations since they do not qualify for hedging accounting.

 

Outstanding foreign exchange options on February 28, 2005:

 

*Group*

 
| ** **             | ** ** | **Amount** | ** ** | **Strike rate** | ** ** | **Maturity date** | ** **            | **Marketvalue(KSEK)** | ** ** |
|------------------------|------------|------------|------------|-----------------|------------|-------------------|-----------------------|-----------------------|------------|
| Issued put  option     |       | €     | 4,400,000  |            | 8.70       |              | August 10, 2005  |                  | (47        | ) |
| Purchased  call option |       | €     | 4,400,000  |            | 10.92      |              | August 10, 2005  |                  | —     |   |
| Issued put  option     |       | €     | 4,400,000  |            | 8.83       |              | February 9, 2006 |                  | (320       | ) |
| Purchased  call option |       | €     | 4,400,000  |            | 11.45      |              | February 9, 2006 |                  | —     |   |
| Issued put  option     |       | €     | 4,400,000  |            | 8.50       |              | August 8, 2006   |                  | (133       | ) |
| Purchased  call option |       | €     | 4,400,000  |            | 10.78      |              | August 8, 2006   |                  | 0          |   |
| ** **             |       | ** ** |       | ** **      |       | ** **        |                  | **(500**              | **)**      |

 

No outstanding diesel swaps on February 28, 2005:

 

**Note 30. Going-concern matters**

 

Concordia has over time accumulated significant losses, wherebyshareholder equity has become negative and cash and bank balances havedecreased, even though additional cash was contributed through the refinancingproject consummated in February 2004 and through the Restructuring. The ConcordiaBus Group long term ability to continue its operations is dependent on asuccessful future tendering process and continuing cost cutting initiatives aswell as an improvement in cash flows.

 

F-28

----

 

 Since the Restructuring, theCompany remains is highly leveraged as a result of the Senior Secured Notesoutstanding, the mezzanine facility and significant operational leaseobligations. This leverage has put additional pressure on the Company’s cashflows and has limited the Company’s ability to seek additional external funds.Existing cash and bank balances are not expected to be sufficient to coverfuture cash needs for potential operating losses, normal capital expenditures,mandatory interest payment and amortization on debt owed.

 

Prior to the Restructuring, and for the fiscal year ending February 28,2005, the Company was highly leveraged as a result of the Senior SubordinatedNotes and the Senior Secured Notes outstanding. However, on October 4, 2005 holders of 99.91% in aggregateprincipal amount of the Senior Subordinated Notes received equity in Concordiain exchange for releasing Concordia from all claims they had under the Senior SubordinatedNotes as part of a restructuring of Concordia. As a result, as of October 4, 2005, 97.5% of the issued ordinaryshare capital is held by former holders of Concordia’s Senior SubordinatedNotes. In connection with the Restructuring, Concordia Bus AB has borrowed€45,000,000 under a mezzanine facility of which approximately €38,000,000 hasbeen contributed to Concordia Bus Nordic as an equity capital contribution topay for the expenses of the Restructuring and to cover its capital needs.  The remaining amount has been used to coverrestructuring expenses. 

 

As of February 28, 2005, Concordia had approximately SEK 1.188 millionof long-term debt due to third parties, including the Senior Secured Notes andlong term finance lease obligations but excluding operating lease obligationsand excluding Senior Subordinated Notes of SEK 1.448 million, which areclassified as short term. As of November 30, 2005, Concordia hasapproximately SEK 1.691 million of long-term debt due to third parties, includinglongterm finance lease obligations but excluding operating lease obligations.Its ability to service the existing debt, including amortization and interest,is dependent on the underlying businesses generating sufficient cash flow anddistributable earnings. Furthermore its ability to service its existing debt,is dependent on the ability to transfer profit from Concordia Bus Nordic AB toConcordia. The non-restricted equity in the underlying companies, available fordividends, has been reduced during the year due to losses, which furthermorelimits its ability to receive dividends from subsidiaries.

 

The consolidated statements of operations for the year endedFebruary 28, 2005 shows that earnings generated by the underlyingbusinesses during the period March 1, 2004 - February 28, 2005 havenot been sufficient to cover Concordia’s costs. The management of Concordiabelieves that now that the restructuring is consummated Concordia will be ableto continue as a going concern primarily as a result of reduction of the ConcordiaBus Group’s total indebtedness and consequently improvement in Concordia’s cashflow used in financing activities. Furthermore, Concordia and its subsidiariesare continuing to implement changes in the operations, changes to the administrativestructure as well as certain changes in the capital structures. In addition,the improvements in compensation levels in new tenders with public transportauthorities are continuing.

