**UNITED STATES****SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.20549**

**FORM 20-F**
| **(Mark One)**                                        | ** ** | ** **                                                                                                               |
|-------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|
| ** **                                            | ** ** | ** **                                                                                                               |
| o                                                     | ** ** | **REGISTRATION STATEMENT PURSUANT TO  SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT  OF 1934** |
|                                                  | ** ** | ** **                                                                                                               |
| **OR**                                                |
| ** **                                            |
| x                                                     | ** ** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                 |
|                                                  | ** ** | ** **                                                                                                               |
| **For the  fiscal year ended December 31, 2006** |
| **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**          |

 

**000-22828 Commissionfile number**

**CONCORDIA BUS NORDIC AB (publ)******(Exact name of Registrantas specified in its charter)

**SWEDEN**(Jurisdiction of incorporation ororganization)

**Solna Strandväg 78, 171-54 Solna,Sweden**(Address of principalexecutive offices)

Securities registered or to be registered pursuant toSection 12(b) of the Act: **None**

Securities registered or to be registered pursuant toSection 12(g) of the Act: **None**

Securities for which there is a reporting obligationpursuant to Section 15(d) of the Act:

**NONE**

Indicate the number of outstanding shares of each of theissuer’s classes of capital or common stock as of the close of the periodcovered by the annual report:

**160,000 sharesof Common Stock as of December 31, 2006**

Indicate by check mark if the registrant is a well-knownseasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  o      No  x

If this report is an annual or transition report,indicate by check mark if the registrant is not required to file reportspursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934.

Yes  o      No  x

Note—Checking the box above will not relieve anyregistrant required to file reports pursuant to Section 13 or 15(d)of 

the Securities Exchange Act of 1934 from theirobligations under those Sections.

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes  o      No  x

Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o                Acceleratedfiler o                Non-accelerated  filer x

If this is an annual report, indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

Yes  o      No  x

Indicate by check mark which financial statement item theregistrant has elected to follow.

Item 17 x            Item 18 o

 

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**TABLE OF CONTENTS**
| PART I |
|-------------|
| Item  1.    |   | Identity  Of Directors, Senior Management And Advisors |   | 3 |
| Item  2.    |   | Offer  Statistics And Expected Timetable |   | 3 |
| Item 3.     |   | Key  Information |   | 3 |
|        | A. | Selected  Financial Data |   | 3 |
|        | B. | Capitalization  And Indebtedness |   | 6 |
|        | C. | Reasons  For The Offer And Use Of Proceeds |   | 6 |
|        | D. | Risk Factors |   | 7 |
| Item 4.     |   | Information On  The Company |   | 14 |
|        | A. | History And  Development Of The Company |   | 14 |
|        | B. | Business  Overview |   | 14 |
|        | C. | Organizational  Structure |   | 23 |
|        | D. | Property, Plant  And Equipment |   | 23 |
| Item 5.     |   | Operating  And Financial Review And Prospects |   | 24 |
|        | A. | Operating  Results |   | 24 |
|        | B. | Liquidity And  Capital Resources |   | 32 |
|        | C. | Research  And Development, Patents, Licences, Etc. |   | 34 |
|        | D. | Trend  Information |   | 34 |
|        | E. | Off-Balance  Sheet Arrangements |   | 34 |
|        | F. | Tabular  Disclosure of Contractual Obligations |   | 35 |
| Item 6.     |   | Directors,  Senior Management And Employees |   | 35 |
|        | A. | Directors And  Senior Management |   | 35 |
|        | B. | Compensation |   | 37 |
|        | C. | Board  Practices |   | 37 |
|        | D. | Employees |   | 37 |
|        | E. | Share  Ownership |   | 38 |
| Item 7.     |   | Major  Shareholders And Related Party Transactions |   | 38 |
|        | A. | Major Shareholders |   | 39 |
|        | B. | Related Party  Transactions |   | 39 |
|        | C. | Interests Of  Experts And Counsel |   | 39 |
| Item 8.     |   | Financial  Information |   | 39 |
|        | A. | Consolidated  Statements And Other Financial Information |   | 39 |
|        | B. | Significant Changes |   | 39 |
| Item 9.     |   | The Offer And  Listing |   | 40 |
|        | A. | Market Price  Information |   | 40 |
|        | B. | Markets |   | 40 |
| Item 10.    |   | Additional  Information |   | 40 |
|        | A. | Share  Capital |   | 40 |
|        | B. | Memorandum  And Articles Of Association |   | 40 |
|        | C. | Material Contracts |   | 40 |
|        | D. | Exchange  Controls |   | 43 |
|        | E. | Taxation |   | 43 |
|        | F. | Dividends And  Paying Agents |   | 46 |
|        | G. | Statement By Experts |   | 46 |
|        | H. | Documents On Display |   | 46 |
|        | I. | Subsidiary  Information |   | 47 |
| Item 11.    |   | Quantitative  And Qualitative Disclosures About Market Risk |   | 47 |
| Item 12.    |   | Description  Of Securities Other Than Equity Securities |   | 48 |
|        |   | PART II |   |   |
| Item 13.    |   | Defaults,  Dividend Arrearages And Delinquencies |   | 48 |
| Item 14.    |   | Material  Modifications To The Rights Of Security Holders And Use Of Proceeds |   | 48 |
| Item 15.    |   | Controls And  Procedures |   | 48 |
| Item 16A.   |   | Audit  Committee Financial Expert |   | 48 |
| Item 16B.   |   | Code Of Ethics |   | 48 |
| Item 16C.   |   | Principal  Accountant Fees And Services |   | 49 |
| Item 16D.   |   | Exemptions  From The Listing Standards For Audit Committees |   | 49 |
|        |   |   |   |   |

 

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| Item 16E. |   | Purchases  Of Equity Securities By The Issuer And Affiliated Purchasers |   | 49 |
|-----------|--------|-------------------------------------------------------------------------|--------|----|
| PART III  |
| Item 17.  |   | Financial  Statements                                                   |   | 50 |
| Item 18.  |   | Financial  Statements                                                   |   | 51 |
| Item  19. |   | Exhibits                                                                |   | 51 |
|      |   | Signatures                                                              |   | 54 |

 

**CAUTIONARY NOTICE REGARDING FORWARD LOOKINGSTATEMENTS**

This annual report includes forward looking statements.  We have based these forward lookingstatements on our current expectations and projections about futureevents.  These forward looking statementscan be identified by the use of forward looking terminology, including theterms “believe,” “estimate,” “anticipate,” “expect,” “intend,” “continue,” “may,”“will” or “should” or, in each case, their negative, or other variations orcomparable terminology.  These forwardlooking statements include all matters that are not historical facts.  They appear under subheading “D.  Risk Factors” of “Item 3.  Key Information” and “Item 5.  Operating and Financial Review and Prospects”and elsewhere in this annual report and include statements regarding ourintentions, beliefs or current expectations concerning, among other things, ourresults of operations, financial condition, liquidity, prospects, growth,strategies and the industry in which we operate.

By their nature, forward lookingstatements involve risks and uncertainties because they relate to events anddepend on circumstances that may 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 annualreport.  In addition, even if our resultsof operations, financial condition and liquidity, and the development of theindustry in which we operate are consistent with the forward looking statementscontained in this annual report, those results or developments may not beindicative of results or developments in subsequent periods.  Important factors that could cause thosedifferences include, but are not limited to:

·                  oursubstantial leverage and our ability to meet our debt service obligations;

·                  ourability to win and/or renew public contracts;

·                  downwardpressure on prices resulting from competition in our industry;

·                  ourexposure to cost increases that may not be sufficiently accounted for by theindexation terms in our contracts;

·                  potentialchanges in the funding provided to transportation authorities by governments;

·                  ourability to win contracts with a margin and return on capital commensurate withour cost structure;

·                  ourability to forecast the costs associated with contracts successfully;

·                  ourability to take advantage of terms in our lease agreements;

·                  ourexposure to fluctuations in interest notes (leasing);

·                  ourrelations with our employees;

·                  ourexposure to fluctuations in fuel prices;

·                  possiblefinancial losses pursuant to our hedging strategies; and

·                  ourexposure to currency exchange rate fluctuations.

We undertake no obligation to update publicly or torevise any forward looking statements, whether as a result of new information,future events or otherwise.  Furthermore,these forward looking statements may be materially impacted by the factorslisted under subheading “D.  Risk Factors”of “Item 3.  Key Information”.  In light of these risks, uncertainties and 

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assumptions, the forward looking events discussed inthis 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.

**ENFORCEMENT OF CERTAIN CIVIL LIABILITIES**

 Concordia BusNordic AB (publ) (“Concordia”) is organized under the laws of Sweden.  All of our directors, executive officers andour subsidiaries and the independent auditors named in this annual report arenon-residents of the United States.  As aresult, it may not be possible for investors to effect service of processwithin the United States upon us or such persons or to enforce against any ofthem judgments of US courts predicated upon civil liabilities under US federalsecurities laws.  Although we agree underthe terms of the indenture relating to the senior secured notes to acceptservice of process in the United States by an agent designated for such purpose,it may not be possible for investors to (i) effect service of processwithin the United States upon our officers and directors and the independentauditors named herein and to (ii) realize in the United States uponjudgments against such persons obtained in such courts predicated upon civilliabilities of such persons, including any judgments predicated upon US federalsecurities laws to the extent such judgments exceed such person’s USassets.  There is also doubt as to theenforceability in Sweden, in original actions or in actions for enforcement, ofjudgments of US courts predicted upon the civil liability provisions of thefederal securities laws of the United States.

**CURRENCY AND FINANCIAL STATEMENT PRESENTATION**

Unless otherwise indicated, references in this annualreport to “SEK,” “Swedish Krona” or “Swedish Kronor” are to the lawful currencyof Sweden; references to “euro” or “€” are to the single currency of theparticipating Member States in the Third Stage of European Economic andMonetary Union of the Treaty Establishing the European Community, as amendedfrom time to time; references to “Norwegian Kroner” or “NOK” are to the lawfulcurrency of Norway; and references to “US dollars” or “$” are to the lawfulcurrency of the United States of America.

The consolidated financial statements of Concordia areprepared in accordance with accounting principles generally accepted in Sweden(“Swedish GAAP”), which differ in certain respects from generally acceptedaccounting principles in certain other countries.  The significant differences between SwedishGAAP and accounting principles generally accepted in the United States ofAmerica (“US GAAP”) are discussed in Note 32 to the consolidated financialstatements of Concordia included elsewhere in this annual report.

**SUMMARY**

*Unless otherwise stated in thisprospectus or unless the context otherwise requires, references to “Concordia”,“we,” or “our” are to Concordia Bus Nordic AB and, as the context may require,its subsidiaries [; references to “our indirect Parent” are to Concordia Bus AB(publ) and, as the context may require, its subsidiaries; references to “ourdirect Parent” or “the Parent Guarantor” are to Concordia Bus Nordic Holding ABand, as the context may require, its subsidiaries; references to “Swebus” areto Swebus AB; references to “Concordia Finland” are to Concordia Bus Finland OyAb; references to “SBC” are to Ingeniør M.O. Schøyens Bilcentraler AS;references to “SG” or the “Schøyen Group” are to Schøyen Group; and referencesto “Bus Holdings” are to Bus Holdings S.a.r.l.]*

# **PART I**

## ***Item 1. Identity of Directors, Senior Management and Advisers***

Not applicable.

## ***Item 2. Offer Statistics and Expected Timetable***

Not applicable.

## ***Item 3. Key Information***

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

Previously, Concordia Bus Nordic Holding AB (“Holding”)was named Interbus Finans AB and was a wholly owned subsidiary of Concordia,which was wholly owned by Concordia Bus AB (“Bus”).  In January 2004, a reorganization 

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was performed whereby Concordia transferred to Bus its100% share ownership of Interbus Finans AB. Bus then transferred its shares in Concordia to Interbus Finans AB.  Interbus Finans AB was then renamed ConcordiaBus Nordic Holding AB.

This reorganization had the effect of creating a newholding company for Concordia from one of its dormant subsidiaries.  Holding is a non operating holding companythat has no assets other than its shares in Concordia.  For periods after the reorganization, theconsolidated financial position, results of operations and cash flows ofConcordia are the same as that of Holding. Since this was a reorganization of entities under common control, theconsolidated financial statements contained in this annual report are presentedas if Holding was in existence as the shareholder of Concordia for all periodspresented.

The following tables set forth selected consolidatedfinancial data derived from audited financial statements as of and for theyears ended February 28, 2001, February 28, 2002, February 28,2003, February 29, 2004 and February 28, 2005.

This information should be read in conjunction withthe sections “Management’s Discussion and Analysis of Financial Condition andResults of Operations” and the consolidated financial statements and the notesthereto included elsewhere in this annual report.

The consolidated financial statements of Concordiahave been prepared in accordance with Swedish GAAP, which differ in certainsignificant respects from US GAAP.  Thesignificant differences between Swedish GAAP and US GAAP are discussed in Note32 to the consolidated financial statements of Holding included elsewhere inthis annual report.

**CONCORDIABUS NORDIC HOLDING AB**

**SELECTEDCONSOLIDATED FINANCIAL DATA**

**(SEKin millions, except per share amount and ratios)**
| ** **                                         | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and for   the year ended  February 29,** | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and   for the year   ended   February 28,** | ** ** |
|----------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|
| ** **                                         | ** ** | **2006**                                                                            | ** ** | **2005**                                                                            | ** ** | **2004**                                                                            | ** ** | **2003**                                                                            | ** ** | **2002**                                                                                    | ** ** |
| ** **                                         | ** ** | ** **                                                                          | ** ** | ** **                                                                          | ** ** | ** **                                                                          | ** ** | ** **                                                                          | ** ** | ** **                                                                                  | ** ** |
| **Statement  of Operations**                       |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                        |       |
| Net revenue                                        |       | 4,683                                                                               |       | 4,812                                                                               |       | 4,761                                                                               |       | 4,758                                                                               |       | 4,226                                                                                       |       |
| Operating  expenses (f)                            |       | (4,671                                                                              | )          | (4,722                                                                              | )          | (4,544                                                                              | )          | (4,505                                                                              | )          | (3,999                                                                                      | )          |
| Gain (loss) on  sale of fixed assets               |       | 6                                                                                   |       | 4                                                                                   |       | 6                                                                                   |       | (4                                                                                  | )          | 20                                                                                          |       |
| Depreciation;  amortization and Write-downs        |       | (300                                                                                | )          | (350                                                                                | )          | (331                                                                                | )          | (372                                                                                | )          | (362                                                                                        | )          |
| Operating profit  (loss)                           |       | (282                                                                                | )          | (256                                                                                | )          | (108                                                                                | )          | (123                                                                                | )          | (115                                                                                        | )          |
| Financial income  and expense, net(a)              |       | (274                                                                                | )          | (141                                                                                | )          | (146                                                                                | )          | (105                                                                                | )          | (104                                                                                        | )          |
| Income taxes                                       |       | (1                                                                                  | )          | 1                                                                                   |       | 83                                                                                  |       | 49                                                                                  |       | 46                                                                                          |       |
| Net profit  (loss)                                 |       | (557                                                                                | )          | (396                                                                                | )          | (171                                                                                | )          | (179                                                                                | )          | (173                                                                                        | )          |
| Net profit  (loss) per share (in thousands of SEK) |       | (1,855                                                                              | )          | (1,320                                                                              | )          | (572                                                                                | )          | (596                                                                                | )          | (577                                                                                        | )          |
| **Balance  Sheet Data**                            |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                        |       |
| Total fixed assets                                 |       | 1,321                                                                               |       | 1,514                                                                               |       | 1,827                                                                               |       | 2,127                                                                               |       | 2,321                                                                                       |       |
| *Of  which: buses*                                 | * *   | *1,041*                                                                             | * *   | *1,228*                                                                             | * *   | *1,491*                                                                             | * *   | *1,793*                                                                             | * *   | *1,971*                                                                                     | * *   |
| Total current  assets                              |       | 879                                                                                 |       | 772                                                                                 |       | 1,024                                                                               |       | 757                                                                                 |       | 1,035                                                                                       |       |
| Total assets                                       |       | 2,200                                                                               |       | 2,286                                                                               |       | 2,851                                                                               |       | 2,884                                                                               |       | 3,356                                                                                       |       |
| Share capital                                      |       | 0                                                                                   |       | 0                                                                                   |       | 0                                                                                   |       | 0                                                                                   |       | 0                                                                                           |       |
| Total  shareholder’s equity                   |       | (350                                                                                | )          | (144                                                                                | )          | 235                                                                                 |       | 412                                                                                 |       | 692                                                                                         |       |
| Total provisions                                   |       | 62                                                                                  |       | 104                                                                                 |       | 146                                                                                 |       | 198                                                                                 |       | 269                                                                                         |       |
| Total  non-current liabilities                     |       | 1,509                                                                               |       | 1,188                                                                               |       | 1,216                                                                               |       | 858                                                                                 |       | 1,652                                                                                       |       |
| Total current  liabilities                         |       | 979                                                                                 |       | 1,138                                                                               |       | 1,254                                                                               |       | 1,416                                                                               |       | 743                                                                                         |       |
| Total debt                                         |       | 1,501                                                                               |       | 1,488                                                                               |       | 1,589                                                                               |       | 1,497                                                                               |       | 1,691                                                                                       |       |
| *Of  which: Subordinated Shareholder Loan, net(b)* | * *   | *271*                                                                               | * *   | *292*                                                                               | * *   | *368*                                                                               | * *   | *494*                                                                               | * *   | *631*                                                                                       | * *   |
| *Of  which: senior debt(c)*                        | * *   | *1,230*                                                                             | * *   | *1,196*                                                                             | * *   | *1,221*                                                                             | * *   | *1,003*                                                                             | * *   | *1,060*                                                                                     | * *   |
| **US  GAAP:**                                      |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                        |       |
| Net loss                                           |       | (535                                                                                | )          | (385                                                                                | )          | (127                                                                                | )          | (168                                                                                | )          | (188                                                                                        | )          |

 

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| ** **                                                | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and for   the year ended  February 29,** | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and   for the year   ended   February 28,** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|
| ** **                                                | ** ** | **2006**                                                                            | ** ** | **2005**                                                                            | ** ** | **2004**                                                                            | ** ** | **2003**                                                                            | ** ** | **2002**                                                                                    | ** ** |
| Basic and  diluted loss per share (in thousands of SEK)   |       | (1,793                                                                              | )          | (1,283                                                                              | )          | (425                                                                                | )          | (560                                                                                | )          | (626                                                                                        | )          |
| Total assets                                              |       | 2,446                                                                               |       | 3,006                                                                               |       | 3,561                                                                               |       | 3,579                                                                               |       | 4,041                                                                                       |       |
| Shareholder’s  equity, end of year                   |       | 267                                                                                 |       | 453                                                                                 |       | 826                                                                                 |       | 952                                                                                 |       | 1,231                                                                                       |       |
| **Cash  Flow Data**                                       |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                        |       |
| Cash flow from  operations                                |       | (257                                                                                | )          | (99                                                                                 | )          | 24                                                                                  |       | (66                                                                                 | )          | 39                                                                                          |       |
|                                                      | ** ** | ** **                                                                          | ** ** | ** **                                                                          | ** ** | ** **                                                                          | ** ** | ** **                                                                          | ** ** | ** **                                                                                  | ** ** |
| Cash flow from  investing activities                      |       | (74                                                                                 | )          | (63                                                                                 | )          | (11                                                                                 | )          | (136                                                                                | )          | 274                                                                                         |       |
| Cash flow from  financing activities                      |       | 345                                                                                 |       | (8                                                                                  | )          | 152                                                                                 |       | (95                                                                                 | )          | (78                                                                                         | )          |
| Total capital  expenditures                               |       | 134                                                                                 |       | 112                                                                                 |       | 32                                                                                  |       | 216                                                                                 |       | 43                                                                                          |       |
| *Of  which: capital expenditures on buses*                | * *   | *123*                                                                               | * *   | *100*                                                                               | * *   | *15*                                                                                | * *   | *182*                                                                               | * *   | *21*                                                                                        | * *   |
| **Other  Financial Data**                                 |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                |       |                                                                                        |       |
| Net present  value of operating leases(d)                 |       | 1,059                                                                               |       | 875                                                                                 |       | 957                                                                                 |       | 1,003                                                                               |       | 748                                                                                         |       |
| Ratio of  earnings to fixed charges under Swedish GAAP(e) |       | —                                                                              |       | —                                                                              |       | 0.0x                                                                                |       | —                                                                              |       | —                                                                                      |       |
| Ratio of earnings to  fixed charges under US GAAP(e)      |       | —                                                                              |       | —                                                                              |       | 0.3x                                                                                |       | —                                                                              |       | —                                                                                      |       |

 

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(a)           Includes financingcosts and other financial charges and unrealized exchange rate gains and losseson loans denominated in foreign currency. The net foreign currency exchange gains and losses represented SEK3 million for the year ended February 28, 2002, SEK 4 millionfor the year ended February 28, 2003, SEK (7) million for the yearended February 29, 2004, SEK 19 million for the year endedFebruary 28, 2005 and SEK (46) million for the year ended February 28,2006.

(b)           The SubordinatedShareholder Loan (defined below), net, reflects the combination of the netbalance of the initial subordinated loan of SEK 501 million and aggregategroup contributions received by Bus from Holding and its subsidiaries inexchange for tax losses from Bus and cash payments from Holding to Bus relatingto servicing the €160,000,000 11.0% Senior Subordinated Notes due 2010 issuedby Bus.  For a description of theSubordinated Shareholder Loan, see “Description of Other MaterialIndebtedness—Subordinated Shareholder Loan from Holding.”

(c)           Total senior debtincludes long term senior debt and the short-term portion of long term seniordebt to third parties including obligations under financial lease arrangementsbut excluding the Subordinated Shareholder Loan.  Holding believes that total senior debt is auseful supplement to total debt and other balance sheet data as it indicatesthe amount of debt Holding owes which ranked *pari passu*with the €130,000,000 9.125% Senior Secured Notes due August 1, 2009 issued byConcordia on January 22, 2004.

(d)           Net present value ofoperating leases represents the net present value of future minimum leasepayments for vehicles, real estate and certain other leased assets underoperating lease arrangements.

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(e)           Ratio of earnings tofixed charges is expressed as net income before taxation plus fixed charges(interest expenses, amortization of financing fees and the interest componentof operating leases) divided by fixed charges. Earnings were inadequate to cover fixed charges by SEK 219 millionunder Swedish GAAP and by SEK 228 million under US GAAP for the year endedFebruary 28, 2002.  For the yearended February 28, 2003 earnings were inadequate to cover fixed charges bySEK 228 million under Swedish GAAP and SEK 226 million under USGAAP.  For the year endedFebruary 29, 2004 earnings were inadequate to cover fixed charges by SEK254 million under Swedish GAAP and SEK 198 million under USGAAP.  For the year endedFebruary 28, 2005 earnings were inadequate to cover fixed charges by SEK397 million under Swedish GAAP and SEK 389 under US GAAP.  See Exhibit 12.1 to this annual report.

(f)            **Operatingexpenses**
|                                    | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and for   the year ended  February 29,** | ** ** | **As of and for   the year ended  February 28,** | ** ** | **As of and for   the year ended  February 28,** | ** ** |
|------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                         | ** ** | **2006**                                                                            | ** ** | **2005**                                                                            | ** ** | **2004**                                                                            | ** ** | **2003**                                                                            | ** ** | **2002**                                                                            | ** ** |
| ** **                         | ** ** | **SEK**                                                                             | ** ** | **SEK**                                                                             | ** ** | **SEK**                                                                             | ** ** | **SEK**                                                                             | ** ** | **SEK**                                                                             | ** ** |
| Fuel, tires and  other consumables |       | (1,113                                                                              | )          | (989                                                                                | )          | (929                                                                                | )          | (919                                                                                | )          | (805                                                                                | )          |
| Other external  costs              |       | (1,049                                                                              | )          | (1,127                                                                              | )          | (1,004                                                                              | )]         | (989                                                                                | )          | (854                                                                                | )          |
| Personnel costs                    |       | (2,509                                                                              | )          | (2,606                                                                              | )          | (2,611                                                                              | )          | (2,597                                                                              | )          | (2,340                                                                              | )          |
| Operating expenses                 |       | (4,671                                                                              | )          | (4,722                                                                              | )          | (4,544                                                                              | )          | (4,505                                                                              | )          | (3,999                                                                              | )          |

 

The table below sets forth, for the periods and datesindicated, certain information concerning the exchange rate for the SwedishKrona against the US dollar based upon the noon buying rate in the City of NewYork for cable transfers in Swedish Krona as announced by the Federal ReserveBank of New York for 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 August 26, 2005 was $[·]
| ** **                        | ** ** | **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 (through August  26, 2005) |       |                |       |        |       |     |       |    |       |

 

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

### **B.****                                    Capitalizationand Indebtedness**

Not applicable.

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

Not applicable.

6

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### **D.****                                    RiskFactors**

***Concordia is a holding company with no revenue generatingoperations of its own as a result our financial condition could be adverselyaffected if our subsidiaries do not make distributions to us.***

Concordia is a holding company.  Our principal asset is our investment in oursubsidiaries.  We conduct no business oroperations except through direct and indirect subsidiaries.  Our ability to service our indebtedness,including the €130,000,000 9.125% Senior Secured Notes due August 1, 2009 (the “SeniorNotes”), and our indebtedness to Bus of approximately SEK 271 million isentirely dependent upon the receipt of funds from our subsidiaries by means ofdividends, interest, intercompany loans or otherwise.  The ability of our subsidiaries to make thosefunds available to us is subject to, among other things, applicable corporateand other laws and restrictions contained in agreements to which suchsubsidiaries may be subject.  We cannotassure you that our subsidiaries will be in a position to make funds availableto us.  Although the indenture related tothe Senior Notes limits 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.  Also, according toSwedish law, our subsidiaries may only pay dividends to us to the extent that theyhave distributable earnings.   Theirfailure to have such distributable earnings in the future could have a materialadverse effect on our financial condition.

***To service our debt, we will require a significant amount ofcash.  If our subsidiaries do notgenerate sufficient cash, our parent companies may default on our respectivedebt which could have a material adverse effect on our business.***

Our ability to make payments on and to refinance ourdebt, including the Senior Notes, will depend on our subsidiaries’ ability togenerate cash in the future and our subsidiaries’ ability to generatedistributable earnings or other funds available for that purpose.  For the year ended February 28, 2006 we spent€11.9 million to service our debt.  Oursubsidiaries ability to generate cash is, to a certain extent, is subject togeneral economic, financial, competitive and other factors that are beyond ourcontrol.

We sustained operating losses of SEK 282 million forthe year ended February 28, 2006, 256 million for the year endedFebruary 28, 2005 and SEK 108 million for the year endedFebruary 29, 2004  We sustained netlosses of SEK 557 million for the year ended February 28, 2006,396 million for the year ended February 28, 2005 and SEK171 million for the year ended February 29, 2004.

We may need to refinance all or a portion of our andour subsidiaries’ debt, including the Senior Notes, on or before maturity.  We may not be able to refinance any of suchdebt, including debt under the Senior Notes, on commercially reasonable termsor at all, which could have a material adverse effect on our business.

Further, our parent companies’ ability to makepayments on the Mezzanine Facility is currently wholly dependent upon our andour subsidiaries’ ability to make payments in connection with the SubordinatedShareholder Loan and the Capital Contribution, as well as our and oursubsidiaries’ ability to generate distributable earnings for that purpose.  Although we believe that, after makingpayments permitted in respect of the Subordinated Shareholder Loan and theCapital Contribution, we will have available distributable earnings to makepayments in respect of the Senior Notes, we cannot assure you we will havesufficient distributable earnings to do so. Any failure to provide funds to our parent companies’ sufficient to makeinterest payments on the Mezzanine Facility could result in a default under theMezzanine Facility.  A default on theMezzanine Facility could result in an insolvency of Bus, which would acceleratepayment on the Senior Notes in accordance with the terms of the indenture.  Even if Bus did not suffer an insolvency,such default could limit our ability to obtain funding on commerciallyacceptable terms or at all, which could have a material adverse effect on ourbusiness.

***We expect that Holding and Bus will seek to cause us to makefunds available for interest payments in connection with theirindebtedness.  The making of suchdistributions to our parent companies could have a material adverse effect onall results of operations or financial condition.***

We are a wholly owned indirect subsidiary of Bus.  The terms of the Parent Notes require Bus tomake semi-annual interest payments which, in fiscal 2005, on an annualizedbasis equaled €17.6 million.  Bus did notmake its last payment and in connection with the restructuring expects that theParent Notes will be converted into common shares representing 97.5% of thecommon equity in Bus and that the remainder will be reduced to 25% of theirface value.  In connection with thatrestructuring Holding has borrowed €25,000,000 to pay for the expenses of therestructuring and Bus intends to borrow an additional €45,000,000 (together,the “Mezzanine Facility”) of which approximately €13,000,000 Bus intends tocontribute to us, via Holding, as an equity contribution.  A portion of the net proceeds received fromthe issuance of the Parent Notes was loaned to us by Bus pursuant to asubordinated intercompany loan (the “Subordinated Shareholder Loan”) and whichbears 

7

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interest at a rate of 11% and matures onFebruary 14, 2010 and which, in connection with the restructuring, wastransferred to Holding.  As of February28, 2005 the outstanding balance of the Subordinated Shareholder Loan isapproximately SEK €  167,000,000. Holding will have to make interest payments of approximately €[•]million in connection with its borrowing until it is repaid with the proceedsof the Mezzanine Facility and Bus will have to make substantial and greaterinterest payments once it had drawn down the Mezzanine Facility.  The terms of the Senior Notes permit us tomake distributions to our parent companies, whether in the form of dividends,distributions, advances or otherwise for the purpose of making thesesemi-annual interest payments.  To theextent allowed by Swedish law, we intend to make such distributions to ourparent companies via dividends, by making interest payments on the SubordinatedShareholder Loan and the Mezzanine Facility, or by repaying the principal onthe Subordinated Shareholder Loan accordingly to Swedish law, we can only paydividends to our parent companies to the extent we have distributable earnings.

***Our substantial leverage could adversely affect our abilityto run our business.***

We have now and will continue to have a significantamount of debt.  As of February 28,2006, our total consolidated debt was approximately SEK 1,517 million, ofwhich total consolidated senior debt was approximately SEK 1,230 millionand our shareholders deficit was SEK (350) million.  We also have substantial payment obligationsunder our operating leases.  The presentvalue of future lease payments for our operating leases February 28, 2006,was SEK 1,059million, SEK 875 million as of February 28, 2005 and SEK957 million as of February 29, 2004.

In addition, we expect that Holding and Bus will seekto cause us to make funds available to them, in excess of our obligations inrespect of the Subordinated Shareholder Loan and the Capital Contribution, inrespect of our parent companies’ interest payment obligations under theMezzanine Facility.  

Our and our subsidiaries’ substantial debt, and suchneed to provide funds to our parent companies, could have importantconsequences for you.  For example, itcould among other things:

·              makeit more difficult for us to satisfy our obligations under the Senior Notes;

·              limitour ability to fund our working capital, capital expenditures and generalcorporate requirements;

·              limitour ability to borrow additional funds;

·              limitour ability to enter into leases for buses;

·              requireus to dedicate a substantial portion of our cash flow from operations topayments on our debt, thereby reducing the funds available to us for otherpurposes;

·              makeus more vulnerable to economic downturns; and

·              reduceour flexibility to respond to changing business and economic conditions.

In addition, we and our subsidiaries may be able toincur substantial additional debt in the future.  The terms of the indenture governing theSenior Notes restrict but do not fully prohibit us and our subsidiaries fromborrowing, and some of those borrowings may be secured.  Further, if new debt is added to our and oursubsidiaries’ current debt levels, the related risks that we and they now facecould intensify.

Any of the foregoing could have a material adverseeffect on our business, our ability to make payments under the Senior Notes andour ability to continue presenting our financial statements under theassumption that we are a going concern.

***The terms of our indebtedness restrict our corporateactivities, if we fail to comply with these terms could result in a defaultunder our indebtedness.***

The indenture under which the Senior Notes wereissued, restricts, and in some cases prohibits, among other things, our and oursubsidiaries’ ability to:

·              incuradditional debt;

·              makeprepayments of certain debt;

·              paydividends;

·              makeinvestments;

·              engagein transactions with affiliates;

·              issuecapital stock;

·              createliens;

·              sellassets; and

·              engagein mergers and consolidations.

A failure to comply with these covenants would resultin a default under the Senior Notes, which in turn could result in an event ofdefault under our other indebtedness.

***We may not have the ability to raise the funds necessary tofinance the change of control offer or asset sale offers required by theindenture under which the Senior Notes were issued.***

Upon the occurrence of specific kinds of change ofcontrol events, we will be required to offer to repurchase all outstandingSenior Notes.  Furthermore, a change ofcontrol may result in a default under and possibly acceleration of other seniordebt we may incur.  Also, if we or oursubsidiaries sell assets we may, subject to conditions, be required to offer torepurchase Senior Notes.  It is possible,however, that we will not have sufficient funds at the time we are required tomake such an offer to make the required repurchase of Senior Notes.  

8

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

In the year ended February 28, 2006, ourcontracts with local public transportation authorities comprise approximately88% of our revenue.  In Sweden, Norwayand Finland, we operate under 104, 10 and 37 contracts, respectively, with thelargest contract accounting for 6.2% of our net revenue and the top 25contracts accounting for approximately 55% of total revenue in the year endedFebruary 28, 2006. These contracts usually have a five to eight year term. Local public transportation authoritiesconduct a competitive bidding process for each contract shortly before itterminates and the most important criteria for determining the success of thebid is usually price.  See “Business—Sweden—TenderingProcedures” for a discussion of the competitive bidding process in Sweden.  If we fail to continue to renew our localpublic transportation authorities contracts, our revenues will be adverselyaffected as our older local public transportation authorities contractsexpire.  This may affect our ability tosatisfy our obligations under the Senior Notes.

***If we do not retain or gain local public transportationauthority contracts, we may not benefit from the option to renew existingoperating lease agreements at a lower cost.***

As of February 28, 2006, we have entered intooperating leasing arrangements for 1,569 of our 3,397 buses.  The contracts under which these buses areleased are classified as operating leases which means that no carrying valuesare recorded on our balance sheet.  Theterm of any given lease is established to match as far as possible with theduration of the underlying contract with the local public transportationauthority, generally five to eight years.

Currently, the structure of the lease contract is suchthat at the inception of a new lease contract, the leasing fee is establishedbased on the purchase price paid by the lessor and residual value agreed withthe manufacturer for the period of the lease. At the end of each leasing contract period each leasing contract can berenewed or terminated (and we have an obligation to renew the lease contractsfor a certain aggregate number of buses). The lease payments for the second leasing period, which are based on theagreed residual value at the date of the extension, are lower than the paymentsduring the initial term.  If we are notsuccessful in renewing or extending the local public transportation authoritycontracts, or in efficiently redeploying our buses elsewhere, we may not gainthe benefit of such lower costs.

Further, in the event of an acceleration under theSenior Notes following a default, all or part of the leasing contracts coveringa significant portion of our leases may be terminated at the option of thelessor.  This could have a materialadverse effect on our business.

***Competition on price or other factors could adversely affectour business.***

It is our policy to focus on increasing our return oncapital and cash generation.  We believethat our change in focus toward higher, more appropriate tendering price levelshas been adopted by other major operators. 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.  For example,during the period fiscal 2002 to fiscal 2005, CPTAs awarded contracts to us onrenewal with prices between 10% and 54% above the prices in the previouscontracts.  However, no assurance can begiven that the more favorable pricing trends will continue in the future fornew tenders.  For more information, see “Business—Sweden—Competitionin the Swedish Bus Transportation Market.”

***If indices in our contracts do not reflect our costincreases, our business could be adversely affected.***

Local public transportation authorities contractsprovide for a fee to be paid to us in return for providing bus operations forthe routes and schedules described in the contracts.  The amount of the fee to be paid each year isadjusted annually based on an index, or on several indices, that is intended tocompensate for changes in our costs. Historically, contracts with local public transportation authorities,which produce a substantial portion of Swebus’ revenues in Sweden, havecontained cost indices primarily based on consumer price indices.

While, as tendered contracts expire and new contractsare tendered, it is now becoming increasingly common to include either (i) aprice adjustment 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 adjustment indices contained inour future local public transportation authorities contracts fail to reflectour actual cost structure, changes in our costs that are not reflected in theindices included in these contracts could adversely affect our operatingmargins.

***The local public transportation authorities rely ongovernment subsidies.  Removal of thesesubsidies could drive down local public transportation authorities’ contractfees.***

In Sweden and Norway, management believes thatapproximately 50% and 40%, respectively, of fees to bus operating companiespaid by local public transportation authorities under local publictransportation authorities contracts in fiscal 2006 were funded by governmentsubsidies (as opposed to bus ticket revenues). See “Business—Sweden—Contractual Public Bus Transportation Service” fora discussion of these subsidies.  ManyEuropean countries have sought to reduce subsidies in recent years.  Should Sweden more aggressively seek toreduce subsidies, fees from local public transportation authorities contractsmay decrease, and local public transportation authorities could seek torenegotiate the scope of existing contracts. A decision to reduce subsidies could have an adverse effect on potentialfees under local public transportation authorities contracts.

***Enforcement of the guarantees of the Senior Notes on thecollateral securing the Senior Notes may be subject to certain***

9

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***limitations and could be deemed to be invalid if found to bein violation of Swedish, Finnish or Norwegian corporate benefit requirements.***

Under the indenture related to the Senior Notes, someof our subsidiaries (the “Guarantors”) provided guarantees for the Senior Notes(the “Senior Note Guarantees”).  Inaddition, under that indenture, pledges of collateral were made to secure theSenior Notes (the “Collateral”). Generally, claims of creditors of a subsidiary will have priority withrespect to the assets of such subsidiary over the claims of creditors of itsparent company.  However, subject to thelimitations and qualifications described below, holders of the Senior Noteswill have direct claims against the Guarantors under the Senior NoteGuarantees.  Guarantors guaranteeing theSenior Notes at include:
| **Name**                                          | ** ** | **Jurisdiction of Incorporation** |
|---------------------------------------------------|------------|-----------------------------------|
| Alpus AB                                          |       | Sweden                            |
| Concordia Bus  Nordic Holding AB             |       | Sweden                            |
| Enköping-Bålsta Fastighetsbolag AB      |       | Sweden                            |
| Interbus AB                                       |       | Sweden                            |
| Malmfältens  Omnibus AB                      |       | Sweden                            |
| Swebus AB                                         |       | Sweden                            |
| Swebus Busco AB                                   |       | Sweden                            |
| Swebus Express  AB                                |       | Sweden                            |
| Swebus  Fastigheter AB                            |       | Sweden                            |
| Ingeniør M.O.  Schøyens Bilcentraler AS |       | Norway                            |
| Concordia Bus Finland  Oy Ab                      |       | Finland                           |

 

Enforcementof the Senior Note Guarantees and Collateral may be limited in certaincircumstances.  Any such limitationwould, if applicable, effectively subordinate the Senior Notes in right ofpayment to all indebtedness of the relevant Guarantor then existingirrespective of the granting of the Senior Note Guarantee.

 

*Swedish Subsidiary Guarantees and Collateral.*

* *

Enforcementof the Senior Note Guarantees and Collateral may, in whole or in part, belimited 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 shallbe determined on the basis of whether the undertaking was made for businessreasons so as to involve corporate benefit for the subsidiary and whether theguaranteed party is solvent for repayment of the secured amount at the time ofproviding the security.  The absence ofbusiness reasons and corporate benefit would have the effect that theperformance 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 SeniorNote Guarantees and Collateral would be invalid and any payments madethereunder would be subject to recovery at least to the extent they violate theabove mentioned rules on corporate interest.

 

*Finnish Subsidiary Guarantee and Collateral.*

* *

Thegranting of guarantees and security is restricted under the Finnish CompaniesAct.  Enforcement of the Senior NoteGuarantees and Collateral issued or granted by Concordia Finland may, in wholeor in part, be limited to the extent that the undertaking by such subsidiary isdeemed to be in conflict with the limitations set out in the Finnish CompaniesAct, including the corporate interest of Concordia 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 businessreasons and corporate benefit would have the effect that the performance of theundertaking, or a part thereof, would violate the Finnish Companies Act.  Any such violation would render the SeniorNote Guarantees and Collateral invalid and any payments made thereunder wouldbe subject to recovery at least to the extent that they violate the FinnishCompanies 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.  Indetermining the sufficiency of the business reason or corporate benefit, aNorwegian court will consider whether or not the granting of the guarantee orsecurity supported the object and the operations of that subsidiary.  We believe sufficient corporate benefitexists with respect to the Senior Note Guarantee and Collateral granted by theNorwegian subsidiary.  However, there canbe no certainty as to the sufficiency of the corporate benefit.]

 

***If we or our Swedish, Norwegian or Finnishoperating subsidiaries incur substantial operating losses, we or they may besubject to liquidation under our respective national regimes.***

*** ***

The respective companies acts and insolvency andreorganization laws of Sweden, Norway and Finland apply to Concordia and itsoperating subsidiaries.  Under theseregimes, if losses reduce the equity of these entities or any of theirsubsidiaries 

10

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(includingConcordia itself on a stand alone rather than a consolidated basis) to anamount less than 50% of its registered share capital, or (in Norway only) ifthe equity becomes inadequate compared to the risks and the size of itsbusiness, the directors of such entity would be obligated by law to convene ageneral shareholders meeting to resolve to liquidate such entity unless thedirectors were able to balance the amount of such equity and the registeredshare capital (in Sweden, within eight months of such meeting, and in Finland,within twelve months of such meeting) by (1) increasing the equity in an amountsufficient to achieve such balance and, in the Norwegian scheme, to ensure thatits equity becomes adequate compared to the risks and the size of its business,or (2) reducing the share capital to pay off losses in an amount sufficient toachieve such balance. Due to these requirements, Concordia Finland convertedportions of its shareholder loan from Concordia into a subordinated loan inJuly 2001, in February 2003, 2004, 2005 and 2006 and also in July 2005. InFebruary 2006, Swebus and Swebus Busco received a capital contribution fromConcordia Bus Nordic. In addition, if we are not successful in our cost-cuttinginitiatives and our losses continue, this may cause our equity to decreasesufficiently to require an equity increase or share capital reduction asdescribed above.  If we are unable toprocure such an equity increase or share capital reduction, it would have anadverse effect on our ability to continue presenting our financial statementsunder the assumption that we are a going concern.  See “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Operating Results—CriticalAccounting Policies—Going concern matters.” In addition, if we are not successful in our cost-cutting initiativesand our losses continue, this may cause our equity to decrease sufficiently torequire an equity increase or share capital reduction as described above.  If we are unable to procure such an equityincrease or share capital reduction, it would have an adverse effect on ourability to continue presenting our financial statements under the assumption thatwe are a going concern.  See “Management’sDiscussion and Analysis of Financial Condition and Results ofOperations—Operating Results—Critical Accounting Policies—Going concernmatters.”

 

***Your rights as a creditor may not be asstrong under Swedish, Norwegian or Finnish insolvency laws as under otherinsolvency laws.***

*** ***

UnderSwedish, Norwegian or Finnish law, there is no consolidation of bankruptcies ofthe assets and liabilities of a group of companies.  Each individual company would thus be treatedseparately by a bankruptcy administrator appointed by the local districtcourt.  The assets of our subsidiarieswould first be used to satisfy the debts of each respective subsidiary and onlythe remaining surplus (if any) of a subsidiary would benefit our creditors.  As a result, your ability to protect yourinterests as a creditor of a parent of such subsidiary may not be as strongunder Swedish, Norwegian or Finnish law as it would be under the laws of othercountries.

 

*Sweden*

* *

UnderSwedish law, secured creditors enjoy a privileged position in bankruptcy andsimilar proceedings.  Such provisionsafford debtors and unsecured creditors only limited protection relative to theclaims of secured creditors.