 

These financial statements have been prepared assuming that Concordia andits subsidiaries will be successful in their initiatives and, consequently,they have been prepared assuming that Concordia will continue as a goingconcern. These financial statements have also been prepared under theassumption that during the 12 month period following the release of thesefinancial statements: (i) Concordia Bus Nordic AB will be in compliancewith its covenants associated with its senior secured notes, and(ii) Concordia Bus AB will not become insolvent or bankrupt. If ConcordiaBus Nordic AB were to be in breach of one or more of those covenants, and ifthe lenders so elected, the €130,000,000 Senior Secured Notes, which areclassified as long term as of February 28, 2005, would become immediatelydue and payable.

 

Further, in the event of an acceleration under the senior secured notesfollowing a default, all or part of the leasing contracts covering asignificant portion of Concordia’s leases may be terminated at the option ofthe lessor. This could have a material adverse effect on Concordia’s business.

 

**Note 31. Subsidiaries of Concordia**

 

Concordia Bus AB (publ) has the following wholly ownedsubsidiaries:

 
| ** **                                          | ** ** | **Company’s  registration  number** | ** ** | **Number  of shares** | ** ** | **Ownership  (%)** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------|------------|-----------------------|------------|--------------------|------------|
| **Subsidiaries**                                    |       |                                     |       |                  |       |               |       |
| Concordia  Bus Nordic Holding AB                    |       | 556028-1122                              |       | 300                   |       | 100                |       |
| Concordia  Bus Nordic AB                            |       | 556031-8569                              |       | 160,000               |       | 100                |       |
| —Interbus AB                                   |       | 556097-8990                              |       | 5,000                 |       | 100                |       |
| —Swebus AB                                     |       | 556057-0128                              |       | 3,000                 |       | 100                |       |
| —Swebus  Busco AB                              |       | 556583-0527                              |       | 1,000                 |       | 100                |       |
| —Swebus  Express AB                            |       | 556358-3276                              |       | 5,000                 |       | 100                |       |
| **Foreign  subsidiaries**                           |       |                                     |       |                  |       |               |       |
| —Concordia  Bus Finland Oy AB             |       | 0505988-8                                |       | 2,000                 |       | 100                |       |
| —Ingenior  M.O. Schoyens Bilcentraler A/S |       | 915768237                                |       | 750                   |       | 100                |       |
| **Real estate  companies**                          |       |                                     |       |                  |       |               |       |
| —Swebus Fastigheter AB                         |       | 556031-3354                              |       | 10,000                |       | 100                |       |

 

F-29

----

 
| ** **                                          | ** ** | **Company’s  registration  number** | ** ** | **Number  of shares** | ** ** | **Ownership  (%)** | ** ** |
|-----------------------------------------------------|------------|------------------------------------------|------------|-----------------------|------------|--------------------|------------|
| —Subsidiaries to Swebus  Fastigheter AB:       |       |                                     |       |                  |       |               |       |
| —Alpus AB                                      |       | 556011-6571                              |       | 10,000                |       | 100                |       |
| —Malmfältens Omnibus AB                   |       | 556032-0359                              |       | 960                   |       | 100                |       |
| —Enköping-Bålsta  Fastighetsbolag AB |       | 556012-9388                              |       | 1,500                 |       | 100                |       |
| **Dormant  companies**                              |       |                                     |       |                  |       |               |       |
| —Arlanda buss AB                               |       | 556030-5335                              |       | 1,000                 |       | 100                |       |
| —Billingens Trafikk AB                         |       | 556027-3137                              |       | 14,000                |       | 100                |       |
| —Enköping-Bålsta Trafik AB           |       | 556410-2894                              |       | 1,000                 |       | 100                |       |
| —Gävle Trafik AB                          |       | 556031-1812                              |       | 70,000                |       | 100                |       |
| —Hälsinge Wasatrafik AB                   |       | 556039-2622                              |       | 1,550                 |       | 100                |       |
| —AB Härnösandsbuss                   |       | 556029-8258                              |       | 3,000                 |       | 100                |       |
| —Karlstadsbuss AB                              |       | 556051-2039                              |       | 3,000                 |       | 100                |       |
| —AB Kristinehamns  Omnibusstrafik              |       | 556043-6445                              |       | 9,000                 |       | 100                |       |
| —Saltsjöbuss AB                           |       | 556210-1500                              |       | 2,500                 |       | 100                |       |
| —Swebus Service AB                             |       | 556041-6736                              |       | 1,000                 |       | 100                |       |
| —Swebus Västerås AB                  |       | 556115-9988                              |       | 5,100                 |       | 100                |       |
| —Tumlare Buss AB                               |       | 556068-5975                              |       | 1,010                 |       | 100                |       |
| —Wasabuss AB                                   |       | 556416-2419                              |       | 1,000                 |       | 100                |       |
| —Wasatrafik AB                                 |       | 556048-9188                              |       | 2,400                 |       | 100                |       |

 

**Note 32. Related party transactions**

 

Erik Linnarsson is a partner at AdvokatfirmanLindahl HB, which acts as legal counsel to Concordia and is a director ofcertain of Concordia’s operating subsidiaries.

 

Under a lease arrangement between SchØyen Group and IngeniØr M.O.SchØyens Bilcentraler A/S, SchØyen Group has leased depots and other realproperty to SBC AB, a subsidiary of Concordia, for a period of ten years endingin 2009. The rentals paid were SEK 14 million, SEK 13 million, and SEK 15million for the years ended February 29, 2005, February 28, 2004, andFebruary 28, 2003, respectively.

 

Concordia Bus Management A/S, a wholly-owned subsidiary of ConcordiaBus BV, has provided management services to Concordia and its subsidiaries. Amanagement fee has been charged to Concordia and their subsidiaries for theseservices amounting to SEK 11 million, SEK 15 million, and SEK 23 million foryears ended February 28, 2005, February 29, 2004, andFebruary 28, 2003, respectively.

 

In connection with the termination of certain key employees during theyears, Concordia Bus Nordic AB has transferred funds to the SchØyen Group at anamount of NOK 1,005 thousand to settle certain shareholder loans. InAugust 2005 these shareholder loans have been repaid at its nominal amountby the SchØyen Group.

 

On February 28, 2005 we have made a valuation allowance of anaggregate of SEK 33,000,000 for loans that Concordia Bus BV and Concordia BusManagement AS owed to Concordia. The receivables still exist and actions willbe taken to get them collected however given the ongoing restructuring processand the financial status of these two companies Concordia has chosen a prudentview when determining collectability.

 

For a description of the Subordinated Shareholder Loan, see“Description of Other Material Indebtedness—Subordinated Shareholder Loan fromConcordia Bus AB.”

 

**Note 33. Reconciliation to accounting principles generally accepted in the UnitedStates of America**

 

Accounting policies used by the Concordia Bus Group conform withaccounting principles generally accepted in Sweden (“Swedish GAAP”) whichdiffer in certain significant respects from accounting principles generallyaccepted in the United States of America (“U.S. GAAP”). Below is adescription of these differences and a reconciliation of net loss,shareholder’s equity (deficit) and cash flows to U.S. GAAP.

 

F-30

----

 
| ** **                                                             | ** ** | **Note**   | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| **Net loss  under Swedish GAAP**                                       | ** ** | ** ** | ** ** | **(560**                               | **)**      | **(409**                               | **)**      | **(344**                               | **)**      |
| (See Note 1)                                                           | ** ** | ** ** | ** ** | ** **                             | ** ** | ** **                             | ** ** | ** **                             | ** ** |
| Adjustments:                                                           |       |       |       |                                   |       |                                   |       |                                   |       |
| Goodwill amortization                                                  |       | (a         | )          | 44                                     |       | 44                                     |       | 44                                     |       |
| Pensions                                                               |       | (b         | )          | 0                                      |       | 2                                      |       | 1                                      |       |
| Derivative financial instruments                                       |       | (d         | )          | 1                                      |       | 26                                     |       | (11                                    | )          |
| Sale-leaseback of real estate                                          |       | (e         | )          | 4                                      |       | 15                                     |       | 8                                      |       |
| Lease classification                                                   |       | (f         | )          | (4                                     | )          | (6                                     | )          | (8                                     | )          |
| Restructuring                                                          |       | (g         | )          | (6                                     | )          | 6                                      |       | —                                 |       |
| Tax effect  of U.S. GAAP adjustments                              |       |       |       | 3                                      |       | (12                                    | )          | 9                                      |       |
| **Net loss  under U.S. GAAP**                                     | ** ** | ** ** | ** ** | **(518**                               | **)**      | **(334**                               | **)**      | **(301**                               | **)**      |
| Number of  shares                                                      |       |       |       | 5,000                                  |       | 5,000                                  |       | 5,000                                  |       |
| **Primary and diluted net loss per share  under U.S. GAAP (SEK)** | ** ** | ** ** | ** ** | **(103,600**                           | **)**      | **(66,895**                            | **)**      | **(60,180**                            | **)**      |

 
| ** **                                                  | ** ** | **Note**   | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|-------------------------------------------------------------|------------|------------|------------|----------------------------|------------|----------------------------|------------|
| **Shareholder’s  equity (deficit) under Swedish GAAP** | ** ** | ** ** | ** ** | **(873**                   | **)**      | **(330**                   | **)**      |
| Adjustments:                                                |       |       |       |                       |       |                       |       |
| Goodwill amortization                                       |       | (a         | )          | 125                        |       | 81                         |       |
| Pensions                                                    |       | (b         | )          | (10                        | )          | (5                         | )          |
| Refund from defined contribution plan                       |       | (c         | )          | 54                         |       | 54                         |       |
| Derivative financial instruments                            |       | (d         | )          | 1                          |       | (0                         | )          |
| Sale-leaseback of real estate                               |       | (e         | )          | (31                        | )          | (35                        | )          |
| Lease classification                                        |       | (f         | )          | (21                        | )          | (17                        | )          |
| Restructuring                                               |       | (g         | )          | —                     |       | 6                          |       |
| Tax effect  of U.S. GAAP adjustments                   |       |       |       | 2                          |       | (1                         | )          |
| **Capital  deficiency under U.S. GAAP**                | ** ** | ** ** | ** ** | **(753**                   | **)**      | **(247**                   | **)**      |