 

Thesecurity in the floating charges pledged by Swebus attach to all of therelevant pledgor’s assets (including real estate property, cash and bankdeposits) due to recent amendments in Swedish insolvency law.  According to the new rules, the floatingcharge will carry a general right of priority, which means that it may beenforced only in the event of bankruptcy or insolvent liquidation.  Furthermore, the right of priority that willattach to the floating charge will be enforceable only against 55% of the valueof the property remaining after distribution has been made to creditors withspecific rights of priority.

 

Thebusiness reorganization laws of Sweden apply to Concordia.  Under official business reorganization,creditors may under certain circumstances be forced to approve the terms of thebusiness reorganization.  During abusiness reorganization, Concordia will not be allowed to fulfill anyobligations incurred before the reorganization without the permission of theadministrator appointed by the local district court.

 

CouncilRegulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings isapplicable in Sweden.  In certaincircumstances, that regulation will govern determinations as to the appropriatejurisdiction and competent authority within the European Union with respect toinsolvency proceedings.

 

*Norway*

* *

Noteholders’rights with respect to the Senior Note Guarantees and pledges of security fromSBC may be compromised in an insolvency proceeding with respect to SBC.

 

TheNorwegian Bankruptcy Act 1984 sets out two main procedures that can be followedin respect of a company being illiquid or insolvent:  debt settlement proceedings (voluntary orcompulsory) and bankruptcy.  Only thesubject company can apply for debt settlement proceedings.

 

Thepurpose of debt settlement proceedings is to give a debtor who is illiquid theopportunity to negotiate with its creditors for a voluntary composition or acompulsory composition under the protection of the courts.  In such a proceeding, the court will appointa debt settlement committee composed preferentially of creditors’representatives with a lawyer as chairman. If a voluntary debt settlement is opposed by any of the creditors, thealternatives are either compulsory debt settlement proceedings orbankruptcy.  While in debt settlementproceedings a debtor is restricted with respect to carrying on its business butremains in charge of its business under the supervision of the committee.  As a general rule, during the first threemonths of debt settlement proceedings, a bankruptcy petition cannot be filed.

 

Duringthe first six months of the debt settlement or bankruptcy proceedings, securitymay only be enforced with the consent of the debt settlement committee or thebankruptcy trustee (as the case may be).

11

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In certain circumstances, liens by operation of lawhave priority ranking ahead of any contractually agreed pledges.

*Finland*

Under Finnish insolvency law, secured creditors enjoya privileged position in bankruptcy and similar proceedings.  Such provisions afford debtors and unsecuredcreditors only limited protection relative to the claims of securedcreditors.  In addition to the prioritygiven to secured debts under Finnish insolvency law, in certain circumstances,liens by operation of law have priority ranking ahead of contractually agreedfirst priority pledges.

Pledges over specific assets and certain liens byoperation of law have priority ranking ahead of pledged floating charges.  Furthermore, in the event of bankruptcyproceedings, the proceeds remaining from the sale of assets subject to thefloating charge, after payment to creditors with higher priority ranking, wouldbe divided, with those remaining proceeds being paid (1) 50% to creditors whoseclaims are secured by the floating charge and (2) 50% to remaining creditors(including creditors secured by floating charge to the extent their claims arenot satisfied pursuant to clause (1) above) pro rata in relation to therespective amounts of their claims.

The business reorganization laws of Finland restrictthe actions that are allowed to be taken by either debtors or creditors duringbusiness reorganization proceedings.

Council Regulation (EC) No 1346/2000 of 29 May 2000 oninsolvency proceedings is applicable in Finland.  In certain circumstances, that regulationwill govern determinations as to the appropriate jurisdiction and competentauthority within the European Union with respect to insolvency proceedings.

***Fraudulentconveyance laws of Sweden, Norway and Finland may protect our creditors to yourdisadvantage.***

*Sweden and Finland*

Under Swedish and Finnish law relating to fraudulentconveyance, it is possible that other creditors may claim that payments to youunder the Senior Notes or the Senior Note Guarantees or any recoveries withrespect to the pledged Collateral should be voided as fraudulent conveyances.

Under Swedish and Finnish law, in the case ofbankruptcy or company reorganization proceedings affecting us, the payments toyou under the Senior Notes or the Senior Note Guarantees (of principal orinterest or otherwise), which are made less than three months (or two years ifeffected to a related party) before the application for bankruptcy or companyreorganization proceedings is filed with the competent court may, in certainsituations, be recovered if the payment is carried out:

·              using unusual means of payment;

·              prematurely; or

·              in an amount which, in light of adebtor’s financial position, is material.

Payments which are deemed to be customary are,however, permissible.

Furthermore, the security granted in respect of theSenior Notes or the Senior Note Guarantees, if granted less than three months(or two years, if effected to a related party) before the application forbankruptcy or company reorganization proceedings were filed with a competentcourt, may be recovered if the security was not a condition under suchindebtedness or was not pledged without delay after our accrual of suchindebtedness.  Nonetheless, securityprovided that is deemed to be customary is permissible.

A Swedish or Finnish court could also determine that afraudulent conveyance has taken place under the general provision on recoverywhereby a payment to you under the Senior Notes or the Senior Note Guaranteesor the pledging of the Collateral could be revoked if an agreement, transactionor other act, such as the issuance of the Senior Notes or the Senior NoteGuarantees or the pledging of the Collateral is held to favor a creditor in anundue manner to the detriment of another creditor or to transfer property outof the reach of the creditors or to increase the debt to the detriment of thecreditors, provided that:

·              the debtor was insolvent at thetime the agreement, transaction or other act was concluded or the debtor becameinsolvent as a result of the transaction, by itself or combined with othercircumstances; and

·              the other party knew or shouldhave known of the insolvency or over-indebtedness or of the impact of suchpayment on the debtor’s financing state as well as of the circumstances due towhich the payment under the Senior Notes or the Senior Note Guarantees or thepledging of the Collateral was undue.

However, under Swedish and Finnish law, if such anagreement, transaction or other act is concluded earlier than five years beforethe application for bankruptcy or company reorganization was filed, the paymentto you under the Senior Notes or the Senior Note Guarantees or the pledging ofthe Collateral could be revoked only if a party to the agreement, transactionor other act was someone related to the bankrupt or reorganized party, such asa group company.

Furthermore, under Finnish law, a gift may berecovered by the estate if it has been made within one year prior to the duedate.  A gift that has been given beforethis, but within three years prior to the due date may be recovered if it hasbeen given to a person within the debtor’s sphere of interest and it is notproven that the debtor was not excessively indebted nor became excessivelyindebted as a result of the gift.  Atransfer resulting from a sale, trade or any other agreement can likewise berecovered if it can be shown that the agreement was unbalanced to the extentthat the transfer should be regarded as a gift.

Under Swedish law, a gift may be recovered by theestate if it has been made within six months prior to the date of applicationfor bankruptcy or reorganization.  A giftthat has been given before this, but within one year prior to the date ofapplication (or three years if effected to a related party) may be recovered ifit is not proven that the debtor was not excessively indebted nor becameexcessively indebted as a result of the gift. A transfer resulting from a sale, trade or any

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other agreement can likewise be recovered if it can beshown that the agreement was unbalanced to the extent that the transfer shouldbe regarded as a gift.

In addition, if any of our major subsidiaries inSweden or Finland were to enter bankruptcy proceedings, a court in thatjurisdiction could prevent our subsidiaries from making payments to us, therebypossibly impairing our ability to pay the amounts due under the Senior Notes.

*Norway*

Under Norwegian insolvency laws, the granting ofsecurity interests and unusual payments can be voided if undertaken during thethree month period prior to the commencement of insolvency proceedings.  There are also other preference provisionssuch as fraudulent conveyance rules that can void any transaction that (a) inan improper way favors one creditor (even if such creditor was not party to thetransaction) at the expense of the other creditors, (b) otherwise restricts theavailability of debtor’s assets for the benefit of creditors, or (c) increasesthe debtor’s debt in a detrimental way for the creditors, in each case providedthat the debtor’s financial position was weak at the time of, or becamematerially weaker as a result of, the transaction and the other party knew orshould have known of the debtor’s financial difficulties (or othercircumstances which made the transaction improper).

***You may not be ableto recover in civil proceedings for US securities laws violations.***

We are a public company with limited liabilityregistered under the laws of Sweden with our registered office in Stockholm,Sweden.  The Guarantors are organizedunder the laws of Sweden, Norway and Finland. None of our directors or officers, nor those of the Guarantors, areresidents of the United States. Substantially all of our assets and, all the assets of the Guarantorsand all of the assets of such persons are located outside of the UnitedStates.  There is doubt as to theenforceability in Sweden, Norway and Finland, in original actions or in actionsfor the enforcement of judgments of US courts, of civil liabilities predicatedsolely upon the federal securities laws of the United States.

Because there is no treaty between the United Statesand Sweden providing for the reciprocal recognition and enforcement ofjudgments, US judgments are not enforceable in Sweden.  A US judgment will be of some persuasiveauthority as a matter of evidence before the courts of law, administrativetribunals or executive or other public authorities of Sweden.  However, there is Swedish case law toindicate that a US judgment (i) that is based on contract among the partiesexcluding the jurisdiction of the courts of Sweden, (ii) that was renderedunder observance of due process, (iii) against which there lies no more appealand (iv) the recognition of which would not manifestly contravene fundamentalprinciples of the legal order, or the public policy, of Sweden, should beacknowledged without retrial on the merits.

A final and conclusive judgment obtained in the stateor federal courts in the State of New York in respect of the indenture relatingto the Senior Notes would be enforced by the courts of Norway withoutexamination of the merits of the case, if (a) such judgment obtained is finaland enforceable in and pursuant to the laws of the country or state where ithas been passed, (b) the judgment does not relate to an interest in land inNorway, and (c) enforcement of the judgment is in accordance with the mandatoryprovisions of the Norwegian Enforcement Act (1992).

A judgment obtained from a competent court in theUnited States would not be enforceable by the Finnish courts as such sincethere is no international convention to which both Finland and the UnitedStates are parties.  However, Finnishtitle for execution can be sought for such enforcement and in requesting aFinnish court to make a decision to such effect, a judgment of a relevant courtof the United States will constitute evidence of the questions of the contentsof the governing law as applied to the matter in dispute and such judgmentwould generally, through such proceedings, be recognized by a Finnish court tothe extent it is final and conclusive and not contrary to Finnish public policyor mandatory provisions of Finnish law.

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

Personnel costs constituted approximately 55% of ourtotal operating expenses (excluding depreciation and amortization) in the yearended February 28, 2006.  Our busdrivers and most of our other employees are unionized.  Concordia’s operations could be adverselyaffected in the event that it were not able to reach agreement with any laborunion representing Concordia’s employees or by an agreement with a labor unionrepresenting Concordia’s employees that contains terms that would preventConcordia from competing effectively with other bus transportationcompanies.  As in most labor intensiveindustries, strikes, work stoppages and other organized labor activities couldalso have significant adverse effects on operating and financial results.  In the fiscal year 2005, an industry widestrike in Finland interfered with the operations of our Finnish operatingcompany for several days.

***Fluctuation inprice and availability of diesel fuel could hurt our business.***

Significant changes in fuel availability or costswould materially impact our business. Diesel fuel availability and prices are affected by a number of factors,including environmental legislation and global economic and politicaldevelopments, over which we have little to no control.  In addition, our costs are affected by annualincreases in fuel taxes, which are largely offset by compensation fromindexation.  In the event of a shortagein diesel fuel supply resulting from a disruption of oil imports, reduction inproduction or otherwise, we could face higher diesel fuel prices or the curtailmentof scheduled diesel fuel deliveries. Notwithstanding our hedging arrangements, in the year endedFebruary 28, 2006, our total cost of diesel fuel averaged SEK 7.03 perliter.  For a further discussion of ourresponse to fluctuations in prices or a decrease in fuel availability, includingour hedging policies, see “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Liquidity and Capital Resources—MarketRisk.”

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

SBC, which comprised approximately 8% of our revenuein the year ended February 28, 2005, prepares its financial statements in,and its functional currency is, Norwegian Kroner.  In preparing our consolidated financialstatements, we translate SBC’s financial statements into Swedish Kronor at eachfiscal year end.  Consequently, ourresults from operations are affected by fluctuations in the rate of exchangebetween Swedish Kronor and Norwegian Kroner.

Concordia Finland, which comprised approximately 9% ofour revenue in the year ended February 28, 2005, prepares its financialstatements in, and its functional currency is, the euro.  In preparing our consolidated financialstatements, we translate Concordia Finland’s financial statements into SwedishKronor at each reporting period.  Consequently,our results from operations are affected by fluctuations in the rate ofexchange between the Swedish Krona and the euro.

Further, we are also exposed to currency fluctuationson loans, primarily as a result of having to make interest and principal paymentsin euro on the Senior Notes.  We haveentered into collar arrangements through the sale of puts and the purchase ofcalls with the same settlement dates. While this arrangement caps the amount of benefit we can obtain from anappreciation of the Swedish Kronor against the euro, it also caps our potentialincreased interest costs through a depreciation of the Swedish Kronor againstthe euro.  Our parent companies also facecurrency fluctuation risks on the Mezzanine Facility.

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

**A.            Historyand Development of the Company**

Our legal name is Concordia Bus Nordic AB (publ) andour commercial name is Concordia.  Wewere incorporated on December 22, 1932. Concordia is domiciled in Sweden and is a public limited liability company.  We are incorporated in Sweden and ourregistered address is Solna Strandväg 78, SE 171 54, Solna, Sweden.  Our financial year ends on the last day ofFebruary.  Our authorized and issuedshare capital is SEK 16,000,000 divided into 160,000 shares of one class with anominal value of SEK 100 each.  The sharecapital is fully paid.  Our telephonenumber is +46 8 546 300 00.  Our agent forservice of process is CT Corporation System, 111 Eighth Avenue, New York, NewYork 10011.

Previously, Concordia Bus Nordic Holding AB was namedInterbus Finans AB and was a wholly owned subsidiary of Concordia Bus Nordic AB(publ), which was wholly owned by Bus. In January 2004, a reorganization was performed whereby ConcordiaBus Nordic AB (publ) transferred to Bus its 100% share ownership of InterbusFinans AB.  Bus then transferred itsshares in Concordia Bus Nordic AB (publ) to Interbus Finans AB.  Interbus Finans AB was then renamed ConcordiaBus Nordic Holding AB.

This reorganization had the effect of creating a newholding company for Concordia Bus Nordic AB (publ) from one of its dormantsubsidiaries.  Holding is a non operatingholding company that has no assets other than its shares in Concordia BusNordic AB (publ).

In January 2000, Bus, backed by SG (the thenparent company of SBC) and certain private equity funds affiliated with GoldmanSachs International, acquired Concordia Bus Nordic.  On February 28, 2001, we acquired SBCwith effect from February 1, 2001.

On July 22, 2005, Concordia Bus Nordic AB and ConcordiaBus AB gave notice that they had entered into an agreement with an *ad hoc* committee which represents not lessthan 75% of the bond holders in Concordia Bus AB’s bond loan, an informal groupwhich represents the majority of the bond holders in Concordia Bus Nordic’sbond loan and the owners of Concordia Bus AB regarding the reorganization ofConcordia Bus AB.  According to theagreement, the bond holders have waived the entire loan of Euro 160 million,including accrued interest, in exchange for shares in Concordia Bus ABcorresponding to 97.5% of the share capital. The reorganization was carried out on October 4, 2005.  In connection with the reorganization,Concordia Bus received a loan of Euro 45 million in order to cover thereorganization costs and strengthen liquidity in the group.  In connection with the annual accounts, thesubsidiaries, Swebus AB and Swebus Busco AB, have received equity through ashareholder’s contribution from Concordia Bus Nordic Holding totaling SEK 800million, in order to strengthen their equity.

**B.            BusinessOverview**

We provide public bus transportation services inSweden, Norway and Finland, operating through our three main operatingsubsidiaries:  Swebus, SBC and ConcordiaFinland, respectively.  We also provideexpress bus and coach hire services.  InSweden, we currently operate 2,766 buses, and are the largest operator throughSwebus, with an estimated market share of approximately 29% of the public bustransportation market (measured by the number of buses in operation).  This market share data has been calculatedbased on the share of total number of buses, as provided by the relevantCPTA.  In Norway, SBC currently operatesapproximately 343 buses and has an estimated 16% market share of the public bustransportation market in southeastern Norway, which includes Oslo andneighboring cities.  This market sharedata has been calculated based on the share of total number of buses, asprovided by the relevant CPTA.  InFinland, Concordia Finland currently operates 288 buses and is the secondlargest operator in the greater Helsinki area with a market share of 25%.  This market share data has been calculatedbased on the relative numbers of contract kilometers.  This information is made available at 

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each tendering.

For the year ended February 28, 2006, we had netrevenue of SEK 4,683 million.  Wesustained operating losses of SEK 282 million for the year ended February 28,2006, 256 million for the year ended February 28, 2005 and SEK108 million for the year ended February 29, 2004  We sustained net losses of SEK 557million for the year ended February 28, 2006, 396 million for the yearended February 28, 2005 and SEK 171 million for the year endedFebruary 29, 2004.

**General**

Our core business is providing bus services to localpublic transportation authorities in Sweden, Norway and Finland.  In our markets, the substantial majority ofbus transportation services are provided under long-term contracts (generallyfive to eight year terms) with local public transportation authorities,according to which the bus operator provides services for a specific set of busroutes for fixed annual fees (subject to periodic adjustments based on priceindices) which we refer to as “gross agreements.”  These contracts provide us with steadyrevenue streams because we receive a fixed annual amount from the respectivepublic transportation authorities rather than relying on passenger ticketreceipts.  Certain contracts, called “netagreements,” include passenger numbers 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 endedFebruary 28, 2006, we derived approximately 88% of our revenue from acombination of gross agreements and net agreements in Sweden, Norway andFinland.  We operate under approximately150 contracts with local public transportation authorities, the largest ofwhich accounted for only 6.2% of our net revenue in the year endedFebruary 28, 2006.  The top 25contracts accounted for approximately 55% of net revenue in the year endedFebruary 28, 2006.

We also provide express bus services (scheduledintercity or long distance bus services) and coach hire services.

Following deregulation in 1989, there was a wave ofconsolidation in the Swedish bus market. This has resulted in three large operators who have a combined marketshare in the contractual public bus transportation market in Sweden ofapproximately 60% (measured by the number of buses in operation).  Swebus is the largest operator with a 29%market share. (Source: Svenska Lokaltrafikföreningen, the Swedish local trafficorganization, or “SLTF”).  Recent tendersfor bus transportation contracts provide evidence that consolidation in theindustry in Sweden has produced a more favorable pricing environment.  We expect this trend to continue in the nearterm.  We also believe that a similarpattern of pricing dynamics is now beginning to occur in Norway and Finland.

To prepare the organization for continued need of costefficiency and battle for new contracts, a reorganization of the operatingcompanies have been performed. This has lead to, among others, fewer managementlevels, key performance metrics, ranking lists among depot’s decentralizedP&L and increased resources on contract tendering. Further improvementfocus will be on tender achievement, best practice efficiency, fleet managementand financial solutions.

Over the last two years, we have rolled out theinitial phase of the Hastus software planning system at all our locations.  We augment our use of Hastus software withthe Sintopt software, our proprietary logistics system.  The Sintopt software uses higher level algorithmsto enable us to achieve increased levels of optimization with our bus anddriver schedules.  In addition, we havealso identified other sources of cost savings, including fuel consumptionorganization, purchasing cost savings, and reductions of employee sickness andabsences.

The improved planning and scheduling described above,combined with an integrated plan for bus fleet utilization and maintenance,enable us to determine with a higher degree of certainty the optimal number ofbuses needed for our existing operations. We are focusing our efforts onutilizing our existing fleet to provide new revenues through alternative uses,such as local coach and school bus hire.

We have developed and implemented a web-based systemfor our personnel (such as tracking absence for medical reasons) and a newOperational Management System (OMS). This system is the last phase of our IT strategy and brings togetheroperational data residing in our centralized database and provides several newways for us to track our business operations, such as kilometer/fuel tracking,driver activity capture and daily production statistics.  The system is now operational in a majorityof our locations.

As the largest operator of buses in the Nordic region,we have achieved significant savings by centralizing more of our bulk/commoditypurchasing.

**Seasonality**

Our contracts with public transportation authoritiesare typically structured such that the level of monthly fees depends on thecontractually agreed volume of operations, which varies from month to month,and in many cases declines in the summer months.  In addition, our express bus and coach hireservices businesses usually experience relatively high revenues from April toSeptember and during December in a given year, as customers tend to use theseservices during vacation periods and periods having more favorableweather.  Furthermore, as a result of ourcollective bargaining agreements, our personnel costs usually increase in thebeginning of each calendar year.

**Sweden**

***General***

As of February 28, 2006, we operated 2,766 busesin three bus transportation markets in Sweden:

·              contractual public bustransportation;

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·              express bus services (scheduledintercity or long distance bus services); and

·              coach hire services.

Contractual public bus transportation servicesoperated 2,597 buses, express bus services 99 buses and coach hire services inSweden operated 70 buses.  Our Swedishoperations generated revenue of SEK 3,877 million for the year endedFebruary 28, 2006.

***Contractual PublicBus Transportation Service***

As of February 28, 2006, we were operating 2,597buses under 104 public bus transportation contracts with local public transportauthorities.

As of February 28, 2006, we had a market share ofapproximately 29% (in terms of number of buses) of the Swedish contractualpublic bus transportation market.  Thismarket share data has been calculated based on the share of total number ofbuses, as provided by the relevant CPTA. We have a relatively even distribution of our contract portfolio interms of revenue among the southern, eastern and western regions ofSweden.  Due to the economics of the busindustry in the northern region of Sweden, we have a smaller presence in thisregion.  We intend to focus on areas ofhigh urban concentration and to review our contract portfolio critically withregard to smaller, less profitable contracts, particularly those relating toareas of relatively low population density.

The greater city area of Stockholm, together withVärmland, Uppland and Västra Götaland, are our most important markets, andcollectively account for approximately 65% of our total revenue in Sweden.

Bus services are provided in the Swedish public bustransportation market according to publicly tendered contracts entered into bybus operators with local public transport authorities.  See “—Regulation—Sweden Tendering Procedures.”

Most Swedish bus operators have similar cost bases, asmost bus drivers are in the same unions and most buses meet similarspecifications.  We believe thedifference in competitive power comes from a bus operator’s ability to optimizeits depot structure, its skill in planning and scheduling, and its ability tosolve the complex logistical issues involved in meeting the requirements of thecontracts.  Having access to a largefleet and being able to shift resources significantly benefit the largeroperators.

***Regulation***

In Sweden, the administration of public transportationfor a particular region is delegated to the relevant local public transportauthorities, which plan, price and coordinate public transport within theirgeographical area and which enter into contracts with both public and privateoperators.  There are 24 independentlocal public transport authorities in Sweden, which cover the 21 provinces ofSweden and its five largest cities.

Prior to 1989, public transportation contracts werenot subject to competitive tendering procedures and operators typicallymonopolized a particular public authority’s geographical area ofresponsibility.  In 1989, Sweden beganrequiring, subject to specific exceptions, local public transport authoritiespurchasing bus services to conduct competitive tender procedures.  This deregulation and the resulting pricecompetition led to a reduction in contract prices by an estimated 20% to 30% inreal terms in the decade after competitive tendering requirements wereintroduced 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 are compensated based on aconsumer price index which takes fuel costs into account, overall, in recentyears, this index has not risen sufficiently despite the increase in thecomponent based on fuel costs to reflect the increase in our costs.  Therefore, operators have not beencompensated in a manner allowing them to cover their increased costsfully.  This trend led to consolidationin the industry and begun to produce a more favorable pricing environment.  As a result, commencing in 1998 and to agreater extent in 2000 through 2005, we have renewed contracts at higherprices.

*Tendering Procedures*

Under Swedish law implementing European Uniondirectives concerning public procurement, public bus transportation contractsmust be awarded on a commercial basis and, subject to limited exceptions, mustinvolve a competitive bidding process.

Typically, following a study of the community’stransportation needs and input from transportation providers, the local publictransportation authorities determine the required bus routes, schedules, faresand other requirements.  Invitations totender contain bid information packages which state the specific routes andtimetables to be covered by the operator and usually contain requirementsregarding bus types, technical standards (seats, age, design, etc.), exteriorappearance requirements, the environmental standards (such as types of fuel,emissions standards and requirements for exhaust filters) and qualityrequirements.

The local public transport authorities are required tofollow established criteria for awarding contracts, of which the single mostimportant is typically price.  Otherfactors may be considered, including the cost of adapting to a new operator andthe level of service quality.  In manycases, local public transport authorities choose to subdivide procurement intoa series of contracts, each with a specified portion of a community’s routes toavoid having a single operator dominating a large area.

*Contracts*

acts, other than contracts for school bustransportation, are generally for five to eight year terms, although many haverecently provided for the extension of the term.  In some cases, there are options which may beexercised by either Swebus or the local transportation authority, but otheroptions are exercisable only by the local transportation authority.  Extension options 

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exercisable only by the local transportationauthorities generally provide for one or two year extensions.

The various criteria set forth in the bid informationpackage, as described in the heading “Tendering Procedures” in this section,become part of the contracts.  Busoperators must then seek to comply with these requirements as efficiently aspossible.  In isolated cases, there areprovisions that an incoming operator must purchase used buses from the outgoingoperator.

Public transportation contracts in Sweden usuallyprovide for fixed fees to be paid to the operator in return for the contractedbus services, which fees are subject to monthly, quarterly, semi-annual orannual fee adjustments intended to account for changes in costs incurred.  At present, contracts with local publictransportation authorities that produce a substantial portion of Swebus’revenues in Sweden contain cost indices which reflect bus industry costs or anindex which contains a labor or fuel cost component.  Although management believes that Swebus’indices matches bus operation industry costs more closely than in the past,there can be no assurance the indices will cover 100% of cost increases.  See the subheading “Risk Factors—RisksRelated to the Company—If indices in our contracts do not reflect our costincreases, our business could be adversely affected.”

Over 90% of the public transport contracts subject tocompetitive bidding are gross agreements, which means the operator receives afixed amount (usually per vehicle kilometer) for operating the routes and thereis no direct financial benefit to the operator for increasing passengervolumes.  The local public transportationauthorities retain all ticketing revenues and set the fares.

***Express BusServices***

We operate an extensive network of express busservices under the trade name “Swebus Express” which operates under a separatelegal entity called “Swebus Express AB” and provides public long distancetransportation.  In the year ended February 28,2006, we employed approximately 99 buses on a full time basis for express busservices in Sweden. We operate with daily and weekend services throughoutSweden, as well as international routes between Oslo —Copenhagen,Stockholm-Copenhagen and Stockholm-Oslo. Our express buses covered in aggregateapproximately 369,000 kilometers per week during the year endingFebruary 28, 2006, and transported more than 2.8 million passengerslast year.

For the year ended February 28, 2006, express busservices in Sweden had total revenue of SEK 365 million.  Providing an extensive national network and aseamless mode of transport between a large numbers of destinations has becomeSwebus’ main competitive advantage. Swebus Express sells tickets via Internet, as well as in advance throughticket agencies. If you buy a ticket 24 h before the departure everyone willget a discount. Swebus Express also sells tickets on the buses but at a higherprice.

Swebus’ policy is to provide coaches for anypassengers who want to travel and arrive at the applicable embarkation pointsat scheduled departure times.  We do notallocate particular seats for passengers. We offer discounts for children, students and pensioners as well as forall passengers who can plan a trip and buy the tickets by advance booking.  Management believes that the increase in theamount of pensioner traveling on Swebus Express reflects pensioners’ growingdemand for inexpensive flexible scheduled travel.

Express bus services in Sweden are generally deregulatedso that an express bus service operator has full responsibility for all aspectsof the service, including route planning, schedules and fares.  In some regions, express bus services arecombined with regional or local public bus services.  In these circumstances the local publictransportation authorities compensates the express bus operators for making anumber of stops in proximity to a regular local public bus service within aregion.

We believe that the express bus service industry willenjoy continued growth as more routes are developed and more passengersappreciate the price competitive service as compared to rail and airlineservices and, more importantly, the high costs of driving private cars.  Based on current demographic trends, weexpect that the potential passenger base for express bus services will expandas the number of people engaged in long distance employment or studiesincreases.

***Coach Hire Services***

We also operate a coach hire service under the name “Interbus,”which operates 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.  Interbusoperates a coach hire service business in the Stockholm, Gothenburg and Malmöareas.  As of February 28, 2005,Interbus operated approximately 70 full-time coaches and additional expressbuses as needed.

For the year ended February 28, 2006, we hadtotal third party revenue of SEK 138 million from coach hire services inSweden.  The Swedish coach hire market isconcentrated primarily in densely populated areas, such as Stockholm,Gothenburg and Malmö.  The customer basefor the coach hire market is diverse, ranging from small groups organizing 

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private outings to organizers of major sportingevents.  The business FO-resor, which wasacquired the year before in order to provide package tours for both groups andindividuals, had a positive development and contributed to the third partyrevenue for this year with SEK 22 million.

Interbus’ typical customers include major eventplanners, corporations and travel agencies. Swebus’ coach fleet size enables it to meet the requirements of a widerange of customers and to manage bus transportation for both small and large events.  We are one of a few major operators in Swedenwhich has the capacity to satisfy larger customers.  A significant and growing portion of thecoach hire service is related to cruise line operations.  Our fleet size improves our competitivenessin this market because cruise ships require operators with significant carryingcapacity to ferry people between the ship and the relevant city, or to providesightseeing tours.

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

*Contractual Public Bus Transportation*

Deregulation has changed the nature of competition inthe Swedish bus industry.  Over the pastseveral years, the Swedish contractual public bus transportation market hasexperienced intense price competition. In this competitive pricing environment benefited, large companies withadvantages of economies of scale have enjoyed expansion at the expense ofrelatively inefficient larger carriers (including operators owned by the localpublic transport authorities) and smaller bus operators.  As a result of this competition there arecurrently three large private bus operators.

The Swedish contractual public bus transportationmarket features a few operators that hold large shares of the market and manysmall local operators.  Managementbelieves that the relative market shares of the three largest Swedish busoperators are Swebus (with approximately 29% of the market), Busslink, (withapproximately 16% of the market) and Connex (with approximately 17% of themarket).  This market share data has beencalculated based on the share of total number of buses, according to theSLTP.  Swebus, Busslink and Connex arethe only national competitors.

In rural markets, in the northern and southern regionof Sweden, large bus companies face stiff competition from small, privatelyowned local operators, who have formed into loose cooperative ventures in whichbus fleets are pooled and who can operate very flexible schedules and are notheavily unionized.  These factors,combined with the lower levels of operations in northern areas that do notbenefit large scale operators, allow these smaller operators to bid forservices at prices that are often not economically viable for larger operatorssuch as Swebus.

In general, we believe that we face more competitionon tenders that require fewer than 50 buses, as there are more operatorscapable of servicing such requirements. In the tenders for larger contracts, such as in the major cities, thereare generally five operators tendering.

*Express Bus Services*

The express bus market in Sweden is fully open tocompetition and is highly fragmented.  Inthe year ending February 28, 2006, we had more than 50% market share ofthe Swedish express bus service market, as measured by kilometers served,according to the SLTF.  We operate 99 busesin this market.  The next largestoperator is Säfflebussen, which operates primarily between Gothenburg andStockholm and to Oslo.  Säfflebussen hasa market share exceeding 20%, according to the SLTF.  This market share data has been calculatedbased on the share of total number of buses.

The third largest operator is Svenska Buss, which is ajoint venture among seven privately owned bus companies and operates primarilyin the south of Sweden.  Svenska Buss hasa market share of about 10% and operates primarily between Stockholm andseveral northern cities.

*Coach Hire Services*

The coach hire market is fully open to competition,and is more fragmented than the contractual public bus transportationmarket.  While we dedicate approximately70 buses to coach hire services, the market is characterized primarily by smallto medium sized operators.  The mediumsized operators typically have between 10 and 20 buses.  The small operators are usually privatecompanies operating up to four buses, where the owners of the buses both driveand maintain the buses themselves.  Thesmall operators are cost efficient and highly competitive, but cannot bid forlarger contracts due to their limited resources.  Within the bus industry, the coach hiremarket is the segment that is most sensitive to general economic conditions, astourism and 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 hire operations, so that ouroperating margins in this segment have been less volatile than revenues intimes of downturns.

***Insurance***

Swebus carries the following types of insurance:  general legal and product liability, propertyand business travel insurance.  Wegenerally self-insure with respect to ordinary course damage to our busfleet.  Swebus believes that it carriestypes and levels of insurance that are consistent with the types and levelscarried by other major bus operating companies in 

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Europe.  Swebusdoes not carry business interruption insurance, but this is common for manyEuropean businesses, particularly those (like Swebus) in which the risk ofmajor interruption of business is small.

***EnvironmentalMatters and Other Regulations***

We are required to comply with a series of Swedish andEU environmental, health, and safety regulations.  These regulations include requirementsregarding emission standards, safe storage of diesel fuel, and proper maintenancefor the buses.  In addition, publictransportation contracts stipulate additional environmental standards relatingto emission standards and the maintenance of the bus fleet.  We believe that Swebus materially complieswith these regulations and contract requirements.

***IntellectualProperty***

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

***Legal Proceedings***

Swebus has a claim on the CPTA in Stockholm regardingcompensation for unfair indexes in some of the contracts, starting from theyear 2001.  The CPTA has rejected theclaim and the case will be solved in the city court in Stockholm.

**Drivers and Other Personnel**

For the year ended February 28, 2005, we had anaverage of 5,572 full-time employees in Sweden. Should a company lose a public transportation authorities contract, itis often the case that drivers will move to the company that wins thecontract.  The incoming operatorgenerally does not need to 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 personnelin Sweden are members of trade unions. The principal union to which the drivers and maintenance personnelbelong is Svenska Kommunalarbetareföbundet (the Swedish Municipal WorkersUnion).  A small minority of driversbelong to Svenska Transportarbetareföbundet (the Swedish Transportation WorkersUnion).

In Sweden, wages and general working conditions aregenerally the subject of nationally negotiated collective bargainingagreements.  The collective bargainingagreement generally applicable to our blue collar employees expires on October30, 2005.  A separate collectivebargaining agreement normally applies to operations under public tenders.

We believe that our relationships with our employeesand unions are good.  Swebus has onlyexperienced one industrial disruption in the last five years, inFebruary 1999.  This strike wasindustry-wide in Sweden and lasted for 13 days. See “Risk Factors—Risks Related to the Company—Our employees are heavilyunionized.  Bargaining power and strikescan hurt our businesses.”

***Pensions***

In addition to the state sponsored pension scheme, weprovide pension benefits, under the terms of our collective bargainingagreements, through two plans:  a definedbenefit plan with Alecta covers the majority of our white collar employees; ourblue collar employees are covered under a defined contribution plan with Fora.

**Property, Plant and Equipment**

We currently lease our facilities, the majority ofthem for use by Swebus.  Swebus conductsits bus operations out of a system of 45 depots and 74 parking areas locatedthroughout Sweden.  These divide asfollows:

·              45 depots, which include garageswith full maintenance facilities, washing facilities, parking, administrativeoffices and eating and changing facilities for drivers and mechanics;

·              20 sub-depots, which includewashing facilities, parking, small administrative offices for payrolldisbursement and limited facilities for drivers; and

·              74 parking areas with limitedstaff facilities.

Some of the larger depots are located adjacent to busstations and Swebus rents portions of parking capacity to some externalcustomers.  However, Swebus does notoperate bus stations.

We generally select our depot sites according to theirproximity to our routes.  We intend toexamine ways to use sales and leasebacks of depots with flexible lease terms asa way for Swebus to change depots to adjust to its changing needs as publictransportation contracts are won and lost.

**Norway**

***Contractual PublicBus Transportation******

SBC is the seventh largest bus operator in Norway,with 345 buses and a market share in southeastern Norway of 20%, based onresults of competitive tenders.  Thismarket share data has been calculated based on the share of total number ofbuses, as provided by the relevant CPTA. SBC’s operations generated revenue of SEK 398 million (SEK466 million) for the year ended February 28, 2006.

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SBC operates principally in the contractual public bustransportation sector in the counties of Hedmark, Oppland, Akershus and Østfoldin Southeastern Norway. All contracts are won in competitive tendering. Inaddition SBC operates a minor number of buses in the city of Oslo, which willbe terminated by August 2006, due to ending of the contract. SBC chose not tobid for this tender because of non-competitive tender conditions set up by theCPTA.

In 2006, management estimates that the Norwegianmarket for contractual public bus transportation employed approximately 7,000buses and amounted to NOK 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 or more of Norway’s 18 counties and a number of cities.The city of Oslo has a stand-alone status outside the counties in Norway andtherefore technically is both a municipality and a county.

*Regulation*

The administration of public transportation in Norwayfor a particular region or city is delegated to the relevant local publictransportation authorities, which are responsible for planning, pricing andcoordinating public transport within 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 ofFebruary 28, 2006, only 11 of the 19 local public transport authorities inNorway had opted to use competitive bidding methods as their means ofdistributing public transportation contracts. SBC expects, however, that further local public transport authoritieswill follow suit because of the significant cost savings associated withputting a contract up for competitive tender. If competitive bidding is not used, bus operators negotiate with localpublic transport authorities to provide exclusive service for specific routesfor specified periods (up to ten years). Bus operators are aware that if they do not offer competitive prices,the authorities will open bidding either in a formal tendering process or bysimply requesting competitors to approach them with offers.  The threat of competitive bidding has alsoincreased the bargaining power of the public authorities and caused prices todecrease.  The level of public subsidiesvaries largely from province to province in Norway, and management estimatesthat the average level of subsidies in Norway is approximately 40%.  SBC believes that the general trend is thatthe level of subsidies is generally decreasing. For further information relating to subsidies, see the subheading “RiskFactors—Risks Related to the Company—The local public transport authoritiesrely on government subsidies.  Removal ofthese subsidies could drive down local public transportation authorities’contract fees.”

*Competition*

In Norway, the public transportation market has begunto experience developments similar to those that have occurred in Sweden.  These developments include price competitionand consolidation.  Nevertheless, theNorwegian bus industry remains fragmented with approximately 227 bus companiesoperating a total of approximately 7,600 buses in 2006.  Almost 60% of Norwegian bus operators hadfleets averaging fewer than ten buses. In contrast to Sweden, competitive bidding is not prevalent and hasinstead been used for smaller contracts to obtain a “signal price,” which isthen used as a target for renegotiating the entire contract portfolio.

SBC is a major operator in Southeastern Norway.  On a national level, both Nettbuss AS (ownedby Norges Statsbaner BA, the state railway operator) and Norgesbuss AS havesignificantly larger fleets than SBC, but neither of them are dominant in anysingle region.

Since 1989, contracts with public transportauthorities in Norway to provide bus services have been potentially subject tocompetitive bidding procedures.  Theability to compel competitive bidding has increased the bargaining power of thepublic 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 risks relating to our current contractssee “Risk Factors—Risks Related to the Company—If we lose many local publictransportation authorities’ contracts as they are renewed or we are unable towin new contracts, our business will be adversely affected.  Further, if we experience difficulties inoperating under our existing contracts, our business may be adversely affected.”

***Drivers and OtherPersonnel***

For the year ended February 28, 2006, SBC had anaverage of 486 full-time employees.

Nearly all of SBC’s employees are represented byunions under the terms of industry-wide collective bargaining agreements.  All union agreements are renegotiated everytwo years.  The largest collectivebargaining agreement, which covers drivers and maintenance personnel, expireson March 31, 2008.

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SBC considers its relations with its employees and theunions to be good.

***EnvironmentalMatters and Other Regulations***

All persons and entities governed by Norwegian law areobliged to comply with the Norwegian environmental, health and safety acts,regulations and public orders.  Healthand safety requirements are to a large extent the implementation into Norwegianlaw of various European Union regulations. The relevant legislation for our operations includes the Pollution andWaste Act 1981, the Worker Protection and Working Environment Act 1977, thePlanning and Construction Act 1985, the Fire and Explosion Protection Act 2002and the Neighbouring Properties Act 1961. These acts, and the connected provisions of orders based on these acts,include provisions regarding environmental permits, emission standards, storageand handling of fuels and other hazardous substances, waste management,technical provisions regarding maintenance of buses and requirements regardingthe environmental safety standards of fuel distribution stations.

***Legal Proceedings***

SBC is not currently involved in any material legalproceedings.

**Finland**

***Contractual PublicBus Transportation***

We operate a Finnish public bus transportationbusiness through our principal subsidiary in Finland, Concordia BusFinland.  Concordia Bus Finland is amajor bus operator in Finland with 274 buses in operation as ofFebruary 28, 2006, and approximately 28 public bus transportationcontracts with local public transport authorities.  Our Finnish operations generated revenue ofEUR 43,6 million for the year ended February 28, 2006.  Concordia Bus Finland operates only in theFinnish contractual public bus transportation sector in the greater Helsinkiarea in the cities of Helsinki, Vantaa and Espoo, and does not offer eitherexpress bus or coach hire services.

Management estimates that in 2005, the Finnish busmarket employed approximately 8,800 buses and included approximately 400operators.  The Finnish bus market iswell developed in both rural and urban areas. Finland’s geography and low population density make bus transportationvery competitively priced as compared to railway services.  Additionally, the passenger railway networkis centered on Helsinki and is being reduced in rural areas.  This situation provides an advantage to busoperators because they can offer bus passengers the possibility to make moreconvenient cross country trips than on the railways.

The greater Helsinki area, with a total population ofapproximately one million, is Finland’s largest market for contractualpublic bus transportation.  The greaterHelsinki area and Turku are the only markets currently subject to competitivebidding.  Significant price pressure hasled to consolidation in these areas. Except for the greater Helsinki and Turku areas, local traffic in most citiesis largely provided by local operators.

*Regulation*

As in Sweden, the administration of publictransportation in Finland for a particular region is the responsibility of thelocal transportation authority.  Ingreater Helsinki and Turku, public transportation authorities have opened theirlocal public transportation contracts to competitive bidding.  In 1994, the Helsinki Metropolitan AreaCouncil (commonly known as the YTV), which is the authority that regulatesinter region public transport traffic between the three cities of Helsinki,Espoo, and Vantaa, was the first to initiate competitive bidding inFinland.  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 Bus Finland expects an increase in the number of regionssubject to competitive tendering in the near future.

Currently, in areas other than those referenced above,the local public transport authorities have granted independent operatorslicenses to run bus services, which essentially gives each operator a monopolyposition.  Licenses are normally grantedfor a three to ten year period and are usually renewed with the same operator.  We do not have any contractual public busservices agreements in areas not subject to competitive bidding.

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*Contracts and Contract Tendering*

In the YTV region, and other areas in whichcompetitive bidding has been instituted, the contract structure and bidding andprocurement procedures closely resembles that of the local publictransportation authorities contracts in Sweden described in the subheading “Sweden—TenderingProcedures” and “Sweden—Contracts” in this section.  Typically, the public transportationcontracts have five year terms and under these contracts all ticket revenuesare forwarded to the local public transportation authorities and the operatorreceives fixed fees.  The compensation isadjusted periodically by reference to an index intended to cover cost itemsthat relate to the bus transportation industry such as drivers’ wages, cost ofbuses and fuel.

***Drivers and OtherPersonnel***

For the year ended February 28, 2006, ConcordiaBus Finland had an average of 645 employees.

All of Concordia Bus Finland’s employees arerepresented by unions under the terms of industry-wide collective bargainingagreements.  The largest collectivebargaining agreement, which covers drivers and maintenance personnel, expireson February 1, 2008.

Concordia Bus Finland considers its relations with itsemployees and the unions to be good.  See“Risk Factors—Risks Related to the Company—Our employees are heavilyunionized.  Bargaining power and strikescan hurt our business.”