 

Under Swedish GAAP, Concordia’s cash flow statements are presented inaccordance with the Swedish Financial Accounting Standards Council’srecommendation No. 7. These statements present substantially the sameinformation as is required under U.S. Statement of Financial Accounting Standards(“SFAS”) No. 95, “Statement of Cash Flows”, in the manner in which certaininformation is presented.

 

A summary of Concordia’s operating, investing and financing activities,classified in accordance with U.S. GAAP, utilizing the amounts shown inthe Swedish GAAP cash flow statement, are as follows:

 
| ** **                                                             | ** ** | **Note**   | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Cash flows provided by (used in) operating  activities, Swedish GAAP   |       |       |       | (98                                    | )          | 7                                      |       | 15                                     |       |
| Lease  classification                                                  |       | (f         | )          | 12                                     |       | 12                                     |       | 12                                     |       |
| Cash flows provided by (used in) operating  activities, U.S. GAAP |       |       |       | (86                                    | )          | 19                                     |       | 27                                     |       |
| Cash flows used in investing activities,  Swedish GAAP                 |       |       |       | (63                                    | )          | (11                                    | )          | (136                                   | )          |
| Restricted  cash                                                       |       | 19         |       | (51                                    | )          | —                                 |       | —                                 |       |
| Cash flows  used in investing activities, U.S. GAAP               |       |       |       | (114                                   | )          | (11                                    | )          | (136                                   | )          |
| Cash flows provided by (used in) financing  activities, Swedish GAAP   |       |       |       | (8                                     | )          | 153                                    |       | (99                                    | )          |
| Lease  classification                                                  |       | (f         | )          | (12                                    | )          | (12                                    | )          | (12                                    | )          |
| Cash flows provided by (used in) financing  activities, U.S. GAAP |       |       |       | (20                                    | )          | 141                                    |       | (111                                   | )          |
| **Net increase (decrease) in cash and bank  balances**                 | ** ** | ** ** | ** ** | **(220**                               | **)**      | **149**                                | ** ** | **(220**                               | **)**      |

 

There were no significant non-cash investing or financing activitiesduring either of the three years presented above other than that Concordiaentered into capital leases resulting in the recognition of capitalized vehiclecosts and related capital lease obligations of SEK 4 for the year endedFebruary 28, 2005, SEK 1 million for the year ended February 29,2004 and SEK 37 million for the year ended February 28, 2003.

 

F-31

----

 

**(a)           Goodwillamortization**

 

For Swedish GAAP, Concordia amortizes goodwill balances based on theirestimated economic lives and assesses the balances for impairment wheneverthere is an indicator that the assets may be impaired. Effective March 1,2002, Concordia adopted Statement of Financial Accounting Standard (“SFAS”)No. 142, “Goodwill and Other Intangible Assets,” for U.S. GAAPpurposes. SFAS No. 142 requires goodwill to no longer be amortized, butinstead be tested for impairment upon adoption of SFAS No. 142, as well ason an annual basis, and more frequently if circumstances indicate a possibleimpairment. If the carrying value of goodwill exceeds its fair value, animpairment loss is recognized. Prior to adopting SFAS No. 142, forU.S. GAAP purposes, Concordia amortized goodwill balances over theirestimated economic lives, not to exceed twenty years, and assessed the balancesfor impairment whenever events or changes in circumstances indicated that the carryingamounts may not be recoverable.

 

Upon the adoption of SFAS No. 142, the transition provisions ofSFAS No. 141, “Business Combinations,” also became effective requiring, incertain circumstances, the reclassification of amounts between recognized goodwilland other intangibles relating to previous business combinations. Thetransition provisions of SFAS No. 141 did not affect any of Concordia’spreviously reported goodwill under U.S. GAAP.

 

Under SFAS No. 142, the U.S. GAAP goodwill impairment test isperformed at the reporting unit level and is comprised of two steps. Theinitial step is designed to identify potential goodwill impairment by comparingan estimate of the fair value of the applicable reporting unit to its carryingvalue, including goodwill. Concordia’s measurement of fair value is based on anevaluation of both future discounted cash flows, consistent with those utilizedin Concordia’s annual planning process, and public company trading multiples.If the carrying value exceeds fair value, a second step is performed, whichcompares the implied fair value of the applicable reporting unit’s goodwillwith the carrying amount of that goodwill, to measure the amount of goodwillimpairment, if any. Subsequent reversal of a recognized impairment loss isprohibited.