***EnvironmentalRegulation and Other Regulations***

Concordia Bus Finland is required to comply with theFinnish environmental, health and safety regulation, a large part of whichoriginates from the European Union regulations implemented into Finnishlaw.  The applicable legislation (i.e.the Environmental Protection Act and the Environmental Protection Decree, theChemicals Act and the related regulations, and the Waste Act) and otherregulations include provisions regarding environmental permits, emissionstandards, storage and handling of fuels and other hazardous substances, wastemanagement, technical provisions regarding maintenance of buses andrequirements regarding the environmental safety standard of fuel distributionstations.

In addition, the public transportation contractsentered into with various public entities in the Helsinki area provide that thebuses have to fulfill, certain technical and other requirements.

***Legal Proceedings***

Concordia Bus Finland is not currently involved inon-going legal proceedings.

**Business Management**

In Sweden we have structured autonomous operations foreach business line—the contractual public bus transportation business, theexpress bus business and coach hire. Each operating unit is responsible for preparing and securing andintegrating new business, operational management, and long term planning.  We provide overall business directionpolicies and control systems, and financial, information technology, andproperty and asset management 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 Nordicregion.  Our size permits us to seekfavorable terms from suppliers in the Nordic region and elsewhere.  Consequently, we are not dependent on any onesupplier to meet our bus requirements. We have entered into framework agreements with Volvo and Evobus for thesupply of our buses going forward.  Asfar as possible, we will continue to acquire vehicles under operating leasearrangements to meet our bus fleet 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 tofinance a portion of our bus fleet.  Asof February 28, 2006, 1,571 of our 3,397 buses were financed throughoperating lease arrangements.  The netpresent value of outstanding obligations for buses as of February 28,2006, was SEK 1,020 million (the net present value of our outstandingobligations under leases relating to real estate as of February 28, 2005,was SEK 39 million).

The large majority of lease terms for buses includeresidual value guarantees from the bus manufacturer, whereby we retain anoption to return the buses to the manufacturer without cost to us.  The number of buses that can be returnedunder these agreements is subject to certain limitations.

The structure of the lease contract is such that atthe inception of a new lease contract, the leasing fee is established based onthe purchase price paid by the lessor and the residual value agreed with themanufacturer for the period of the lease. At the end of each leasing contract period each leasing contract can berenewed or terminated.  The leasepayments for the second leasing period are always at terms based on the fairvalue at the date of the extension which are usually lower than the 

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payments during the initial term.  If we are successful in renewing or extendinga local public transportation authority contract, our leasing contract can berenewed at terms based on the fair value at the date of the extension.  This is likely to result in lease paymentswhich are substantially lower than the payments during the initial term.

We centralize our fuel purchases in order to benefitfrom bulk purchases.  We obtain most ofour diesel fuel requirements from a single major petroleum company in theNordic region.  In the year endedFebruary 28, 2006, we used approximately 97 million litres of diesel fuel.  Our contract with this supplier currentlyends June 30, 2006, but will automatically renew for two years unlessnotice is provided by either party three months prior to the end date.  The price is based on the prevailing spotprice for diesel fuel at the time of purchase. In addition, we hedge a portion of our diesel fuel purchases.

See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Quantitative and Qualitative DisclosuresAbout Market Risk—Fuel Prices”.  Webelieve that, if necessary, we could find an alternative supplier for ourdiesel fuel requirements.

We rent our tires from Michelin.  Rental fees are charged on a per kilometerbasis.  Michelin provides all necessarymaintenance with respect to the tires. Our current contract with Michelin expires December 31, 2008.  Under the contract, Michelin is required tosupply us with all the tires that we may require for our buses.  We believe that, if necessary, we could findan alternative supplier of tires for our buses.

**Information Technology**

We have standardized, modernized and centralized ourhardware and software applications across our operations, and the completefunction is now run internally (after previously being outsourced).  We currently have four standardized coreapplications covering financial reporting, traffic planning, fleet maintenance,and administrative planning.  Our Finnishand Norwegian operations and the vast majority of our locations in Sweden areconnected to the Stockholm head office by permanent, high-speed connections.  We have established a training center in thehead office to ensure a smooth roll-out of the system.

We are in the final stages of implementing OMS, ourOperational Management System.  We havein place a “production barometer,” a system which enables us to examineproduction activity at each of our locations on a day by day basis againstbudgeted hours.

**C.            OrganizationalStructure**

The following chart sets forth the corporate structureof Concordia.

CHART

(a)           Pursuantto an intercompany loan agreement entered into on February 28, 2002, as amendedand restated on January 16, 2004 and again on July 22, 2005 Bus provided ashareholder loan (the “Subordinated Shareholder Loan”) to Concordia originallyin the amount of SEK 501 million in aggregate principal amount,comprising a portion of the net proceeds of the Senior Subordinated Notesissued in 2002.  The most recentamendment novated the Subordinated Shareholder Loan to Holding and; as ofFebruary 28, 2006, the outstanding amount is SEK 167 million.  The terms of this Subordinated Shareholder Loan,as so amended and restated, provide that (i) interest accrues at a rate of11% per annum, (ii) the loan is payable on demand and (iii) paymentsin respect of the Subordinated Shareholder Loan are subordinated to ConcordiaBus Nordic’s obligations under the Senior Notes.

(b)           TheSenior Notes benefit from (i) a pledge by Holding of the shares inConcordia, (ii) a pledge by Concordia of the shares of all of itsoperating subsidiaries, (iii) certain other security, including a pledgeby Swebus Busco AB of all of the buses it owns (with a book value atFebruary 28, 2005, of approximately SEK 1 billion), whichrepresents substantially all of the tangible fixed assets of Concordia and itsoperating subsidiaries, and a pledge by Swebus AB of a floating charge overits assets securing an amount up to SEK 115 million and (iv) apledge by Concordia of certain secured intercompany loans to Swebus AB andSwebus Busco AB, in the amounts of SEK 200 million andSEK 800 million, respectively, pursuant to which a second rankingsecurity interest over certain assets of those Guarantors has been granted toConcordia.  The indenture in respect ofthe Senior Notes includes certain intercreditor arrangements between Concordiaand the trustee with respect to the collateral securitising such intercompanyloans.  The laws of certain jurisdictionsmay limit recovery over security constituting the collateral.

(c)           Holding,Swebus AB, Swebus Busco AB, Swebus Express AB, Interbus AB,Ingeniø M.O., Schøyens Bilcentraler AS, Concordia BusFinland Oy Ab, Swebus Fastigheter AB, Alpus AB, MalmfältensOmnibus AB and Enköping-Bõlsta Fastighetsbolag AB.

(d)           Thesecompanies are dormant and have no material assets.  As Concordia has designated ArlandaBuss AB, Billingens Trafik AB, Enköping-Bålsta Trafik AB,Hälsinge Wasatrafik AB, AB Härnösandsbuss, Karlstadsbuss AB, ABKristinehamns Omnibusstrafik, Saltsjöbuss AB, Swebus Service AB,Swebus Västerås AB, Tumlare Buss AB, Wasabuss AB and Wasatrafik ABas unrestricted subsidiaries these companies do not guarantee the Senior Notes.

**D.            Property,Plants and Equipment**

Concordia operated 3,397 buses at February 28,2005, of which 1,571 were operated under operating lease agreements with 

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the other 1,828 buses being either legally owned byConcordia or operated under financing lease agreements.  At February 28, 2005 we operated 2,766buses, 343 buses and 288 buses in Sweden, Norway and Finland, respectively.

At February 28, 2005, we operated 3,730 buses, ofwhich 1,470 were operated under operating lease agreements with the other 2,260buses being either legally owned by Concordia or operated under financing leaseagreements.  At February 28, 2005 weoperated 2,989 buses, 379 buses and 362 buses in Sweden, Norway and Finland,respectively.

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

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

Those of our buses which are subject to operatinglease agreements are also subject to residual value guarantees from our bussuppliers, Volvo and Mercedes/SETRA.  Theresidual value guarantees enable Concordia to return those buses to oursuppliers at no further cost to us at the end of the first lease period of theoperating lease agreement.  The firstlease period must be at least 48 months for Mercedes/SETRA buses and at least60 months for Volvo buses.

The return conditions, stated in the residual valueguarantees, include that the buses must be in roadworthy condition and fulfilla kilometer allowance.  If the buses donot meet these conditions, Concordia may have to compensate the suppliers forthe extra cost.

The residual value guarantees also include alimitation regarding the number of buses that can be returned to the suppliers. For Volvo buses, the return is limitedto a total number of vehicles per calendar year corresponding to 30 percent ofthe average purchases of new Volvo buses during the past three calendar years.  For Mercedes/SETRA buses the return of busesis limited to the annual average (20% of the overall amount) per year of thedeliveries of Mercedes/SETRA buses between 2000 and 2004.  The Mercedes/SERTA buses are providedpursuant to the Evobus framework agreement.

We currently lease our facilities, the majority ofthem for use by Swebus.  Swebus conductsits bus operations out of a system of 45 depots and 74 parking areas locatedthroughout Sweden. These divide as follows:

·              45 depots, which include garageswith full maintenance facilities, washing facilities, parking, administrativeoffices and eating and changing facilities for drivers and mechanics;

·              20 sub-depots, which includewashing facilities, parking, small administrative offices for payrolldisbursement and limited facilities for drivers; and

·              74 parking areas with limitedstaff facilities.

Some of the larger depots are located adjacent to busstations and Swebus rents portions of parking capacity to some externalcustomers.  However, Swebus does notoperate bus stations.

We generally select our depot sites according to theirproximity to our routes.  We intend toexamine ways to use sales and leasebacks of depots with flexible lease terms asa way for Swebus to change depots to adjust to its changing needs as publictransportation contracts are won and lost.Concordia has no material propertiesin Norway or Finland.

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

**A.            OperatingResults**

*The following should be read inconjunction with our consolidated financial statements included in this annualreport starting on page F-1.  Ourconsolidated financial statements are prepared in accordance with Swedish GAAP,which differ in various significant respects from US GAAP.  The significant differences between SwedishGAAP and US GAAP are discussed in Note 33 to the consolidated financialstatements of Concordia included elsewhere in this annual report.*

Overview

Concordia Bus Nordic AB was incorporated on December22, 1932.  In January 2000, Bus,backed by SG (the then parent company of SBC) and certain private equity fundsaffiliated with Goldman Sachs International, acquired Concordia BusNordic.  In connection with theacquisition, SG agreed to contribute its bus operating subsidiary, SBC, to Busby no later than March 1, 2002, pursuant to mutual options.  On February 28, 2001, we acquired SBCwith effect from February 1, 2001.

We provide public bus transportation services inSweden, Norway and Finland, through our three main operating subsidiaries:  Swebus, SBC and Concordia Finland,respectively.  We also provide expressbus and coach hire services.  In Sweden,we currently operate 2,766 buses, and are the largest operator through Swebus,with an estimated market share of approximately 29% of the public bustransportation market (measured by the number of buses in operation).  This market share data has been calculatedbased on the share of total number of buses, as provided by the CPTA.  In Norway, SBC currently operatesapproximately 343 buses and has an estimated 16% market share of the public bustransportation market in southeastern Norway, which includes Oslo andneighboring cities.  This market sharedata has been calculated based on the share of total number of buses, asprovided by the CPTA.  In Finland,Concordia Finland currently operates 288 buses and is 

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the second largest operator in the greater Helsinkiarea with a market share of 25%.  Thismarket share data has been calculated based on the relative numbers of contractkilometers.  This information is madeavailable at each tendering.

The operating results for Concordia Bus Nordic duringthe fiscal years 2004 to 2006 have been negative, mostly due to loss makingcontracts in the CPTA segment.  The groupprofit and loss statement for Concordia Bus Nordic for the year endedFebruary 28, 2006 shows that earnings generated by the underlyingbusinesses during the period March 1, 2005 - February 28, 2006 havenot been sufficient to cover Holding’s costs. Concordia and its subsidiaries are continuing to implement changes inthe operations, changes to the administrative structure and certain changes inthe capital structures.  Changes inoperations and administrative structure are made to improve traffic planningand make the usage of buses and staff more efficient.

On July 22, 2005, Concordia Bus Nordic AB andConcordia Bus AB gave notice that they had entered into an agreement with an *ad hoc* committee which represents not lessthan 75% of the bond holders in Concordia Bus AB’s bond loan, an informal groupwhich represents the majority of the bond holders in Concordia Bus Nordic’sbond loan and the owners of Concordia Bus AB regarding the reorganization ofConcordia Bus AB.  According to theagreement, the bond holders have waived the entire loan of Euro 160 million,including accrued interest, in exchange for shares in Concordia Bus ABcorresponding to 97.5% of the share capital. The reorganization was carried out on October 4, 2005.  In connection with the reorganization,Concordia Bus received a loan of Euro 45 million in order to cover thereorganization costs and strengthen liquidity in the group.  In connection with the annual accounts, thesubsidiaries, Swebus AB and Swebus Busco AB, have received equity through ashareholder’s contribution from Concordia Bus Nordic Holding totaling SEK 800million, in order to strengthen their equity.

Our contracts with public transportation authoritiesare typically structured such that the level of monthly fees depends on thecontractually agreed volume of operations, which varies from month to month,and in many cases declines in the summer months.  In addition, our express bus and coach hireservices businesses usually experience relatively high revenues from April toSeptember and during December in a given year, as customers tend to use theseservices during vacation periods and periods having more favorableweather.  Furthermore, as a result of ourcollective bargaining agreements, our personnel costs usually increase in thebeginning of each calendar year.

***Critical AccountingPolicies***

The preparation of our consolidated financialstatements requires management to make certain estimates and assumptions thataffect the reported amounts of assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenues andexpenses during the periods presented. The following paragraphs include descriptions of some accounting areasthat require a higher degree of complexity and/or judgment in making estimates.

*Recoverability of tangible andintangible fixed assets including goodwill.*

Impairment reviews of tangible and intangible fixedassets, including goodwill, are performed whenever there is an indication ofpossible impairment.  The carrying valuesof fixed assets, including goodwill related to those assets, are not consideredto be recoverable when the expected discounted cash flows from those assets areless than their carrying values.  Animpairment loss is determined based on the amount by which the carrying valueexceeds the fair value of those assets. Losses on fixed assets to be disposed of are determined in a similarmanner, taking into account the selling price reduced by the costs of disposal.

One of our significant assets is our goodwill in oursubsidiary SBC.  If future cash flows donot develop favorably, there is a risk that goodwill may be impaired and needto be written-down.  Goodwill isaccounted for in accordance with Swedish GAAP which in certain areas differsfrom US GAAP.  Please see Note 32 item(a), “Goodwill amortization,” to the consolidated financial statements ofHolding filed as part of this annual report for a description of thosedifferences.

In addition to goodwill, we also have significantinvestments in buses.  As ofFebruary 28, 2006, the carrying value of buses was SEK1,041 million.  The depreciation of thesebuses is based on a straight-line basis over their estimated useful lives,which range from three to 14 years depending on the type of bus.  Recoverability of these assets being held andused is measured by a comparison of the carrying amount of the asset to thefuture net cash flows expected to be generated by the asset.  If such assets are considered impaired, theimpairment loss recognized is measured as the amount by which the carryingvalue of the asset exceeds the fair value of the asset.  If we are not successful in renewing ourcontracts at a level that keeps our buses in service, we may have excess buscapacity and therefore may desire to sell these buses to third parties.  In such a situation the carrying value ofthese buses may exceed the amount that can be recovered in a sales transaction.

*Loss making contracts.*

Most of our contracts are five to eight year contractswith municipalities to provide bus services in a particular area.  Under the terms of these contracts, revenuesare generally indexed at a rate corresponding to a consumer price index or aprice index which more closely corresponds to the company’s actual coststructure in providing its services, such as an index that considers thesignificance of changes in diesel prices, payroll costs and otherexpenses.  Due to the fact that thecontracted price level on some of our older contracts has proven to be too lowto fully cover the costs of those contracts, certain contracts have become lossmaking.  Provisions have been recorded onan individual CPTA basis.  We may berequired to record additional provisions for loss making contracts in thefuture if the increase in revenue from the underlying contracts 

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does not offset the actual increase in costs.

*Deferred income taxes.*

Considering our recent history of losses, we have notrecorded any deferred tax asset for our operating loss carry forward, ortemporary tax difference.

***Going ConcernMatters***

Concordia Bus Nordic has interest-bearing liabilitiesamounting to SEK 1,263 million, including financial leasing agreements butexcluding operational leasing agreements. Concordia Bus Nordic’s ability to pay interest and make loan repaymentson the outstanding bond loan and other obligations is conditional on theunderlying subsidiaries generating sufficient profits available fordistribution and a cash surplus such that payment of interest and debtrepayment is possible. It is evident from the consolidated income statement forConcordia Bus Nordic AB as per February 28, 2006 that profits from theunderlying subsidiaries are insufficient to cover the parent company’s costsfor the financial year March 1, 2005 – February 28, 2006.

The Concordia Bus group has accumulated significanthistorical deficits whereupon equity has become negative and cash and bankbalances have declined.  The issue of theconditions for continued operation of the group’s business thus came to thefore during 2005.  On July 22, 2005,Concordia Bus Nordic AB and Concordia Bus AB gave notice that they had enteredinto an agreement with an *ad hoc*committee which represents not less than 75% of the bond holders in ConcordiaBus AB’s bond loan, an informal group which represents the majority of the bondholders in Concordia Bus Nordic’s bond loan and the owners of Concordia Bus ABregarding the reorganization of Concordia Bus AB.  According to the agreement, the bond holdershave waived the entire loan of Euro 160 million, including accrued interest, inexchange for shares in Concordia Bus AB corresponding to 97.5% of the share capital.  The reorganization was carried out on October4, 2005.  In connection with thereorganization, Concordia Bus received a loan of Euro 45 million in orderto cover the reorganization costs and strengthen liquidity in the group.  In connection with the annual accounts, thesubsidiaries, Swebus AB and Swebus Busco AB, have received equity through ashareholder’s contribution from Concordia Bus Nordic Holding totaling SEK 800million, in order to strengthen their equity.

The conversion of the Euro 160 million bond loan intoshare capital has restored the group’s equity and the liquidity contributionwhich was then made to the group has been crucial for the assumption regardingcontinued operation of the business at the time of preparation of this annualreport.

The group’s long-term ability to continue itsoperations is dependent on continued cost saving measures and on the groupsucceeding in future procurements, thereby improving cash flow and results fromthe operations.  The group’s reducedindebtedness provides an improved cash flow in the financing operation.  In addition, Concordia Bus and itssubsidiaries are continuing to implement radical changes in the operationalbusiness as well as changes in the administrative structure and also certainchanges in the company’s capital structure. The group also sees signs of significant improvement in the compensationlevels in new procurements with CPTAs. The business plan that has been prepared shows an improvement in theresult by 200 million in the coming year and an operating result without lossin two years’ time.

**New Accounting Principles in 2005 forSwedish GAAP**

During the year ended February 28, 2005, therecommendation Employee Benefits (RR 29) issued by the Swedish FinancialAccounting Standards Council, became effective. The change has positivelyaffected consolidated equity as of March 1, 2004 by SEK 5 million,net of deferred taxes.

**International Financial ReportingStandards**

Effective January 1, 2005, all listed EuropeanUnion companies are required to present their consolidated financial statementsin accordance with International Financial Reporting Standards (“IFRS”).  The latest date for transitioning forConcordia will be the year ended February 28, 2007, which means that thefirst full set of financial statements will be the Company’s financial reportsfor the year ending February 28, 2008.

Concordia is currently in the process of assessing theimplications of the adoption of IFRS. The impact that these new standards will have on the Company’s net lossand financial position has not yet been assessed.

Major disclosure differences based on the current IFRSstatus relate to the following areas: judgments, assumptions, risks and information regarding acquisition ofcompanies.  Major accounting differencesbased on the current IFRS status includes the following areas:

·              Intangible assets—Goodwillamortization will no longer be allowed;

·              Share based payment—The fair valueof awards is recognized in equity at the grant date and expensed during the 

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vesting period;

·              Financial instruments—In general,to be reported at fair value and depending on classification, to be takeneither through the income statement or directly to shareholders’ equity;

·              Component method of depreciation.

**New Accounting Principles in 2005 forUS GAAP**

***Consolidation ofVariable Interest Entities***

In December 2003, the U.S. Financial AccountingStandards Board (“FASB”) issued FASB Interpretation No. 46 (revisedDecember 2003), “Consolidation of Variable Interest Entities,” (“FIN 46R”)which addresses the consolidation of variable interest entities by businessenterprises. Variable interest entities are entities in which either the equityinvestment at risk is not sufficient to absorb the probable losses withoutadditional subordinated financial support from other parties, or the investorswith equity at risk lack certain essential characteristics of a controllinginterest. Under FIN 46R, an entity must consolidate any variable interestentity in which the entity holds variable interests and is deemed the primarybeneficiary. Portions of the requirements of FIN 46R were required to beadopted during the year ended February 29, 2004, while other portions wererequired to be adopted during the year ended February 28, 2005 under the transitionrules. The adoption of the remaining provisions of FIN 46R during the yearended February 28, 2005 did not have a significant effect on our consolidatedfinancial position or results of operations reported in accordance with USGAAP.

In May 2003, the Emerging Issues Task Force of theFASB reached a consensus 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 effect onour consolidated financial position or results of operations reported inaccordance with US GAAP.

In December 2004, the FASB issued SFAS No. 153, “Exchangesof Non-Monetary Assets – an amendment of APB Opinion No. 29” (“SFAS 153”).  Accounting Principles Board (“APB”) OpinionNo. 29, “Accounting for Nonmonetary Transactions” provided an exception to thebasic fair-value measurement principle for exchanges of similar productiveassets. That exception required that some nonmonetary exchanges, althoughcommercially substantive, be recorded on a carryover basis. SFAS 153 eliminatesthe exception to fair value for exchanges of similar productive assets andreplaces it with a general exception to fair-value measurement for exchangetransactions that do not have commercial substance—that is, transactions thatare not expected to result in significant changes in the cash flows of thereporting entity. SFAS 153 is effective prospectively for us in accounting fornonmonetary asset exchanges which occur on or after March 1, 2006 for US GAAPpurposes.

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 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 Opinion No. 20, “Accounting Changes” previously requiredthat most voluntary changes in accounting principle be recognized by includingin net income of the period of the change the cumulative effect of changing tothe new accounting principle. SFAS 154 is effective for accounting changes andcorrections of errors made by us on or after March 1, 2006 for US GAAPpurposes, except that SFAS 154 does not change the transition provisions of anyexisting accounting pronouncement, including those that are in a transitionphase as of March 1, 2006.

**Results of Operations**

The following table sets forth our results ofoperations for the years indicated in terms of amounts as well as a percentageof net revenue.
| ** **                                 | ** ** | **Year ended   February 28, 2006**        | ** ** | **Year ended   February 28, 2005** | ** ** | **Year ended   February 29, 2004** | ** ** |
|--------------------------------------------|------------|---------------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                                 | ** ** | **Amount**                                                    | ** ** | **%**                                                  | ** ** | **Amount**                                             | ** ** | **%** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                                 | ** ** | **(in millions SEK, except percentages)** | ** ** |
| Net revenue                                |       | 4,683                                                         |       | 100.0                                                  | %          | 4,812                                                  |       | 100.0 | % | 4,761 |   | 100.0 | % |
| Operating  expenses(a)                     |       | (4,671                                                        | )          | (99.7                                                  | )%         | (4,722                                                 | )          | (98.1 | )% | (4,544 | ) | (95.4 | )% |
| Gain (loss) on  sale of fixed assets       |       | 6                                                             |       | 0.1                                                    | %          | 4                                                      |       | 0.1 | % | 6 |   | 0.1 | % |
| Depreciation; amortization  and write-down |       | (300                                                          | )          | (6.4                                                   | )%         | (350                                                   | )          | (7.3 | )% | (331 | ) | (7.0 | )% |
| Operating loss                             |       | (282                                                          | )          | (6.0                                                   | )%         | (256                                                   | )          | (5.3 | )% | (108 | ) | (2.3 | )% |
| Financial income  and expenses, net        |       | (274                                                          | )          | (5.9                                                   | )%         | (141                                                   | )          | (2.9 | )% | (146 | ) | (3.1 | )% |
| Income taxes                               |       | (1                                                            | )          | (0.0                                                   | )%         | 1                                                      |       | 0.02 | % | 83 |   | 1.7 | % |
| Net loss                                   |       | (557                                                          | )          | (11.9                                                  | )%         | (396                                                   | )          | (8.2 | )% | (171 | ) | (3.6 | )% |

 

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(a)           **Operating expenses**
|                                    | ** ** | **Year ended   February 28,  2006** | ** ** | **Year ended   February 28,  2005** | ** ** | **Year ended   February 29,  2004** | ** ** |
|------------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                         | ** ** | **SEK**                                            | ** ** | **SEK**                                            | ** ** | **SEK**                                            | ** ** |
|                               |       |                                               |       |                                               |       |                                               |       |
| Fuel, tires and  other consumables |       | (1,113                                             | )          | (989                                               | )          | (929                                               | )          |
| Other external  costs              |       | (1,049                                             | )          | (1,127                                             | )          | (1,004                                             | )]         |
| Personnel costs                    |       | (2,509                                             | )          | (2,606                                             | )          | (2,611                                             | )          |
| Operating expenses .               |       | (4,671                                             | )          | (4,722                                             | )          | (4,544                                             | )          |

 

The following table sets forth our revenues, in termsof amounts as well as a percentage of revenues, and operating profit (loss), interms of amounts and as a percentage of total operating profit (loss), on thebasis of each of our businesses:
| ** **                                                | ** ** | **Year ended  February 28,  2006**                          | ** ** | **Year ended  February 28,  2005** | ** ** | **Year ended  February 29,  2004** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                | ** ** | **Amount**                                                            | ** ** | **%**                                        | ** ** | **Amount**                                   | ** ** | **%** | ** ** | **Amount** | ** ** | **%** | ** ** |
| ** **                                                | ** ** | **(in millions of SEK, except percentages)** | ** ** |
| Revenues:                                                 |       |                                                                  |       |                                         |       |                                         |       |   |   |   |   |   |   |
| Bus services for  local public transportation authorities |       | 4,088                                                                 |       | 87.3                                         | %          | 4,272                                        |       | 88.8 | % | 4,242 |   | 89.1 | % |
| Express bus  operations                                   |       | 364                                                                   |       | 7.8                                          | %          | 337                                          |       | 7.0 | % | 327 |   | 6.9 | % |
| Coach hire  operations                                    |       | 136                                                                   |       | 2.9                                          | %          | 117                                          |       | 2.4 | % | 110 |   | 2.3 | % |
| Other                                                     |       | 95                                                                    |       | 2.0                                          | %          | 86                                           |       | 1.8 | % | 82 |   | 1.7 | % |
| Net revenue                                               |       | 4,683                                                                 |       | 100.0                                        | %          | 4,812                                        |       | 100.0 | % | 4,761 |   | 100.0 | % |
| Operating profit  (loss):                                 |       |                                                                  |       |                                         |       |                                         |       |   |   |   |   |   |   |
| Bus services for  local public transportation authorities |       | (178                                                                  | )          | —                                       |       | (187                                         | )          | — |   | (92 | ) | — |   |
| Express bus  operations                                   |       | 13                                                                    |       | —                                       |       | 29                                           |       | — |   | 34 |   | — |   |
| Coach hire  operations                                    |       | 1                                                                     |       | —                                       |       | 4                                            |       | — |   | 3 |   | — |   |
| Other                                                     |       | (118                                                                  | )          | —                                       |       | (102                                         | )          | — |   | (53 | ) | — |   |
| Total operating loss                                      |       | (282                                                                  | )          | —                                       |       | (256                                         | )          | — |   | (108 | ) | — |   |

 

**Full year ended February 28, 2006compared to the full year ended February 28, 2005**

The following section provides an analysis of ourresults of operations between the actual numbers for the year March 1, 2005 –February 28, 2006 as compared with year March 1, 2004 – February 28, 2005.

**Revenues**

Revenues decreased SEK 129 million, or 3%, from SEK 4,812million for the year ended February 28, 2005, to SEK 4,683 million for the yearended February 28, 2006, mainly because the loss of contracts exceeded therevenues we gained from new contracts and increased prices in existingcontracts.

Revenues from the provision of bus services for localpublic transportation authorities decreased by SEK 184 million, or 4%, from SEK4,272 million for the year ended February 28, 2005, to SEK 4,088 million forthe year ended February 28, 2006.

The decrease in revenue is principally due to lostcontracts of SEK 498 million and decreased volume in existing contracts of SEK14 million. This was partially offset by our winning of new contracts, whichprovided an increase of SEK 126 million and increased prices in existingcontracts of SEK 191 million. Added to this, we have a positive foreignexchange variance of SEK 11 million.

Revenues from express bus services increased by SEK 27million, or 8%, from SEK 337 million for the year ended February 28, 2005  to SEK 364 million for the year ended February28, 2006. This increase is mainly due to increased number of passengers on theroutes between Stockholm-Oslo and Stockholm-Copenhagen, which have resulted inincreased revenue by SEK 11 million. The remaining increase is a result of a ahigher yield from passenger tickets marginal.

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Revenues from coach hire increased by SEK 19 million,or 16%, from SEK 117 million for the year ended February 28, 2005, to SEK 136million for the year ended February 28, 2006. The increase is attributed torevenues from the tourist traffic in FO-resor, which was acquired September 1,2004, and increased volume in the Stockholm area.

Other revenues amounted to SEK 95 million for the yearended February 28, 2006, and SEK 86 million for the year ended February 28,2005. Other revenues largely consist of sales of diesel fuel and maintenanceand repair services to third parties.

**Gain on Sale of Fixed Assets**

Gain on sale of fixed assets is comprised of sales ofbuses and other assets. Gain on sale of fixed assets was SEK 6 million for theyear ended February 28, 2006 compared to SEK 4 million for the year endedFebruary 28, 2005.

**Operating Costs**

Operating costs consist primarily of personnel costs(which includes wages, salaries, social security fees and pension costs of busdrivers, mechanics and other employees), fuel, tires and other consumablescosts, and other external costs, which include depot costs and head officeadministrative costs. Operating costs also include operating lease charges.Operating costs decreased by SEK 51 million, or 1%, from SEK 4,722 for the yearended February 28, 2005, to SEK 4,671 million for the year ended February 28,2006. This decrease is due to a number of factors, which are explained below.

Fuel, tires and other consumable costs have increasedby SEK 124 million or 13% to SEK 1,113 million for the year ended February 28,2006 from SEK 989 million for the year ended February 28, 2005. The increasewas largely due to an increase in fuel prices of SEK 132 million, which wasoffset by decreased fuel costs of SEK 28 million as a result of reduced trafficfrom our lost contracts. The average diesel price was SEK 7,03 per liter forthe year ended February 28, 2005, compared to SEK 5,95 for the year endedFebruary 28, 2005. In addition, costs for maintenance, tyres and washing andcleaning increased by SEK 20 million, compared to the year ended February 28,2005, mainly as a result of a provision for tyre costs in February 2006 of SEK17 million.

There has been a 4% decrease in personnel costs, bySEK 97 million to SEK 2,509 million, for the year ended February 28, 2006, fromSEK 2,606 million for the year ended February 28, 2005. This is mainly a resultfrom a reduction in number of drivers due to lost contracts, which resulted inlower wage costs of  SEK 219 million.This decrease was partly offset by an increase in wages resulting from aneffective increase in salary of SEK 124 million. Other personnel costs havedecreased by SEK 13 million and pension premiums decreased by SEK 3 million.Added to this, personnel costs in connection with closure of depots in Swedenare SEK 14 million higher than last year

Operating lease charges decreased by SEK 1 million orby less than 1% to SEK 427 million for the year ended February 28, 2006 fromSEK 428 million for the year ended February 28, 2005. This decrease wasprincipally a result of decreased lease charges for buses entering the secondlease-term, where the lease charges are approximately 60% lower than in thefirst lease term, which resulted in lower lease charges of SEK 13 million, thiswas offset by an increased number of buses under operational lease.

Other external costs decreased by SEK 77 million toSEK 622 million for the year ended February 28, 2006 from SEK 699 million forthe year ended February 28, 2005. The decrease was largely due to provisions inthe year-end closing last year whic incurred other external costs of SEK 120million and  utilization of provisions forloss making contracts which was lower by SEK 9 million for the year endedFebruary 28, 2006. This was offset by professional fees in connection with therestructuring of Concordia Bus of  SEK 30million, increased insurance premiums of SEK 5 million, an increase inmarketing and sales costs of SEK 4 million and costs in connection withrestructuring and close down of depots in Sweden of SEK 13 million.

**Depreciation and Amortization**

Depreciation and amortization charges compriseprincipally the depreciation of buses and other vehicles but they also relateto the depreciation of tools, fixtures and fittings, buildings and computerequipment. In addition, amortization of goodwill resulting from acquisitions ofbus operations is also included.

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Depreciation andamortization costs decreased by SEK 50 million, or 14%, from SEK 350 millionfor the year ended February 28, 2005, to SEK 300 million for the year endedFebruary 28 2006. This is mainly due to a lower number of buses in the fleetthat we own, resulting in lower depreciation of SEK 45 million, and write-downof surplus buses, which was SEK 5 million higher the year ended February 28,2005. The number of owned buses as of November 30, 2005 was 1,826, compared to2,235 as of November 30, 2004.

**Operating profit/loss**

Operating loss wasSEK 282 million for the year ended February 28, 2006, compared to SEK 256million for the year ended February 28, 2005.

Operating lossfrom bus operations for local public transportation authorities was SEK 178 millionfor the year ended February 28, 2006, compared to an operating loss of SEK 174million for the year ended February 28, 2005, mainly due to reduced volume.

Operating profitfrom express bus services decreased by SEK 16 million to SEK 13 million for theyear ended February 28, 2006 compared to SEK 29 million for the year endedFebruary 28, 2005. This is mainly due to increased fuel prices, increasedsubcontracting and staff costs.

Operating profitfrom coach hire services was SEK 1 million for the year ended February 28,2006, compared to an operating profit of SEK 4 million for the year ended February28, 2005, due to the weak market for coach hire in Sweden.

Head office costsand other items increased from SEK 102 million for the year ended February 28,2005, to SEK 104 million for the year ended February 28, 2006, mainly due tocosts in connection with the restructuring of Concordia Bus.

**Financial Income and Expenses**

Financial incomeand expenses includes interest income from cash and cash equivalents andinterest expense from loans made by banks and other financial indebtedness.Financial income and expenses increased by SEK 133 million from a financialexpense of SEK 141 million for the year ended February 28, 2005 to SEK 274million for the year ended February 28, 2006.

This result can beprimarily attributed to the restructuring of Concordia, where we had costs forconsent fees, funding fees and commitment fees of a total of SEK 71 million forthe year ended February 28,2006 compared to SEK 6 million for the year endedFebruary 28,2005. Added to this, foreign exchange gains and losses resulted inincreased costs of SEK 61 million, we had a foreign exchange loss of SEK 43million for the year ended February 28, 2006, compared to a foreign exchangegain of SEK 18 million for the year ended February 28, 2005. Interest costsalso increased by SEK 8 million.

**Taxes**

The standard rateof taxation in Sweden is 28%. The effective tax rate for the year endedFebruary 28, 2006 was 0%. This effective tax rate resulted from amortization ofgoodwill of 2% and valuation allowance of net operating losses of 26%.

**Fullyear ended February 28, 2005 compared to the full year endedFebruary 29, 2004**

The following section provides an analysis of ourresults of operations between the actual numbers for the year March 1,2004 — February 28, 2005 as compared with year March 1, 2003 —February 29, 2004.

***Revenues***

Revenues increased SEK 51 million or 1% from SEK4,761 million for the year ended February 29, 2004 to SEK4,812 million for the year ended February 28, 2005.

Revenues from the provision of bus services for localpublic transportation authorities increased by SEK 30 million, or 1%, fromSEK 4,242 million for the year ended February 29, 2004 to SEK4,272 million for the year ended February 28, 2005.  The increase in revenue is principally due toour winning of new contracts, which provided an increase of SEK411 million which was offset by the impact from lost contracts of SEK 410 millionand a strike in Finland in November 2004 that caused a loss of revenues of SEK13 million during the year ended February 28, 2005.  In the fiscal year 2004 we had a retroactivecompensation from the Stockholm CPTA in May 2003 of SEK 28 million as aresult of a law requiring more frequent breaks 

30

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for drivers, which had a positive impact on the yearended February 29, 2004.  The netimpact from the volume and price changes on the existing contracts was positiveby SEK 70 million during the year ended February 28, 2005.

Revenues from express bus services increased by SEK10 million, or 3%, from SEK 327 million for the year endedFebruary 29, 2004 to SEK 337 million for the year endedFebruary 28, 2005.  This increase islargely due to a higher yield from passenger tickets of SEK 5 million,attributable to an increase in passenger traffic of SEK 2 million and anincrease in prices of SEK 3 million.

Revenues from coach hire services increased by SEK7 million, or 6%, from SEK 110 million for the year endedFebruary 29, 2004 to SEK 117 million for the year endedFebruary 28, 2005.  The revenueincrease is mainly due to the acquisition of the companies FO Resor andMarstrand Hermansby Buss, which increased revenue by SEK 9 million.

Other revenue increased by SEK 4 million from SEK82 million for the year ended February 29, 2004, to SEK86 million for the year ended February 28, 2005.  Other revenue largely consist of sales ofdiesel fuel, and maintenance and repair services to third parties.

***Gain on Sale of Fixed Assets***

Gain on sale of fixed assets is comprised of sales ofbuses and other assets.  Gain on sale offixed assets was SEK 4 million for the year ended February 28, 2005compared to SEK 6 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 for busdrivers, mechanics and other employees), fuel, tires and other consumablescosts, and other external costs, which include depot costs and head officeadministrative costs.  Operating externalcosts also include operating lease charges.

Operating costs increased by SEK 178 million, or4%, from SEK 4,544 for the year ended February 29, 2004 to SEK4,722 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 increasedby SEK 60 million or 6% to SEK 989 million for the year endedFebruary 28, 2005 from SEK 929 million for the year endedFebruary 29, 2004.  The increase islargely due to a high diesel price during the second and third quarterresulting in increased fuel costs of SEK 50 million, partially offset byreduced volume causing a reduced cost of SEK 17 million.  The increase was also due to highermaintenance costs of total SEK 22 million and due to a SEK 5 millionincrease in costs of washing and cleaning.

Personnel costs decreased by SEK 5 million or0.2% to SEK 2,606 million for the year ended February 28, 2005compared to SEK 2,611 million for the year ended February 29,2004.  The decrease mainly resulted froma reduction of drivers due to lost contracts and productivity improvements ofSEK 108 million and a reduction of pension costs due to lower pensionpremiums of SEK 22 million.  Thiswas offset by an effective increase in salary of SEK 83 million and socialcharges of SEK 35 million.  Added tothis, the restructuring of Concordia Bus resulted in a provision for personnelcosts of SEK 7 million.

Operating lease charges increased by SEK40 million, or 10%, from SEK 388 million for the year endedFebruary 29, 2004 to SEK 428 for the year ended February 28,2005.  This increase was principally aresult of our increased use of operating leases for buses.  The total number of buses under operatingleases was 1,470 as of February 28, 2005, compared to 1,317 as ofFebruary 29, 2004.

Other external costs increased by SEK 83 millionto SEK 699 million for the year ended February 28, 2005 from SEK616 million for the year ended February 29, 2004.  This was mainly due to costs related to therestructuring of Concordia Bus which has resulted in other external costs ofSEK 120 million.  These costscontain provision for claim on CPTA of SEK 73 million, bad debt provisionof receivable due from parent and management company of SEK 33 million andprofessional fees of SEK 14 million. We also had increased damage and other operational costs of SEK18 million.  This was partiallyoffset by utilization of provisions for loss making contracts which was lowerby SEK 59 million for the year ended February 28, 2005.

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

Depreciation and amortization charges compriseprincipally the depreciation of buses and other vehicles but also relate to thedepreciation of tools, fixtures and fittings, buildings and computerequipment.  In addition, amortization ofgoodwill resulting from acquisitions of bus operations is also included.  Depreciation and amortization costs increasedby SEK 19 million, or 6%, from SEK 331 million for the year endedFebruary 29, 2004 to SEK 350 million for the year endedFebruary 28, 2005 principally as a result of the write-down of buses inthe year-end of SEK 42 million, offset by a shift from owned buses to alarger number of leased buses.  Totalgoodwill amortization remained constant at SEK 13 million for the yearended February 28, 2005 and for the year ended February 29, 2004.

***Operating profit/loss***

Operating loss was SEK 256 million for the yearended February 28, 2005, compared to SEK 108 million for the yearended February 29, 2004.

Operating loss from bus operations for local publictransportation authorities was SEK 187 million for the year endedFebruary 28, 2005, compared to an operating loss of SEK 92 million for theyear ended February 29, 2004, mainly due to higher fuel costs andincreased operating lease charges.  

Operating profit from express bus services decreasedby SEK 5 million to SEK 29 million for the year endedFebruary 28, 2005 

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compared to SEK 34 million for the year endedFebruary 29, 2004.

Operating profit from coach hire services was SEK4 million for the year ended February 28, 2005, compared to anoperating profit of SEK 3 million for the year ended February 29,2004.

Head office costs and others items increased from SEK53 million for the year ended February 29, 2004, to SEK102 million for the year ended February 28, 2005, mainly due to costsin connection with the restructuring of Concordia Bus.  

***Financial Income and Expenses***

Financial income and expenses includes interest incomefrom cash and cash equivalents and interest expense from loans made by banksand other financial indebtedness. Financial income and expenses decreased by SEK 5 million from afinancial expense of SEK 146 million for the year ended February 29,2004 to SEK 141 million for the year ended February 28, 2005.

This result can be primarily attributed to a write-offof deferred financing costs by SEK 21 million in January 2004, apositive effect of SEK 25 million, resulting from a foreign exchange lossof SEK 7 million for the year ended February 29, 2004 to a foreignexchange gain of SEK 18 million for the year ended February 28, 2005,as well as decreased interest income of SEK 2. This was offset by higher interest payments and other financial chargesof SEK 39 million due to higher interest rate.  The average calculated interest expenses onthird party liabilities for the year ended February 28, 2005 was 9,0% compared to 7.3% for the year ended February 29,2004.

***Taxes***

The standard rate of taxation in Sweden is 28%.  The effective tax rate for the year endedFebruary 28, 2005 was 0%.  Thiseffective tax rate resulted from amortization of goodwill of 3% and valuationallowance of net operating losses of 25%.

**MarketRisk**

We currently have no hedges in place for diesel fuelcosts for the period from March 1, 2006, to February 28, 2007.  However protection is provided through thediesel fuel price indexation provisions in many of our contracts, coveringapproximately 55% of our projected diesel fuel costs in fiscal year 2006.  See “—Quantitative and Qualitative DisclosureAbout Market Risk—Fuel Prices.”

As of the date hereof, SEK 1,230 million of ourloans were denominated in euros.  See“—Quantitative and Qualitative Disclosures About Market Risk—Interest Rates”and “—Foreign Exchange.”

Many of our contracts are with local public transportauthorities which rely on government subsidies for funding. Many Europeancountries have sought to 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 reduce subsidies could have anadverse effect on potential fees under local public transportation authoritiescontracts.

Inflation had no material impact on our operationsduring the year ended February 28, 2005. However, due to the nature of our contractual business where costincreases are compensated through movements in agreed indices (elements oftotal inflation) we are currently subject to under compensation due to amismatch between our industry costs and our relative level of compensation fromthe indices which the local transportation authorities use to compensateus.  

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

Historically, our liquidity requirements ariseprimarily from our need to fund lease payments, purchase buses, service our andBus’ debt obligations, fund our working capital requirements and expand our business.  

For the next twelve months our funds needed for leasepayments (financial and operational) amount to SEK 331 million, for interestpayments on our own debt of SEK 109 million and finance lease obligations ofSEK 8 million.  The Company expects thatits working capital requirements during the 2006 fiscal year will not bematerially significant.  We havehistorically relied upon cash generated from operations and capitalcontributions from our parent Holding. As we are a holding company, our principal asset is our investment inour subsidiaries.  We conduct no businessor operations except through direct and indirect subsidiaries.

Following the issuance of the Senior Notes in January2004, our indebtedness and debt service obligations increasedsignificantly.  Absent a restructuring ofthe Parent Notes, we do not believe our working capital is sufficient for ourpresent requirements.  For informationabout our proposed restructuring, see the sub-heading “Going Concern Matters”in the section “Operating and Financial Review and Prospects.”

***Historical Cash Flow***

*Netcash flows provided by/used in operations*

Net cash used by operating activities was negative SEK257 million for the year ended February 28, 2006, compared to negative cashflow of SEK 58 million for the nine months ended November 30, 2004. The mainreason for the negative cash flow is payment of restructuring fees of a totalof SEK 146 million, including restructuring fees for our parent companyConcordia Bus AB. The cash flow from operations has also been negativelyeffected by the higher price on fuel.

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Net cash flows from operating activities was negativeSEK 98 million for the year ended February 28, 2005, compared to positive cashflow from operating activities of SEK 24 million for the year ended February29, 2004.  The difference was mainly dueto higher fuel prices in operations of SEK 33 million, payment of SEK 15million in restructuring fees in the last quarter.  We also had a retroactive compensation fromthe Stockholm CPTA in May 2003 of SEK 28 million as a result of a law requiringmore frequent breaks for drivers, which had a positive impact on the year endedFebruary 29, 2004.

*Netcash flows provided by/used in investing activities*

Net capex was SEK 74 million for the year endedFebruary 28, 2006. Investments in tangible fixed asset were SEK 134 million forthe year ended February 28, 2006, compared to SEK 112 million for the yearended February 28, 2005. The capital expenditure is attributed to a purchase ofbuses in Norway of SEK 84 million and purchase of equipment in Sweden andNorway. During the period we have sold buses and equipment worth of SEK 42million and financial fixed assets worth of 19 million.

Net cash flows from investing activities was negativeSEK 63 million for the year ended February 28, 2005, compared with negative SEK11 million for the year ended February 29, 2004.  Investments in tangible fixed assets were SEK112 million for the year ended February 28, 2005, compared to SEK 32 millionfor the year ended February 29, 2004.  Ofthe total capital expenditure SEK 29 million was attributable to purchase ofused buses 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 topurchase of buses within a new business in Interbus.  The remaining capital expenditure was forpurchase of equipment in Sweden and Norway. During the year ended February 28, 2005 we sold buses for SEK 44million, of which SEK 13 million were purchased and sold during the sameyear.  We have also sold apartments inFinland for SEK 10 million.

*Netcash flows provided by/used in financing activities*

Cash from financing activities are positive SEK 326for the year ended February 28, 2006. This is a result of the restructuringwhere we received SEK 333 million in shareholders contribution from ConcordiaBus AB. Payment of financial lease obligation amounts to SEK 7 million.

Net cash flows from financing activities decreased tonegative SEK 8 million for the year ended February 28, 2005 from SEK 152million for the year ended February 29, 2004. This decrease was primarily the result of receiving the proceeds of theSenior Notes in the 2004 financial year.

***Debt***

As of February 28, 2005 we had total net indebtednessof SEK 1,070 million after the deduction of cash balance of SEK 192million.  The interest expense for theyear ended February 28, 2006 was SEK 148 million.

The outstanding amount of the Senior Notes as ofFebruary 28, 2006 was €130 million (SEK 1,230 million).  The Senior Notes will mature on August 1,2009 and carry a fixed interest rate of 9.125% per annum.  Interest is paid on February 1 and August 1of each year until maturity.

The indenture under which the Senior Notes were issuedrestrict, and in some cases prohibit, among other things, our and oursubsidiaries’ ability to incur additional debt, make prepayments of certaindebt, pay dividends, make investments, engage in transactions with affiliates,issue capital stock, create liens, sell assets, significantly alter the focusand structure of their business and engage in mergers and consolidations.  Certain of these limitations could impair ouroperations and limit our ability to implement certain of our strategies.  Concordia and its subsidiaries may not incuradditional debt, except in certain limited circumstances, unless it meets acoverage ratio test that has not been met by the Concordia group for severalyears.  Continued inability to meet thistest inhibits our ability to acquire funding, which may limit our ability totake advantage of possible opportunities. Concordia and its subsidiaries may not prepay or retire indebtedness,except in certain limited circumstances, which could inhibit our ability totake advantage of changes in market interest rates or other favorable marketconditions.  Other covenants narrow thescope of investments Concordia and its subsidiaries may make, which couldinhibit our ability to pursue possible opportunities.  Concordia and its subsidiaries also facecertain restrictions on their ability to create liens on or sell its assets,further limiting access to possible funding sources.  Concordia and its subsidiaries may notsignificantly alter the focus and structure of its business, which could limitour ability to diversify our lines of business. Lastly, failure to comply with these covenants could result in a defaultunder the Senior Notes, which in turn could result in an event of default underour other indebtedness, or an event of default under the indebtedness of Bus.

***Leases***

We have entered into operating lease agreements tofinance a portion of our bus fleet.  Asof February 28, 2006, 1,571 of our 3,397 buses were financed through operatinglease arrangements.  The net presentvalue of outstanding 

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obligations for buses as of February 28, 2006, was SEK1,020 million (the net present value of our outstanding obligations underleases relating to real estate as of February 28, 2006, was SEK 39 million).

The large majority of lease terms for buses includeresidual value guarantees from the bus manufacturer, whereby we retain anoption to return the buses to the manufacturer without cost to us.  The number of buses that can be returnedunder these agreements is subject to limitation.

The structure of the lease contract is such that atthe inception of a new lease contract, the leasing fee is established based onthe purchase price paid by the lessor and the residual value agreed with themanufacturer for the period of the lease. At the end of each leasing contract period each leasing contract can berenewed or terminated.  The leasepayments for the second leasing period are always at terms based on the fairvalue at the date of the extension which are lower than the payments during theinitial term.  If we are successful inrenewing or extending a local public transportation authority contract, ourleasing contract can be renewed at terms based on the fair value at the date ofthe extension.  This is likely to resultin lease payments which are substantially lower than the payments during theinitial term.

In a situation where we are not able to payoutstanding lease fees, the lessor has the right to retain the buses at ourexpense and also obtain additional compensation based on the outstandingleasing fees at the time when the 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 amaterial adverse effect on our business.

***Holding and Bus’ Debt***

                Ourliquidity requirements also include the requirement that we service Bus’indebtedness. In connection with the restructuring, Bus has incurred€45,000,000 of indebtedness under the Mezzanine Facility.  After the restructuring Bus requires us todistribute sufficient funds to it service the Mezzanine Facility.  We estimate that we will have to distribute€3,825,000 indirectly to Bus in twelve months following the financial yearending February 28, 2006.

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

Not applicable.

### **D.****                                    TrendInformation**

During the year ended February 28, 2006 we submittedtenders for 1,509 out of the buses that were open for competitive tenders,which included contracts for routes where we operated 496 buses. Results for1,509 of those tendered buses have been announced, 496 of which were for buseswe operated. Concordia has won 762 buses in total of tenders announced duringyear consisting of 266 buses that we currently operate and 496 buses that werewon from the competition.

During the year ended February 28, 2005, we havesubmitted tenders for 1,027 out of the 1,442 buses that were open forcompetitive tenders, which included contracts for routes where we alreadyoperated 421 buses.  We have retained 78buses out of the 421 buses we operated and won 143 from our competitors.  Lost Units include our Oslo contract, whichwas for 65 buses,  Helsinborg contract,which was for 52 buses and several small contracts in Southern Sweden amountingto 79 buses.  In addition we won a totalof 143 units from our competitors.

We believe that the favorable pricing environment inSweden in urban city areas and moderate price increases in Finland willcontinue in the next fiscal year. Pricing development in Norway is still irrational with some contractsstill being tendered at uneconomical prices.

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

Concordia does not have any off-balance sheetarrangements (as defined in the rules to this Item 5.E.) which have or arereasonably likely to have a current or future negative effect on Concordia’sfinancial condition, changes in financial 

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condition, revenues or expenses, results ofoperations, liquidity, capital expenditures, or capital resources that ismaterial to investors.

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

The following table summarizes our contractualobligations and the expected settlement dates for the different obligations asof February 28, 2005:
| ** **                       | ** ** | ** **                              | ** ** | **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)            |       | 1,230                                   |       | —                                     |       | — |   | 1,230 |   | — |   |
| Debt to  affiliated companies(b) |       | 271                                     |       | 271                                        |       | — |   | — |   | — |   |
| Operating leases                 |       | 2,013                                   |       | 331                                        |       | 524 |   | 512 |   | 646 |   |
| Interest on  rates               |       | 491                                     |       | 109                                        |       | 218 |   | 55 |   | — |   |
| Financial leases                 |       | 32                                      |       | 8                                          |       | 13 |   | 11 |   | — |   |
| Total contractual  obligations   |       | 4,037                                   |       | 719                                        |       | 755 |   | 1,808 |   | 646 |   |

 

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(a)           This amount represents the SeniorNotes (€130 million) translated into SEK at the rate of €1.00 = SEK9.4630, the rate published by the Swedish central bank for February 28,2006.  The debt bears interest at anannual rate of 9.125%.

(b)           Represents the SubordinatedShareholder Loan of SEK 501 million due to our parent Holding net ofrepayments made where there are no contractual requirements to repay the debtat a specified date.  Our parentcompanies, holding companies without any cash of their own, have obligations topay interest on the Mezzanine Facility at a variable rate.

(c)           As described in “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—GoingConcern Matters,” violations of related debt covenants could cause the entireamount of debt to become due and payable in any period earlier than shown inthis table.

## **Item6.* Directors, Senior Management and Employees***

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

**Board of Directors**

Under the Swedish Companies Act of 1975, our Board ofDirectors has ultimate responsibility for our organization and the managementof our affairs.  Our Articles ofAssociation provide for a Board of Directors elected by our shareholders of notfewer than four nor more than ten directors. Under Swedish law, the chief executive officer of a company and at leasthalf of the members of the Board of Directors must be resident in an EuropeanEconomic Area country unless the Swedish government or an authority appointedby the Swedish government grants an exemption. In a public limited liability company, like Concordia, the chiefexecutive officer may not also serve as the Chairman of the Board ofDirectors.  Concordia Bus BV, a companyincorporated under the laws of the Netherlands, is not subject to this limitationunder Swedish law.

Information concerning the Directors of Concordia isset forth below.
| Name              | ** ** | **Age** | ** ** | **Position**          |
|-------------------|------------|---------|------------|-----------------------|
| Jan Sjöqvist |       | 56      |       | Chairman and Director |
| Jan Sundling      |       | 57      |       | Director              |
| Rolf Lydahl       |       | 61      |       | Director              |
| Gina Germano      |       | 40      |       | Director              |

 

*Jan Sjöqvist*, born1948. Chariman of the Board. Jan was appointed Chairman of the Board andDirector of Concordia Bus in November 2005. Other appointments are Chairman ofthe Board of ODEN Anläggningsentreprenad, Board member of Stora Enso, GreenCargo and Lannebo Fonder. Former CEO of NCC.

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*Jan Sundling*, born1947. Jan was appointed Director of Concordia Bus in November 2005. He is CEOof Green Cargo Sweden since 2001. Former CEO of ASG and Linjeflyg. President ofThe Swedish International Freight Association, member of the Board of SIQ.

*Rolf Lydahl,* born1945. Rolf was appointed Director of Concordia Bus in November 2005. Otherappointments are Chairman of the Board of Jernhusen and IndeCap, member of theBoard of Sardus, SwedCarrier and Electra Finans. Former CEO of Probo, vice CEOof Nordstjernan and Head of Credit Suisse’s representative office in Stockholm.

*Gina Germano*, born1966, US citizen. Gina was appointed Director of Concordia Bus in November2005. She is Senior portfolio manager of BlueBay Asset Management since 2002.Former portfolio manager of Lazard Asset Management, equity analyst at MorganStanley. Master from the University of Lund, degree from Boston University andNorthwestern University

The address of the members of our Board of Directorsis Solna Strandväg 78, SE 171 54, Solna, Sweden.

**SeniorManagement**

Day to day management of Concordia has been delegatedby Concordia Bus AB to the management, which is comprised of the followingpersons:
| Name                | ** ** | **Age** | ** ** | **Position**            | ** ** | **Year First Employed** |
|---------------------|------------|---------|------------|-------------------------|------------|-------------------------|
| Ragnar Norbäck |       | 50      |       | Chief Executive Officer |       | 2004                    |
| Per Skargard        |       | 49      |       | Chief Financial Officer |       | 2004                    |

 

*Ragnar Norbäck* wasappointed Chief Executive Officer of Concordia Bus and director of Concordia onJune 30, 2004.  He initially joinedConcordia Bus’s senior management as Chief Operating Officer inFebruary 2004.  His most recentposition was with American Express as Head of Corporate Travel Nordic andCountry Manager Nordic, a position he had held since October 2000.  From 1990 to 1996, he was COO ofLinjebuss.  He then joined Volvo Aero asa Business Area Manager from 1996 through 1999. He holds a Master of Science Degree from Chalmers University.

*Per Skargard*joinedConcordia’s Executive Management team as Chief Financial Officer in November2004.  His recent position was atDHL/Danzas/ASG Nordic as CFO since 2001. Per has a Bachelor of BusinessAdministration and has practice CFO and Finance Director in transportation,telecom and retail business.

The following are members of our senior managementthat are not members of Concordia Bus BV’s management board:
| **Name**    | ** ** | **Age** | ** ** | **Position**                  | ** ** | **Year First Employed** |
|-------------|------------|---------|------------|-------------------------------|------------|-------------------------|
| Jan Bosaeus |       | 46      |       | Managing Director (Swebus AB) |       | 2002                    |

 

*Jan Bosaeus* is theManaging Director of Swebus AB.  He hasbeen the Managing Director of Swebus since mid October 2002.  From May 2002 he worked as Director of AssetManagement in Swebus.  From 1999 to 2002he was in the senior management team of Kalmar LMV Sweden AB, withresponsibility for after sales.  Hereceived a Business Degree from IHM Business School in 1997.
| **Name**    | ** ** | **Age** | ** ** | **Position**                          | ** ** | **Year First Employed** |
|-------------|------------|---------|------------|---------------------------------------|------------|-------------------------|
| Per Jansson |       | 48      |       | Managing Director (Swebus Express AB) |       | 1983                    |

 

*Per Jansson*is theManaging Director of Swebus Express AB since February 2006. Before this he wasNordic operating manager for American Express/Nyman Schultz travel agencies. Hehas 20 years experience of consumer products from positions withing ICA andCoop.
| **Name**          | ** ** | **Age** | ** ** | **Position**                    | ** ** | **Year First Employed** |
|-------------------|------------|---------|------------|---------------------------------|------------|-------------------------|
| Per-Erik  Ericson |       | 60      |       | Managing Director (Interbus AB) |       | 1975                    |

 

*Per-Erik Ericson*is the Managing Director of Interbus AB. Per-Erik joined Interbus in 1975 and has been Managing Director since1983.  He has 31 years of bus industryexperience.

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| **Name** | ** ** | **Age** | ** ** | **Position**                              | ** ** | **Year First Employed** |
|----------|------------|---------|------------|-------------------------------------------|------------|-------------------------|
| Tom Ward |       | 50      |       | Managing Director (Concordia Bus Finland) |       | 2004                    |

 

*Tom Ward* is theManaging Director of Concordia Bus Finland. He has been the Managing Director since December 2004.  Mr. Ward has a long career in transportationindustry.  He previously worked as aDirector of a profit centre in Oy Scan-Auto Ab.

The senior management of SBC is composed of thefollowing person:
| **Name**     | ** ** | **Age** | ** ** | **Position**            | ** ** | **Year First Employed** |
|--------------|------------|---------|------------|-------------------------|------------|-------------------------|
| Sjur Brenden |       | 45      |       | Managing Director (SBC) |       | 2001                    |

 

*Sjur Brenden*received an MBA in 1989 in Sundsvall, Sweden. He became the Managing Director of SBC in 2001, prior to which he wasManaging Director of Sporveisbussene AS. From 1989 to 1997, Mr. Brenden held different management positions inLinjebuss Sverige AB in Sweden.

The address of the members of our senior management isc/o Concordia Bus Nordic AB, Solna Strandväg 78, SE 171 54, Solna, Sweden.

### **B.****                                    Compensation**

During the year ended February 28, 2005, ourboard of directors did not receive any remuneration from us..  During the year ended February 28, 2006,members of our senior management received from us an aggregate remuneration ofapproximately SEK 9.7 million.

In the event oftermination of employment, members of senior management within the ConcordiaBus group are entitled to a maximum of 12 months’ compensation.  As a basis, both the company and the officermust give 6 months’ notice of termination. In addition, another 6 months’ compensation is payable in the event theemployment is terminated by the company. “Senior management” includes the parent company’s president and chieffinancial officer as well as the presidents of subsidiaries.  Agreements covering the aforesaid have beenentered into with two presidents of subsidiaries during the year.

During the year, a stock option program has beenprepared covering the board of directors of the parent company and seniormanagement.  Senior management includesthe parent company’s president and chief financial officer as well as thepresidents of subsidiaries.  All stockoptions have been valued in accordance with the Black & Scholesmethod.  The stock options correspond toan increase in share capital of 6.5%.

We have a bonus plan for our senior executives basedon achieving annual objectives, and established by the Board of Directors.  This bonus can be worth up to 100% of theexecutive’s base salary.

### **C.****                                    BoardPractices**

Our directors are elected for a period of one year,with the possibility for re-election each year at the annual generalshareholders meeting.  There are nobenefits upon termination of employment. Our ultimate parent company, Concordia Bus AB has the same Board ofDirectors as us.  This Board sets theyearly remuneration for both the directors and the management of Bus.  We have no formal audit committee. Our Boardof Directors receives monthly reports from management as to financial conditionand meets with management once a month to discuss the financial results.  In addition, our auditors present theirfindings and discuss any material audit issues with our Board of Directors atleast annually and with the Board of Directors.

### **D.****                                    Employees**

The average number of persons (including executivedirectors) employed by us during each of the last three fiscal years was:
| ** **                                 | ** ** | **Sweden** | ** ** | **Finland** | ** ** | **Norway** | ** ** |
|--------------------------------------------|------------|------------|------------|-------------|------------|------------|------------|
| For the year  ended February 29, 2004 |       | 6,182      |       | 750         |       | 580        |       |
| For the year ended  February 28, 2005 |       | 5,572      |       | 766         |       | 611        |       |
| For the year ended  February 28, 2006 |       | 5,152      |       | 645         |       | 502        |       |

 

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Concordia considers its relations with its employeesand unions to be good.

### **E.****                                      ShareOwnership**

No member of the Board of Directors or of Managementbeneficially owns at least one percent of the ordinary shares.  See “Compensation” above, for a discussion ofthe share option plan available to our directors and senior management.

## **Item7.* Major Shareholders and Related Party Transactions***

### **A.****                                    MajorShareholders**

Concordia Bus AB, which owns 100% of the share capitalof Concordia Bus Nordic Holding, which owns 100% of the share capital ofConcordia Bus Nordic. Through its ownership of Concordia Bus Nordic Holding,Concordia Bus AB indirectly controls Concordia Bus Nordic.

As of August 26, 2005, the issued ordinary shares ofConcordia Bus AB are owned approximately 27% by Bluebay Asset Management, 17%by Bear Sterns, 11% by Avenue Capital, 9% by Fidelity Funds, 7% by Lone Starand 28% by others.

**Subscriptionand Shareholders’ Agreement**

If the proposed restructuring of Bus is successfullycompleted pursuant to the terms and conditions of the Restructuring Agreement,Goldman Sachs International and Schøyen Group will own indirectly no more than2.5% of Concordia. 97.5% of Bus will become owned by holders of Bus’ ParentNotes, subject to a management incentive plan.

[Schøyen Group, Bus Holdings and other parties haveentered into a subscription and shareholders’ agreement as the shareholders ofConcordia Bus BV.  The shareholders’agreement provides, among other things, that the supervisory board of ConcordiaBus BV, which is ultimately responsible for management of its affairs, becomprised of five members:  two electedby Schøyen Group, two elected by Bus Holdings, and one independent membernominated by Bus Holdings and acceptable to Schøyen Group.  Specified significant business decisions byConcordia Bus BV or its subsidiaries, including Concordia, such as mergers, anychanges to the share capital or the grant of options, any incurrence of (otherthan inter company indebtedness incurred on an arms length basis) changes to orrepayment of indebtedness in excess of a material amount or giving of aguarantee in respect of indebtedness, the approval of or changes to an annualbudget or approval of any significant expenditure which has not been providedfor in such annual budget, changing the terms of employment or remuneration ofsenior executives, management or officers, adopting any material employeebenefit or compensation plan or collective bargaining agreement, entrance intoany material joint venture, partnership or strategic alliance or subscribingfor equity capital in any person, changing the constitutional documents of anysubsidiary, removing auditors or materially changing their arrangement,purchasing, leasing, acquiring or disposing of any material amounts ofsecurities or assets, making distributions to shareholders, commencingproceedings for bankruptcy, effecting a dissolution of Concordia Bus BV or itssubsidiaries, disposal of all or substantially all of its assets, engaging inrelated party transactions, commencement, termination or settlement of anymaterial litigation, approval of any transfer of any shares of Concordia Bus BVby its shareholders, substantial changes to its business activities or enteringinto any contract, agreement, arrangement or commitment to do any of theforegoing require that at least one supervisory board member nominated bySchøyen Group and one supervisory board member nominated by Bus Holdingsapprove the transaction.  Day to daymanagement of Concordia Bus BV and its subsidiaries has been delegated to amanagement board comprised of five members who are jointly appointed by SchøyenGroup and Bus Holdings.  The members ofthis management board are members of senior management of Concordia.  For further information about management see“Management—Senior Management.”  Theshareholders’ agreement also provides for specified transfer restrictions,rights of first offer, tag-along rights and bring along rights, and provisionsregarding change of control.  Ifspecified conditions are met, the tag-along rights require a proposingshareholder to allow other shareholders to dispose of their shares under thesame terms and conditions as the proposing shareholder and the bring alongrights require other shareholders to dispose of their shares under the sameterms and conditions as the selling shareholder.

The current supervisory board members are:  Harald Arnkvaern, Richard Sharp, RobertGeorge Doumar Jr. and Colin Longhurst. Previously there was a fifth member, Bjorn Wolrath, who resigned onOctober 24, 2001.  Harald Arnkvaern 

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and Bjorn Wolrath were nominated by Schøyen GruppenA.S., Richard Sharp and Robert George Doumar Jr. were nominated by Bus HoldingS.a.r.l.  and Colin Longhurst wasnominated by both.

In conjunction with the shareholders’ agreement,Schøyen Group and Bus Holdings caused Concordia Bus BV to create a share optionplan and enter into a management services agreement with Concordia BusManagement AS, a wholly owned subsidiary of Concordia Bus BV, and causedConcordia Bus Management AS to enter into service agreements with members ofConcordia Bus BV’s management board who are members of senior management ofConcordia.  For further information aboutthese agreements and the options plan see “—Related Party Transactions,”below.]

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

During the year, Concordia Bus AB has receivedfinancing via a loan from several of its owners.  The loan amounts to EUR 45 million.  The mezzanine loan carries variable interest(EURIBOR) plus 6.5%, payable half-yearly on December 15 and June 15.  In addition, the debt is recalculated upwardsby 6.5% per year.  The loan matures onOctober 10, 2010 but may be repaid earlier. Early repayment of the loan may not take place before October 10, 2006.

One member of Concordia Bus AB’s board of directors isappointed by Blue Bay Asset Management, which owns approx. 25% of the shares inConcordia Bus AB.  The member may receivefees in his capacity as board member.

Concordia Bus Nordic AB owes a debt to Concordia BusAB amounting to SEK 271 million. Interest has been paid during the year in the amount of SEK 26million.  For a description of theSubordinated Shareholder Loan, see “Description of Other MaterialIndebtedness—Subordinated Shareholder Loan from Concordia Bus AB”. During theyear, Concordia Bus AB has provided services to Concordia Bus Nordic AB.Compensation for these services amounts to SEK 4 million.

During the year, a stock option program has beenprepared which covers the parent company’s board of directors.  All stock options have been valued inaccordance with the Black & Scholes method. The stock option corresponds to an increase in share capital of 6.5%.

Upon completion ofthe restructuring our ultimate parent, Concordia Bus AB, paid Goldman Sachs International and Schoyen Gruppen AS€1,500,000 each in connection with unwinding the Concordia group of companies’former corporate structure.

The Board of Directorsis of the opinion that the fees paid to the company’s close affiliates are at alevel with the fees which would have been paid between independent parties.

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

Not applicable.

## **Item8.* Financial Information***

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

See Item 17.

**Legal Proceedings**

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

**Dividend DistributionPolicy**

Not applicable.

### **B.****                                    SignificantChanges**

None.

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## **Item9.*  The Offer and Listing***

Not applicable

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

Not applicable.

### **B.****                                    Markets**

Not applicable.

## **Item10.* Additional Information***

### **A.****                                    ShareCapital**

Not applicable.

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

Incorporated by reference from the registrationstatement on Form F-4 filed with the Commission on May 15, 2000 byCB Bus AB (publ).  In May2000, CB Bus AB (publ) changed its name to Concordia Bus AB (publ).

### **C.****                                    MaterialContracts**

(a)           Amanagement services agreement, by and among, Concordia Bus Management A/S,CB Bus AB (publ)*, Ingenior M.O. Schøyens Bilcentraler A/S andConcordia Bus BV, dated January 14, 2000, for the purpose ofproviding management services to Concordia and for detailing the terms of theservice contracts, including the provision of a share option plan for thegranting of options to officers and directors of Concordia Bus BV and itssubsidiaries relating to 2.5% of the issued ordinary share capital of ConcordiaBus BV.

(b)           Subscriptionand Shareholders’ Agreement, dated October 27, 1999, by and amongConcordia Bus B.V., Schøyen Gruppen A/S, Bus Holdings S.a.r.l.,and Goldman Sachs International.  Thisagreement provides, among other things, that the supervisory board of ConcordiaBus BV, which is ultimately responsible for management of its affairs becomprised of five members:  two electedby Schøyen Group, two elected by Bus Holdings, and one independent membernominated by Bus Holdings and acceptable to Schøyen Group.  Specified significant business decisions by ConcordiaBus BV or its subsidiaries, including Concordia, such as mergers, substantialchanges to its business activities and incurrence of indebtedness require thatat least one supervisory board member nominated by Schøyen Group and onesupervisory board member nominated by Bus Holdings approve thetransaction.  Day to day management ofConcordia Bus BV and its subsidiaries has been delegated to a management boardcomprised of five members who are jointly appointed by Schøyen Group and BusHoldings.  The members of this managementboard are members of senior management of Concordia.  In addition, Schøyen Group has agreed in theshareholders’ agreement that the board of directors of SBC is to be comprisedof five members:  three elected bySchøyen Group and two by Bus Holdings. Specified significant business decisions of SBC require the approval ofat least one of the board members nominated by Bus Holdings.  The shareholders’ agreement also provides forspecified transfer restrictions, rights of first offer, tag-along rights andbring along rights, and provisions regarding change of control.  If specified conditions are met, thetag-along rights require a proposing shareholder to allow other shareholders todispose of their shares under the same terms and conditions as the proposingshareholder and the bring along rights require other shareholders to dispose oftheir shares under the same terms and conditions as the selling shareholder.

(c)           Indenture,dated January 22, 2004 between Concordia Bus Nordic AB (publ) and DeutscheBank Trust Company Americas in respect of Concordia Bus Nordic AB (publ)’s€130,000,000 9.125% Senior Secured Notes due August 1, 2009 issued onJanuary 16, 2004.  The net proceedsfrom this offering were approximately €124 million including expensesincurred in connection with the offering. The Senior Notes mature on August 1, 2009.  Interest on the Senior Notes accrues at therate of 9.125% per annum and is payable every six months.  They rank senior to existing and futureindebtedness that is expressly subordinated in right of payment to the SeniorNotes and will rank at least *pari passu*with all existing and future unsecured liabilities that are not sosubordinated.  They will effectively ranksenior in right of payment to our unsecured liabilities with respect to thevalue of the collateral securing the Senior Notes and the guarantees securingthe Senior Notes 

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

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(subject to any priority rights for such unsecuredliabilities pursuant to applicable law). The guarantees rank senior in right of payment to any existing andfuture indebtedness that is expressly subordinated in right of payment to theguarantors and will be at least *pari passu*to existing and future unsubordinated unsecured liabilities of the respectiveGuarantors.  They will rank effectivelysenior in right of payment to the unsecured liabilities of those guarantorswith respect to the value of the collateral securing the Senior Notes (subjectto any priority rights for such unsecured liabilities pursuant to applicablelaw).  The Senior Notes are redeemable atour option in whole or in part at any time, on and after February 1, 2007,at the following redemption prices (expressed as percentages of the principalamount) if redeemed during the twelve month period commencing onFebruary 1 of the year set forth below, plus, in each case, accrued andunpaid interest thereon to 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, wemay on one or more occasions redeem the Senior Notes in an aggregate principalamount not to exceed 35% of the aggregate principal amount of the notes originallyissued with the net cash proceeds of one or more public equity offerings (asdefined in the indenture) at a redemption price of 109.125% of the principalamount thereof, plus accrued and unpaid interest and any special interest oradditional amounts (as defined in the Exchange and Registration RightsAgreement) to the redemption date; provided, however, that after any suchredemption at least 65% of the aggregate principal amount of the Senior Notesoriginally issued must be outstanding and the redemption must occur within90 days of the date of the closing of such public equity offering.

Under the indenture, in the event of a change ofcontrol event (as defined in the indenture) each holder of Senior Notes willhave the right to require us to repurchase, in whole or in part, such holder’sSenior Notes at a purchase price equal to 101.0% of their principal amount,plus accrued and unpaid interest and any special interest or additionalamounts, if any, to the date of repurchase.

The indenture contains certain restrictive covenantswhich, among other things, impose limitations (subject to certain exceptions)on us and certain restricted subsidiary (as defined in the indenture) withrespect to, *inter alia*, the payment of dividends orother distributions on capital, the purchase, redemption, or the acquisition orretiring for value of share capital or any warrants, options or other rightsfor share capital, the incurrence, repayment or otherwise acquisition of orretirement for value of certain indebtedness, sales of assets, sales andleasebacks by us or our subsidiaries and various matters in respect of theconduct of our business, including the merger or sale of all or substantiallyall of our assets.

Upon the happening of certain events of default specifiedin the indenture, the trustee for the Senior Notes or the holders of at least25% in principal amount of the then outstanding Senior Notes may declare theSenior Notes to be due and payable immediately. Upon the happening of certain other events of default specified in theindenture, the outstanding Senior Notes will automatically become due andpayable without any action by the trustee or the holders of the Senior Notes.

We may terminate our obligations under the indentureexcept as to any surviving rights of registration of transfer or exchange ofthe Senior Notes, by (i) irrevocably depositing with the trustee as trustfunds in trust for the purpose an amount sufficient to pay and discharge theentire indebtedness as well as any special interest or additional amounts onsuch Senior Notes not previously delivered to the trustee or any paying agentfor cancellation, and which have become due and payable, for all sums payableby us under the indenture, or to the stated maturity or redemption date, as thecase may be, together with instructions from us directing the trustee to applysuch funds to the payment thereof at maturity or redemption, as the case maybe, and by (ii) paying all other sums payable under the indenture anddelivering to the trustees an officer’s certificate and opinion of counsel,each stating that all conditions in the indenture relating to satisfaction anddischarge have been complied with and opinions from counsel with respect tocertain tax matters.

(d)           Exchangeand Registration Rights Agreement dated January 22, 2004, betweenConcordia Bus Nordic, Goldman Sachs International, J.P.  Morgan Securities, Ltd. and theGuarantors for the purpose of registering the Senior Notes with the Securitiesand Exchange Commission in the United States.

(e)           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 Notes.

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(f)            Amendedand Restated Subordinated Loan Agreement, signed on February 28, 2002,replaced by agreement dated December 22, 2003 and amended and restated onJanuary 22, 2004, between Concordia Bus, as the lender, Concordia BusNordic and Deutsche Bank Trust Company amended for the purpose of subordinatingthe subordinated loan to the Senior Notes.

(g)           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 Notes.

(h)           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 Notes.

(i)            SharePledge Agreement, dated January 22, 2004, between SwebusFastigheter AB as pledgor and Deutsche Trustee Company Limited as securitytrustee regarding shares in Alpus AB, Enköping BõlstaFastighetsbolag AB and Malmfältens Omnibus AB for the purpose ofsecuring the Senior Notes.

(j)            SharePledge Agreement, dated January 22, 2004, between Holding as pledgor andDeutsche Trustee Company Limited as security trustee in respect of shares inConcordia Bus Nordic for the purpose of securing the Senior 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 Swebus Express AB, Interbus AB, Swebus AB, SwebusFastigheter AB and Swebus Busco AB for the purpose of securing theSenior Notes.

(l)            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 Notes.

(m)          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 Notes.

(n)           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 Notes.

(o)           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 SeniorNotes.

(p)           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 Notes.

(q)           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 Notes.

(r)            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 Notes.

(s)           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 Notes.

(t)            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 Notes.

(u)           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 Notes.

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

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**D.****                                    ExchangeControls**

There are currently no Swedish laws or regulationsthat restrict the import or export of capital or the remittance of dividends orinterest to non-resident holders of our securities.

### **E.****                                      Taxation**

The following discussion summarizes certain Swedishand United States tax consequences of the ownership and disposition of theSenior Notes.  This discussion is basedon laws currently in force, as interpreted and applied as of the date of thisannual report.  Those laws are subject tochange after the date of this annual report, possibly with retroactiveeffect.  This discussion does not purportto describe all of the tax considerations that may be relevant to you in lightof your particular circumstances.  Youare advised to consult with your own tax advisors as to the Swedish and UnitedStates tax consequences to you of the purchase, ownership and disposition ofthe Senior Notes, including the effect of any state or local tax laws or thelaws of any other country.

**Swedish TaxConsiderations**

The following is a summary of certain principalSwedish income, wealth, inheritance and gift tax considerations for purchasersof the Senior Notes.  The purpose of thesummary is to generally outline certain Swedish tax consequences to Non-SwedishHolders (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 any foreign tax considerations.  As used herein, a “Non-Swedish Holder” is abeneficial owner of a Senior Note that is:

·                  anindividual who is not a resident of Sweden and who has no connection to Swedenunder Swedish law other than his or her investment in the Senior Notes; or

·                  anentity not organized under the laws of Sweden.

Under Swedish law, payments of any principal orinterest to a Non-Swedish Holder will not be subject to Swedish income taxunless the Non-Swedish Holder carries on a trade or business in Sweden wherethe payments of principal or interest are attributable to a permanentestablishment.  In addition, neither theSenior Notes nor any Non-Swedish Holder thereof will be subject to Swedishinheritance or gift tax unless the Non-Swedish Holder:

·                  atthe time of his or her death or the gift was a citizen of Sweden or was marriedto a Swedish citizen; and

·                  wasa resident of Sweden at any time within ten years preceding his or her death,or the time of receipt of the gift, respectively.

Sweden does not levy any inheritance tax on the estateof a Non-Swedish Holder.  No Non-SwedishHolder of the Senior Notes will be subject to Swedish wealth tax.

Swedish law does not impose withholding tax onpayments of principal or interest to a Non-Swedish Holder of any Senior Note.

Under Swedish law, capital gains realized on a sale ofa Senior Note by a Non-Swedish Holder will not be subject to Swedish income taxunless the Non-Swedish Holder carries on a trade or business in Sweden wherethe capital gains are attributable to a permanent establishment.

**United States Federal TaxConsiderations**

The following discussion is a summary of certain USfederal income tax consequences of the purchase, ownership and disposition ofthe Senior Notes by US Holders (as defined below).  This summary is not a complete analysis ordescription of all potential tax consequences to US Holders and does notaddress all tax considerations that may be relevant 

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to all categories of potential purchasers (such asbanks, financial institutions, insurance companies, dealers in securities orcommodities, tax-exempt investors, investors whose functional currency is notthe US dollar, investors that hold Senior Notes as part of a “straddle” or“conversion transaction” and other investors subject to special rules).

You are urged to consult your own tax advisorsconcerning the US federal, state and local tax consequences, as well as anyapplicable foreign tax consequences, of the purchase, ownership and dispositionof the Senior Notes.

This summary is based on the Internal Revenue Code of1986, as amended, judicial decisions, administrative pronouncements, andexisting and proposed Treasury regulations, changes or differinginterpretations to any of which after the date of this annual report couldapply on a retroactive basis and affect the tax consequences described herein.

As used herein, “US Holder” is a beneficial owner of aSenior Note that (1) holds the Senior Note as a capital asset and(2) is, for US federal income tax purposes:

·                                acitizen or resident of the United States,

·                                acorporation (or other entity treated as a corporation for US federal income taxpurposes) created or organized in or under the laws of the United States or anypolitical subdivision thereof,

·                                anestate the income of which is subject to US federal income taxation regardlessof its source, or

·                                atrust the administration of which is subject to the primary supervision of acourt within the United States and for which one or more US persons have theauthority to control all substantial decisions or that has a valid election ineffect under applicable US Treasury Regulations to be treated as a UnitedStates person.

In the case of any partnership (or other entitytreated as a partnership for US federal income tax purposes), it will beconsidered a US Holder to the extent that its partners are described above.

***Payments of Interest***

Subject to the discussion under “Amortizable BondPremium” below, payments of interest on a Senior Note will be includible in thegross income of a US Holder as ordinary income from foreign sources at the timeit is received or accrued, in accordance with the US Holder’s method ofaccounting for US federal income tax purposes, under the following rules:

In the case of a US Holder that is not required toaccrue interest income prior to the receipt thereof (for example, an individualUS Holder who uses a cash method of accounting), the amount of interest incomein respect of any interest payment will be determined by translating suchpayment into US dollars at the spot exchange rate in effect on the date suchinterest payment is received.  Noexchange gain or loss will be realized with respect to the receipt of suchinterest payment, other than exchange gain or loss that is attributable to theactual disposition of the euros received.

In the case of a US Holder that is required to accrueinterest income prior to receipt thereof (for example, because the US Holderuses an accrual method of accounting), the amount of any interest incomeaccrued during any accrual period will generally be determined by translatingthe accruals into US dollars at the average spot exchange rate applicable tothe accrual period.  Such US Holder willadditionally realize exchange gain or loss with respect to any interest incomeaccrued on the date such interest income is received (or on the date the SeniorNote is disposed of) in an amount equal to the difference between (x) theamount determined by converting the amount of the payment received into USdollars at the spot exchange rate in effect on the date such payment isreceived and (y) the amount of interest income accrued in respect of suchpayment according to the rule set forth in the prior sentence.  Notwithstanding the prior two sentences, a USHolder that is required to accrue interest income prior to receipt thereof mayalternatively make an election to apply a “spot accrual convention” thateffectively allows the US Holder to translate accrued interest into US dollarsat a single spot exchange rate, as set forth in Treasury regulations section1.988-2(b)(2)(iii)(B).  Exchange gain orloss is treated as ordinary income or loss for US federal income purposes.

***Amortizable Bond Premium***

A US Holder that purchased a Senior Note for an amountgreater than the Senior Note’s stated principal amount will be considered tohave purchased the Senior Note with “amortizable bond premium” equal to theexcess of the purchase price 

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over the stated principal amount.  Such US Holder may elect to amortize suchpremium as an offset to payments of interest on the Senior Note, effectivelyreducing the amount of interest income in the hands of such US Holder.

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 theamount of deductible premium steadily growing over the term of the SeniorNote.  Because Concordia may redeem theSenior Notes under certain circumstances, an electing US Holder must amortizethe premium based on the expected term of the Senior Notes assuming thatConcordia will or will not exercise its right to redeem Senior Notes in amanner that will minimize the yield on the Senior Notes.  Concordia believes, based on the additionalamounts that it will have to pay in order to redeem Senior Notes underdifferent circumstances that it is significantly more likely than not that theSenior Notes will not be redeemed prior to their maturity.  Accordingly, an electing US Holder should usethe entire scheduled term of the Senior Note as the expected term of the SeniorNotes for purposes of amortizing the premium. Each time a premium reduces an electing US Holder’s taxable income, theholder must decrease its tax basis in the Senior Note by the amount of suchpremium.

A US Holder makes this election by claiming adeduction (or interest offset) on its US federal income tax return for theacquisition premium for the first taxable year to which the US Holder wishesthe election to apply, and by attaching a statement to the return to the effectthat the holder is making the election under Treasury regulation section1.171-4.  Once made, the election appliesto all taxable debt obligations held by the US Holder during or after thetaxable year for which the election is made and may be revoked only with theconsent of the US Internal Revenue Service.

Bond premium on a Senior Note will be computed in theapplicable foreign currency.  Withrespect to a US Holder that elects to amortize the premium, the amortizablebond premium will reduce interest income in the applicable foreigncurrency.  At the time bond premium isamortized, exchange gain or loss (which is generally ordinary income or loss)will be realized based on the difference between spot rates at such time and atthe time of acquisition of the Senior Note. A US Holder that does not elect to amortize bond premium will translatethe bond premium, computed in the applicable foreign currency, into US dollarsat the spot rate on the maturity date and such bond premium will constitute acapital loss which may be offset or eliminated by exchange gain.

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

***Market Discount***

If a US Holder purchased a Senior Note for an amountthat is 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 market discount rules, a US holderwill be required to treat any principal payment on, or any gain on the sale,exchange, retirement or other disposition of, the Senior Note, as ordinaryincome to the extent of the market discount which has not previously beenincluded in income and is treated as having accrued on such Senior Note at thetime of such payment or disposition.  Inaddition, the US Holder may be required to defer, until the maturity of theSenior Note or its earlier disposition in a taxable transaction, the deductionof all or a portion of the interest expense on any indebtedness incurred orcontinued to purchase or carry such note.

Any market discount will be considered to accrueratably during the period from the date of acquisition to the maturity date ofthe Senior Note, unless the US Holder elects to accrue on a constant interestmethod.  This election to accrue marketdiscount on a constant interest method is to be made for the taxable year inwhich the US Holder acquired the Senior Note, applies only to that Senior Note,and may not be revoked without the consent of the IRS.  A US Holder of a note may elect to includemarket discount in income currently as it accrues (on either a ratable or constantinterest method), in which case the rule described above regarding deferral ofinterest deductions will not apply.  Thiselection to include market discount in income currently, once made, applies toall market discount obligations acquired on or after the first day of the firsttaxable year to which the election applies and may not be revoked without theconsent of the IRS.  As discussed above,an electing US Holder should use the entire scheduled term of the Senior Noteas the expected term of the Senior Notes for purposes of accruing marketdiscount.

The amount of market discount includible in incomewill generally be determined by translating the market discount determined inthe foreign currency into US dollars at the spot rate on the date the SeniorNote is retired or otherwise disposed of. If the US Holder has elected to accrue market discount currently, thenthe amount which accrues is determined in the foreign currency and thentranslated into US dollars on the basis of the average exchange rate in effectduring such accrual 

45

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period.  A USHolder will recognize exchange gain or loss with respect to market discountwhich is accrued currently using the approach applicable to the accrual ofinterest income as described above.

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

Upon the sale, exchange, retirement or otherdisposition of a Senior Note, a US Holder will generally recognize taxable gainor loss equal to the difference between the amount realized, generally based onthe spot rate on the date of sale, exchange or retirement (not including anyamounts received that are attributable to accrued and unpaid interest or marketdiscount, which will be taxable as ordinary interest income, and exchange gainor loss as set forth above) and the US Holder’s tax basis in the SeniorNote.  A US Holder’s tax basis in aSenior Note generally will be its cost in US dollars as determined using thespot rate on the date of acquisition (as adjusted to account for anyamortizable bond premium, as set forth above). Gain or loss will be capital gain or loss and will be long-term capitalgain or loss if the Senior Note was held from more than one year at the time ofthe disposition.  Gain or loss recognizedby a US Holder generally will be treated as US source income or loss.