 

Upon adoption of SFAS No. 142, Concordia performed transitionalimpairment tests of goodwill under U.S. GAAP. As a result of theseimpairment tests, no impairment charges were recognized at the date ofadoption. Subsequent annual impairment tests are performed, at a minimum, ongoodwill in conjunction with Concordia’s annual planning process. Noimpairments were recorded under U.S. GAAP as a result of the annualimpairment tests.

 

Changes in the total carrying amount of goodwill for U.S. GAAPpurposes were as follows during each of the years ended February 29/28:

 
| ** **                                                            | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Balance at  March 1 for U.S. GAAP reporting purposes        |       | 856      |       | 856      |       | 856      |       |
| Acquisitions                                                          |       | —   |       | —   |       | —   |       |
| Amortization                                                          |       | —   |       | —   |       | —   |       |
| Balance at  February 29/28 for U.S. GAAP reporting purposes |       | 856      |       | 856      |       | 856      |       |

 

As required by SFAS No. 142, the results for periods prior to itsadoption have not been restated. The following table reconciles the reportednet loss and basic and diluted net loss per share, all in accordance withU.S. GAAP, to that which would have resulted if SFAS No. 142 had beenadopted on March 1, 2001 (in SEK millions, except per share amounts):

 
| ** **                                           | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Reported net  loss in accordance with U.S. GAAP |       | (518     | )          | (334     | )          | (301     | )          |
| Add: Goodwill amortization, net of tax of  nil       |       | —   |       | —   |       | —   |       |
| Adjusted net  loss in accordance with U.S. GAAP |       | (518     | )          | (334     | )          | (301     | )          |

 
| ** **                                                                       | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Reported  basic and diluted net loss per share in accordance with U.S. GAAP |       | (103,600 | )          | (66,895  | )          | (60,180  | )          |
| Add: Goodwill  amortization, net of tax of nil                                   |       | —   |       | —   |       | —   |       |
| Adjusted  basic and diluted net loss per share accordance with U.S. GAAP    |       | (103,600 | )          | (66,895  | )          | (60,180  | )          |

 

Under Swedish GAAP, Concordia recognized the net present value ofpension refund discussed in (c), below, as a component of the purchase price ofConcordia Bus Nordic AB for Swedish GAAP but not for U.S. GAAP. Thisdifference in accounting for the acquisition resulted in goodwill forU.S. GAAP being larger than goodwill for Swedish GAAP. As a result, priorto the adoption of SFAS No. 142, goodwill amortization underU.S. GAAP was greater than goodwill amortization under Swedish GAAP.

 

F-32

----

 

**(b)           Pensions**

 

Both Swedish and U.S. GAAP have the same objective, which is theaccrual for the projected cost of providing such pension benefits. There arecertain differences with U.S. GAAP being more prescriptive, requiring theuse of the projected unit credit method; whereas under Swedish GAAP, theaccrued benefit obligation is calculated. Other areas of differences includethe actuarial assumptions, the treatment of actuarial gains and losses and planchanges. Concordia has pension arrangements under two defined benefit plans forits employees in Norway and one defined benefit plan for retired employees inSweden.

 

Concordia’s defined benefit pension plan for Swedish retirees isunfunded and has 568 plan participants at February 28, 2005.

 

Prior to January 1, 2004, Concordia offered two defined benefitpension plans to employees in Norway. One of the plans was for employees whobegin work with Concordia before the age of 58 years. Such plan is fundedand has 528 plan participants at February 28, 2005. The plan assetsare invested in a combination of equity securities, government guaranteedbonds, real estate and other high-grade long-term investments. The other planwas for employees who begin work at the age of 58 years or later. Suchplan is not funded and includes 424 plan participants at February 28,2005. Beginning January 1, 2004, the two defined benefit plans were closedto new enrollments. Instead, new employees must enroll in SBC’s definedcontribution plan.

 

The amounts computed in accordance with U.S. GAAP as shown below relateto the defined benefit pension plans described previously:

 
| ** **                                              | ** ** | **2005** | ** ** | **2004**    | ** ** |
|---------------------------------------------------------|------------|----------|------------|-------------|------------|
| **Change  in benefit obligation:**                      |       |     |       |        |       |
| Benefit obligation beginning of the year                | ** ** | **192**  |       | 196         |       |
| Service cost                                            |       | 5        |       | 4           |       |
| Interest cost                                           |       | 10       |       | 11          |       |
| Actuarial (gains) losses                                |       | (6       | )          | (1          | )          |
| Benefits paid                                           |       | (15      | )          | (16         | )          |
| Other                                                   |       | 8        |       | (2          | )          |
| Benefit obligation end of the year                      | ** ** | **194**  | ** ** | **192**     | ** ** |
| **Change  in plan assets:**                             |       |     |       |        |       |
| Fair value of plan assets at the beginning  of the year | ** ** | **116**  | ** ** | **116**     | ** ** |
| Actual return on plan assets                            |       | 7        |       | 7           |       |
| Employer contributions                                  |       | 4        |       | 4           |       |
| Benefits paid                                           |       | (9       | )          | (6          | )          |
| Other                                                   |       | 9        |       | (5          | )          |
| Fair value of plan assets at the end of the  year       | ** ** | **127**  | ** ** | **116**     | ** ** |
| Funded status                                           |       | (67      | )          | **(76**     | **)**      |
| Unrecognized net actuarial (gain) loss                  |       | 9        | ** ** | **14**      | ** ** |
| Accrued benefit obligation                              | ** ** | **(58**  | **)**      | **(62**     | **)**      |
| **Components  of net pension cost:**                    |       |     |       |        |       |
| Service cost                                            |       | 5        |       | 4           |       |
| Interest cost                                           |       | 10       |       | 11          |       |
| Expected return on plan assets                          |       | (7       | )          | (7          | )          |
| Amortization of net actuarial (gain) loss               |       | —   |       | —      |       |
| Social charges                                          |       | 1        |       | —      |       |
| Net pension cost                                        | ** ** | **9**    | ** ** | **8**       | ** ** |
| **Weighted-average  assumptions at year end:**          |       |     |       |        |       |
| Discount rates                                          |       | 5.3-6.5  | %          | **5.5-7.0** | **%**      |
| Expected return on plan assets                          |       | 5.5      | %          | **6.0**     | **%**      |
| Rate of compensation increases                          |       | 3.3      | %          | **3.0**     | **%**      |
| Inflation rates                                         |       | 2.0      | %          | **2.0**     | **%**      |

 

A reconciliation of the above disclosures, which are combined forConcordia’s three defined benefit plans, to the amounts recorded in the balancesheet is as follows:

 

F-33

----

 
| ** **                                     | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Norwegian  plan with net prepaid pension asset |       | 9                          |       | 11                         |       |
| Norwegian  plan with net pension obligation    |       | (15                        | )          | (16                        | )          |
| Swedish plan  with net pension obligation      |       | (19                        | )          | (57                        | )          |
| **Net  accrued pension benefit obligation**    | ** ** | **(67**                    | **)**      | (62                        | )          |

 

In regards to the plans having a net pension obligation, the followingis the funded status of those plans on a combined basis, before consideration ofunrecognized items:

 
| ** **                      | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|---------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Accumulated  benefit obligation |       | (194                       | )          | (192                       | )          |
| Fair value  of plan assets      |       | 127                        |       | 116                        |       |
| **Funded  status**              | ** ** | **(67**                    | **)**      | **(76**                    | **)**      |

 

For other active employees the entities in the Swebus group haveindividual plans or participate in plans administered outside Concordia. Thesepension plans are generally non-contributory for the employees and coversubstantially all of Swebus employees.

 

Concordia recognized additional liability of SEK 19 million as ofFebruary 28, 2005. such amount represented the excess of the differencebetween accumulated benefit obligation of SEK 194 million and the fair value ofplan assets of SEK 127 million, and the recorded liability under Swedish GAAPof SEK 48 million.

 

**(c)           Refundfrom defined contribution plan**

 

Swedish companies participate in a collectively bargained pension planfor all Swedish white-collar employees (a multiemployer pension plan). Requiredcontributions to the plan are charged to earnings as they become due and payablefor purposes of both Swedish GAAP and U.S. GAAP. In 1998, the planadministrator (“SPP”) announced a significant surplus in the plan and that thesurplus would be returned to plan participants. In 1999, the plan administratorannounced how much each employer would receive. In 2000, actual payment termswere announced, which include an initial cash refund based on a formula (whichresulted in a refund of 20% of the calculated share of surplus for manycompanies) with the remainder applied as a credit against future premiums orpotentially transferred to another entity. Until the surplus is refunded toparticipating companies, it was the legal property of the pension plan. UnderSwedish GAAP, the refund was recognized as an asset as part of the net assetsof which were acquired by its shareholder on January 14, 2000. Suchaccounting treatment differs from the accounting treatment underU.S. GAAP, where any refunds under a defined contribution plan arerecognized as income in the period when the refund can actually be utilized.Thus, under U.S. GAAP, no asset for this refund was recognized inconnection with the acquisition of Concordia by its shareholder. As ofFebruary 28, 2002, Concordia had received the full amount of the refund incash and, consequently, had recognized the amount in income and, therefore in equityunder U.S. GAAP.

 

**(d)           Financialinstruments**

 

*Derivative Financial Instruments:*

 

Concordia uses financial instruments to manage risks associated withinterest rate exposure on variable rate debt, fuel price risk and foreigncurrency exposure associated with Euro-denominated debt. These financialinstruments include interest rate swaps, fixed price fuel contracts and foreigncurrency contracts.