***Backup Withholding and Information Reporting***

US backup withholding and information reportingrequirements generally will apply to certain payments to certain non-corporateUS Holders of Senior Notes.  Informationreporting requirements will apply to interest on, and to proceeds from thesale, redemption or other disposition of Senior Notes paid to a US Holder(other than an “exempt recipient,” including a corporation and certain otherpersons who, when required, demonstrate their exempt status).  We will be required to backup withhold aportion of interest on, and the proceeds from the sale, redemption or otherdisposition of, Senior Notes paid by a US paying agent or other US intermediaryto a US Holder (other than an “exempt recipient”) if such US Holder fails tofurnish its correct taxpayer identification number or certification of exemptstatus or fails to report all interest and dividends required to be shown onits US federal income tax returns.

Backup withholding is not a separate tax.  The amount of any backup withholding from apayment to a US Holder will be allowed as a credit against the US Holder’s USfederal income tax liability and may entitle the US Holder to a refund, providedthat the required information is provided to the US Internal RevenueService.  US Holders of the Senior Notesshould consult their own tax advisors regarding the application of the backupwithholding and information reporting requirements.

***Tax Return Disclosure and Investor List Requirements***

US Treasury regulations (the “Tax ShelterRegulations”) intended to address so called tax shelters and other potentiallytax motivated transactions require participants in a “reportable transaction”to disclose certain information about the reportable transaction on IRS Form8886 and retain information relating to the reportable transaction.  Organizers and sellers of a reportabletransaction are required to maintain lists identifying the investorsparticipating in the reportable transaction and furnish to the IRS upon demandsuch investor information as well as detailed information regarding thereportable transaction.  A transactionmay be a “reportable transaction” based upon any of several indicia (includingthe existence of confidentiality agreements, certain indemnity arrangements andcertain loss transactions) and require reporting of transactions that aregenerally not considered tax shelters, including certain foreign currencytransactions.  Investors should consulttheir tax advisors concerning any possible disclosure obligation with respectto their investment in the Senior Notes and should be aware that Concordiaintends to comply with the disclosure and list maintenance requirements underthe Tax Shelter Regulations as they determine apply to them with respect to anysuch reportable transaction.

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

Not applicable.

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

Not applicable.

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

The annual report, its exhibits and schedules, reportsand other information that we have filed with or furnished to the Commissionmay be inspected and copied at the public reference facilities maintained bythe Commission at Room 1024, 

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Judiciary Plaza, 450 Fifth Street, N.W.,Washington, D.C.  20549.  You can obtain copies of this material by mailfrom the Public Reference section of the Commission, 450 FifthStreet, N.W., Washington, D.C., 20549, at prescribed rates.

### **I.****                                         SubsidiaryInformation**

Not applicable.

## **Item11.* Quantitative and Qualitative Disclosures About Market Risk***

The principal marketrisks (i.e., the risk of loss arising from adverse changes in market rates andprices) to which we are exposed are:

·              Interest rates on debt;

·              Foreign exchange rates;

·              Fuel prices; and

·              Inflation.

The following riskmanagement discussion and the estimated amounts generated from analyticaltechniques are forward looking statements of the market risk assuming certainmarket conditions occur. Our actual results in the future may differ materiallyfrom these projected results due to actual developments in the global financialmarkets.

***InterestRate Risk***

Interest rate risk refers to the risk that changes inthe market rate of interest adversely affects Concordia’s interest cost.  How fast a change in the interest rate willinfluence the net interest depends on the borrowings fixed interest term.

We currently hedgeparts of our exposure to interest rate fluctuations on our lease debt throughthe use of derivative instruments. We have entered into Swedish Kronor interestrate swaps and caps to fix a portion of the interest within the lease paymentswe make under the lease debt.

Based on the nominal valueof the operational lease debt at February 28, 2006 of SEK 2,013 million, a 1%change in interest rates would increase lease charges by approximately SEK 20,1million per annum. Senior secured notes outstanding at February 28, 2006 with a carrying value of SEK 1,230million have been excluded from the above interest rate sensitivity analysisbecause they bear a fixed rate of interest.

***ForeignExchange***

We are exposed tocurrency fluctuations on loans, primarily as a result of having to makeinterest payments in Euro on our senior note loan. We estimate that a 10%depreciation in the value of the Swedish Kronor against the Euro would increaseour interest costs by approximately SEK 11,2 million per annum.

Our foreign subsidiaries in Norway and Finland areconsolidated using the current rate method. Fluctuation in NOK and Euro againstSEK is not considered to have a material effect on the consolidated financialstatements of the company, considering the level of profits/losses made bythese companies.

***FuelPrices***

Nordic is also exposed to commodity price risk throughits requirements for diesel fuel.  Dieselfuel is priced in the international commodity markets in US dollars. Wepurchase our diesel fuel requirements out of our operating revenue, which islargely denominated in Swedish Kronor. Therefore, we are exposed to currencyfluctuation risk between the dollars and the Swedish Kronor. We currently haveno hedges in place.

We estimate that a 10% depreciation in the value ofthe Swedish Kronor against the dollar would increase our diesel fuel costs byapproximately SEK 14,7 million per annum. We estimate that a diesel priceincrease of 1 dollar per ton would increase our diesel fuel costs by SEK 0.2million per annum.  The net result of thediesel hedging contracts have positively affected the diesel expenses for thefiscal year 2006, the fiscal year 2005 and fiscal year 2004 with SEK 0, SEK17.4 and SEK 0.2 million respectively.

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***Inflation***

Inflation had nomaterial impact on our operations during the three months ended February 28,2006 or the three months ended February 28, 2005. However, due to the nature ofour contractual business where cost increases are compensated through movementsin agreed indices (elements of total inflation) we are 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.

## **Item12.* Description of Securities other than Equity Securities***

Not applicable.

# **PART II**

## **Item13.  *Defaults,Dividend Arrearages and Delinquencies***

Not applicable.

## **Item14.  *MaterialModifications to the Rights of Security Holders and Use of Proceeds***

Not applicable.

## **Item15.* Controls and Procedures***

**Evaluation of DisclosureControls and Procedures**

As of the end of our fiscal year, we carried out anevaluation, under the supervision and with the participation of our chiefexecutive officer and chief financial officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executiveofficer and chief financial officer have concluded that our disclosure controlsand procedures are effective in timely alerting them to material informationrequired to be included in our periodic reports to the Securities and ExchangeCommission.

There are inherent limitations to the effectiveness ofany system of disclosure controls and procedures, including the possibility ofhuman error and the circumvention or overriding of such controls andprocedures.  In addition, we have limitedinfluence over the controls and procedures of entities in which we hold aminority interest.  Accordingly, eveneffective disclosure controls and procedures can only provide reasonableassurance of achieving their control objectives.

**Changes in InternalControls**

There were no significant changes in our internalcontrol over financial reporting during the fiscal year that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

## **Item16A.* Audit Committee Financial Expert***

The independent members of our Supervisory Board ofDirectors act as our Audit Committee. Our Audit Committee does not include a financial expert because we arenot required to have one under Swedish law.

**Item16B.  *Codeof Ethics***

We have not adopted a formal corporate code of ethicsregarding Concordia’s chief executive officer, chief financial officer andcontroller because we are not required to have one under Swedish law.

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**Item16C.  *PrincipalAccountant Fees and Services***

The selection of our independent requested publicaccounting firm was approved by the audit committee.  Following is a summary of the fees to ourindependent requested public accounting firm for the years endedFebruary 28, 2005 and February 29, 2004in millions of SEK:
| ** **          | ** ** | **Year ended   February 28, 2006** | ** ** | **Year ended   February 28, 2005** | ** ** |
|---------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
| Audit Fees          |       | 5                                                      |       | 2                                                      |       |
| Audit-Related  Fees |       | —                                                 |       | 1                                                      |       |
| Tax Fees            |       | —                                                 |       | —                                                 |       |
| All Other Fees      |       | —                                                 |       | —                                                 |       |
| Total Fees          | ** ** | **5**                                                  | ** ** | **3**                                                  | ** ** |

 

Concordia’s Audit Committee has adopted pre-approvalpolicies and procedures in compliance with paragraph (c)(7)(i) ofRule 2-01 of Regulation S-X that require the Audit Committee toapprove the appointment of the independent auditor of Concordia before suchauditor is engaged and approve each of the audit and non-audit related servicesto be provided by such auditor under such engagement by Concordia.  All services provided by the principalauditor during the year ended February 29, 2004 were approved by the AuditCommittee pursuant to the pre-approval policy.

**Item16D.  *Exemptionsfrom the Listing Standards for Audit Committees***

Not applicable.

**Item16E.  *Purchasesof Equity Securities by the Issuer and Affiliated Purchasers***

Not applicable.

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## PART III

## **Item 17.*  Financial Statements***

See Pages F-1 - F-53

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## ***Item 18.*FinancialStatements**

Not applicable.

## ***Item 19. *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,  Ingeni< >r M.O. Sch< >yens Bilcentraler A.S.,  Concordia Bus Finland Oy Ab, Swebus Fastigheter AB, Alpus AB, Enköping-Bõlsta  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., Sch< >yen  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 Sch< >yen 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 Sch<*>yen Gruppen and Christiania Bank og  Kreditkasse ASA, as security agent.*                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4(a)(6).  |   | Deed for the Sale and Purchase of Ingeni<*>r  M.O. Sch<*>yens Bilcentraler A.S. dated October 27, 1999 by and  among Sch<*>yen 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 Ingeni<*>r M.O. Sch<*>yens Bilcentraler A.S., dated  January 14, 2000, by and among Sch<*>yen 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 Ingeni<*>r M.O. Sch<*>yens  Bilcentraler A.S., dated February 4, 2000 by and among Sch<*>yen  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 Ingeni<*>r M.O. Sch<*>yens Bilcentraler A.S.,  dated February 24, 2000, by and among Sch<*>yen 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 Ingeni<*>r M.O. Sch<*>yens 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, Ingeni<*>r M.O. Sch<*>yens  Bilcentraler A.S., Concordia Bus Finland Oy Ab, Swebus Fastigheter AB, Alpus  AB, Enköping-Bõlsta 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,  Ingeni<*>r M.O. Sch<*>yens Bilcentraler A.S., Concordia Bus  Finland Oy Ab, Swebus Fastigheter AB, Alpus AB, Enköping-Bõlsta  Fastighetsbolag AB, and Malmfältens Omnibus AB.*****                                                                                          |
| 4(a)(16). |   | Amended and Restated Subordinated Loan Agreement,  signed on February 28, 2002, replaced by agreement dated                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 

51

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|           |   | 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.*****                                                                               |
|-----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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-Bõlsta  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  Ingeni<*>r M.O. Sch<*>yens 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-Bõlsta 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 Ingeni<*>r M.O. Sch<*>yens 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 Ingeni<*>r M.O.  Sch<*>yens Bilcentraler A.S. of Trade Receivables, dated  January 22, 2004.*****                                                                                                                                   |
| 4(a)(33). |   | Purchase Agreement dated as of July 28, 2005 between  Concordia Bus Nordic AB (publ) and other parties relating to the purchase of  up to €130,000,0000, 9.125% Senior Secured Notes due August 1, 2009.******                                                           |
| 4(a)(34). |   | Mezzanine Facility Agreement dated as of July 20,  2005 between Concordia Bus AB (publ), Concordia Bus Nordic Holding AB,  Deutsche Bank Luxembourg S.A. (acting as Facility Agent) & Citicorp  Trustee Company Limited (as Security Agent).******                        |
| 4(a)(35). |   | 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(a)(36). |   | First Ranking Pledge Agreement of a shareholders’  contribution loan, dated as of July 18, 2005 between Concordia Bus Nordic  Holding AB and Citicorp Trustee Co. Ltd.******                                                                                             |
| 4(a)(37). |   | 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(a)(38). |   | Second Ranking Pledge Agreement of a shareholders’  contribution loan, dated as of July 18, 2005 between Concordia Bus Nordic  Holding AB and Concordia Bus AB (publ).******                                                                                             |
| 4(a)(39). |   | 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(a)(40). |   | 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(a)(41). |   | 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                                               |

 

52

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|           |   | Trustee).******                                                                                                                                                                                                                                                                                                                                                                                                |
|-----------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4(a)(42). |   | Sale and Assignment Agreement of a Shareholders’  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(a)(43). |   | Shareholder’s Contribution Loan Agreement dated as  of July 18, 2005, between Concordia Bus Nordic AB, Concordia Bus Holding AB.******                                                                                                                                                                                                                                                                    |
| 4(a)(44). |   | 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, Schøyen Gruppen AS, Centaurous Capital Limited,  Citigroup Global Markets Limited, JP Morgan Chase, N.A. as Agent and The  Consenting Noteholders signatories.****** |
| 4(a)(45)  |   | Shareholder Agreement dated as of [·],  between Concordia Bus AB, Concordia Bus Holding AB and the noteholders.******                                                                                                                                                                                                                                                                                     |
| 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 Ingeni<*>r M.O. Sch<*>yens  Bilcentraler A/S.**                                                                                                                                                                                                   |
| 8.        |   | Subsidiaries of registrant.                                                                                                                                                                                                                                                                                                                                                                                    |
| 12.       |   | Certifications pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                |
| 13(a)(1). |   | Certification of Ragnar Norback, chief executive  officer, pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                                                                                                    |
| 13(a)(2). |   | Certification of Per Skargard, chief financial  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 the Registrant’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.                                                                                             |

 

53

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SIGNATURES

The registrant hereby certifies that it meets all of therequirements for filing on Form 20-F and that it has duly caused andauthorized the undersigned to sign this annual report on its behalf.
|                     | CONCORDIA BUS NORDIC HOLDING AB (publ) |
|--------------------------|----------------------------------------|
|                     | By:                               | /s/: Per Skärgård |   |
|                     |                                   | Per  Skärgård

*Chief Financial Officer and Director* |
| Date:  May 15, 2007 |                                   |   |

 

**SIGNATURES**

The registrant hereby certifies that it meets all ofthe requirements for filing on Form 20-F and that it has duly causedand authorized the undersigned to sign this annual report on its behalf.
|   | CONCORDIA BUS NORDIC HOLDING AB (publ) |
|--------|----------------------------------------|
|   | By:                                    | /s/:  Per Skärgård |   |
|   |                                   | Per  Skärgård

*Chief Financial Officer and Director* |

 

 

54

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**INDEX TO FINANCIAL STATEMENTS**

 
| ***Financial Statements of Concordia Bus Nordic  Holding AB*(1)**                                                                                               |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Report of Independent  Registered Public Accounting Firm                                                                                                        |   |
| Consolidated Statements of  Operations for the years ended February 28, 2006, February 28, 2005 and  February 29, 2004                                |   |
| Consolidated Balance Sheets as of  February 28, 2006 and February 28, 2005                                                                                 |   |
| Consolidated Statements of  Changes in Shareholder’s Equity for the years ended February 28, 2006,  February 28, 2005 and February 29, 2004 |   |
| Consolidated Statements of  Cash Flows for the years ended February 28, 2006, February 28, 2005 and  February 29, 2004                                |   |
| Notes to Consolidated  Financial Statements                                                                                                                     |   |
| ***Financial  Statements of Swebus AB*(2)**                                                                                                                     |   |
| Report of Independent Registered Public Accounting  Firm                                                                                                        |   |
| Statements of Operations for the years ended  February 28, 2006, February 28, 2005 and February 29, 2004                                              |   |
| Balance Sheets as of February 28, 2006 and  February 28, 2005                                                                                         |   |
| Statements of Cash Flows for the years ended February  28, 2006, February 28, 2005 and February 29, 2004                                                   |   |
| Notes to Financial Statements                                                                                                                                   |   |
| ***Financial  Statements of Ingenior M.O. Schoyens Bilcentraler AS*(2)**                                                                                        |   |

 

----

(1)           Previously, Concordia Bus NordicHolding AB was named Interbus Finans AB and was a wholly owned subsidiary ofConcordia Bus Nordic AB (publ), which was wholly owned by Concordia BusAB. In January 2004, a reorganization was performed whereby Concordia BusNordic AB (publ) transferred to Concordia Bus AB its 100% shareownership of Interbus Finans AB. Concordia Bus AB then transferredits shares in Concordia Bus Nordic AB (publ) to Interbus Finans AB.Interbus Finans AB was then renamed Concordia Bus Nordic Holding AB.

Such reorganizationhad the effect of creating a new holding company for Concordia Bus Nordic AB(publ) from one of its dormant subsidiaries. Concordia Bus Nordic Holding AB isa non-operating holding company that has no assets other than its sharesin Concordia Bus Nordic AB (publ). Since this was a reorganization of entitiesunder common control, the consolidated financial statements contained in thisprospectus are presented as if Concordia Bus Nordic Holding AB was inexistence as the shareholder of Concordia Bus Nordic AB (publ) for all periodspresented.

Subsequent to thereorganization, the consolidated financial position, results of operations andcash flows of Concordia Bus Nordic AB (publ) are almost the same as thatof Concordia Bus Nordic Holding AB.

(2)           The audited financial statements ofthis subsidiary of Concordia Bus Nordic Holding AB are included in thisForm 20-F to comply with Section 3-16 of Regulation S-Xof U.S. federal securities laws.

F-1

----

**Reportof Independent Registered Public Accounting Firms**

To the Board of Directors and Shareholders ofConcordia Bus Nordic Holding AB

We have audited the accompanying consolidated balancesheet of Concordia Bus Nordic Holding AB as of February 28, 2006, and therelated consolidated income statement, statement of cash flows and statement ofchanges in shareholders’ equity for the year ended February 28, 2006. Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on ouraudit.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit, the financialstatements referred to above present fairly, in all material respects, theconsolidated financial position of Concordia Bus Nordic Holding AB at February28, 2006, and the consolidated results of its operations and its cash flows forthe year ended February 28, 2006, in conformity with accounting principlesgenerally accepted in Sweden.

Accounting principles generally accepted in Swedendiffer in certain respects from accounting principles generally accepted in theUnited States of America. Information relating to the nature and effect of suchdifferences is presented in Note 30 to the consolidated financial statements.

Ernst &Young AB

Erik Åström

Authorized PublicAccountant

Stockholm, Sweden

September 27, 2006

F-2

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**CONCORDIABUS NORDIC HOLDING AB AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(all amounts in millions of SEK, except share andper share amounts)**
| ** **                                     | ** ** | **Note**   | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 28, 2004** | ** ** |
|------------------------------------------------|------------|------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                     | ** ** | ** ** | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| Net revenue                                    |       | 2,3,4      |       | 4,683                                            |       | 4,812                                            |       | 4,761                                            |       |
| Fuel, tires and other  consumables             |       | 5          |       | (1,113                                           | )          | (989                                             | )          | (929                                             | )          |
| Other external costs                           |       | 5,6        |       | (1,049                                           | )          | (1,127                                           | )          | (1,004                                           | )          |
| Personnel costs                                |       | 5,7        |       | (2,509                                           | )          | (2,606                                           | )          | (2,611                                           | )          |
| Gain (loss) on sale of  fixed assets           |       |       |       | 6                                                |       | 4                                                |       | 6                                                |       |
| Depreciation,  amortization and write-downs    |       | 2,5,8      |       | (300                                             | )          | (350                                             | )          | (331                                             | )          |
| **Operating loss**                             |       | 2          | ** ** | **(282**                                         | **)**      | **(256**                                         | **)**      | **(108**                                         | **)**      |
| ** **                                     |       |       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| Interest income                                |       | 9          |       | 4                                                |       | 3                                                |       | 5                                                |       |
| Interest expense and  similar items            |       | 10         |       | (278                                             | )          | (144                                             | )          | (151                                             | )          |
| **Financial income and expenses**              |       |       | ** ** | **(274**                                         | **)**      | **(141**                                         | **)**      | **(146**                                         | **)**      |
| ** **                                     |       |       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| **Loss before income taxes**                   |       |       | ** ** | **(556**                                         | **)**      | **(397**                                         | **)**      | **(254**                                         | **)**      |
| Income taxes                                   |       | 11         |       | (1                                               | )          | 1                                                |       | 83                                               |       |
| **Net loss**                                   |       |       | ** ** | **(557**                                         | **)**      | **(396**                                         | **)**      | **(171**                                         | **)**      |
| ** **                                     |       |       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| Weighted average number  of shares outstanding |       |       |       | 300                                              |       | 300                                              |       | 300                                              |       |
| **Net loss per share (in thousands of SEK)**   |       | 24         | ** ** | **(1,856**                                       | **)**      | **(1,320**                                       | **)**      | **(572**                                         | **)**      |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

F-3

----

**CONCORDIABUS NORDIC HOLDING AB AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(all amounts in millions of SEK)**
| **ASSETS**                                        | ** ** | **Note**   | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------------|------------|------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                        | ** ** | ** ** | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Fixed assets**                                  |       |       |       |                            |       |                            |       |
| Goodwill                                          |       | 12         |       | 211                             |       | 209                             |       |
| **Total intangible fixed assets**                 |       |       | ** ** | **211**                         | ** ** | **209**                         | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Buildings and land                                |       | 13         |       | 4                               |       | 2                               |       |
| Equipment, tools,  fixtures and fittings          |       | 13         |       | 30                              |       | 27                              |       |
| Vehicles                                          |       | 13         |       | 1,041                           |       | 1,228                           |       |
| **Total tangible fixed assets**                   |       |       | ** ** | **1,075**                       | ** ** | **1,257**                       | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Other financial fixed  assets                     |       | 14         |       | 35                              |       | 48                              |       |
| **Total financial fixed assets**                  |       |       | ** ** | **35**                          | ** ** | **48**                          | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Total fixed assets**                            |       |       | ** ** | **1,321**                       | ** ** | **1,514**                       | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Current assets**                                |       |       |       |                            |       |                            |       |
| Inventories                                       |       | 15         |       | 30                              |       | 33                              |       |
|                                              |       |       |       |                            |       |                            |       |
| **Current receivables and other  current assets** |       |       |       |                            |       |                            |       |
| Accounts receivables                              |       | 16         |       | 441                             |       | 345                             |       |
| Other current  receivables                        |       |       |       | 62                              |       | 76                              |       |
| Accrued income and  prepaid expenses              |       | 17         |       | 122                             |       | 143                             |       |
| **Total receivables and other  current assets**   |       |       | ** ** | **625**                         | ** ** | **564**                         | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Cash and bank balances**                        |       | 18         | ** ** | **192**                         | ** ** | **175**                         | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Total current assets**                          |       |       | ** ** | **847**                         | ** ** | **772**                         | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **TOTAL ASSETS**                                  |       | 2,3        | ** ** | **2,168**                       | ** ** | **2,286**                       | ** ** |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

F-4

----

**CONCORDIABUS NORDIC HOLDING AB AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

**(all amounts in millions of SEK, except share andper share amounts)**
| **SHAREHOLDER’S EQUITY AND LIABILITIES**  | ** ** | **Note**   | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                    | ** ** | ** ** | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Shareholder’s equity**                                 |       |       |       |                            |       |                            |       |
| Restricted equity                                             |       |       |       |                            |       |                            |       |
| Share capital (300  shares at par value SEK 1,000)            |       |       |       | 0                               |       | 0                               |       |
| Restricted reserves                                           |       |       |       | 0                               |       | 132                             |       |
| **Total restricted equity**                                   | ** ** | ** ** | ** ** | **0**                           | ** ** | **132**                         | ** ** |
| ** **                                                    | ** ** | ** ** | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Non-restricted  equity                                        |       |       |       |                            |       |                            |       |
| Retained earnings                                             |       |       |       | 207                             |       | 120                             |       |
| Net loss for the year                                         |       |       |       | (557                            | )          | (396                            | )          |
| **Total non-restricted  equity (deficit)**                    |       |       | ** ** | **(350**                        | **)**      | **(276**                        | **)**      |
| ** **                                                    |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Total shareholder’s equity  (deficit)**                |       |       | ** ** | **(350**                        | **)**      | **(144**                        | **)**      |
| ** **                                                    |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Liabilities**                                               |       |       |       |                            |       |                            |       |
| Provisions                                                    |       |       |       |                            |       |                            |       |
| Provisions for pensions  and similar commitments              |       | 19         |       | 44                              |       | 51                              |       |
| Other provisions                                              |       | 23         |       | 18                              |       | 60                              |       |
| **Total provisions**                                          |       |       | ** ** | **62**                          | ** ** | **111**                         | ** ** |
| ** **                                                    |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Non-current  liabilities                                      |       |       |       |                            |       |                            |       |
| Notes payable                                                 |       | 20         |       | 1,230                           |       | 1,176                           |       |
| Long-term debt to  affiliated companies                       |       | 20         |       | 255                             |       | —                          |       |
| Finance lease  obligations                                    |       | 20         |       | 24                              |       | 12                              |       |
| **Total non-current  liabilities**                            |       |       | ** ** | **1.509**                       | ** ** | **1,188**                       | ** ** |
| ** **                                                    |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Current liabilities                                           |       |       |       |                            |       |                            |       |
| Short-term  portion of long-term liabilities                  |       | 20         |       | 8                               |       | 8                               |       |
| Short-term  portion of long-term debt to affiliated companies |       | 20         |       | 16                              |       | 292                             |       |
| Accounts payable                                              |       |       |       | 185                             |       | 216                             |       |
| Other current  liabilities                                    |       |       |       | 156                             |       | 157                             |       |
| Accrued expenses and  deferred income                         |       | 21         |       | 582                             |       | 458                             |       |
| **Total current liabilities**                                 |       |       | ** ** | **947**                         | ** ** | **1,131**                       | ** ** |
| ** **                                                    |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **TOTAL SHAREHOLDER’S EQUITY AND  LIABILITIES**          |       |       | ** ** | **2,168**                       | ** ** | **2,286**                       | ** ** |
| ** **                                                    |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **PLEDGED ASSETS AND CONTINGENT  LIABILITIES**                |       | 22         |       |                            |       |                            |       |
| Pledged assets                                                |       |       |       | 1,995                           |       | 1,613                           |       |
| Contingent liabilities                                        |       |       |       | —                          |       | —                          |       |
| **Total pledged assets and contingent liabilities**           | ** ** | ** ** | ** ** | **1,995**                       | ** ** | **1,613**                       | ** ** |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

F-5

----

**CONCORDIABUS NORDIC HOLDING AB AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CHANGES INSHAREHOLDER’S EQUITY**

**(all amounts in millions of SEK)**
| ** **                                               | ** ** | **Share capital** | ** ** | **Restricted  reserves** | ** ** | **Non-restricted  equity** | ** ** | **Total  shareholder’s  equity** | ** ** |
|----------------------------------------------------------|------------|------------------------|------------|--------------------------|------------|----------------------------|------------|---------------------------------------|------------|
| **Balance, March 1, 2003**                               | ** ** | **0**                  | ** ** | **389**                  | ** ** | **23**                     | ** ** | **412**                               | ** ** |
| Transfer between  restricted and non-restricted reserves |       | —                 |       | (147                     | )          | 147                        |       | —                                |       |
| Change in cumulative  translation adjustment             |       | —                 |       | —                   |       | (6                         | )          | (6                                    | )          |
| Net loss for the year                                    |       | —                 |       | —                   |       | (171                       | )          | (171                                  | )          |
| **Balance, February 28, 2004**                           | ** ** | **0**                  | ** ** | **242**                  | ** ** | **(7**                     | **)**      | **235**                               | ** ** |
| Transfer between  restricted and non-restricted reserves |       | —                 |       | (112                     | )          | 112                        |       | —                                |       |
| Effect of change in  accounting principles               |       | —                 |       | —                   |       | 7                          |       | 7                                     |       |
| Effect of change in  accounting principles, tax effect   |       | —                 |       | —                   |       | (2                         | )          | (2                                    | )          |
| Change in cumulative  translation adjustment             |       | —                 |       | 2                        |       | 10                         |       | 12                                    |       |
| Net loss for the year                                    |       | —                 |       | —                   |       | (396                       | )          | (396                                  | )          |
| **Balance, February 28, 2005**                           | ** ** | **0**                  | ** ** | **132**                  | ** ** | **(276**                   | **)**      | **(144**                              | **)**      |
| Transfer between  restricted and non-restricted reserves |       | —                 |       | (132                     | )          | 132                        |       | —                                |       |
| Received shareholder’s  contribution                |       | —                 |       | —                   |       | 333                        |       | 333                                   |       |
| Change in cumulative  translation adjustment             |       | —                 |       | —                   |       | 18                         |       | 18                                    |       |
| Net loss for the year                                    |       | —                 |       | —                   |       | (557                       | )          | (557                                  | )          |
| **Balance, February 28, 2006**                           | ** ** | **0**                  | ** ** | **0**                    | ** ** | **(350**                   | **)**      | **(350**                              | **)**      |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

F-6

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**CONCORDIABUS NORDIC HOLDING AB AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(all amounts in millions of SEK)**
| ** **                                                                            | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|---------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| **Cash flows from operations**                                                        |       |                                             |       |                                             |       |                                             |       |
| Loss before income  taxes                                                             |       | (556                                             | )          | (397                                             | )          | (254                                             | )          |
| Depreciation and  amortization                                                        |       | 300                                              |       | 350                                              |       | 331                                              |       |
| Amortization of  deferred financing costs                                             |       | 10                                               |       | 10                                               |       | 31                                               |       |
| (Gain) / loss on sale  of fixed assets                                                |       | (6                                               | )          | (4                                               | )          | (6                                               | )          |
| Foreign currency  exchange loss                                                       |       | 52                                               |       | (14                                              | )          | 17                                               |       |
| Change in pension  provision                                                          |       | (7                                               | )          | (2                                               | )          | (9                                               | )          |
| Change in provision for  loss making contracts and restructuring                      |       | (42                                              | )          | (26                                              | )          | 40                                               |       |
| Change in interest  receivable, (Note 9)                                              |       | 1                                                |       | 11                                               |       | (10                                              | )          |
| Change in interest  liability, (Note 10)                                              |       | 17                                               |       | (6                                               | )          | (12                                              | )          |
| Income taxes received  (paid)                                                         |       | (3                                               | )          | (1                                               | )          | 1                                                |       |
|                                                                                  |       |                                             |       |                                             |       |                                             |       |
| **Change in working capital**                                                         |       |                                             |       |                                             |       |                                             |       |
| (Increase) decrease in  inventories                                                   |       | 3                                                |       | (2                                               | )          | 5                                                |       |
| (Increase) decrease in  current receivables                                           |       | (92                                              | )          | 118                                              |       | (100                                             | )          |
| Increase (decrease) in  current liabilities                                           |       | 68                                               |       | (135                                             | )          | (10                                              | )          |
| **Net cash flows provided by  (used in) operations**                                  | ** ** | **(255**                                         | **)**      | **(98**                                          | **)**      | **24**                                           | ** ** |
| ** **                                                                            | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| **Cash flows from investing  activities**                                             |       |                                             |       |                                             |       |                                             |       |
| Investments in  buildings and land, vehicles, equipment, tools, fixtures and fittings |       | (114                                             | )          | (112                                             | )          | (32                                              | )          |
| Sale of buildings and  land, vehicles, equipment, tools, fixtures and fittings        |       | 42                                               |       | 44                                               |       | 21                                               |       |
| Acquisition of  intangible assets                                                     |       | (1                                               | )          |                                             |       |                                             |       |
| Sale of financial fixed  assets                                                       |       | 16                                               |       | 5                                                |       | —                                           |       |
| **Net cash flows provided by  (used in) investing activities**                        | ** ** | **(57**                                          | **)**      | **(63**                                          | **)**      | **(11**                                          | **)**      |
| ** **                                                                            | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| **Cash flows from financing  activities**                                             |       |                                             |       |                                             |       |                                             |       |
| Shareholders  contribution                                                            |       | 333                                              |       | —                                           |       | —                                           |       |
| Proceeds from  borrowings                                                             |       | 235                                              |       | 3                                                |       | 1,191                                            |       |
| Repayment of long-term  borrowings                                                    |       | (235                                             | )          | —                                           |       | (984                                             | )          |
| Payment of financial  lease obligation                                                |       | (7                                               | )          | (6                                               | )          | (6                                               | )          |
| Costs incurred in  connection with debt refinancing                                   |       | —                                           |       | (5                                               | )          | (49                                              | )          |
| **Net cash flows provided by  (used in) financing activities**                        | ** ** | **326**                                          | ** ** | **(8**                                           | **)**      | **152**                                          | ** ** |
| ** **                                                                            | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| **INCREASE (DECREASE) IN CASH AND  BANK BALANCES**                                    | ** ** | **14**                                           | ** ** | **(169**                                         | **)**      | **165**                                          | ** ** |
| **CASH AND BANK BALANCES AT  BEGINNING OF YEAR**                                      | ** ** | **175**                                          | ** ** | **346**                                          | ** ** | **180**                                          | ** ** |
| **Translation difference**                                                            | ** ** | **3**                                            | ** ** | **(2**                                           | **)**      | **1**                                            | ** ** |
| **CASH AND BANK BALANCES AT END OF YEAR**                                             | ** ** | **192**                                          | ** ** | **175**                                          | ** ** | **346**                                          | ** ** |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

F-7

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**CONCORDIABUS NORDIC HOLDING AB AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(All amounts in millions of SEK unless otherwisestated)**

**Note1. Organization and accounting principles**

**Organization**

ConcordiaBus Nordic Holding AB and its subsidiaries (“Concordia Bus Group” or“Concordia”) is a Swedish registered limited liability company, wholly owned byConcordia Bus AB (reg no 556574-8240) with its registered office inStockholm, Sweden.

Previously,Concordia Bus Nordic Holding AB was named Interbus Finans AB and was a whollyowned subsidiary of Concordia Bus Nordic AB (publ), which was wholly ownedby Concordia Bus AB. In January 2004, a reorganization took place wherebyConcordia Bus Nordic AB (publ) transferred to Concordia Bus AB its100% share ownership of Interbus Finans AB. Concordia Bus AB thentransferred its shares in Concordia Bus Nordic AB (publ) to InterbusFinans AB. Interbus Finans AB was then renamed Concordia Bus NordicHolding AB.

Suchreorganization had the effect of creating a new holding company for ConcordiaBus Nordic AB from one of its dormant subsidiaries. Concordia Bus Nordic AB isthus now a 100% owned subsidiary of Concordia Bus Nordic Holding AB. ConcordiaBus Nordic Holding AB is a non-operating holding company that has noindependent assets or operations other than its shares in Concordia Bus NordicAB. Subsequent to the reorganization, the consolidated financial position,results of operations and cash flows of Concordia Bus Nordic AB are the same asthat of Concordia Bus Nordic Holding AB. Since this was a reorganization ofentities under common control, the consolidated financial statements arepresented as if Concordia Bus Nordic Holding AB was in existence as theshareholder of Concordia Bus Nordic AB for all periods presented.

Theoperations of Concordia consist of providing regular bus services undercontract through its subsidiaries to transit authorities in Sweden, Norway andFinland. In addition to contracted services, Concordia also supplies extensiveexpress bus services over major parts of Sweden, as well as charter and tourbus services, mainly in Gothenburg and Stockholm. In addition to the contractedservices, Concordia also operates extensive intercity express bus servicesbetween major cities of Sweden, as well as charter and tour bus services,mainly in Gothenburg, Malmö and Stockholm region. The operations are conductedthrough wholly-owned subsidiaries of Concordia Bus Nordic AB.Concordia Bus Nordic AB has no independent assets or operations otherthan its shares in these subsidiaries.

**Accountingprinciples**

Theconsolidated financial statements of the Concordia Bus Group have been preparedin accordance with generally accepted accounting principles in Sweden (“SwedishGAAP”) and thus have been prepared in accordance with recommendations issued bythe Swedish Financial Accounting Standards Council (“Redovisningsrådet”). TheConcordia Bus Group is required to reconcile its financial statements toaccounting principles generally accepted in the United States of America(“U.S. GAAP”). Significant differences between Swedish GAAP andU.S. GAAP are described in Note 30.

Thesame accounting policies and methods of computation are followed for the yearended February 28, 2006 consolidated financial statements as compared with themost recent annual financial statements. There has been a gradual transition inrecent years to new Swedish recommendations of the Swedish Financial AccountingStandards Council which are based on and comply with IFRS. From March 1, 2007,Concordia Bus Nordic Holding AB are required to present its consolidatedfinancial statements fully in accordance with International Financial ReportingStandards (IFRS). The impact of the adoption of the IFRS is not expected to bematerial for the Goup ́s consolidated financial position. As the company alreadyfollow IAS 32 and has now financial instruments, the only anticipated impacteffect is the effect of non-amortiziation on goodwill.

***Currency***

Thesefinancial statements have been prepared in SEK. References to “SEK”, “Swedishkrona” or “Swedish kronor” are to Swedish currency.

F-8

----

***Consolidated Financial Statements***

TheConsolidated Financial Statements have been prepared in accordance with therecommendations of the Swedish Financial Accounting Standards Board(“Redovisningsrådet”) concerning consolidated financial statements. Theconsolidated Income Statements and Balance Sheets of Concordia include allcompanies in which the Concordia Bus Nordic Holding AB, directly orindirectly, holds more than 50 percent of the voting rights.

Acquisitionshave been accounted for using the purchase method. This means that the assetsand liabilities, including deferred taxes, of acquired subsidiaries arerecorded at fair value at the date of the acquisition. If the purchase priceexceeds the estimated fair value of the company’s net assets, the difference isreported as goodwill, which is amortized over its estimated useful life. Incomefrom companies acquired during the year is included in the ConsolidatedFinancial Statements from the date of acquisition. Net income from companiessold is included up to the date of the sale.

Internalprofits and inter-company transactions within the group are eliminated inthe Consolidated Financial Statements.

***Translation of investments in foreign subsidiaries***

Concordiauses the current rate method to translate the financial statements of foreign subsidiaries,in accordance with the suggested recommendations of the Swedish FinancialAccounting Standards Board (“Redovisningsrådet”). In applying this method,subsidiaries are reported as independent units with operations conducted inforeign currencies and in which the Company has a net investment. This meansthat the assets and liabilities of the foreign subsidiaries are translated atthe exchange rate as of the Balance Sheet date. The Income Statements aretranslated at the average rate for the year.

***Revenue recognition***

Themajority of Concordia’s revenues arise from contracts with local publictransportation authorities having contract terms of 5-8 years (“CPTAcontracts”).

CPTAcontracts generally provide Concordia with fixed fee revenue in return for thecontracted bus services. Accordingly, all ticket revenues collected byConcordia on such contracts, referred to as gross agreements, are forwarded tothe local public transportation authorities, and Concordia receives its fixedfees regardless of the number of passengers transported. Under some contracts,Concordia receives fees from the local transportation authority after providingservices. Under other contracts, Concordia receives fees in advance ofproviding services. Regardless of the timing of receiving the fees from thelocal public transportation authorities, Concordia recognizes revenue on astraight-line basis over the period of the contract and, accordingly, accruesfor earned fee revenue or defers unearned fee revenue as appropriate. Such fixedfees are generally subject to periodic adjustment for certain changes in costsincurred or cost indices. In recognizing the fee revenue over the period of thecontract, Concordia records adjustments to the fee revenue during the contractperiod based on the agreed cost adjustment mechanism contained in thecontracts. Revenues earned by Concordia on certain other CPTA contracts,referred to as net agreements, are based on or consider the number ofpassengers transported. Revenues for these contracts are recognized on the dateof travel by the passenger.

Revenuesfrom express bus services are derived from passenger ticket revenue received,and revenues from coach hire services are derived from the agreed price forhire of the buses. Concordia recognizes express bus service revenue and coachhire service revenue as services are provided. Express bus service revenues arerecognized on the date of travel by the passenger. Coach hire service revenuesare recognized on a straight-line basis over the period of hire.

Revenuealso includes rental income, sale of fuel and diesel and from engineeringservices. The revenue resulting from other operating activities is recognizedwhen the product is delivered or the service is performed or, in terms ofleasing revenues, on a straight-line basis over the term of lease.

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

***Income Taxes***

Thetotal tax expense of the Concordia Bus Group consists of current and deferredtaxes. Deferred tax primarily consists of estimated tax on changes in untaxedreserves for the year and unused portion of income tax loss carry forwards tothe extent that these losses can be used in the near future for taxablereduction of future taxable income. The deferred income tax position iscalculated using the enacted tax rate for each country respectively.

F-9

----

Inthe consolidated income statement taxes are reported as if the group companieswere separate taxable legal entities, in accordance with current taxationlegislation for all periods reported.

***Depreciation and Amortization***

Depreciationand amortization is computed based on an asset’s expected useful life and itsdepreciable amount. The depreciable amount is computed as the differencebetween cost of acquisition and the expected residual value of the asset at theend of its useful life. Depreciation is computed using a straight-line methodbased 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  | % |

 

Goodwillpertaining to the acquisition of Ingenior M.O Schoyens Bilcentraler A/S is amortized over 20 years,which is based on the company’s strong strategic position in the Norwegianmarketplace and its well established brand in this market.

Deferredfinancing fees are amortized straight-line over the life of the debt.

***Tangible fixed assets***

Tangiblefixed assets are valued at cost, less accumulated depreciation and impairmentcharges.

***Impairment of tangible and intangible fixed assets***

Impairmentreviews of tangible and intangible fixed assets, including goodwill, areperformed whenever there is an indication of possible impairment. The carryingvalues of fixed assets, including goodwill related to those assets, are notconsidered to be recoverable when the expected discounted cash flows from thoseassets are less than their carrying values. An impairment loss is determinedbased on the amount by which the carrying value exceeds the fair value of thoseassets. Losses on fixed assets to be disposed of are determined in a similarmanner, taking into account the selling price reduced by the costs of disposal.

In our valuation of allunits we have relied on the income approach and the market approach to estimatethe fair value of the equity. In using the income approach, we utilized thediscounted cash flow method variation and estimated the fair value of theequity based in anticipated cash flows of several years, plus terminal value atthe end of the time horizon and discounted these items to their present valueusing an appropriate rate of return. In addition, we used the guideline companymethod of the market approach. In using the guideline company approach, weestimated the value of the reporting unit by comparing the reporting unit tosimilar businesses whose securities are actively traded in the public market.

***Receivables and payables***

Receivablesand payables are recorded on an individual basis at the amounts, which isestimated to be received/paid.

***Receivables and payables in foreign currencies***

Receivablesand payables in foreign currencies are valued using the rate at the balancesheet date. Gains and losses on trade receivables and payables are reportedunder operating profit (loss). Gains and losses related to other receivablesand payables are reported under financial income and expenses.

F-10

----

***Inventories***

Inventory is valued at the lowerof cost, using the first in first out method, and market value after provisionfor obsolescence.

***Loss makingcontracts***

A significant portion ofConcordia’s revenues are derived from five to eight- year contracts withmunicipalities to provide bus services in a particular area. Under the terms ofthe contracts, the revenues are generally indexed at a rate corresponding to aconsumer price index or a net price index. Due to changes in circumstances andbecause costs have generally increased more quickly than revenues, suchcontracts may become loss making. Concordia records a provision for such lossmaking contracts at the lowest level for which there are separate identifiablecash flows. Losses are recognized in the period in which management determinesthat cumulative losses will be incurred on a particular contract. The loss iscomputed after taking into account direct and indirect costs related to theservice provided under the contract including depreciation on the related buseswhich will be used to meet the service obligation. Concordia Busnormally has multiple contracts with the CPTAs (Contract Public Transportation Authority). In most of the casesthe different contracts with the same CPTA are closely connected to each other.The contracts share the same resources (staff, equipment, vehicles andpremises). Often the contracts also are related for other reasons. Concordiasign several contracts at the same time where some are loss making and some areprofit making. In instances where the cash flows from such contracts areinterrelated, provisions for loss making contracts are measured by groupcontracts, however in no instance on a higher level than by CPTA. Concordiaalso sign contracts to maximize 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.

***Derivativecontracts***

Currency derivatives (currencyforwards and currency swaps) entered into in order to secure the currencyexposure in interest payable for issued debt are accounted for as hedgingsecurities, that is, the gains and losses attributed to these derivatives arerecorded when the currency exchange rate differences on the underlyingcommercial flows are realised. Derivatives that do not qualify for hedgeaccounting are accounted for at the lower of acquisition cost or market value,where unrealised losses are accounted for as a financial cost in the statementof operations.

Interest rate derivatives(interest rate swaps) entered into in order to obtain a fixed interest ratewith the preferred maturity in the lease obligation are accounted for ashedging securities, that is, the gains and losses attributed to these derivativesis recorded at the same time as the hedged item is recorded. Interest ratederivatives that do not qualify for hedge accounting are accounted for at thelower of acquisition cost or market value, where unrealised losses areaccounted for as a financial cost in the statement of operations.

Diesel derivatives entered intoin order to obtain a more secure price level are accounted for as hedgingsecurities, that is, the gains and losses attributed to these derivatives arerecorded at the same time as the hedged item is recorded. Diesel derivativesthat do not qualify for hedge accounting are accounted for at the lower ofacquisition cost or market value, where unrealised losses are accounted for asan operating cost in the statement of operations.

***Restructurings***

Concordia records provisions forrestructurings and related activities only after the detailed formal plan forthe restructuring has been formulated and either the implementation commencesor the main features of the plan have been announced to those affected by it.Provisions for restructurings include only the direct expenditures arising fromthe restructuring, which are those that are both necessarily entailed by therestructuring and not associated with the continuing activities of theenterprise.

***Leasing***

Leases are classified in the consolidated financial statements as eitherfinancial leases or operating leases. A finance lease transfers to the lesseethe significant economic risks and rewards of ownership. If this is not thecase, the lease is classified as an operating lease. For each finance lease, afixed asset is reported in the balance sheet and a corresponding leaseobligation is recorded as a liability. In the statement of operations, thecosts of financial leases are reported as depreciation and interest expense.Under operating leases no asset or liability is recorded in the balance sheet.In the statement of operations, the costs of operating leases are charged tothe income statement on a straight-line basis.

F-11

----

 

***Cash flowstatement***

The cash flow statement isderived from the statement of income and other changes between the opening andclosing balance sheets, eliminating the effect of currency translationdifferences. The cash and bank balances in the cash flow statement includesecurities, time deposits and other short term deposits. Cash includes cash andbank balances, excl. restricted cash, is the outstanding balance for the chequeaccount connected to the group cheque account, where Concordia BusNordic AB is the contracting part with the bank.

***Retirementindemnities***

Various insurance companiesmanage Concordia’s pension plans. In all of these plans, the pension liabilitycorresponds to the pension obligation as determined by actuarial calculations.Pension plans for active personnel are funded under a multiemployer plan andthrough defined contribution plans. Pension programs for active personnel arefunded through monthly payments of pension premiums. Provisions are made in thebalance sheet for former personnel.

***Use ofestimates***

The preparation of financialstatements in conformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesto the date of the financial statements and the reported amounts of revenuesand expense during the reporting period. Actual results could differ from thoseestimates.

**Segment information**

Concordia operates within threebus transportation markets which are Concordia’s main reportable segments:contractual public bus transportation “CPTA”, scheduled intercity bus services(express bus services); and coach hire services. In Norway and Finland thegroup operates within the contractual public bus transportation segment only.

The contractual public bustransportation division operates throughout Sweden and in the major urban areasin Norway and Finland. The majority of revenues are generated from contractualagreements with municipalities whereby Concordia receives fixed revenues forproviding the contracted services.

Swebus Express conducts itsbusiness on certain routes all over Sweden. Revenues are derived from ticketsales to passengers.

Coach hire services (Interbus)operate hire and excursion engagements, primarily in the three major cities inSweden, Stockholm, Gothenburg and Malmö, but also in other bigger cities in theNordic countries.

The management and reporting ofresults of Concordia’s operations is based upon the reportable segments ratherthan the legal structure. Concordia’s operating decision-making group isthe Board of Directors. Each segment is managed separately because eachbusiness requires specialized industry knowledge and strategies.

The accounting policies for thereportable segments are the same as those used in the consolidated financialstatements.

Concordia Bus Nordic AB evaluates performance based upon the operatingprofit or loss before tax of each reportable segment and generally accounts forinter-segment sales and transfers as if the sales or transfers were tothird parties at current market prices. Sales are attributed to geographicalareas based on the location of the assets producing the revenue.

F-12

----

 

**Note 2. Primary segments—markettypes**

Revenue by segment:
| ** **                                 | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| CPTA—Sweden                           |       | 3,320                                            |       | 3,407                                            |       | 3,486                                            |       |
| CPTA—Sweden,  sales to other segments |       | 34                                               |       | 34                                               |       | 37                                               |       |
| *Total  CPTA—Sweden*                  |       | 3,354                                            |       | 3,441                                            | * *   | *3,523*                                          | * *   |
| CPTA—Norway                           |       | 365                                              |       | 450                                              |       | 365                                              |       |
| CPTA—Finland                          |       | 403                                              |       | 415                                              |       | 391                                              |       |
| *Total  CPTA*                              |       | 4,122                                            |       | 4,306                                            |       | 4,279                                            |       |
| Express                                    |       | 364                                              |       | 337                                              |       | 327                                              |       |
| Interbus—external  customers          |       | 136                                              |       | 117                                              |       | 110                                              |       |
| Interbus—sales  to other segments     |       | 25                                               |       | 25                                               |       | 27                                               |       |
| *Total  bus operations*                    |       | 4,647                                            |       | 4,785                                            |       | 4,743                                            |       |
| Other revenue  and group elimination       |       | 36                                               |       | 27                                               |       | 18                                               |       |
| **Total revenue**                          | ** ** | **4,683**                                        | ** ** | **4,812**                                        | ** ** | **4,761**                                        | ** ** |

 

Sales to one single customer represent 34 %, 30 %, and 28%, of total consolidated net sales for the years ended February 2006, 2005 and2004, respectively.

Operating profit (loss) bysegment:
| ** **                       | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|----------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| CPTA—Sweden(1)              |       | (169                                             | )          | (162                                             | )          | (57                                              | )          |
| CPTA—Norway(2)              |       | 9                                                |       | (7                                               | )          | (11                                              | )          |
| CPTA—Finland(3)             |       | (18                                              | )          | (18                                              | )          | (24                                              | )          |
| *Total  CPTA*                    |       | (178                                             | )          | (187                                             | )          | (92                                              | )          |
| Express                          |       | 13                                               |       | 29                                               |       | 34                                               |       |
| Interbus                         |       | 1                                                |       | 4                                                |       | 3                                                |       |
| *Total  Express and Interbus*    | * *   | *14*                                             | * *   | *33*                                             | * *   | *37*                                             | * *   |
| *Total  bus operations*          |       | (164                                             | )          | (154                                             | )          | (55                                              | )          |
| Head office  items and others(4) |       | (118                                             | )          | (102                                             | )          | (53                                              | )          |
| **Total operating loss**         | ** ** | **(282**                                         | **)**      | **(256**                                         | **)**      | **(108**                                         | **)**      |

 

Total operating loss, above,includes costs for loss making contracts and restructuring costs of SEK 86, SEK127 and SEK 40, respectively, for the years ended February 28, 2006,February 28, 2005 and February 29 2004.

----

(1)           IncludesSEK 77, SEK 90 and SEK 47, respectively, costs for loss making contracts andrestructuring costs for the years ended February 28, 2006,February 28, 2005 and February 29 2004.

(2)           IncludesSEK 5, SEK 7 and SEK 8, respectively, of costs for loss making contracts forthe years ended February 28, 2006, February 28, 2005 and February 292004.

(3)           IncludesSEK 0, SEK 3 and SEK 1, respectively, of costs for loss making contracts forthe years ended February 28, 2006, February 2, 2005 and February 292004.

(4)           IncludesSEK 14 and 47 of restructuring costs for the years ended February 28, 2006and February 28 2005.

Identifiable assets by segment:
| ** **                                 | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| CPTA—Sweden                           |       | 1,246                           |       | 1,287                           |       |
| CPTA—Norway                           |       | 481                             |       | 354                             |       |
| CPTA—Finland                          |       | 180                             |       | 194                             |       |
| *Total  CPTA*                              | * *   | *1,907*                         | * *   | *1,835*                         | * *   |
| Express                                    |       | 96                              |       | 157                             |       |
| Interbus                                   |       | 60                              |       | 57                              |       |
| *Subtotal  Express and Interbus*           | * *   | *156*                           | * *   | *214*                           | * *   |
| *Total  bus operations*                    | * *   | *2,063*                         | * *   | *2,049*                         | * *   |
| Real estate                                |       | 0                               |       | 1                               |       |
| Head Office  assets and group eliminations |       | 105                             |       | 236                             |       |
| **Total assets**                           | ** ** | **2,168**                       | ** ** | **2,286**                       | ** ** |

 

F-13

----

 

Identifiable liabilities bysegment:
| ** **                                      | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| CPTA—Sweden                                |       | 698                             |       | 655                             |       |
| CPTA—Norway                                |       | 77                              |       | 59                              |       |
| CPTA—Finland                               |       | 79                              |       | 78                              |       |
| *Total  CPTA*                                   | * *   | *854*                           | * *   | *792*                           | * *   |
| Express                                         |       | 50                              |       | 40                              |       |
| Interbus                                        |       | 33                              |       | 29                              |       |
| *Subtotal  Express and Interbus*                | * *   | *83*                            | * *   | *69*                            | * *   |
| *Total  bus operations*                         | * *   | *937*                           | * *   | *861*                           | * *   |
| Head Office  liabilities and group eliminations |       | 1,581                           |       | 1,569                           |       |
| **Total liabilities**                           | ** ** | **2,518**                       | ** ** | **2,430**                       | ** ** |

 

Investments in intangible,tangible and financial fixed assets by segment:
| ** **                                                                | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|---------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| CPTA—Sweden                                                          |       | 28                                               |       | 55                                               |       | 19                                               |       |
| CPTA—Norway                                                          |       | 94                                               |       | 35                                               |       | 3                                                |       |
| CPTA—Finland                                                         |       | 0                                                |       | 0                                                |       | 0                                                |       |
| *Total  CPTA*                                                             | * *   | *122*                                            | * *   | *90*                                             | * *   | *22*                                             | * *   |
| Express                                                                   |       | 0                                                |       | 4                                                |       | 1                                                |       |
| Interbus                                                                  |       | 8                                                |       | 11                                               |       | 0                                                |       |
| *Total  Express and Interbus*                                             | * *   | *8*                                              | * *   | *15*                                             | * *   | *1*                                              | * *   |
| *Total  bus operations*                                                   | * *   | *130*                                            | * *   | *105*                                            | * *   | *23*                                             | * *   |
| Head office  items and others                                             |       | 5                                                |       | 12                                               |       | 58                                               |       |
| **Total investments in  intangible, tangible and financial fixed assets** | ** ** | **135**                                          | ** ** | **117**                                          | ** ** | **81**                                           | ** ** |

 

Reconciliation to statements ofcash flows:
| ** **                                                                         | ** ** | **Year Ended   February 28, 2006 ** | ** ** | **Year Ended   February 28, 2005 ** | ** ** | **Year Ended   February 29, 2004 ** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| Investments in  buildings, land, vehicles, equipment, tools, fixtures and fittings |       | 114                                                          |       | 108                                                          |       | 32                                                           |       |
| Investments in  intangible assets                                                  |       | 1                                                            |       | —                                                       |       | —                                                       |       |
| Costs incurred  and capitalized in connection with debt refinancing                |       | —                                                       |       | 5                                                            |       | 49                                                           |       |
| Non-cash  investment                                                               |       | 20                                                           |       | 4                                                            |       | —                                                       |       |
| **Total investments in  intangible, tangible and financial fixed assets**          | ** ** | **135**                                                      | ** ** | **117**                                                      | ** ** | **81**                                                       | ** ** |

 

Depreciation, amortization and write-downs by segment:
| ** **                    | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|-------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| CPTA—Sweden              |       | 215                                              |       | 249                                              |       | 226                                              |       |
| CPTA—Norway              |       | 39                                               |       | 42                                               |       | 29                                               |       |
| CPTA—Finland             |       | 20                                               |       | 30                                               |       | 28                                               |       |
| *Total  CPTA*                 | * *   | *274*                                            | * *   | *321*                                            | * *   | *283*                                            | * *   |
| Express                       |       | 10                                               |       | 13                                               |       | 18                                               |       |
| Interbus                      |       | 8                                                |       | 10                                               |       | 10                                               |       |
| *Total  Express and Interbus* | * *   | *18*                                             | * *   | *23*                                             | * *   | *28*                                             | * *   |
| *Total  bus operations*       | * *   | *292*                                            | * *   | *344*                                            | * *   | *311*                                            | * *   |
| Buildings                     |       | 0                                                |       | 0                                                |       | 0                                                |       |
| Head office  items and others |       | 8                                                |       | 6                                                |       | 20                                               |       |
| **Total depreciation**        | ** ** | **300**                                          | ** ** | **350**                                          | ** ** | **331**                                          | ** ** |

 

F-14

----

 

**Note 3. Secondarysegments—marketing areas**

Revenue by country:
| **Revenue**       | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|-------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Sweden            |       | 3,877                                            |       | 3,924                                            |       | 3,986                                            |       |
| Norway            |       | 398                                              |       | 466                                              |       | 379                                              |       |
| Finland           |       | 408                                              |       | 422                                              |       | 396                                              |       |
| **Total revenue** | ** ** | **4,683**                                        | ** ** | **4,812**                                        | ** ** | **4,761**                                        | ** ** |

 

Assets by country:
| **Assets**       | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Sweden           |       | 1,507                           |       | 1,738                           |       |
| Norway           |       | 481                             |       | 354                             |       |
| Finland          |       | 180                             |       | 194                             |       |
| **Total assets** | ** ** | **2,168**                       | ** ** | **2,286**                       | ** ** |

 

Investments in intangible,tangible and financial fixed assets by country:
| **Investments**                                                           | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|---------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Sweden                                                                    |       | 41                                               |       | 82                                               |       | 78                                               |       |
| Norway                                                                    |       | 94                                               |       | 35                                               |       | 3                                                |       |
| Finland                                                                   |       | 0                                                |       | 0                                                |       | 0                                                |       |
| **Total investments in  intangible, tangible and financial fixed assets** | ** ** | **135**                                          | ** ** | **117**                                          | ** ** | **81**                                           | ** ** |

 

Reconciliation to statements ofcash flows:
| ** **                                                                         | ** ** | **Year Ended   February 28, 2006 ** | ** ** | **Year Ended   February 28, 2005 ** | ** ** | **Year Ended   February 29, 2004 ** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| Investments in  buildings, land, vehicles, equipment, tools, fixtures and fittings |       | 114                                                          |       | 108                                                          |       | 32                                                           |       |
| Investments in  intangible assets                                                  |       | 1                                                            |       | —                                                       |       | —                                                       |       |
| Costs incurred  and capitalized in connection with debt refinancing                |       | —                                                       |       | 5                                                            |       | 49                                                           |       |
| **Investment  according to Statement of cash flows**                               | ** ** | **115**                                                      | ** ** | **113**                                                      | ** ** | **81**                                                       | ** ** |
| Non-cash  investments                                                              | ** ** | **20**                                                       | ** ** | **4**                                                        |       | —                                                       |       |
| **Total investments in  intangible, tangible and financial fixed assets**          | ** ** | **135**                                                      | ** ** | **117**                                                      | ** ** | **81**                                                       | ** ** |

 

**Note 4. Net revenue**

Net revenue is comprised ofrevenue from bus services, rental income, sale of fuel including diesel andrevenues from engineering services provided to external customers.
| **Revenue by type**                   | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Revenue from  regular bus services              |       | 4,552                                            |       | 4,726                                            |       | 4,663                                            |       |
| Rent, external  engineering and diesel revenues |       | 31                                               |       | 34                                               |       | 47                                               |       |
| Other revenues                                  |       | 100                                              |       | 52                                               |       | 51                                               |       |
| **Total revenues**                              | ** ** | **4,683**                                        | ** ** | **4,812**                                        | ** ** | **4,761**                                        | ** ** |

 

F-15

----

 

**Note 5. Costs of services provided**

Direct costs of services providedare included, along with other costs, in the following cost categories in thestatements of operations: fuel, tires and other consumables; other externalcosts; personnel costs; depreciation and amortization. The direct costs ofservices included in these cost categories were as follows:
| ** **                                             | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Driver’s costs                                    |       | 2,171                                            |       | 2,287                                            |       | 2,290                                            |       |
| Depreciation of  PSV and operating lease charges       |       | 689                                              |       | 736                                              |       | 676                                              |       |
| Fuel, tires,  other consumables and other direct costs |       | 1,379                                            |       | 1,254                                            |       | 1,170                                            |       |
| **Total costs of services  provided**                  | ** ** | **4,239**                                        | ** ** | **4,277**                                        | ** ** | **4,136**                                        | ** ** |

 

**Note 6. Other external costs**
| **Audit fees (in thousands of SEK)** | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|---------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| **Deloitte  & Touche AB**                                 |       |                                             |       |                                             |       |                                             |       |
| Audit and audit  related fees                                 |       | 3,276                                            |       | 2,738                                            |       | 4,144                                            |       |
| Other services                                                |       | —                                           |       | —                                           |       | —                                           |       |
| **Total**                                                     | ** ** | **3,276**                                        | ** ** | **2,738**                                        | ** ** | **4,144**                                        | ** ** |
| ** **                                                    |       |                                             |       |                                             |       |                                             |       |
| **Ernst&Young  AB**                                       |       |                                             |       |                                             |       |                                             |       |
| Audit and audit  related fees                                 |       | 1,822                                            |       | —                                           |       | —                                           |       |
| Other services                                                |       | —                                           |       | —                                           |       | —                                           |       |
| **Total**                                                     | ** ** | **1,822**                                        | ** ** | **—**                                       | ** ** | **—**                                       | ** ** |
| **Total audit fees**                                          | ** ** | **5,098**                                        | ** ** | **2,738**                                        | ** ** | **4,144**                                        | ** ** |

 

Audit and audit related feesrepresent the independent auditors’ examination of the financial statements andquarterly reports. The audit and audit related fees also represent fees inconjunction with the auditor’s examination of significant decisions, actionstaken and circumstances of Concordia in order to be able to determine thepossible liability to the Company of any Board Member or the Managing Directoror whether they have in some other way acted in contravention of the CompaniesAct, the Annual Accounts Act or the Articles of Association. Audit and auditrelated fees also include professional services in connection with the offeringof debt securities of Concordia. All other services provided are included in “otherservices”.
| **Leasing charges**                         | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Leasing charges  for the year (operating leases) |       | 427                                              |       | 428                                              |       | 388                                              |       |
| **Total**                                        | ** ** | **427**                                          | ** ** | **428**                                          | ** ** | **388**                                          | ** ** |

 

For the years ended February 28,2006, February 28, 2005 and February 29, 2004, Concordia had 1,571,1,470, and 1,317 buses, respectively, under operational leasing contracts. Thetotal debt for these buses amounts to SEK 2,013 for the year ended February 28,2006, SEK 1,935 for the year ended February 28, 2005, and SEK 1,952for the year ended February 29, 2004. Concordia also has properties underoperational leasing contracts in which it conducts business.

Total future minimum leasepayments discounted for each of the periods are as follows:
| ** **              | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| —Vehicles  (Buses) |       | 1,020                           |       | 829                             |       |
| —Properties        |       | 39                              |       | 46                              |       |
| **Total**               | ** ** | **1,059**                       | ** ** | **875**                         | ** ** |

 

The present value of the futureleasing payments at February 28, 2006 is payable as follows:
| ** **              | ** ** | **Total** | ** ** | **Less than  a year** | ** ** | **1-3  years** | ** ** | **3-5  years** | ** ** | **More than  5 years** | ** ** |
|-------------------------|------------|-----------|------------|---------------------------------|------------|----------------|------------|----------------|------------|----------------------------------|------------|
| —Vehicles  (Buses) |       | 1,020     |       | 201                             |       | 280            |       | 296            |       | 243                              |       |
| —Properties        |       | 39        |       | 7                               |       | 16             |       | 16             |       | —                           |       |
| **Total**               | ** ** | **1 059** | ** ** | **208**                         | ** ** | **296**        | ** ** | **312**        | ** ** | **243**                          | ** ** |

 

F-16

----

 

The following is a schedule, byyear, of future gross rental payments under operating leases as ofFebruary 28, 2006, should we keep our current operational leased busesthrough all contractual terms.
| **Years Ending:** | ** ** | ** ** | ** ** |
|------------------------|------------|------------|------------|
| February 28,  2007     |       | 331        |       |
| February 28,  2008     |       | 280        |       |
| February 29,  2009     |       | 244        |       |
| February 28,  2010     |       | 243        |       |
| February 28,  2011     |       | 269        |       |
| Later years            |       | 646        |       |
| **Total**              | ** ** | **2,013**  | ** ** |

 

**Note 7. Personnel costs**
| ** **                                                              | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| **AVERAGE  NUMBER OF EMPLOYEES**                                        | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| **Total  company of which:**                                            | ** ** | **6 299**                                        | ** ** | **6,949**                                        | ** ** | **7,512**                                        | ** ** |
| Men                                                                     |       | 5 381                                            |       | 6,101                                            |       | 6,467                                            |       |
| Women                                                                   |       | 918                                              |       | 848                                              |       | 1,045                                            |       |
| **Finland  of which**                                                   | ** ** | **645**                                          | ** ** | **766**                                          | ** ** | **750**                                          | ** ** |
| Men                                                                     |       | 608                                              |       | 725                                              |       | 723                                              |       |
| Women                                                                   |       | 37                                               |       | 41                                               |       | 27                                               |       |
| **Norway  of which**                                                    | ** ** | **502**                                          | ** ** | **611**                                          | ** ** | **580**                                          | ** ** |
| Men                                                                     |       | 477                                              |       | 577                                              |       | 531                                              |       |
| Women                                                                   |       | 25                                               |       | 34                                               |       | 49                                               |       |
| **Sweden  of which:**                                                   | ** ** | **5 152**                                        | ** ** | **5,572**                                        | ** ** | **6,182**                                        | ** ** |
| Men                                                                     |       | 4 296                                            |       | 4,799                                            |       | 5,213                                            |       |
| Women                                                                   |       | 856                                              |       | 773                                              |       | 969                                              |       |
|                                                                    |       |                                             |       |                                             |       |                                             |       |
| **SALARIES  AND OTHER REMUNERATIONS**                                   |       |                                             |       |                                             |       |                                             |       |
| Board of  Directors and President*                                      |       | 7                                                |       | 5                                                |       | 5                                                |       |
| Other employees  in Sweden                                              |       | 1 425                                            |       | 1,450                                            |       | 1,476                                            |       |
| ** **                                                              | ** ** | **1 432**                                        | ** ** | **1,455**                                        | ** ** | **1,481**                                        | ** ** |
| **Subsidiaries  abroad**                                                |       |                                             |       |                                             |       |                                             |       |
| Finland, Board  of Directors and President                              |       | 2                                                |       | 2                                                |       | 1                                                |       |
| Finland, other  employees                                               |       | 193                                              |       | 205                                              |       | 197                                              |       |
| Norway, Board of  Directors and President                               |       | 1                                                |       | 2                                                |       | 2                                                |       |
| Norway, other  employees                                                |       | 167                                              |       | 232                                              |       | 183                                              |       |
| **TOTAL**                                                               | ** ** | **1 795**                                        | ** ** | **1,896**                                        | ** ** | **1,864**                                        | ** ** |
| **Employer’s  contribution for national social security purposes** | ** ** | **650**                                          | ** ** | **672**                                          | ** ** | **708**                                          | ** ** |
| Of which pension  costs to other employees                              |       | 119                                              |       | 124                                              |       | 161                                              |       |
| Of which pension costs  to Board of Directors and President             |       | 2                                                |       | 2                                                |       | 2                                                |       |

 

----

*              Numbersfor the group represent Board of Directors and presidents in all Swedishsubsidiaries. Remunerations to the former president of Concordia Bus Nordic ABwas paid out by Concordia Bus Management AS and was included as corporate costscharged to Concordia Bus Nordic AB, and therefore not included in the abovetable as personnel costs for the year ended in February 2004. As of June 2004the president was employed by Concordia Bus Nordic AB and therefore included inthe above table as personnel costs for the years ended February 28, 2005 and2006.   The former CFO resigned fromConcordia Bus on June 30, 2004.  Hereceived a termination payment of SEK 2 million.
| ** **                                                  | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Board members and senior management** | ** ** | **Number**                      | ** ** | **Thereof  men**                | ** ** | **Number**                      | ** ** | **Thereof  men** | ** ** | **Number** | ** ** | **Thereof  men** | ** ** |
| Board members                                               |       | 24                              |       | 96                              | %          | 24                              |       | 100 | % | 13 |   | 100 | % |
| Managing directors and other  members of senior management  |       | 27                              |       | 89                              | %          | 28                              |       | 88 | % | 21 |   | 90 | % |

 

F-17

----

 

*Compensation*

In the event oftermination of employment, members of senior management within the ConcordiaBus group are entitled to a maximum of 12 months’ compensation. The 12 months ́is divided in th the following components;

1)  As a basis, both the company and the officermust give 6 months’ notice of termination as a mutual term. 2).  In addition, another 6 months’ compensationis payable in the event the employment is terminated by the company.  “Senior management” includes the parentcompany’s shief executive officer and chief financial officer as well asmanaging directors of subsidiaries. Agreements covering the aforesaid have been entered into with managingdirectors in two of the subsidiaries during the year.

**Note 8. Depreciation, amortizationand write-downs**
| ** **                               | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Goodwill                                 |       | 14                                               |       | 13                                               |       | 13                                               |       |
| Buildings and  land                      |       | 1                                                |       | 0                                                |       | 0                                                |       |
| Equipment,  tools, fixtures and fittings |       | 13                                               |       | 18                                               |       | 20                                               |       |
| Vehicles                                 |       | 272                                              |       | 319                                              |       | 298                                              |       |
| **Total**                                | ** ** | **300**                                          | ** ** | **350**                                          | ** ** | **331**                                          | ** ** |

 

For information concerning theuseful lives of the assets, please see Note 1. Organization and AccountingPrinciples—Depreciation.

**Note 9. Interest income**
| ** **             | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Other interest  income |       | 4                                                |       | 3                                                |       | 5                                                |       |
| **Total**              | ** ** | **4**                                            | ** ** | **3**                                            | ** ** | **5**                                            | ** ** |

 

Of the total interest incomeabove, SEK 4, SEK 3 and SEK 5 has been received during the years endedFebruary 28, 2006, February 29, 2005, and February 28, 2004,respectively.

**Note 10. Interest expense and othersimilar items**
| ** **                                          | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|-----------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Interest expense  on loan from affiliated companies |       | (26                                              | )          | (32                                              | )          | (24                                              | )          |
| Interest expense  on loans from credit institutions |       | (7                                               | )          | (1                                               | )          | (70                                              | )          |
| Interest expense  on senior secured notes           |       | (112                                             | )          | (108                                             | )          | (11                                              | )          |
| Amortization of  deferred financing fees            |       | (10                                              | )          | (10                                              | )          | (6                                               | )          |
| Write-off of  unamortized deferred financing fees   |       | —                                           |       | —                                           |       | (25                                              | )          |
| Exchange rate  gains and losses, net                |       | (46                                              | )          | 18                                               |       | (7                                               | )          |
| Other financial  costs                              |       | (77                                              | )          | (11                                              | )          | (8                                               | )          |
| **Total**                                           | ** ** | **(278**                                         | **)**      | **(144**                                         | **)**      | **(151**                                         | **)**      |

** **

Paid interest expense during theyears ended February 28 2006, SEK 187, February 28 2005, SEK 136, andFebruary 29 2004, SEK 163.

**Note 11. Income taxes**
| ** **                           | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|--------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Income taxes  paid / (repaid)        |       | (1                                               | )          | (1                                               | )          | 1                                                |       |
| Income taxes on  group contributions |       | —                                           |       | —                                           |       | —                                           |       |
| Deferred income  taxes               |       | —                                           |       | 2                                                |       | 82                                               |       |
| **Total**                            | ** ** | **(1**                                           | **)**      | **1**                                            | ** ** | **83**                                           | ** ** |

 

F-18

----

 

Differencebetween statutory income tax rate and effective rate of income tax benefit:
| ** **                                                                                   | ** ** | **Year Ended   February 28, 2006 ** | ** ** | **Year Ended   February 28, 2005 ** | ** ** | **Year Ended   February 29, 2004 ** | ** ** |
|----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| Loss before  income taxes                                                                    |       | (544                                                         | )          | (397                                                         | )          | (254                                                         | )          |
| Tax at Swedish  statutory rate of 28%                                                        |       | 152                                                          |       | 111                                                          |       | 71                                                           |       |
| Tax effect  regarding non-taxable items                                                      |       | (1                                                           | )          | (1                                                           | )          | 1                                                            |       |
| Tax effect  regarding goodwill amortisation                                                  |       | (4                                                           | )          | (4                                                           | )          | (4                                                           | )          |
| Tax effect of  tax losses from previous years not previously recognized in the balance sheet |       | —                                                       |       | —                                                       |       | 15                                                           |       |
| Tax loss carry  forwards for which no deferred tax asset has been recognized                 |       | (148                                                         | )          | (105                                                         | )          | —                                                       |       |
| **Total income tax benefit**                                                                 | ** ** | **(1**                                                       | **)**      | **1**                                                        | ** ** | **83**                                                       | ** ** |

 

The income tax rates in Sweden,Norway and Finland are 28%. The tax loss carry forward is based on the lossbefore tax with adjustments for non deductible/non-taxablerevenues/costs. Concordia Bus Nordic Holding AB group had unrecordedaccumulated tax loss carry forwards amounting to SEK 854, SEK 252 and SEK 65 atFebruary 28, 2006, 2005 and February 29, 2004, respectively. Thelosses can only be used in the countries where they arise and in Sweden theycan be used without time limitation. The indirect subsidiary Concordia BusFinland Oy Ab has accumulated tax loss carry forwards of SEK 137 of whichSEK 11 can be used until 2011, SEK 4 until 2012, SEK 14 until2013, SEK 23 until 2014, SEK 20 until 2015, SEK 22 until 2016 and SEK 43 can beused without time limitations. The indirect subsidiary IngeniØr M.O. SchcØyensBilcentraler AS does not have any tax loss carry forwards.

Temporary differences arise ininstances where assets or liabilities are valued differently for tax purposes.Temporary differences have resulted in deferred tax assets as follows:
| ** **                           | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
|                                 |       |                            |       |                            |       |
| Provision for  loss making contracts |       | 5                               |       | 16                              |       |
| Tax loss carry  forward              |       | 239                             |       | 71                              |       |
| Valuation on  receivables            |       | 23                              |       | 23                              |       |
| Other temporary  differences         |       | 7                               |       | 2                               |       |
| Valuation  allowance                 |       | (274                            | )          | (112                            | )          |
| **Total deferred income tax asset**  |       | —                          | ** ** | **—**                      | ** ** |

 

**Note 12. Intangible assets**
| **Goodwill**                       | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Acquisition  cost**              |       |                            |       |                            |       |
| Beginning  balance                 |       | 312                             |       | 302                             |       |
| Acquisition cost                   |       | 1                               |       | —                          |       |
| Translation  difference            |       | 15                              |       | 10                              |       |
| Ending balance                     |       | 328                             |       | 312                             |       |
| **Accumulated  depreciation**      |       |                            |       |                            |       |
| Beginning  balance                 |       | (103                            | )          | (89                             | )          |
| Depreciation for  the year         |       | (14                             | )          | (13                             | )          |
| Translation  difference            |       | 0                               |       | (1                              | )          |
| Ending balance                     |       | (117                            | )          | (103                            | )          |
| **Net book value, ending balance** | ** ** | **211**                         | ** ** | **209**                         | ** ** |

 

**Note 13. Tangible assets**
| **Buildings and land**    | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Acquisition  cost**               |       |                            |       |                            |       |
| Beginning  balance                  |       | 3                               |       | 3                               |       |
| Purchases                           |       | 3                               |       | 0                               |       |
| Sales/Disposals                     |       | 0                               |       | 0                               |       |
| Ending balance                      |       | 6                               |       | 3                               |       |
| **Accumulated  depreciation**       |       |                            |       |                            |       |
| Beginning  balance                  |       | (1                              | )          | (1                              | )          |
| Sales/Disposals                     |       | 0                               |       | 0                               |       |
| Depreciation for  the year          |       | (1                              | )          | (0                              | )          |
| Ending balance                      |       | (2                              | )          | (1                              | )          |
| **Net  book value, ending balance** | ** ** | **4**                           | ** ** | **2**                           | ** ** |
| Tax assessment value                |       | —                          |       | —                          |       |

 

F-19

----

 

The tax assessment value is thebasis used by the tax authorities for computing property taxes. Concordia Busdoes not own any property. Building and land consists of construction work onleased property.
| **Equipment, tools, fixtures and fittings** | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-----------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Acquisition  cost**                                           |       |                            |       |                            |       |
| Beginning  balance                                              |       | 235                             |       | 245                             |       |
| Purchases                                                       |       | 16                              |       | 12                              |       |
| Sales/Disposals                                                 |       | (22                             | )          | (22                             | )          |
| Translation  difference                                         |       | 1                               |       | —                          |       |
| Ending balance                                                  |       | 230                             |       | 235                             |       |
| **Accumulated  depreciation**                                   |       |                            |       |                            |       |
| Beginning  balance                                              |       | (208                            | )          | (211                            | )          |
| Sales/Disposals                                                 |       | 22                              |       | 21                              |       |
| Depreciation for  the year                                      |       | (13                             | )          | (18                             | )          |
| Translation  difference                                         |       | (1                              | )          | —                          |       |
| Ending balance                                                  |       | (200                            | )          | (208                            | )          |
| **Net book value, ending balance**                              | ** ** | **30**                          | ** ** | **27**                          | ** ** |

 
| **Vehicles**                       | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Acquisition  cost**              |       |                            |       |                            |       |
| Beginning  balance                 |       | 3,318                           |       | 3,526                           |       |
| Purchases                          |       | 116                             |       | 100                             |       |
| Sales/Disposals                    |       | (430                            | )          | (306                            | )          |
| Translation  difference            |       | 7                               |       | (2                              | )          |
| Ending balance                     |       | 3,011                           |       | 3,318                           |       |
| **Accumulated  depreciation**      |       |                            |       |                            |       |
| Beginning  balance                 |       | (2,041                          | )          | (2,024                          | )          |
| Sales/Disposals                    |       | 364                             |       | 253                             |       |
| Depreciation for  the year         |       | (237                            | )          | (269                            | )          |
| Translation  difference            |       | 0                               |       | (1                              | )          |
| Ending balance                     |       | (1,914                          | )          | (2,041                          | )          |
| **Accumulated  write-downs**       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Beginning  balance                 |       | (49                             | )          | (11                             | )          |
| Sales/Disposals                    |       | 28                              |       | 12                              |       |
| Write-downs for  the year          |       | (35                             | )          | (50                             | )          |
| Ending balance                     |       | (56                             | )          | (49                             | )          |
| ** **                         | ** ** | ** **                      |       |                            |       |
| **Net book value, ending balance** | ** ** | **1,041**                       | ** ** | **1,228**                       | ** ** |

 

Included as purchases during theyear ended February 28, 2006, are SEK 20 and during the year endedFebruary 28, 2005 SEK 4, of investments in vehicles through financiallease agreements.

**Note 14. Other financial fixedassets**
| **Capitalized financing costs**      | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Acquisition  cost**                          |       |                            |       |                            |       |
| Beginning  balance                             |       | 54                              |       | 49                              |       |
| Costs incurred  in connection with refinancing |       | —                          |       | 5                               |       |
| Ending balance                                 | ** ** | **54**                          | ** ** | **54**                          | ** ** |
| **Accumulated  amortization**                  |       |                            |       |                            |       |
| Beginning  balance                             |       | (11                             | )          | (1                              | )          |
| Amortization                                   |       | (10                             | )          | (10                             | )          |
| Ending balance                                 | ** ** | **(21**                         | **)**      | **(11**                         | **)**      |
| Total                                          | ** ** | **33**                          | ** ** | **43**                          | ** ** |

 

F-20

----

 
| **Operating lease deposit**  | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|----------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Acquisition  cost**                  |       |                            |       |                            |       |
| Beginning  balance                     |       | 5                               |       | 5                               |       |
| Increase /  (decrease) during the year |       | (3                              | )          | —                          |       |
| **Ending balance**                     | ** ** | **2**                           | ** ** | **5**                           | ** ** |

 

**Note 15. Inventories**
| ** **     | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|----------------|------------|---------------------------------|------------|---------------------------------|------------|
| Finished goods |       | 30                              |       | 33                              |       |
| **Total**      | ** ** | **30**                          | ** ** | **33**                          | ** ** |

 

Finished goods primarily comprisefuel and spare-parts.

**Note 16. Accounts receivable**

Accounts receivable and relatedallowance for doubtful accounts was as follows:
| ** **                             | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|----------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Accounts  receivable                   |       | 456                             |       | 361                             |       |
| Less: Allowance  for doubtful accounts |       | (15                             | )          | (16                             | )          |
| Net accounts receivable                | ** ** | **441**                         | ** ** | **345**                         | ** ** |

 

As Concordia’s customers areprimarily governmental, Concordia has not experienced significantuncollectibility problems historically. Changes in the allowance for doubtfulaccounts were as follows:
| **Allowance for doubtful accounts receivable:** | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Beginning  balance                                                  |       | (16                                              | )          | (8                                               | )          | (3                                               | )          |
| Additions to  allowance charged to expense                          |       | (3                                               | )          | (9                                               | )          | (5                                               | )          |
| Accounts  receivable written off against the allowance              |       | 4                                                |       | 1                                                |       | 0                                                |       |
| Ending balance                                                      |       | (15                                              | )          | (16                                              | )          | (8                                               | )          |

 

**Note 17. Accrued income and prepaidexpenses**
| ** **                                 | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Accrued  income—CPTA                  |       | 58                              |       | 87                              |       |
| Other prepaid  expenses and accrued income |       | 64                              |       | 56                              |       |
| **Total**                                  | ** ** | **122**                         | ** ** | **143**                         | ** ** |

 

**Note 18. Cash and bank balances**

Included as cash and bankbalances is the outstanding balance for the cheque account connected to thegroup cheque account, where Concordia Bus Nordic AB is the contractingpart with the bank.
| **MSEK**                | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Cash and bank  balances |       | 89                              |       | 124                             |       |
| Restricted cash*        |       | 103                             |       | 51                              |       |
| **Total**               | ** ** | **192**                         | ** ** | **175**                         | ** ** |

 

F-21

----

----

* Restricted cash consists ofrefundable deposits in relation to guarantees made by a bank as security forthe pension liability and commitments for three traffic contracts in Oslo,Norway.

**Note 19. Provisions for pensionsand other commitments**
| ** **                      | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Beginning  balance              |       | 51                              |       | 60                              |       |
| Change in  accounting principle |       | —                          |       | (7                              | )          |
| Change in  provision            |       | (7                              | )          | (2                              | )          |
| **Ending balance**              | ** ** | **44**                          | ** ** | **51**                          | ** ** |

 
| ** **                   | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Accrued pension  obligations |       | 41                              |       | 48                              |       |
| Other pensions  commitments  |       | 3                               |       | 3                               |       |
| **Total**                    | ** ** | **44**                          | ** ** | **51**                          | ** ** |

 

The Concordia Bus Group fundspension obligations based on the advice of external actuarial calculations andmakes payments to a segregated fund managed by a specialist financialinstitution. Independent actuarial valuations are made on an annual basis basedon the accrued benefit obligation. Pension costs are charged to the profit andloss account based on the changes in the actuarially calculated pensionobligation calculated by external actuaries.

Pension plans for active personnelare funded under a multiemployer plan and through defined contribution plans.The total pension cost for the year was SEK 135, SEK 126 and SEK 165 for theyears ended February 28, 2006, February 28, 2005, andFebruary 29, 2004, respectively, of which SEK 4, SEK 10 and SEK 12 relatesto costs for pension plans where the Company has a defined benefit obligationduring the years ended February 28, 2006, February 28, 2005, andFebruary 29, 2004, respectively.

For this financial year, adiscount rate of 4.5-5.0% (5.25 – 5.5%) has been used to calculate the accruedbenefit obligation depending on in which country the obligations are held.

The liability for pensionobligations in Norway and for certain retired employees of the subsidiarySwebus AB, who were employed during a period when Swebus did not operate acompany pension scheme, is carried in the balance sheet. All pensions paid tosuch employees are charged against the provision. An independent actuarialvaluation of the liability is carried out on an annual basis and any increaseor decrease in the provision required is reflected in the profit and lossaccount.

Pension expense has been includedin staff costs and is comprised of the following:
| ** **                                 | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Current service cost                       |       | 2                               |       | 5                               |       |
| Interest cost                              |       | 9                               |       | 10                              |       |
| Expected return  on plan assets            |       | (8                              | )          | (7                              | )          |
| Net actuarial  losses (gains)              |       | 0                               |       | 1                               |       |
| Past service  cost                         |       | —                          |       | —                          |       |
| Employers  contribution to social security |       | 1                               |       | 1                               |       |
| Net pension cost                           | ** ** | **4**                           | ** ** | **10**                          | ** ** |

 

F-22

----

 

The following table reconcilesthe funded status of defined benefit plans to the amounts recognised in thebalance sheet:
|                                            | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Present value of  funded obligations       |       | 195                             |       | 176                             |       |
| Present value of  unfunded obligations     |       | —                          |       | 20                              |       |
| Unrecognised  actuarial losses             |       | (23                             | )          | (20                             | )          |
| Fair value of  plan assets                 |       | (130                            | )          | (127                            | )          |
| Employers  contribution to social security |       | 2                               |       | 1                               |       |
| Other                                      |       | —                          |       | 1                               |       |
| Amount at end of the  year                 | ** ** | **44**                          | ** ** | **51**                          | ** ** |

 

As of the balance sheet date, actual market values of pension planassets were as follows;

 
|                                      | ** ** | **February 28,  2006** | ** ** | **Percent** | ** ** | **February 28,  2005** | ** ** | **Percent** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|-------------|------------|-----------------------------|------------|-------------|------------|
| Fixed income  instruments, liquidity |       | 86                          |       | 66,1        |       | 82                          |       | 64,6        |       |
| Shares and other  investment         |       | 44                          |       | 33,9        |       | 45                          |       | 35,4        |       |
| Total                                | ** ** | **130**                     | ** ** | **100,0**   | ** ** | **127**                     | ** ** | **100,0**   | ** ** |

 

The expected nominal return fromthe Norwegian pension fund portfolio is approximately 5,5 percent per annumover a fem-year period, where inflation is assumued to be 2 precent per annum.The strategic allocation of plan assets is composed to give the expectedaverage return, based on historical data.

The movements in the liabilityrecognised in the balance sheet were as follows:
|                                             | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| At the beginning  of year                   |       | 51                              |       | 53                              |       |
| Exchange  differences                       |       | 0                               |       | (3                              | )          |
| Net periodic cost                           |       | 4                               |       | 9                               |       |
| Expected pension  payments                  |       | (11                             | )          | (10                             | )          |
| Employment  contribution to social security |       | 0                               |       | 0                               |       |
| Other                                       |       | —                          |       | 2                               |       |
| At the end of year                          | ** ** | **44**                          | ** ** | **51**                          | ** ** |

 

Principal actuarial assumptionsused to determine pension obligations were as follows:
| ** **                         | ** ** | **February 28, 2006** | ** ** |
|------------------------------------|------------|---------------------------------|------------|
| Discount rates                     |       | 4.5-5.0                         | %          |
| Expected return  on plan assets    |       | 6.0                             | %          |
| Expected rate of  salary increases |       | 3.0                             | %          |
| Future pension increase            |       | 2.5                             | %          |

 

Estimated benefits paid

Given the current actuarial calculation assumptions, Concordia expectsthe following benefit payments during the next five-year period.
| ** **              | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011 -  2015** | ** ** | **Total** | ** ** |
|-------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|-----------------------|------------|-----------|------------|
| Expected  benefits paid |       | 11       |       | 15       |       | 14       |       | 13       |       | 13       |       | 54                    |       | 120       |       |

 

The company expects to contribute 15 million to its pension plan in 2007and its currenty projecting a funding level of 14 million in the yearthereafter.