 

Under Swedish GAAP, hedge accounting is used as long as a hedge isconsidered effective and then the fair value of the hedge instrument is heldoff balance sheet. The net settlement of the instrument is recorded on the sameline as the expense from the hedge exposure.

 

U.S. GAAP requires that every derivative instrument (includingcertain derivative instruments embedded in other contracts) be recorded on thebalance sheet as either an asset or liability measured at its fair value.U.S. GAAP requires that changes in a derivative’s fair value be recognizedcurrently in earnings unless specific criteria are met to account for suchfinancial instruments as hedges. Concordia accounts for changes in the fairvalue of all its derivative financial instruments through income as it has notchosen to designate any of the derivative instruments as hedges forU.S. GAAP purposes.

 

*Fair Values of Financial Instruments*

 

The carrying amounts of Concordia’s categories of financial fixedassets, accounts and other current receivables, cash and cash balancesapproximated their respective fair values at February 28, 2005 andFebruary 28, 2004. Similarly, the carrying

 

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amounts of Concordia’s categories of non-current liabilities andcurrent liabilities approximated their respective fair values atFebruary 28, 2005 and February 29, 2004.

 

The fair values of derivate financialinstruments held by Concordia at February 28, 2005 are included in note29. in certain circumstances, the fair values of the derivates financialinstruments are not recorded for Swedish GAAP reporting purposes. However, forU.S. GAAP reporting purposes, the carrying amounts of all derivative financialinstruments are equal to their values as stated above.

 

**(e)           Sale-leasebackof real estate**

 

Under Swedish GAAP, a gain incurred in connection with a sale-leasebacktransaction where the criteria for a financial lease transaction is notfulfilled and where the transaction is based on fair value should be recognizedin the period when the sales transaction has been consummated. Under U.S. GAAP,any gain on a sale-leaseback transaction where a majority of the assets areretained by the seller must be deferred and recognized over the life of thelease, if a capital lease, or in proportion to gross rentals if an operatinglease.

 

In periods prior to March 1, 2002, Concordia sold properties andsimultaneously leased them back. Under Swedish GAAP, Concordia recordedimmediate net gains related to these sale-leaseback transactions in itsstatement of operations. Under U.S. GAAP, the net gains related to thesetransactions were deferred and are being amortized in relation to the leaseagreement.

 

**(f)            Leaseclassification**

 

Under Swedish GAAP, leases are reported in the consolidated financialstatements as capital leases if the lease entails the transfer to the lessee,to a material extent, of the economic risks and benefits generally associatedwith ownership. If this is not the case, the lease is reported as an operatinglease and the lease payments are expensed as incurred.

 

Under U.S. GAAP, specific criteria are used to determine whether alease is a capital lease. Specifically, a capital lease is one where either theminimum payments are in excess of 90% of the fair market value, the leasedassets or the lease term is equal to or greater than 75% of the estimatedeconomic life of the property, the lease contains a bargain purchase option, orthe lease transfers ownership of the property to the lessee at the end of thelease term.

 

Certain of Concordia’s leases, which resulted from the sale-leasebacktransactions entered into by Concordia as described in (e), are capital leasesfor U.S. GAAP purposes and operating leases for Swedish GAAP purposes.

 

At February 28, 2005 a total of SEK 21 has been recorded as anequity difference due to classification of leases, whereof SEK 14 relates toaccumulated depreciation (SEK 4 in current year) and the remainder relates todifferences between lease payments and interest portion of lease expenses.

 

**(g)           Restructuring**

 

For Swedish GAAP, Concordia recorded a restructuring provision of SEK6 million at February 29, 2004, relating to one-time, employeetermination costs pertaining to the close-down of operations in Gothenburg,Sweden which will occur after February 29, 2004. As the employees mustcontinue working for longer than a minimum retention period to receive thetermination benefit, the termination costs are deemed to have future benefitunder U.S. GAAP. As a result, under U.S. GAAP, the termination costs cannot berecognized as a provision at February 29, 2004. Instead, the fair value ofthe obligation at February 29, 2004 was recognized under U.S. GAAP ratablyover the estimated remaining service period of the employees. The fair value ofthe obligation was fully recognized in income in the year endedFebruary 28, 2005.