F-23

----

 

**Note 20. Long-term liabilities tocredit institutions and financial lease obligations**
| **Non-current liabilities**                    | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-----------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Borrowings  denominated in Euro                     |       | 1,230                           |       | 1,176                           |       |
| Loans due to  affiliated companies                  |       | 263                             |       | 292                             |       |
| Other  liabilities—financial lease obligations |       | 32                              |       | 20                              |       |
| Less: short-term  portion                           |       | (24                             | )          | (300                            | )          |
| **Total**                                           | ** ** | **1,501**                       | ** ** | **1,188**                       | ** ** |

 

Long-term liabilities includeEuro 130 million of senior secured notes of Concordia Bus Nordic AB.The notes have a fixed annual interest rate of 9.125%, which is paidsemi-annually (February 1 and August 1). The bonds mature inAugust 2009.

As a consequence of theEuro 130 million of notes, Concordia Bus Nordic Holding AB and itssubsidiaries are obligated to follow certain financial restrictions which limitentering financial lease agreements or sale- and lease back agreements, makingcertain kinds of investments, disposing of assets and paying dividends toConcordia’s shareholder except in instances to enable such shareholder tofulfill its own debt service obligations. All of the aforesaid covernants werefulfilled as per February 28, 2006.

The issuer of the senior securednotes, Concordia Bus Nordic AB (publ), is a 100% owned subsidiary of ConcordiaBus Nordic Holding AB. Concordia Bus Nordic Holding AB has fully andunconditionally guaranteed the payment of the notes. Concordia Bus Nordic AB(publ) is the parent company owning 100% of the shares in the operatingsubsidiaries of the Concordia Bus Group. Concordia Bus Nordic AB (publ) has noindependent assets or operations. All subsidiaries of Concordia Bus Nordic AB(publ), other than minor dormant subsidiaries, have also fully andunconditionally guaranteed the payment of the notes. The guarantees of thesubsidiaries and of Concordia Bus Nordic Holding AB are joint and several. Asdescribed in more detail in Note 22, the subsidiaries have also given pledgesof certain collateral (both specific and floating charge certificates) assecurity for the senior secured notes.

*Swedish Subsidiary Guaranteesand Collateral.*

Enforcement of the noteguarantees and collateral may, in whole or in part, be limited to the extentthat the undertaking by each respective subsidiary is deemed to be in conflictwith the corporate interest of the respective subsidiary. The corporateinterest shall be determined on the basis of whether the undertaking was madefor business reasons so as to involve corporate benefit for the subsidiary andwhether the guaranteed party is solvent for repayment of the secured amount atthe time of providing the security. The absence of business reasons andcorporate benefit would have the effect that the performance of theundertaking, or part thereof, would violate the Swedish Companies Act to theextent that it would result in a payment exceeding the distributable profit ofthe respective subsidiary at the time of providing the security. Upon suchviolation, the note guarantees and collateral would be invalid and any paymentsmade thereunder would be subject to recovery at least to the extent theyviolate the above mentioned rules on corporate interest.

*Finnish Subsidiary Guarantee andCollateral.*

The granting ofguarantees and security is restricted under the Finnish Companies Act.  Enforcement of the Senior Note Guarantees andCollateral issued or granted by Concordia Finland may, in whole or in part, belimited to the extent that the undertaking by such subsidiary is deemed to bein conflict with the limitations set out in the Finnish Companies Act,including the corporate interest of Concordia 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 ofbusiness reasons and corporate benefit would have the effect that theperformance of the undertaking, or a part thereof, would violate the FinnishCompanies Act.  Any such violation wouldrender the Senior Note Guarantees and Collateral invalid and any payments madethereunder would be subject to recovery at least to the extent that theyviolate the Finnish Companies Act. The new Finnish Companies Act will enterinto force on 1 September 2006. No prohibitions regarding granting ofguarantees and security to related companies have been incorporated into theNew Companies Act. The new Finnish Companies Act is applicable to guaranteesand securities granted before 1 September 2006, if the enforcement of suchguarantee takes place after 1 September 2006. However, under the generalprovisions of the new Finnish Companies Act, the the enforcement of a guaranteeand security will remain limited to the extent it is deemed to be in conflictwith the corporate interest of the respective subsidiary. The corporateinterest shall be determined on the basis of whether the undertaking was madefor business reasons so as to involve corporate benefit. Should this not be thecase, any payments made under such guarantee and security would be subject torecovery to the extent that

F-24

----

they violate the FinnishCompanies Act. The interest on such recovery payments is deteremined inaccordance with the reference rate determined in Section 12 of the FinnishInterest Act.

*Norwegian Subsidiary Guaranteeand Collateral.*

The issuance of the subsidiaryguarantee and the granting of the relevant security by the Norwegian subsidiarymay be invalid under Norwegian law if such issuance and granting are notmotivated by a legitimate business reason or corporate benefit for thatsubsidiary. In determining the sufficiency of the business reason or corporatebenefit, a Norwegian court will consider whether or not the granting of theguarantee or security supported the object and the operations of thatsubsidiary. 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.

**Loans due to affiliated companies**

All loans due to affiliatedcompanies has classified as long term.

**Other liabilities**
| **Financial lease obligations** | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Payable within 2-5  years                 |       | 24                              |       | 12                              |       |
| Payable after  five years                 |       | —                          |       | 0                               |       |
| **Total  long-term**                      | ** ** | **24**                          | ** ** | **12**                          | ** ** |
| Short-term  portion                       |       | 8                               |       | 8                               |       |
| **Total**                                 | ** ** | **32**                          | ** ** | **20**                          | ** ** |

 

During the financial year endedFebruary 28, 2006, Interbus AB has entered into financial leasearrangements regarding three buses and Swebus Serviceresor has entered intofinancial lease arrangements regarding 20 buses. The lease cost is based on thedepreciation according to an annuity method and a floating rate of interest.

The following is a schedule by years of future minimum gross leasepayments under finance leases together with the present value of the netminimum lease payments as of February 28, 2006:

F-25

----

 
| **Year ending**                         | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|------------|------------|
| February 28,  2007                           |       | 8          |       |
| February 28,  2008                           |       | 8          |       |
| February 29,  2009                           |       | 4          |       |
| February 28,  2010                           |       | 5          |       |
| February 28,  2011                           |       | 7          |       |
| Later years                                  |       | —     |       |
| **Total  minimum gross lease payments**      | ** ** | **32**     | ** ** |
| Less: Amount  representing interest          |       | (2         | )          |
| **Present value of minimum lease  payments** |       | 30         |       |

 

**Note 21. Accrued expenses and deferred income**
| ** **                 | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|----------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Deferred  income—CPTA |       | 136                             |       | 125                             |       |
| Accrued employee  costs    |       | 289                             |       | 235                             |       |
| Accrued interest  expenses |       | 8                               |       | 8                               |       |
| Other accrued  expenses    |       | 149                             |       | 90                              |       |
| **Total**                  | ** ** | **582**                         | ** ** | **458**                         | ** ** |

 

**Note 22. Pledged assets andcontingent liabilities**
| ** **                                                              | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Pledged  shares and contingent liabilities for senior secured notes** |       |                            |       |                            |       |
| Pledged shares  in subsidiaries                                         |       | 820                             |       | 382                             |       |
| Other pledged  assets                                                   |       | 955                             |       | 1,099                           |       |
| Floating charge  certificates                                           |       | 117                             |       | 132                             |       |
| **Other  pledged shares and contingent liabilities**                    |       |                            |       |                            |       |
| Other pledged  assets                                                   |       | 103                             |       | —                          |       |
| Guarantees and  other contingent liabilities                            |       | —                          |       | —                          |       |
| **Total**                                                               | ** ** | **1,995**                       | ** ** | **1,613**                       | ** ** |

 

In January 2004 arefinancing of the Concordia Bus Group’s existing credit facilities wascompleted through the issuance of EUR 130 million of bonds. The proceedsreceived when issuing the bonds was used to repay existing credit facilities.

As security for the bonds,Concordia has pledged the shares in the operating subsidiaries, the foreignsubsidiaries and the real-estate companies, the buses owned by Swebus Busco ABand IngeniØr M.O. SchØyens Bilcentraler AS (“SBC”), the operatingreceivables and fixed assets of SBC, and two internal loans to Swebus Busco ABand Swebus AB amounting to € 87 million and € 22 millionrespectively. The subsidiaries have pledged floating charge certificatesamounting to SEK 117 million and have given guarantees relating tothe bonds. See Note 20 regarding certain limitations on the enforcement ofsuch guarantees and collateral pledges.

The following shares have beenpledged for existing long-term liabilities:
| ** **                                                 | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Concordia Bus  Nordic AB                              |       | —                          |       | —                          |       |
| Shares in Swebus  Fastigheter AB                           |       | 21                              |       | 21                              |       |
| Shares in Swebus  AB                                       |       | 225                             |       | 31                              |       |
| Shares in Swebus  Express AB                               |       | 14                              |       | 14                              |       |
| Shares in  Interbus AB                                     |       | 19                              |       | 20                              |       |
| Shares in  Concordia Bus Finland Oy Ab                     |       | 54                              |       | 50                              |       |
| Shares in Swebus  Busco AB                                 |       | 234                             |       | 1                               |       |
| Shares in IngeniØr M.O. SchØyens Bilcentraler AS |       | 253                             |       | 245                             |       |
| **Total**                                                  | ** ** | **820**                         | ** ** | **382**                         | ** ** |

 

F-26

----

 

**Note 23. Other provisions**
| ** **                                | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|-------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Provisions  for loss-making contracts** |       |                            |       |                            |       |                            |       |
| Beginning  balance                        |       | 53                              |       | 80                              |       | 46                              |       |
| Change in  provision during the year      |       | (35                             | )          | (27                             | )          | 34                              |       |
| **Ending balance**                        | ** ** | **18**                          | ** ** | **53**                          | ** ** | **80**                          | ** ** |

 

Provisions for loss making contractshave been made on an individual or aggregated basis depending oninterdependency of cash flows for the contracts where contractual revenues donot cover the estimated costs. The provision is calculated as the differencebetween the estimated costs to fulfill the contractual commitment and thecontractual revenues.
| ** **                                 | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** | **February 29, 2004** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Restructuring  costs**                   |       |                            |       |                            |       |                            |       |
| Beginning  balance                         |       | 7                               |       | 6                               |       | —                          |       |
| Provisions for  restructuring              |       | —                          |       | 7                               |       | 6                               |       |
| Provisions  reversed against restructuring |       | (7                              | )          | (6                              | )          | —                          |       |
| **Ending balance**                         |       | —                          | ** ** | **7**                           | ** ** | **6**                           | ** ** |

 

Restructuring costs duringfinancial year ended February 28, 2004 were primarily for employee terminationbenefits relating to the Gothenburg, Sweden depots which were closed during thefinancial year ended February 28, 2005.

Ending balanceFebruary 28, 2005, of SEK 7 million relates to costs for employees that havebeen terminated during the financial year ended February 28, 2005, for whichthere is no benefit to the Company.

F-27

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**Note 24. Net loss per share**
| ** **                                        | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|---------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Shares issued and  outstanding                    |       | 300                                              |       | 300                                              |       | 300                                              |       |
| Net loss (millions)                               |       | (557                                             | )          | (396                                             | )          | (171                                             | )          |
| **Net loss per share (in thousands of SEK)** | ** ** | **(1,856**                                       | **)**      | **(1,320**                                       | **)**      | **(572**                                         | **)**      |

 

Net loss per share is computed bydividing net loss by the weighted- average number of shares outstandingduring the year. There were no dilutive securities outstanding during theperiods presented and the number of shares has been unchanged.

**Note 25. Financial risk management andfinancial derivatives**

The principal market risks (i.e.,the risk of loss arising from adverse changes in market rates and prices) towhich Concordia is exposed are:

·                  Interest rateson debt;

·                  Credit and counterpartyrisk;

·                  Foreign exchangerates;

·                  Fuel prices; and

·                  Inflation.

All risk management takes place centrally and inaccordance with a financial policy established by the Board of Directors.  The Concordia Bus group uses derivativeinstruments as part of its financial risk management in order to limitcurrency, interest and diesel price exposures. As per February 28, 2006, the company held no derivative instrumentswith respect to currency, interest and commodity risks due to the fact that thecompany had not received the necessary credits in order to enter intoderivative contracts.

***Interest RateRisk***

“Interest rate risks” refers to the risk that changesin market interest rates will negatively affect the group’s net interestitems.  How quickly changes in interestaffect net interest items depends on the fixed interest period of the loan.

The group is primarily exposed to interestrisks as a consequence of the company’s financial and operational leasing. Theleasing fees and interest are based, among other things, on a variable marketinterest rate.

Based on the nominal value of the leasingliabilities in the amount of SEK 2,000 million as per February 28, 2006, anincrease in the interest rate by one percentage point would increase theleasing cost by SEK 20.1 million for the following financial year.

***Credit andCounterparty Risk***

Concordia’s financialtransactions lead to credit risks towards financial counterparties. Concordia’sfinancial policy states that credit risk shall be reduced through only acceptingcounterparties with high credit rating and through fixed credit limits. OnFebruary 28, 2006, Concordia had no counterparty exposure.

Commercial credit risks arelimited through a diversified customer base with high credit ratings. Aprovision has been recorded for accounts receivables, which have been estimatedto be doubtful of collection.

***ForeignExchange Risk***

Exchange rate exposure exists in conjunction with payment flows inforeign currencies (transaction exposure) and in conjunction with thetranslation of the balance sheet and income statements of subsidiaries toSwedish kronor (translation exposure).

F-28

----

 

*Transaction exposure* – Concordia is exposed to currencyfluctuations on its bond loans which have been raised in euros. The group’sfinancing policy states that all exchange rate exposure for the coming 12months which results in an exchange rate loss in excess of 3 million in theevent of a 10 per cent devaluation of the Swedish crown must be hedged to atleast 50 percent. Concordia has not received the necessary credits in order toenter into derivative contracts for hedging.

Based on the group’s interest payments in the amountof EUR 11.9 million for the upcoming twelve months, the interest expense wouldincrease by SEK 11.2 million in the event the Swedish crown declines in valueby 10 percent relative to**the euro asper February 28, 2006.

Thegroup is also exposed to currency rate fluctuations as a consequence of itspurchases of diesel.  Diesel is purchasedon the international commodities market in US dollars.  Through its revenues index in its CPTAcontracts, the group is compensated to an extent for changes in the dieselprice.  According to our calculations, thisindex compensation reduces by 5/% the exposure to diesel price changes.  The Concordia group had no diesel derivativesas per February 28, 2006.  Based on thebudgeted diesel consumption, a 10 percent decline in value of the Swedish crowncompared to the US dollar would increase the diesel cost by SEK 14.1 millionfor the next financial year.

*Translation exposure –*Concordia currency exposure with respect totranslation of foreign subsidiaries is normally not hedged.

***Fuel Price Risk***

Concordia is also exposed tocommodity price risk through its requirements for diesel fuel. Diesel fuel ispriced in the international commodity markets in US dollars. Concordia receivescompensation for a portion of changes in diesel prices through revenue indexesin the contracts with the CPTA’s. It is estimated that this index compensationreduces 55% of the exposure to diesel price changes.

Based on the budgeted dieselconsumption, an increase of one US dollar/ton would increase diesel costs bySEK 0.2 million for the 12-month period beginning March 1, 2006.

***Inflation***

Inflation had no material impacton our operations during the year ended February 28, 2006. However, due tothe nature of our contractual business where cost increases are compensatedthrough movements in agreed indices (elements of total inflation) we arecurrently subject to under-compensation due to a mismatch between ourindustry costs and our relative level of compensation from the indices whichthe local transportation authorities use to compensate us.

**Note 26. Fair value of financialinstruments**

The carrying amounts of Concordia’scategories of financial fixed assets, accounts and other current receivables,cash and cash balances approximated their respective fair values at February2006, February 28, 2005 and February 28, 2004. Similarly, thecarrying amounts of Concordia’s categories of non-current liabilities andcurrent liabilities approximated their respective fair values at February 28,2006,February 28, 2005 and February 29, 2004. Concordia had noderivate financial instruments during the financial year 2006

**Note 27. Going concern matters**

Concordia Bus Nordic AB has interest-bearingliabilities amounting to SEK 1,263 million, including financial leasingagreements but excluding operational leasing agreements.  The Company’s ability to pay interest andmake loan repayments on the outstanding bond loan and other obligations isdependent on the underlying subsidiaries capacity to generate sufficientprofits and cash surplus available for distribution. It is evident from theconsolidated income statement of the Company as per February 28, 2006 thatprofits from the underlying subsidiaries are insufficient to cover the parentcompany’s costs for the financial year March 1, 2005 — February 28, 2006.Available cash flow has however been sufficient to meet all financialcommitments.

The Concordia Bus group has historically accumulatedsignificant deficits causing the Concordia Bus Nordic AB group equity to becomenegative. Even though cash flow from operations, including investments andworking capital

F-29

----

changes, has been negative, cash and bank balanceshave improved.  The issue of theconditions for continued operation of the group’s business came to a criticalpoint in 2005, leading to a restructuring of the capital structure of theparent company, Concordia Bus AB. On July 22, 2005, Concordia Bus AB announcedthat they had entered into an agreement regarding a restructuring of ConcordiaBus AB with an *ad hoc* committee,representing not less than 75% of the bondholders in the bond loan issued byConcordia Bus AB, and the shareholder of Concordia Bus AB. The *ad hoc* committee was an informal grouprepresenting the majority of the bondholders in Concordia Bus AB’s bond loan.According to the agreement, the bondholders have waived the entire loan of Euro160 million, including accrued interest, in exchange for shares in ConcordiaBus AB corresponding to 97.5% of the share capital. The restructuring wascarried out on October 4, 2005.  Inconnection with the reorganization, Concordia Bus AB received a loan of Euro 45million from its new shareholders in order to cover the reorganization costsand to strengthen the liquidity in the group. In connection with the annual accounts, the subsidiaries, Swebus AB andSwebus Busco AB, have received equity through a shareholder’s contribution fromConcordia Bus Nordic Holding amounting to SEK 800 million, in order tostrengthen equity in these two companies.

**Thereplacement of the Euro 160 million bond loan with share capital to the sameamount has restored the group’s equity and the liquidity contributionrepresented by the 45 M Euro loan been crucial for the assumption regardingcontinued operation of the business at the time of preparation of this annualreport.**

**The group’s long-term ability to continue its operations isdependent on continued cost saving measures, the ability to enter into newtraffic contracts and on the group succeeding in future procurements, therebyimproving cash flow and results from the operations. The group’s reducedindebtedness provides an improved cash flow in the financing operation. Inaddition, Concordia Bus Nordic AB and its subsidiaries are continuing toimplement radical changes in the operational business as well as changes in theadministrative structure and also certain changes in the company’s capitalstructure. The group also sees signs of significant improvement in thecompensation levels in new contracts with CPTAs.  The business plan that has been prepared inconnection to the restructuring shows an improvements in the result by 200million in the coming year and an operating result without loss in two years’time.**

Up to quarter 3 in the subsequent year ending February28 2007, the Concordia Bus Nordic AB group showed a Net Loss reduction of 291 MSEK and a positive cash flow of 81 M SEK. The Net Loss reduction comes fromreplacement of old loss making contracts with new contracts including improvedcompensation terms as well as from improved operational efficiency leading tocost reductions. Also, the company has no restructuring costs in the subsequentyear ending February 28 2007, as was the case in the year ending February 282006.

**Note 28. Subsidiaries of Concordia**

Concordia has the followingwholly owned subsidiaries:
| ** **                                              | ** ** | **Company’s  registration  number** | ** ** | **Number of shares** | ** ** | **Participation  (%)** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------|------------|--------------------------------|------------|------------------------|------------|
| **Operating  companies**                                |       |                                     |       |                           |       |                   |       |
| 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                    |       |
| —IngeniØr M.O. SchØyens Bilcentraler A/S |       | 915768237                                |       | 750                            |       | 100                    |       |
| **Real  estate companies**                              |       |                                     |       |                           |       |                   |       |
| —Swebus  Fastigheter AB                            |       | 556031-3354                              |       | 10,000                         |       | 100                    |       |
| —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  Trafik AB                             |       | 556027-3137                              |       | 14,000                         |       | 100                    |       |
| —Enköping-Bålsta  Trafik AB              |       | 556410-2894                              |       | 1,000                          |       | 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                    |       |

 

F-30

----

**Note 29. Related party transactions**

Two of the supervisory board members of Concordia BusBV, the ultimate parent company of Concordia Bus Nordic Holding AB, areappointed by Schøyen Gruppen A/S (“Schøyen Group”) and two are appointed by BusHoldings S.A.R.L, an affiliate of Goldman Sachs International, both companiesbeing shareholders of Concordia Bus BV. Each director may have receivedcompensation for services in that capacity. Erik Linnarsson, a partner at theLaw Firm appointed by the company (Advokatfirman Lindahl HB), has acted asboard member of some Concordia’s operating subsidiaries.

Under a lease arrangement with Schøyen Group, thesubsidiary Ingeniør M.O. Schøyens Bilcentraler A/S, Schøyen Group has leaseddepots and other real property, for a period of ten years ending in 2009. Therents paid were SEK 11 million, SEK 14 million, and SEK 13 million for theyears ended February 28, 2006, February 28, 2005, and February 29, 2004,respectively.

Concordia Bus Management A/S, an affiliated company100% owned by Concordia Bus BV, has provided management services to the companyand its subsidiaries. A management fee has been charged to the company and itssubsidiaries for services amounting to SEK 0 million, SEK 11 million, and SEK15 million for the years ended February 28, 2006, February 28, 2005, andFebruary 29, 2004, respectively.

External debt has been raised by the company and itsdirect parent Concordia Bus AB. Such external debts has partly been used tofinance operations in subsidiaries within the group. Concordia Bus NordicHolding AB had a net current liability to affiliated companies amounting to SEK292 million on February 28, 2005. As part of the restructuring of Concordia BusAB in the year ending February 29 2005 this liability was settled. Interest onthis liability has been paid amounting to SEK 27 million, SEK 32 million andSEK 24 for the years ended February 28, 2006, February 28, 2005, and February28, 2004, respectively from Concordia Bus Nordic Holding AB to companies withinthe Concordia Bus BV group.

In connection with the termination of certain keyemployees during the years, Concordia Bus Nordic AB has transferred funds tothe Schøyen Group to an amount of NOK 1,005 thousand to settle shareholderloans.

As of October 2005, Concordia Bus AB and itssubsidiaries ceased to be part of the Concordia Bus BV group. Thereafterrelated party transactions with Schøyen Gruppen A/S, Bus Holdings S.A.R.L,Concordia Bus BV, Concordia Bus Management A/S and Concordia Bus Holding has ceasedto exist. At the same time Erik Linnarsson left all formal assignments withcompanies in the Concordia Bus AB group.

As a result of the restructuring executed in October2005 a new supervisory board of the company and its parent, Concordia Bus AB,was nominated. One Director as well as one nominee of these board’s, areemployees of Blue Bay Asset Management, a company who control 27% of the sharesin Concordia Bus AB.  These twoindividuals may receive fees in capacity as board member.

The company owes a debt to its parent company,Concordia Bus AB, amounting to SEK 271 million. Interest has been paid during the year amounting to SEK 26 million.  For a description of the SubordinatedShareholder Loan, see “Description of Other Material Indebtedness - SubordinatedShareholder Loan from Concordia Bus AB”. During the year, Concordia Bus AB hasprovided services to Concordia. Compensation for these services amounts to SEK4 million.

During the year, twostock option programs have been established which covers the parent company’smanagement as well as directors of the supervisory board. The number of stockoptions is in total 1 356 569. Each option entitles to exercise 1

F-31

----

ordinary share each, inthe year 2008. All stock options have been valued in accordance with the Black& Scholes method.  The stock optionsrepresents an increase in the share capital in Concordia Bus AB, resulting in adilution of 6.5% of existing shareholders.

During the year,Concordia Bus AB paid Goldman SachsInternational and Schøyen Gruppen AS,€1,500,000 each. These amounts represents as a contribution to unwind the Concordia Bus BV group of companies accordingto the restructuring agreement.

The Directors of thesupervisory board of is of the opinion that the fees paid to the company’sclose affiliates are at a level with the fees which would have been paidbetween independent parties.

**Note 30.Reconciliation to accounting principles generally accepted in the United Statesof America**

Accounting policies used by theConcordia Bus Nordic Holding AB and subsidiaries conform with accountingSwedish GAAP which differs in certain significant respects from U.S. GAAP.Below are descriptions of these differences and a reconciliation of net loss,shareholder’s equity and cash flows to U.S. GAAP.
| ** **                                                                             | ** ** | **Note** | ** ** | **Year Ended   February 28, 2006 ** | ** ** | **Year ended   February 28, 2005 ** | ** ** | **Year ended   February 29, 2004 ** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| **Net  loss under Swedish GAAP**                                                       |       |     | ** ** | **(557**                                                     | **)**      | **(396**                                                     | **)**      | **(171**                                                     | **)**      |
| Adjustments:                                                                           |       |     |       |                                                         |       |                                                         |       |                                                         |       |
| Goodwill  amortization                                                                 |       | (a)      |       | 14                                                           |       | 13                                                           |       | 13                                                           |       |
| Pensions                                                                               |       | (c)      |       | 3                                                            |       | 0                                                            |       | 2                                                            |       |
| Derivative  financial instruments                                                      |       | (e)      |       | (1                                                           | )          | 1                                                            |       | 26                                                           |       |
| Sale-leaseback  of real estate                                                         |       | (f)      |       | 7                                                            |       | 4                                                            |       | 15                                                           |       |
| Lease  classification                                                                  |       | (g)      |       | (2                                                           | )          | (4                                                           | )          | (6                                                           | )          |
| Restructuring                                                                          |       | (h)      |       | —                                                       |       | (6                                                           | )          | 6                                                            |       |
| Tax effect of  U.S. GAAP adjustments                                                   |       |     |       | (2                                                           | )          | 3                                                            |       | (12                                                          | )          |
| **Net  loss under U.S. GAAP**                                                          |       |     | ** ** | **(538**                                                     | **)**      | **(385**                                                     | **)**      | **(127**                                                     | **)**      |
| Weighted-average  number of shares outstanding                                         |       |     |       | 300                                                          |       | 300                                                          |       | 300                                                          |       |
| **Primary and diluted net loss  per share under U.S. GAAP (in thousands of SEK)** |       |     | ** ** | **(1,793**                                                   | **)**      | **(1,283**                                                   | **)**      | **(425**                                                     | **)**      |

 
| ** **                                        | ** ** | **Note** | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------------|------------|----------|------------|---------------------------------|------------|---------------------------------|------------|
| **Shareholder’s  equity under Swedish GAAP** |       |     | ** ** | **(350**                        | **)**      | **(144**                        | **)**      |
| Adjustments:                                      |       |     |       |                            |       |                            |       |
| Goodwill  amortization                            |       | (a)      |       | 46                              |       | 32                              |       |
| Push-down  accounting                             |       | (b)      |       | 570                             |       | 570                             |       |
| Pensions                                          |       | (c)      |       | (7                              | )          | (10                             | )          |
| Refund from  defined contribution pension plan    |       | (d)      |       | 54                              |       | 54                              |       |
| Derivative  financial instruments                 |       | (e)      |       | 0                               |       | 1                               |       |
| Sale-leaseback  of real estate                    |       | (f)      |       | (24                             | )          | (31                             | )          |
| Lease  classification                             |       | (g)      |       | (22                             | )          | (21                             | )          |
| Restructuring                                     |       | (h)      |       | —                          |       | —                          |       |
| Tax effect of  U.S. GAAP adjustments              |       |     |       | 0                               |       | 2                               |       |
| **Shareholder’s equity under U.S.  GAAP**    |       |     | ** ** | **267**                         | ** ** | **453**                         | ** ** |

 

Under Swedish GAAP, Concordia’s cashflow statements are presented in accordance with the Swedish FinancialAccounting Standards Council’s recommendation No. 7. These statementspresent substantially the same information as is required under U.S. Statementof Financial Accounting Standards (“SFAS”) No. 95, “Statement of CashFlows,” although the classification of certain items is different.

A reconciliation of Concordia’soperating, investing and financing activities, classified in accordance withU.S. GAAP, from the amounts shown in the Swedish GAAP cash flow statement, areas follows:

F-32

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| ** **                                                             | ** ** | **Note** | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|------------------------------------------------------------------------|------------|----------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Cash flows  provided by (used in) operating activities, Swedish GAAP   |       |     |       | (255                                             | )          | (98                                              | )          | 24                                               |       |
| Lease classification                                                   |       | (g)      |       | 10                                               |       | 12                                               |       | 12                                               |       |
| Cash flows  provided by (used in) operating activities, U.S. GAAP |       |     |       | (245                                             | )          | (86                                              | )          | 36                                               |       |
| Cash flows used  in investing activities, Swedish GAAP                 |       |     |       | (57                                              | )          | (63                                              | )          | (11                                              | )          |
| Restricted cash                                                        |       | 18       |       | (52                                              | )          | (51                                              | )          | —                                           |       |
| Cash flows used  in investing activities, U.S. GAAP               |       |     |       | (109                                             | )          | (114                                             | )          | (11                                              | )          |
| Cash flows  provided by (used in) financing activities, Swedish GAAP   |       |     |       | 326                                              |       | (8                                               | )          | 152                                              |       |
| Lease  classification                                                  |       | (g)      |       | (10                                              | )          | (12                                              | )          | (12                                              | )          |
| Cash flows  provided by (used in) financing activities, U.S. GAAP |       |     |       | 316                                              |       | (20                                              | )          | 140                                              |       |
| **Net increase (decrease) in cash  and bank balances**                 |       |     | ** ** | **(38**                                          | **)**      | **(220**                                         | **)**      | **165**                                          | ** ** |

 

There were no significantnon-cash investing or financing activities during either of the years presentedabove other than that Concordia entered into capital leases resulting in therecognition of capitalized vehicle costs and related capital lease obligationsof SEK 20 for the year ended February 28, 2006 and SEK 4 for the yearended February 28, 2005 and SEK 37 million for the year endedFebruary 29, 2004.

**(a)****                                  Goodwill amortization**

For Swedish GAAP, Concordiaamortizes goodwill balances based on their estimated economic lives andassesses the balances for impairment whenever there is an indicator that theassets may be impaired. Effective March 1, 2002, Concordia adopted SFAS No. 142,“Goodwill and Other Intangible Assets,” for U.S. GAAP purposes. SFASNo. 142 requires goodwill to no longer be amortized, but instead be testedfor impairment upon adoption of SFAS No. 142, as well as on an annualbasis, and more frequently if circumstances indicate a possible impairment. Ifthe carrying value of goodwill exceeds its fair value, an impairment loss isrecognized. Prior to adopting SFAS No. 142, for U.S. GAAP purposes,Concordia amortized goodwill balances over their estimated economic lives, notto exceed 20 years, and assessed the balances for impairment whenever events orchanges in circumstances indicated that the carrying amounts may not berecoverable.

Upon the adoption of SFASNo. 142, the transition provisions of SFAS No. 141, “BusinessCombinations,” also became effective requiring, in certain circumstances, thereclassification of amounts between recognized goodwill and other intangiblesrelating to previous business combinations. The transition provisions of SFASNo. 141 did not affect any of Concordia’s previously reported goodwillunder U.S. GAAP.

Under SFAS No. 142, the U.S.GAAP goodwill impairment test is performed at the reporting unit level and iscomprised of two steps. The initial step is designed to identify potential goodwillimpairment by comparing an estimate of the fair value of the applicablereporting unit to its carrying value, including goodwill. Concordia’smeasurement of fair value is based on an evaluation of both future discountedcash flows, consistent with those utilized in Concordia’s annual planningprocess, and public company trading multiples. If the carrying value exceedsfair value, a second step is performed, which compares the implied fair valueof the applicable reporting unit’s goodwill with the carrying amount of thatgoodwill, to measure the amount of goodwill impairment, if any. Subsequentreversal of a recognized impairment loss is prohibited.

Upon adoption of SFASNo. 142, Concordia performed transitional impairment tests of goodwillunder U.S. GAAP. As a result of these impairment tests, no impairment chargeswere recognized at the date of adoption. Subsequent annual impairment tests areperformed, at a minimum, on goodwill in conjunction with Concordia’s annualplanning process. No impairments were recorded under U.S. GAAP as a result ofthe annual impairment tests.

**(b)           Push-downaccounting**

A greater amount of goodwill is recorded under U.S. GAAP compared toSwedish GAAP. The greater amount of goodwill for U.S. GAAP purposes isprimarily a result of the fact that approximately SEK 680 million ofgoodwill, which was created when Concordia’s shareholder acquired Concordia onJanuary 14, 2000, was not required to be pushed down to the financialstatements of Concordia in accordance with Swedish GAAP. U.S. GAAP requiressuch goodwill be pushed down since Concordia became wholly owned by oneshareholder as a result of the acquisition. That greater amount of goodwill wasamortized under U.S. GAAP until February 28, 2002 at which time amortizationwas ceased as described in (a) above.

F-33

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**(c)           Pensions**

Both Swedish GAAP and U.S. GAAPhave the same objective, which is the accrual for the projected cost ofproviding such pension benefits. There are certain differences with U.S. GAAPbeing more prescriptive, requiring the use of the projected unit credit method;whereas under Swedish GAAP, the accrued benefit obligation is calculated. Otherareas of differences include the actuarial assumptions, the treatment ofactuarial gains and losses and plan changes. Concordia has pension arrangementsunder two defined benefit plans for its employees in Norway and one definedbenefit plan for retired employees in Sweden.

Concordia’s defined benefitpension plan for Swedish retirees is unfunded and has 568 plan participants atFebruary 28, 2006.

Prior to January 1, 2004,Concordia offered two defined benefit pension plans to employees in Norway. Oneof the plans was for employees who begin work with Concordia before the age of58 years. Such plan is funded and has 528 plan participants atFebruary 28, 2005. The plan assets are invested in a combination of equitysecurities, government guaranteed bonds, real estate and other high-gradelong-term investments. The other plan was for employees who begin work at theage of 58 years or later. Such plan is not funded and includes 424 planparticipants at February 28, 2005. Beginning January 1, 2004, the twodefined benefit plans were closed to new enrollments. Instead, new employeesmust enroll in SBC’s defined contribution plan.

The amounts computed inaccordance with U.S. GAAP as shown below relate to the defined benefit pensionplans described previously:
| ** **                                              | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Change  in benefit obligation:**                      |       |     |       |     |       |     |       |
| Benefit  obligation beginning of the year               | ** ** | **194**  | ** ** | **192**  | ** ** | **196**  | ** ** |
| Service cost                                            |       | 2        |       | 5        |       | 4        |       |
| Interest cost                                           |       | 9        |       | 10       |       | 11       |       |
| Actuarial  (gains) losses                               |       | (7       | )          | (6       | )          | (1       | )          |
| Benefits paid                                           |       | (17      | )          | (15      | )          | (16      | )          |
| Other                                                   |       | 10       |       | 8        |       | (2       | )          |
| Benefit  obligation end of the year                     | ** ** | **191**  | ** ** | **194**  | ** ** | **192**  | ** ** |
| **Change  in plan assets:**                             |       |     |       |     |       |     |       |
| Fair value of  plan assets at the beginning of the year | ** ** | **127**  | ** ** | **116**  | ** ** | **116**  | ** ** |
| Actual return on  plan assets                           |       | 8        |       | 7        |       | 7        |       |
| Employer  contributions                                 |       | 2        |       | 4        |       | 4        |       |
| Benefits paid                                           |       | (8       | )          | (9       | )          | (6       | )          |
| Other                                                   |       | 1        |       | 9        |       | (5       | )          |
| Fair value of  plan assets at the end of the year       | ** ** | **130**  | ** ** | **127**  | ** ** | **116**  | ** ** |
| Funded status                                           |       | (62      | )          | (67      | )          | (76      | )          |
| Unrecognized net  actuarial loss                        |       | 13       |       | 9        |       | 14       |       |
| Accrued benefit  obligation                             | ** ** | **(49**  | **)**      | **(58**  | **)**      | **(62**  | **)**      |
| **Components  of net pension cost:**                    |       |     |       |     |       |     |       |
| Service cost                                            |       | 2        |       | 5        |       | 4        |       |
| Interest cost                                           |       | 9        |       | 10       |       | 11       |       |
| Expected return  on plan assets                         |       | (8       | )          | (7       | )          | (7       | )          |
| Amortization of  net actuarial gain                     |       | —   |       | —   |       | —   |       |
| Social charges                                          |       | (2       | )          | 1        |       | —   |       |
| Net pension cost                                        | ** ** | **1**    | ** ** | **9**    | ** ** | **8**    | ** ** |
| **Weighted-average  assumptions at year end:**          |       |     |       |     |       |     |       |
| Discount rates                                          |       | 5.3-6.5  | %          | 5.3-6.5  | %          | 5.5-7.0  | %          |
| Expected return  on plan assets                         |       | 4,5      | %          | 5.5      | %          | 6.0      | %          |
| Rate of  compensation increases                         |       | 3,0      | %          | 3.3      | %          | 3.0      | %          |
| Inflation rates                                         |       | 2,0      | %          | 2.0      | %          | 2.0      | %          |

 

A reconciliation of the abovedisclosures, which are combined for Concordia’s three defined benefit plans, tothe amounts recorded in the balance sheet is as follows:

F-34

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| ** **                                     | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Norwegian plan  with net prepaid pension asset |       | 1                               |       | 9                               |       |
| Norwegian plan  with net pension obligation    |       | (2                              | )          | (15                             | )          |
| Swedish plan  with net pension obligation      |       | (46                             | )          | (52                             | )          |
| **Net accrued pension benefit  obligation**    | ** ** | **(48**                         | **)**      | **(58**                         | **)**      |

 

In regards to the plans having anet pension obligation, the following is the funded status of those plans on acombined basis, before consideration of unrecognized items:
| ** **                      | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Accumulated  benefit obligation |       | (194                            | )          | (194                            | )          |
| Fair value of  plan assets      |       | 119                             |       | 127                             |       |
| **Funded status**               | ** ** | **(75**                         | **)**      | **(67**                         | **)**      |

 

For other active employees theentities in the Swebus group have individual plans or participate in plansadministered outside Concordia. These pension plans are generallynon-contributory for the employees and cover substantially all of Swebusemployees.

**(d)           Refundfrom defined contribution pension plan**

Swedish companies participate ina collectively bargained pension plan for all Swedish white-collaremployees (a multiemployer pension plan). Required contributions to the planare charged to earnings as they become due and payable for purposes of bothSwedish GAAP and U.S. GAAP. In 1998, the plan administrator (“SPP”) announced asignificant surplus in the plan and that the surplus would be refunded to planparticipants. In 1999, the plan administrator announced how much each employerwould receive. In 2000, actual payment terms were announced, which include aninitial cash refund based on a formula (which resulted in a refund of 20% ofthe calculated share of surplus for many companies) with the remainder appliedas a credit against future premiums or potentially transferred to anotherentity. Until the surplus was refunded to participating companies, it was thelegal property of the pension plan. Under Swedish GAAP, the refund wasrecognized as an asset as part of the net assets of which were acquired by itsshareholder on January 14, 2000. Such accounting treatment differs fromthe accounting treatment under U.S. GAAP, where any refunds under a definedcontribution plan are recognized as income in the period when the refund canactually be utilized. Thus, under U.S. GAAP, no asset for this refund wasrecognized in connection with the acquisition of Concordia by its shareholder.As of February 28, 2002, Concordia had received the full amount of therefund in cash and, consequently, had recognized the amount in income underU.S. GAAP.

**(e)           Financialinstruments**

***DerivativeFinancial Instruments:***

Concordia had not used anyfinancial instruments to manage risks associated with interest rate exposure onvariable rate debt, fuel price risk and foreign currency exposure associatedwith Euro-denominated debt, during the financial year 2006.

Under Swedish GAAP, hedgeaccounting is used as long as a hedge is considered effective and then the fairvalue of the hedge instrument is held off balance sheet. The net settlement ofthe instrument is recorded on the same line as the expense from the hedgeexposure.

U.S. GAAP requires that everyderivative instrument (including certain derivative instruments embedded inother contracts) be recorded on the balance sheet as either an asset orliability measured at its fair value. U.S. GAAP requires that changes in aderivative’s fair value be recognized currently in earnings unless specificcriteria are met to account for such financial instruments as hedges. Concordiaaccounts for changes in the fair value of all its derivative financialinstruments through income as it has not chosen to designate any of thederivative instruments as hedges for U.S. GAAP purposes.

***Fair Values ofFinancial Instruments***

 In certain circumstances, the fair values ofthe derivatives financial instruments are not recorded for Swedish GAAPreporting purposes. However, for U.S. GAAP reporting purposes, the carryingamounts of all derivative financial instruments are equal to their fair valuesas stated above.

F-35

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

Under Swedish GAAP, a gainincurred in connection with a sale-leaseback transaction where the criteria fora financial lease transaction is not fulfilled and where the transaction isbased on fair value should be recognized in the period when the salestransaction has been consummated. Under U.S. GAAP, any gain on a sale-leasebacktransaction where a majority of the assets are retained by the seller must bedeferred and recognized over the life of the lease, if a capital lease, or inproportion to gross rentals if an operating lease.

In periods prior to March 1,2002, Concordia sold properties and simultaneously leased them back. UnderSwedish GAAP, Concordia recorded immediate net gains related to thesesale-leaseback transactions in its statement of operations. Under U.S. GAAP,the net gains related to these transactions were deferred and are beingamortized in relation to the lease agreement.

**(g)           Leaseclassification**

Under Swedish GAAP, leases arereported in the consolidated financial statements as capital leases if thelease entails the transfer to the lessee, to a material extent, of the economicrisks and benefits generally associated with ownership. If this is not thecase, the lease is reported as an operating lease and the lease payments areexpensed as incurred.

Under U.S. GAAP, specificcriteria are used to determine whether a lease is a capital lease.Specifically, a capital lease is one where either the minimum payments are inexcess of 90% of the fair market value, the leased assets or the lease term isequal to or greater than 75% of the estimated economic life of the property,the lease contains a bargain purchase option, or the lease transfers ownershipof the property to the lessee at the end of the lease term.

Certain of Concordia’s leases,that resulted from the sale-leaseback transactions entered into by Concordia asdescribed in (f), are capital leases for U.S. GAAP purposes and operatingleases for Swedish GAAP purposes.

At February 28, 2006 a total ofSEK 22, SEK 21 in current year, has been recorded as an equity difference dueto classification of leases, whereof SEK 17 relates to accumulated depreciation(SEK 14 in current year) and the remainder relates to differences between leasepayments and interest portion of lease expenses.

**(h)           Restructuring**

For Swedish GAAP, Concordiarecorded a restructuring provision of SEK 6 million atFebruary 29, 2004, relating to one-time, employee termination costspertaining to the close-down of operations in Gothenburg, Sweden which occurredafter February 29, 2004. As the employees continued working for longerthan a minimum retention period to receive the termination benefit, thetermination costs was deemed to have future benefit under U.S. GAAP. As aresult, under U.S. GAAP, the termination costs could not be recognized as aprovision at February 29, 2004. Instead, the fair value of the obligationat February 29, 2004 was recognized for U.S. GAAP ratably over theestimated remaining service period of the employees. During the year endedFebruary 28, 2005 this restructuring provision has been dissolved.