 

**(h)           Comprehensiveloss under U.S. GAAP**

 

The following presents comprehensive loss, defined as changes in thestockholder’s deficit of Concordia as a result of transactions other than thosewith the owner:

 
| ** **                                               | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** | **Year ended  February 28, 2003** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Net loss                                                 |       | (518                                   | )          | (334                                   | )          | (301                                   | )          |
| Other  comprehensive income (loss):                      |       |                                   |       |                                   |       |                                   |       |
| Change in cumulative translation  adjustment, net of tax |       | 12                                     |       | 1                                      |       | (12                                    | )          |
| **Comprehensive  loss**                                  | ** ** | **(506**                               | **)**      | **(333**                               | **)**      | **(313**                               | **)**      |

 

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**(i)            Changesin shareholder’s equity (deficit) under U.S. GAAP**

 
| ** **                                   | ** ** | **Shareholder’s  Equity** | ** ** |
|----------------------------------------------|------------|--------------------------------|------------|
| **Balance  February 28, 2002**          | ** ** | **399**                        | ** ** |
| Change in  cumulative translation adjustment |       | (12                            | )          |
| Net loss                                     |       | (301                           | )          |
| **Balance  February 28, 2003**          | ** ** | **86**                         | ** ** |
| Change in  cumulative translation adjustment |       | 1                              |       |
| Net loss                                     |       | (334                           | )          |
| **Balance  February 29, 2004**          | ** ** | **(247**                       | **)**      |
| Change in  cumulative translation adjustment |       | 12                             |       |
| Net loss                                     |       | (518                           | )          |
| **Balance  February 28, 2005**          | ** ** | **(753**                       | **)**      |

 

**(j)            Newaccounting principles for U.S. GAAP**

 

***Consolidation ofVariable Interest Entities***

 

In December 2003, the U.S. Financial Accounting Standard Board(“FASB”) issued FASB Interpretation No. 46 ( revised inDecember 2003), “Consolidation of Variable Interest Entities, “ (“FIN46R”) which addresses the consolidation of variable interest entities bybusiness enterprises. Variable interest entities are entities in which eitherthe equity investment at risk is not sufficient to absorb the probable losseswithout additional subordinated financial support from other parties, or theinvestors with equity at risk lack certain essential characteristics of acontrolling interest. Under FIN 46R, Concordia must consolidate any variableinterest entity in which Concordia holds variable interests and is deemed theprimary beneficiary. Portions of the requirements of FIN 46R were required tobe adopted during the year ended February 29, 2004, while other portionswere required to be adopted during the year ended February 28, 2005 underthe transition rules. The adoption of the remaining provisions of FIN 46Rduring the year ended February 28, 2005 did not have a significant effecton Concordia’s consolidated financial position or results of operationsreported in accordance with US GAAP did not have any impact on Concordia’sconsolidated financial position or results of operations. The remainingprovisions become effective after February 29, 2004, but management doesnot expect that such provisions will have a material impact on Concordia’sconsolidated financial position or results of operations under U.S. GAAP.

 

***Revenue Arrangementswith Multiple Deliverables***

 

In May 2003, the Emerging Issues Task Force of the FASB reached aconsensus on Issue 00-21, “Revenue Arrangements with Multiple Deliverables”(EITF 00-21), providing further guidance on how to account for multiple elementrevenue contracts. EITF 00-21 is effective for all revenue arrangements enteredinto on or after January 1, 2004. The adoption of the EITF 00-21 during theyear ended February 28, 2005 did not have a significant effect onConcordia’s consolidated financial position or results of operations reportedin accordance with U.S. GAAP.

 

***Exchanges of Non-Monetary Assets***

 

In December 2004, the FASB issued SFAS No. 153, “Exchanges ofNon-Monetary Assets – an amendment of APB Opinion No. 29” (“SFAS 153”).Accounting Principles Board (“APB”) Opinion No. 29, “Accounting forNonmonetary Transactions” provided an exception to the basic fair-valuemeasurement principle for exchanges of similar productive assets. Thatexception required that some nonmonetary exchanges, although commerciallysubstantive, be recorded on a carryover basis. SFAS 153 eliminates theexception to fair value for exchanges of similar productive assets and replacesit with a general exception to fair-value measurement for exchange transactionsthat do not have commercial substance—that is, transactions that are notexpected to result in significant changes in the cash flows of the reportingentity. SFAS 153 is effective prospectively for Concordia in accounting fornonmonetary asset exchanges which occur on or after March 1, 2006 for U.S.GAAP purposes.

 

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***Accounting Changes and Error Corrections***

 

In May 2005, the FASB issued SFAS No. 154, “AccountingChanges and Error Corrections - a replacement of APB Opinion No. 20 andFASB Statement No. 3”**(“SFAS 154”).SFAS 154 applies to all voluntary changes in accounting principle, and changesthe requirements for accounting for and reporting of a change in accountingprinciple. SFAS 154 requires retrospective application to prior periods’financial statements of a voluntary change in accounting principle unless it isimpracticable. APB No. 20, “Accounting Changes” previously required thatmost voluntary changes in accounting principle be recognized by including innet income of the period of the change the cumulative effect of changing to thenew accounting principle. SFAS 154 is effective for accounting changes andcorrections of errors made by Concordia on or after March 1, 2006 for U.S.GAAP purposes, except that SFAS 154 does not change the transition provisionsof any existing accounting pronouncement, including those that are in atransition phase as of March 1, 2006.

 

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