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

The following presents comprehensiveloss, defined as changes in the stockholder’s deficit of Concordia as a resultof transactions other than those with the owner:
|                                                          | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|----------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Net loss                                                 |       | (538                                             | )          | (385                                             | )          | (127                                             | )          |
| Other  comprehensive income (loss):                      |       |                                             |       |                                             |       |                                             |       |
| Change in  cumulative comprehensive income               |       | —                                           |       | —                                           |       | 1                                                |       |
| Change in  cumulative translation adjustment, net of tax |       | 20                                               |       | 12                                               |       | 0                                                |       |
| **Comprehensive loss**                                   | ** ** | **(515**                                         | **)**      | **(373**                                         | **)**      | **(126**                                         | **)**      |

 

**(j)            Changesin shareholder’s equity under U.S. GAAP**
| ** **                                       | ** ** | **Shareholder’s  Equity** | ** ** |
|--------------------------------------------------|------------|--------------------------------|------------|
| **Shareholder’s  equity March 1, 2003**     | ** ** | **952**                        | ** ** |
| Change in  cumulative comprehensive income       |       | 1                              |       |
| Net loss                                         |       | (127                           | )          |
| **Shareholder’s  equity February 29, 2004** | ** ** | **826**                        | ** ** |
| Change in  cumulative translation adjustment     |       | 12                             |       |
| Net loss                                         |       | (385                           | )          |
| **Shareholder’s  equity February 28, 2005** | ** ** | **453**                        | ** ** |
| Shareholders  contribution                       | ** ** | **333**                        | ** ** |
| Change in  cumulative translation adjustment     |       | 19                             |       |
| Net loss                                         |       | (538                           | )          |
| **Shareholder ́s equity February  28,2006**  | ** ** | **267**                        | ** ** |

 

F-36

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

***Consolidationof Variable Interest Entities***

InDecember 2003, the U.S. Financial Accounting Standards Board (“FASB”) issuedFASB Interpretation No. 46 (revised December 2003), “Consolidation ofVariable Interest Entities,” (“FIN 46R”) which addresses the consolidation ofvariable interest entities by business enterprises. Variable interest entitiesare entities in which either the equity investment at risk is not sufficient toabsorb the probable losses without additional subordinated financial support fromother parties, or the investors with equity at risk lack certain essentialcharacteristics of a controlling interest. Under FIN 46R, Concordia mustconsolidate any variable interest entity in which Concordia holds variableinterests and is deemed the primary beneficiary. Portions of the requirementsof 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 February28, 2005 under the transition rules. The adoption of the remaining provisionsof FIN 46R during the year ended February 28, 2005 did not have a significanteffect Concordia’s consolidated financial position or results of operationsreported in accordance with U.S. GAAP.

***RevenueArrangements with Multiple Deliverables***

In May2003, the Emerging Issues Task Force of the FASB reached a consensus on IssueNo. 00-21 “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”),providing further guidance on how to account for multiple element contracts. EITF 00-21was effective for all arrangements entered into by Concordia on or after March1, 2004. The adoption of the EITF 00-21 during the year ended February 28,2005 did not have a significant effect on Concordia’s consolidated financialposition or results of operations reported in accordance with U.S. GAAP.

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

In December 2004, the FASBissued SFAS No. 153, “Exchanges of Non-Monetary Assets – an amendment of APBOpinion No. 29” (“SFAS 153”). Accounting Principles Board (“APB”) Opinion No.29, “Accounting for Nonmonetary Transactions” provided an exception to thebasic fair-value measurement principle for exchanges of similar productiveassets. That exception required that some nonmonetary exchanges, althoughcommercially substantive, be recorded on a carryover basis. SFAS 153 eliminatesthe exception to fair value for exchanges of similar productive assets andreplaces it with a general exception to fair-value measurement for exchangetransactions that do not have commercial substance—that is, transactions thatare not expected to result in significant changes in the cash flows of thereporting entity. SFAS 153 is effective prospectively for Concordia inaccounting for nonmonetary asset exchanges which occur on or after March 1,2006 for U.S. GAAP purposes.

***Accounting Changes and Error Corrections***

In May 2005, the FASBissued SFAS No. 154, “Accounting Changes and Error Corrections - a replacementof APB Opinion No. 20 and FASB Statement No. 3”**(“SFAS154”). SFAS 154 applies to all voluntary changes in accounting principle, andchanges the requirements for accounting for and reporting of a change inaccounting principle. SFAS 154 requires retrospective application to priorperiods’ financial statements of a voluntary change in accounting principleunless it is impracticable. APB No. 20, “Accounting Changes” previouslyrequired that most voluntary changes in accounting principle be recognized byincluding in net income of the period of the change the cumulative effect ofchanging to the new accounting principle. SFAS 154 is effective for accountingchanges and corrections of errors made by Concordia on or after March 1, 2006 for U.S. GAAP purposes, except that SFAS 154does not change the transition provisions of any existing accountingpronouncement, including those that are in a transition phase as of March 1,2006.

F-37

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**Reportof Independent Registered Public Accounting Firms**

Tothe Board of Directors and Shareholders of SwebusAB

We have audited the accompanying balance sheets of SwebusAB (the “Company”) as of February 28, 2006 and February 28, 2005, and therelated statements of operations and cash flows for each of the three years inthe period ended February 28, 2006. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

Inour opinion, based on our audit, the financial statements referred to abovepresent fairly, in all material respects, the consolidated financial positionSwebus AB at February 28, 2006, and theresults of its operations and its cash flows for each of the three years in theperiod ended February 28, 2006 in conformity with accounting principlesgenerally accepted in Sweden.

Accounting principles generally accepted in Swedendiffer in certain respects from accounting principles generally accepted in theUnited States of America. Information relating to the nature and effect of suchdifferences is presented in Note17 to the financial statements.

| Ernst & Young AB    |
|------------------------------|
| Erik Åström        |
| Authorized Public Accountant |
| Stockholm, Sweden            |
| September 27, 2006           |

 

F-38

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**SWEBUS AB STATEMENTS OFOPERATIONS**

**(all amounts in millions ofSEK, except share and per share amounts)**
| ** **                                     | ** ** | **Note** | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|------------------------------------------------|------------|----------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Net revenue for  bus services                  |       |     |       | 3,343                                            |       | 3,441                                            |       | 3,506                                            |       |
| Other operating  income                        |       |     |       | 68                                               |       | 58                                               |       | 72                                               |       |
| **Total  revenue**                             |       | 2        | ** ** | **3,411**                                        | ** ** | **3,499**                                        | ** ** | **3,578**                                        | ** ** |
| ** **                                     |       |     | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| **Operating  expenses**                        |       |     |       |                                             |       |                                             |       |                                             |       |
| Fuel, tires and  other consumables             |       | 2        |       | (825                                             | )          | (729                                             | )          | (688                                             | )          |
| Other external  costs                          |       | 3        |       | (991                                             | )          | (1,142                                           | )          | (1,090                                           | )          |
| Personnel costs                                |       | 4        |       | (1,859                                           | )          | (1,906                                           | )          | (1,984                                           | )          |
| Gain (Loss) on  sale of fixed assets           |       |     |       | 0                                                |       | (1                                               | )          | —                                           |       |
| Depreciation of  tangible fixed assets         |       | 6,7      |       | (13                                              | )          | (15                                              | )          | (11                                              | )          |
| **Operating  loss**                            |       | 2        | ** ** | **(277**                                         | **)**      | **(294**                                         | **)**      | **(195**                                         | **)**      |
| ** **                                     |       |     | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| Interest income  from affiliated companies     |       | 16       |       | 22                                               |       | 10                                               |       | 56                                               |       |
| Other interest  income and similar items       |       |     |       | 0                                                |       | 4                                                |       | —                                           |       |
| Interest expense  to affiliated companies      |       | 16       |       | (38                                              | )          | (84                                              | )          | (64                                              | )          |
| Other interest  expense                        |       |     |       | (1                                               | )          | (1                                               | )          | (1                                               | )          |
| Other financial  expenses                      |       |     |       | (10                                              | )          | (1                                               | )          | (2                                               | )          |
| **Loss  before income taxes**                  |       |     | ** ** | **(306**                                         | **)**      | **(366**                                         | **)**      | **(206**                                         | **)**      |
| Income taxes                                   |       | 5        |       | 0                                                |       | 45                                               |       | 42                                               |       |
|                                           |       |     |       |                                             |       |                                             |       |                                             |       |
| **Net  loss**                                  |       |     | ** ** | **(306**                                         | **)**      | **(321**                                         | **)**      | **(164**                                         | **)**      |
| ** **                                     |       |     | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                       | ** ** |
| Weighted-average  number of shares outstanding |       |     |       | 3,000                                            |       | 3,000                                            |       | 3,000                                            |       |
| Net loss per share (in  thousands of SEK)      |       |     |       | (102                                             | )          | (107                                             | )          | (55                                              | )          |

 

The accompanying notes are an integral part ofthese financial statements.

F-39

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**SWEBUS ABBALANCE SHEETS(all amounts in millions of SEK)**
| **ASSETS**                                        | ** ** | **Note**   | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------------|------------|------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                        | ** ** | ** ** | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Fixed  assets**                                 |       |       |       |                            |       |                            |       |
| **Tangible  fixed assets**                        |       |       |       |                            |       |                            |       |
| Leasehold  improvements                           |       |       |       | 3                               |       | 1                               |       |
| Vehicles                                          |       | 6          |       | 31                              |       | 37                              |       |
| Equipment,  tools, fixtures and fittings          |       | 7          |       | 14                              |       | 11                              |       |
| **Total  tangible fixed assets**                  |       |       | ** ** | **48**                          | ** ** | **49**                          | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Financial  fixed assets**                       |       |       |       |                            |       |                            |       |
| Receivables due  from affiliated companies        |       | 16         |       | —                          |       | 290                             |       |
| Shares in  Subsidiaries                           |       | 8          |       | 1                               |       | —                          |       |
| Other financial  assets                           |       | 7          |       | 0                               |       | 0                               |       |
| **Total  financial fixed assets**                 |       |       | ** ** | **1**                           | ** ** | **290**                         | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Total  fixed assets**                           |       |       | ** ** | **49**                          | ** ** | **339**                         | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Current  assets**                               |       |       |       |                            |       |                            |       |
| **Inventory**                                     |       |       | ** ** | **23**                          | ** ** | **24**                          | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Current  receivables and other current assets** |       |       |       |                            |       |                            |       |
| Accounts  receivable                              |       | 18         |       | 350                             |       | 250                             |       |
| Receivables due  from affiliated companies        |       | 16         |       | 493                             |       | 4                               |       |
| Other current  receivables                        |       |       |       | 41                              |       | 71                              |       |
| Accrued income  and prepaid expenses              |       | 9          |       | 104                             |       | 124                             |       |
| **Total  receivables and other current assets**   |       |       | ** ** | **988**                         | ** ** | **449**                         | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Cash and bank  balances                           |       | 10         |       | 176                             |       | 131                             |       |
|                                              |       |       |       |                            |       |                            |       |
| **Total  current assets**                         |       |       | ** ** | **1,188**                       | ** ** | **604**                         | ** ** |
| ** **                                        |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **TOTAL ASSETS**                                  |       |       | ** ** | **1,237**                       | ** ** | **943**                         | ** ** |

 

The accompanying notes are an integral part of these financialstatements.

F-40

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**SWEBUS AB BALANCE SHEETS**

**(all amounts in millions ofSEK, except share and per share amounts)**
| **SHAREHOLDER’S EQUITY AND LIABILITIES** | ** ** | **Note**   | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                   | ** ** | ** ** | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Shareholder’s  equity**                               |       | 11         |       |                            |       |                            |       |
| **Restricted  equity**                                       |       |       |       |                            |       |                            |       |
| Share capital  (3,000 shares at par value SEK 100)           |       |       |       | 0                               |       | 0                               |       |
| Restricted  reserves                                         |       |       |       | 0                               |       | 0                               |       |
| **Total  restricted equity**                                 |       |       | ** ** | **0**                           | ** ** | **0**                           | ** ** |
| ** **                                                   |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Non-restricted  equity**                                   |       |       |       |                            |       |                            |       |
| Retained  earnings                                           |       |       |       | 531                             |       | 352                             |       |
| Net loss for the  year                                       |       |       |       | (306                            | )          | (321                            | )          |
| **Total  non-restricted equity**                             |       |       | ** ** | **225**                         | ** ** | **31**                          | ** ** |
| ** **                                                   |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Total  shareholder’s equity**                         |       |       | ** ** | **225**                         | ** ** | **31**                          | ** ** |
| ** **                                                   |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Liabilities**                                              |       |       |       |                            |       |                            |       |
| **Provisions**                                               |       |       |       |                            |       |                            |       |
| Provision for  pensions and similar commitments              |       |       |       | 3                               |       | 3                               |       |
| Provision for  loss making contracts                         |       |       |       | 18                              |       | 49                              |       |
| Other provisions                                             |       | 12         |       | 10                              |       | 7                               |       |
| **Total  provisions**                                        |       |       | ** ** | **31**                          | ** ** | **59**                          | ** ** |
| ** **                                                   |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Non-current  liabilities**                                 |       |       |       |                            |       |                            |       |
| Liabilities to  affiliated companies                         |       |       |       | 266                             |       | —                          |       |
| Other non-current  liabilities                               |       | 13         |       | 1                               |       | 3                               |       |
| **Total  non-current liabilities**                           |       |       | ** ** | **267**                         | ** ** | **3**                           | ** ** |
| ** **                                                   |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **Current  liabilities**                                     |       |       |       |                            |       |                            |       |
| Accounts payable                                             |       |       |       | 112                             |       | 160                             |       |
| Liabilities to  affiliated companies                         |       |       |       | 45                              |       | 235                             |       |
| Other current  liabilities                                   |       |       |       | 98                              |       | 104                             |       |
| Accrued expenses  and deferred income                        |       | 14         |       | 457                             |       | 351                             |       |
| **Total  current liabilities**                               |       |       | ** ** | **713**                         | ** ** | **850**                         | ** ** |
| ** **                                                   |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **TOTAL  SHAREHOLDER’S EQUITY AND LIABILITIES**         |       |       | ** ** | **1,237**                       | ** ** | **943**                         | ** ** |
| ** **                                                   |       |       | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| **PLEDGED  ASSETS AND CONTINGENT LIABILITIES**               |       |       |       |                            |       |                            |       |
| **Pledged  assets**                                          |       |       |       |                            |       |                            |       |
| Floating charges                                             |       | 15         |       | 100                             |       | 115                             |       |
| **Contingent  liabilities**                                  |       |       |       |                            |       |                            |       |
| Guarantee on behalf of  Concordia Bus Nordic AB              |       | 15         |       | 1,242                           |       | 1,176                           |       |

 

The accompanying notes are an integral part of these financialstatements.

F-41

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**SWEBUS ABAND SUBSIDIARIES STATEMENTS OF CASH FLOWS(all amounts in millions of SEK)**
| ** **                                                                     | ** ** | **Year Ended   February 28, 2006 ** | ** ** | **Year Ended   February 28, 2005 ** | ** ** | **Year Ended   February 29, 2004 ** | ** ** |
|--------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| **Operating  activities**                                                      |       |                                                         |       |                                                         |       |                                                         |       |
| Loss before  income taxes                                                      |       | (306                                                         | )          | (366                                                         | )          | (206                                                         | )          |
| *Adjustments  for items excluded from cash flows:*                             |       |                                                         |       |                                                         |       |                                                         |       |
| Depreciation                                                                   |       | 13                                                           |       | 15                                                           |       | 11                                                           |       |
| Gains / losses  on sale of fixed assets                                        |       | (2                                                           | )          | 1                                                            |       | —                                                       |       |
| Change in  pension liability                                                   |       | 0                                                            |       | (1                                                           | )          | —                                                       |       |
| Change in other  provisions                                                    |       | (21                                                          | )          | (13                                                          | )          | 46                                                           |       |
| Change in  interest receivable                                                 |       | (0                                                           | )          | 8                                                            |       | (9                                                           | )          |
| Change in  interest payable                                                    |       | (41                                                          | )          | 26                                                           |       | 17                                                           |       |
| **Cash  flows used in operating activities before changes in working capital** | ** ** | **(358**                                                     | **)**      | **(330**                                                     | **)**      | **(141**                                                     | **)**      |
| ** **                                                                     | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** |
| **Change  in working capital:**                                                |       |                                                         |       |                                                         |       |                                                         |       |
| (Increase)  decrease in inventory                                              |       | 0                                                            |       | (1                                                           | )          | 3                                                            |       |
| (Increase)  decrease in current receivables                                    |       | 572                                                          |       | 149                                                          |       | 535                                                          |       |
| Increase  (decrease) in current liabilities                                    |       | (154                                                         | )          | 172                                                          |       | (363                                                         | )          |
| **Change  in working capital**                                                 | ** ** | **418**                                                      | ** ** | **320**                                                      | ** ** | **175**                                                      | ** ** |
| ** **                                                                     | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** |
| **Net  cash flows (used in) provided by operating activities**                 | ** ** | **60**                                                       | ** ** | **(10**                                                      | **)**      | **34**                                                       | ** ** |
| ** **                                                                     | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** |
| **Investing  activities**                                                      |       |                                                         |       |                                                         |       |                                                         |       |
| Acquisition of  subsidiaries                                                   |       | (1                                                           | )          | —                                                       |       | —                                                       |       |
| Investments in  tangible fixed assets                                          |       | (12                                                          | )          | (39                                                          | )          | (11                                                          | )          |
| Sales of  tangible fixed assets                                                |       | 3                                                            |       | 9                                                            |       | —                                                       |       |
| **Net  cash flows provided by (used in) investing activities**                 | ** ** | **(10**                                                      | **)**      | **(30**                                                      | **)**      | **(11**                                                      | **)**      |
| ** **                                                                     | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** |
| **Financing  activities**                                                      |       |                                                         |       |                                                         |       |                                                         |       |
| Payments of  financial lease obligations                                       |       | (4                                                           | )          | (4                                                           | )          | (3                                                           | )          |
|                                                                           |       |                                                         |       |                                                         |       |                                                         |       |
| **Net  cash flows provided by (used in) financing activities**                 | ** ** | **(4**                                                       | **)**      | **(4**                                                       | **)**      | **(3**                                                       | **)**      |
| ** **                                                                     | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** | ** **                                                   | ** ** |
| **Net  (decrease) increase in cash and bank balances**                         | ** ** | **45**                                                       | ** ** | **(44**                                                      | **)**      | **20**                                                       | ** ** |
| **Cash  and bank balances at beginning of year**                               | ** ** | **131**                                                      | ** ** | **175**                                                      | ** ** | **155**                                                      | ** ** |
| **Cash and bank balances at end  of year**                                     | ** ** | **176**                                                      | ** ** | **131**                                                      | ** ** | **175**                                                      | ** ** |

 

The accompanyingnotes are an integral part of these financial statements.

F-42

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**SWEBUS AB NOTES TOFINANCIAL STATEMENTS**

**(all amounts in millions ofSEK unless otherwise stated)**

**Note 1: Organization and accountingprinciples**

**Organization**

Swebus AB (“Swebus” or the “Company”)is a Swedish registered limited liability company, wholly owned by ConcordiaBus Nordic AB (reg no 556031-8569) with its registered office in Stockholm,Sweden. The final operational parent company is Concordia Bus AB. The primaryoperations of Swebus consist of providing regular bus services under contractto transit authorities in Sweden.

During January 2004, Swebus’shareholder, Concordia Bus Nordic AB, issued EUR 130 million of 9.125%senior secured notes due August 1, 2009. Concordia Bus Nordic AB pledgedits shares in certain of its subsidiaries, including Swebus, as collateral forthe senior secured notes, and Swebus, together with other affiliated companies,is a guarantor of the notes. See Note 15.

**Accounting Principles**

The financial statements ofSwebus have been prepared in accordance with accounting principles generallyaccepted in Sweden (“Swedish GAAP”) and, thus, have been prepared in accordancewith the Swedish Annual Accounts Act, as well as in accordance withrecommendation and statements from the recommendations of the SwedishAccounting Standards Board (“Bokföringshämnden” or “BFN”). Swebus’ accountingpolicies, as described below, have been applied consistently in all periodspresented.

Swebus is required to reconcileits financial statements to accounting principles generally accepted in theUnited States of America (“U.S. GAAP”). Significant differences between SwedishGAAP and U.S. GAAP are described in Note 17.

***Currency***

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

***Revenuerecognition***

The majority of Swebus’ revenuesarise from contracts with local public transportation authorities havingcontract terms of five to eight years (“CPTA contracts”).

CPTA contracts generally provideSwebus with fixed fee revenue in return for the contracted bus services.Accordingly, all ticket revenues collected by Swebus on such contracts,referred to as gross agreements, are forwarded to the local publictransportation authorities, and Swebus receives its fixed fees regardless ofthe number of passengers transported. Under some contracts, Swebus receivesfees from the local transportation authority after providing services. Underother contracts, Swebus receives fees in advance of providing services.Regardless of the timing of receiving the fees from the local publictransportation authorities, Swebus recognizes revenue on a straight-line basisover the period of the contract and, accordingly, accrues for earned feerevenue or defers unearned fee revenue as appropriate. Such fixed fees aregenerally subject to periodic adjustment for certain changes in costs incurredor cost indices. In recognizing the fee revenue over the period of thecontract, Swebus records adjustments to the fee revenue during the contractperiod based on the agreed cost adjustment mechanism contained in thecontracts.

Revenues earned by Swebus oncertain other CPTA contracts, referred to as net agreements, are based on orconsider the number of passengers transported. Revenues for these contracts arerecognized on the date of travel by the passenger.

Revenue also includes rentalincome, sale of fuel and diesel and from engineering services. The revenueresulting from other operating activities is recognized when the product isdelivered or the service is performed or, in terms of operating lease revenues,on a straight-line basis over the term of lease.

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

F-43

----

 

***Income Taxes***

The total income tax expense ofSwebus consists of current and deferred income taxes. Deferred income taxprimarily consists of estimated tax on changes in untaxed reserves for the yearand the unused portions of income tax loss carry forwards to the extent thatthese losses can be used in the future as a reduction of future taxable income.The deferred income tax position is calculated using the enacted tax statutoryrate.

***Depreciation***

Annual depreciation andamortization is computed using a straight-line method based on the followingpercentages:
| Leasehold improvements                   |   | 20-33   | % |
|------------------------------------------|--------|---------|---|
| Vehicles                                 |   | 7.15-33 | % |
| Equipment, tools,  fixtures and fittings |   | 10-33   | % |

 

***Tangible fixedassets***

Tangible fixed assets are valuedat cost, less accumulated depreciation and impairment charges.

***Impairment oftangible fixed assets***

Impairment reviews of tangiblefixed assets are performed whenever there is an indication of possibleimpairment. The carrying values of fixed assets are not considered to berecoverable when the expected discounted cash flows from those assets are lessthan their carrying values. An impairment loss is determined based on theamount by which the carrying value exceeds the fair value of those assets.Losses on fixed assets to be disposed of are determined in a similar manner,taking into account the selling price reduced by the costs of disposal.

***Receivables andpayables in foreign currencies***

Receivables and payables inforeign currencies are valued using the rate as of the balance sheet date.Gains and losses on trade receivables and payables are reported under operatingprofit (loss). Gains and losses related to other receivables and payables arereported under financial income and expense.

***Inventories***

Inventories are valued at thelower of cost, using the first in first out method, or market value afterprovision for obsolescence.

***Loss makingcontracts***

A significant portion of Swebusrevenues are derived from five to eight- year contracts withmunicipalities to provide bus services in a particular area. Under the terms ofthe contracts, the revenues are generally indexed at a rate corresponding to aconsumer price index or a net price index. Due to changes in circumstances andbecause costs have generally increased more quickly than revenues, suchcontracts may become loss making. Swebus records a provision for such lossmaking contracts at the lowest level for which there are separate identifiablecash flows. Losses are recognized in the period in which management determinesthat cumulative losses will be incurred on a particular contract. The loss iscomputed after taking into account direct and indirect costs related to theservice provided under the contract including depreciation on the related buseswhich will be used to meet the service obligation. Swebus normally hasmultiple contracts with the CPTAs (ContractPublic Transportation Authority). In most of the cases the differentcontracts with the same CPTA are closely connected to each other. The contractsshare the same resources (staff, equipment, vehicles and premises). Often thecontracts also are related for other reasons. Swebus signs several contracts atthe same time where some are loss making and some are profit making. Ininstances where the cash flows from such contracts are interrelated, provisionsfor loss making contracts are measured by group contracts, however in noinstance on a higher level than by CPTA. Swebus also signs contracts tomaximize the usage of the capacity in the resources. The provision is calculated as the difference between the estimatedcosts to fulfill the contractual commitment and the contractual revenues.

F-44

----

 

***Restructuring***

Swebus records provisions forrestructuring and related activities only after the detailed formal plan forthe restructuring has been formulated and either the implementation commencesor the main features of the plan have been announced to those affected by it.Provisions for restructuring include only the direct expenditures arising fromthe restructuring, which are those that are both necessarily entailed by therestructuring and not associated with the ongoing activities of the enterprise.

***Leasing***

Leases are classified in thefinancial statements as either finance leases or operating leases. A financelease transfers to the lessee the significant economic risks and rewards ofownership. If this is not the case, the lease is an operating lease. For eachfinance lease, a fixed asset is reported in the balance sheet and acorresponding lease obligation is recorded as a liability. In the statement ofoperations, the costs of finance leases are reported as depreciation of thecarrying value of the fixed asses and interest expense on the lease obligation.For operating leases, no asset or liability is recorded in the balance sheet.In the statement of operations, the periodic rental payments for operating leasesare expensed on a straight-line basis.

***Cash flowstatement***

The cash flow statement isderived from the statement of operations and other changes between opening andclosing balance sheets. The cash and bank balances in the cash flow statementincludes securities, time deposits and other short term deposits.

***Use ofestimates***

The preparation of financialstatements in conformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesto the date of the financial statements and the reported amounts of revenuesand expense during the reporting period. Actual results could differ from thoseestimates.

***Segment information***

Swebus operates in one segmentonly, the CPTA business in Sweden.

**Note 2. Operating income andoperating expenses**

**Sales to affiliated companies**

Net sales from bus servicesincludes sale to affiliated companies of SEK 19, SEK 21 and SEK 24for the years ended February 28, 2006, February 28, 2005 andFebruary 29, 2004 respectively. Other operating income mainly relates tothe sale of diesel and other income from affiliated companies, includingworkshop services.

**Purchases from affiliated companies**

Operating expenses includespurchases from affiliated companies of SEK 293, SEK 348, and SEK 353,respectively, for the years ended February 28, 2006, February 28,2005 and February 29, 2004. Purchases from affiliated companies includedoperating lease rental payments of SEK 253, SEK 311, and SEK 306, respectively,for the years ended February 28, 2006, February 28, 2005 andFebruary 29, 2004.

**Note 3. Other external expenses**
| Remuneration and cost compensation to auditors | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29 2004** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
| **(amounts  in thousands of SEK)**                                      | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                      | ** ** |
| Deloitte &  Touche AB                                               |       |                                             |       |                                             |       |                                            |       |
| Audit fees                                                              |       | 220                                              |       | 840                                              |       | 750                                             |       |
| Other  consultancy fees                                                 |       |                                             |       | —                                           |       | 191                                             |       |
| **Ernst  & Young AB**                                               | ** ** | ** **                                       | ** ** | ** **                                       | ** ** | ** **                                      | ** ** |
| Audit fees                                                              |       | 800                                              |       |                                             |       |                                            |       |
| Other  consultancy fees                                                 |       |                                             |       |                                             |       |                                            |       |
| **Total**                                                               | ** ** | **1,020**                                        | ** ** | **840**                                          | ** ** | **941**                                         | ** ** |

 

F-45

----

 

Audit fees represent theindependent auditors examination of the financial statements. The audit feesalso represent fees in conjunction with the auditor’s examination ofsignificant decisions, actions taken and circumstances of the Company in orderto be able to determine the possible liability to the Company of any BoardMember or 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. All other services provided are included in “other consultancyfees”.
| **Operating lease fees** | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Fees paid to  affiliated companies |       | 254                                              |       | 311                                              |       | 306                                              |       |
| Fees paid to  others               |       | 324                                              |       | 323                                              |       | 292                                              |       |
| **Total**                          | ** ** | **578**                                          | ** ** | **634**                                          | ** ** | **598**                                          | ** ** |

 

Swebus had 1,222 buses underexternal operating lease agreements at February 28, 2006 compared to 1,103at February 28, 2005 and 1,049 at February 29, 2004. Swebus also hasnine properties under operational leasing agreements in which it conducts itsbusiness. At February 28, 2006, the net present value of future leasingpayments for buses was SEK 798 compared to SEK 635 at February 28, 2005and SEK 772 at February 29, 2004. At February 28, 2006, the netpresent value of sublease rental payments to be received by Swebus relating tobuses was SEK 11 compared to SEK 17 at February 28, 2005 and SEK 21 atFebruary 29, 2004. At February 28, 2006, the net present value offuture leasing payments for properties was SEK 39, compared to SEK 46 atFebruary 28, 2005 and SEK 52 at February 29, 2004.

External future lease paymentsfor rentals due calculated at net present value are as follows:
| ** **                                  | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Net present  value of future lease payments |       |                            |       |                            |       |
| —Vehicles  (Buses)                     |       | 798                             |       | 635                             |       |
| —Real estate and  other                |       | 39                              |       | 46                              |       |
| **Total**                                   | ** ** | **837**                         | ** ** | **681**                         | ** ** |

 

The table below summarises thenet present value of the future lease payments for Swebus regarding buses underoperational leasing contracts and the expected maturity as of February 28,2006.

External total future minimumlease payments discounted for each of the periods are as follows:
| ** **                   | ** ** | **Total** | ** ** | **Less than a  year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **After  5 years** | ** ** |
|------------------------------|------------|-----------|------------|---------------------------------|------------|--------------------|------------|--------------------|------------|-------------------------|------------|
| —Vehicles  (Buses)      |       | 798       |       | 154                             |       | 180                |       | 260                |       | 204                     |       |
| —Real estate and  other |       | 39        |       | 7                               |       | 16                 |       | 16                 |       | —                  |       |
| **Total**                    | ** ** | **837**   | ** ** | **161**                         | ** ** | **196**            | ** ** | **276**            | ** ** | **204**                 | ** ** |

 

The following is a schedule byyears of leasing payments at February 28, 2006 is payable as follows:
| **Years Ending:** | ** ** | ** ** | ** ** |
|------------------------|------------|------------|------------|
| February 28,  2007     |       | 251        |       |
| February 28,  2008     |       | 210        |       |
| February 29,  2009     |       | 181        |       |
| February 28,  2010     |       | 183        |       |
| February 28,  2011     |       | 221        |       |
| Later years            |       | 579        |       |
| **Total**              | ** ** | **1,625**  | ** ** |

 

**Note 4. Employees and personnelcosts**
| **Average number of employees**                                   | ** ** | **Year Ended   February 28, 2006 ** | ** ** | **Year Ended   February 28, 2005 ** | ** ** | **Year Ended   February 29 2004 ** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| Women                                                                            |       | 770                                                          |       | 705                                                          |       | 911                                                         |       |
| Men                                                                              |       | 3,908                                                        |       | 4,420                                                        |       | 4,856                                                       |       |
| **Total**                                                                        | ** ** | **4,678**                                                    | ** ** | **5,125**                                                    | ** ** | **5,767**                                                   | ** ** |
| **Salaries,  remunerations and payroll overhead**                                |       |                                                         |       |                                                         |       |                                                        |       |
| Salaries and  other remunerations to board of directors and managing director(1) |       | 2                                                            |       | 3                                                            |       | 3                                                           |       |
| Salaries and other  remunerations to other employees                             |       | 1,294                                                        |       | 1,328                                                        |       | 1,374                                                       |       |
| Pension costs to  board of directors and managing director(1)                    |       | 0                                                            |       | 1                                                            |       | 2                                                           |       |
| Pension costs to  other employees                                                |       | 68                                                           |       | 68                                                           |       | 87                                                          |       |
| Other social  security costs                                                     |       | 460                                                          |       | 456                                                          |       | 466                                                         |       |
| **Total**                                                                        | ** ** | **1,824**                                                    | ** ** | **1,856**                                                    | ** ** | **1,932**                                                   | ** ** |

 

F-46

----

 

----

(1)           Theboard of directors and managing director also include the former managingdirector.

Pension costs refer to paymentsunder Swebus’ defined contribution pension plan
| ** **                                              | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| **Board members and  senior management** | ** ** | **Number**                                       | ** ** | **There  of men**                           | ** ** | **Number**                                       | ** ** | **There  of men** | ** ** | **Number** | ** ** | **There  of men** | ** ** |
| Members of the  board                                   |       | 5                                                |       | 100                                              | %          | 6                                                |       | 100 | % | 6 |   | 100 | % |
| Managing directors and  other senior management         |       | 5                                                |       | 100                                              | %          | 8                                                |       | 88 | % | 11 |   | 82 | % |

 

**Information about absence due to illness**

Absence due to illness as apercentage of ordinary working hours:
| ** **                                      | ** ** | **Year Ended  February 28,  2006** | ** ** | **Year Ended  February 28,  2005** | ** ** | **Year Ended  February 29,  2004** | ** ** |
|-------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| Total absence  due to illness                   |       | 12,1                                         | %          | 12.5                                         | %          | 12.9                                         | %          |
| —absence due to  illness—women        |       | 11,3                                         | %          | 17.7                                         | %          | 18.9                                         | %          |
| —absence due to  illness—men          |       | 16,2                                         | %          | 11.5                                         | %          | 11.8                                         | %          |
| —absence due to  illness—age up to 29 |       | 5,9                                          | %          | 6.5                                          | %          | 8.2                                          | %          |
| —absence due to  illness—age 30-49    |       | 12,4                                         | %          | 12.6                                         | %          | 12.7                                         | %          |
| —absence due to  illness—age over 49  |       | 12,5                                         | %          | 13.2                                         | %          | 13.8                                         | %          |
| Share of long-time  absence of total absence    |       | 74,7                                         | %          | 75.9                                         | %          | 76.7                                         | %          |

 

**Note 5. Taxes**
| ** **                                                                          | ** ** | **Year Ended   February 28, 2006 ** | ** ** | **Year Ended   February 28, 2005 ** | ** ** | **Year Ended   February 29 2004 ** | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------------------------------------------------------|------------|--------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| Income tax  effect on group contribution received                                   |       | —                                                       |       | 45                                                           |       | 48                                                          |       |
| Deferred income  tax related to loss making contracts                               |       | (9                                                           | )          | (4                                                           | )          | 11                                                          |       |
| Valuation  allowance of deferred income tax asset                                   |       | 9                                                            |       | 4                                                            |       | (17                                                         | )          |
| **Total  income tax benefit**                                                       | ** ** | **—**                                                   | ** ** | **45**                                                       | ** ** | **42**                                                      | ** ** |
| **Difference  between statutory income tax rate and effective income tax benefit:** |       |                                                         |       |                                                         |       |                                                        |       |
| Loss before  income taxes                                                           |       | (306                                                         | )          | (366                                                         | )          | (206                                                        | )          |
| Income tax  according to statutory tax rate, 28%                                    |       | 86                                                           |       | 102                                                          |       | 58                                                          |       |
| Temporary  differences for which deferred income tax assets have not been recorded  |       | (8                                                           | )          | (8                                                           | )          | (15                                                         | )          |
| Income tax  effect regarding non-deductible items                                   |       | 0                                                            |       | 0                                                            |       | 0                                                           |       |
| Income tax on  losses for which deferred income tax assets have not been recorded   |       | (78                                                          | )          | (49                                                          | )          | (1                                                          | )          |
| **Total income tax benefit**                                                        | ** ** | **—**                                                   | ** ** | **45**                                                       | ** ** | **42**                                                      | ** ** |

 

F-47

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The income tax rate in Sweden is28%. The taxes are based on the loss before tax with adjustments for non deductible/non-taxablerevenues/costs. Swebus AB had unrecorded accumulated tax losses amountingto SEK 541 (SEK 188 million) as of February 28, 2006, representingSEK 151 (SEK 53) in deferred tax assets. The losses can be used without timelimitations. Swebus AB also had unrecorded accumulated temporary taxdifferences representing deferred tax benefits (assets) of SEK 22 (SEK 29) asof February 28, 2006.

**Temporary differences for tax purposesin the balance sheet**

Temporary differences exist ifthe values of assets and liabilities are different for tax purposes than foraccounting purposes. Temporary differences have resulted in the followingdeferred income tax assets:
| ** **                                  | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Provision for  loss making contracts        |       | 5                               |       | 14                              |       |
| Valuation  allowance on receivables         |       | 14                              |       | 14                              |       |
| Tax losses carry  forward                   |       | 151                             |       | 53                              |       |
| Other  (Restructuring)                      |       | 3                               |       | 2                               |       |
| Valuation  allowance on deferred tax assets |       | (173                            | )          | (83                             | )          |
| **Total deferred income tax asset**         | ** ** | **—**                      | ** ** | **—**                      | ** ** |

 

**Note 6. Vehicles**
| ** **                         | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Accumulated  acquisition cost**  |       |                            |       |                            |       |
| Beginning  balance                 |       | 54                              |       | 27                              |       |
| Purchases                          |       | 2                               |       | 37                              |       |
| Sales/Disposals                    |       | (1                              | )          | (10                             | )          |
| **Ending  balance**                | ** ** | **55**                          | ** ** | **54**                          | ** ** |
| **Accumulated  depreciation**      |       |                            |       |                            |       |
| Beginning  balance                 |       | (17                             | )          | (8                              | )          |
| Sales/Disposals                    |       | 1                               |       | 1                               |       |
| Depreciation for  the year         |       | (8                              | )          | (10                             | )          |
| **Ending  balance**                | ** ** | **(24**                         | **)**      | **(17**                         | **)**      |
| **Net book value, ending balance** | ** ** | **31**                          | ** ** | **37**                          | ** ** |

 

Purchase of vehicles of SEK 0,SEK 0 and SEK 1 were acquired through financial leases during the years endedFebruary 28, 2006, February 28, 2005 and February 29, 2004,respectively. During the year ended February 29, 2004, Swebus acquiredvehicles from an affiliated company in the amount of SEK 4, which was equal tothe carrying amount of such vehicles on the financial statements of theaffiliated company.

**Note 7. Equipment, tools, fixturesand fittings**
| ** **                         | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Accumulated  acquisition cost**  |       |                            |       |                            |       |
| Beginning  balance                 |       | 111                             |       | 125                             |       |
| Purchases                          |       | 6                               |       | 2                               |       |
| Sales/Disposals                    |       | (23                             | )          | (16                             | )          |
| **Ending  balance**                | ** ** | **94**                          | ** ** | **111**                         | ** ** |
| **Accumulated  depreciation**      |       |                            |       |                            |       |
| Beginning balance                  |       | (100                            | )          | (110                            | )          |
| Sales/Disposals                    |       | 23                              |       | 15                              |       |
| Depreciation for  the year         |       | (4                              | )          | (5                              | )          |
| **Ending  balance**                | ** ** | **81**                          | ** ** | **(100**                        | **)**      |
| **Net book value, ending balance** | ** ** | **13**                          | ** ** | **11**                          | ** ** |

 
| **Operating lease deposit**  | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|----------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Acquisition  cost**                  |       |                            |       |                            |       |
| Beginning  balance                     |       | 5                               |       | 5                               |       |
| Increase /  (decrease) during the year |       | (5                              | )          | —                          |       |
| **Ending balance**                     | ** ** | **0**                           | ** ** | **5**                           | ** ** |

 

F-48

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**Note 8. Shares in subsidiaries**
| ** **                        | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-----------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Accumulated  acquisition cost** |       |                            |       |                            |       |
| Beginning  balance                | ** ** | **—**                      | ** ** | **—**                      | ** ** |
| Purchases                         |       | 1                               | ** ** | **—**                      | ** ** |
| **Ending balance**                | ** ** | **1**                           | ** ** | **—**                      | ** ** |

 
| ** **              | ** ** | **City of  incorporation** | ** ** | **Company’s  registration  number** | ** ** | **Number of  shares** | ** ** | **Participation  (%)** | ** ** |
|-------------------------|------------|---------------------------------|------------|------------------------------------------|------------|----------------------------|------------|------------------------|------------|
| Swebus  Serviceresor AB |       | Stockholm                       |       | 556416-2419                              |       | 100                        |       | 100                    |       |

 

**Note 9. Accrued income and prepaidexpenses**
| ** **                                          | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-----------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Accrued income and  prepaid expenses regarding CPTA |       | 54                              |       | 87                              |       |
| Other accrued  income and prepaid expenses          |       | 50                              |       | 37                              |       |
| **Total**                                           | ** ** | **104**                         | ** ** | **124**                         | ** ** |

 

**Note 10. Cash and bank balances**

Included in cash and bankbalances is the portion of Swebus’ outstanding balance for the group accountconnected to the Concordia group account, where Swebus’ shareholder is thecontracting party with the bank. Of Swebus’ total cash and bank balances, thegroup account was SEK 176, SEK 126 and SEK 170 at February 28, 2006,February 28, 2005 and February 29, 2004, respectively.

**Note 11. Changes in shareholder’sequity**
| ** **                                 | ** ** | **Share capital** | ** ** | **Statutory  reserve** | ** ** | **Retained earnings  (deficit)** | ** ** | **Net loss  for the year** | ** ** | **Total** | ** ** |
|--------------------------------------------|------------|------------------------|------------|------------------------|------------|---------------------------------------|------------|-------------------------------------------|------------|-----------|------------|
| **Balances  at March 1, 2002**             | ** ** | **0**                  | ** ** | **0**                  | ** ** | **447**                               | ** ** | **(158**                                  | **)**      | **289**   | ** ** |
| Disposition of  prior year’s net loss |       | —                 |       | —                 |       | (158                                  | )          | 158                                       |       | —    |       |
| Group  contribution received               |       | —                 |       | —                 |       | 151                                   |       | —                                    |       | 151       |       |
| Tax effect on  group contribution          |       | —                 |       | —                 |       | (42                                   | )          | —                                    |       | (42       | )          |
| Net loss for the  year                     |       | —                 |       | —                 |       | —                                |       | (123                                      | )          | (123      | )          |
| **Balances  at February 28, 2003**         | ** ** | **0**                  | ** ** | **0**                  | ** ** | **398**                               | ** ** | **(123**                                  | **)**      | **275**   | ** ** |
| Disposition of  prior year’s net loss |       | —                 |       | —                 |       | (123                                  | )          | 123                                       |       | —    |       |
| Group  contribution received               |       | —                 |       | —                 |       | 172                                   |       | —                                    |       | 172       |       |
| Tax effect on  group contribution          |       | —                 |       | —                 |       | (48                                   | )          | —                                    |       | (48       | )          |
| Net loss for the  year                     |       | —                 |       | —                 |       | —                                |       | (164                                      | )          | (164      | )          |
| **Balances  at February 29, 2004**         | ** ** | **0**                  | ** ** | **0**                  | ** ** | **399**                               | ** ** | **(164**                                  | **)**      | **235**   | ** ** |
| Disposition of  prior year’s net loss |       | —                 |       | —                 |       | (164                                  | )          | 164                                       |       | —    |       |
| Group  contribution received               |       | —                 |       | —                 |       | 162                                   |       | —                                    |       | 162       |       |
| Tax effect on  group contribution          |       | —                 |       | —                 |       | (45                                   | )          | —                                    |       | (45       | )          |
| Net loss for the  year                     |       | —                 |       | —                 |       | —                                |       | (321                                      | )          | (321      | )          |
| **Balances  at February 28, 2005**         | ** ** | **0**                  | ** ** | **0**                  | ** ** | **352**                               | ** ** | **(321**                                  | **)**      | **31**    | ** ** |
| Disposition of  prior year’s net loss |       | —                 |       | —                 |       | (321                                  | )          | 321                                       |       | —    |       |
| Group  contribution received               |       | —                 |       | —                 |       | 500                                   |       | —                                    |       | 500       |       |
| Tax effect on  group contribution          |       | —                 |       | —                 |       | —                                |       | —                                    |       | —    |       |
| Net loss for the  year                     |       | —                 |       | —                 |       | —                                |       | (306                                      | )          | (306      | )          |
| **Balances at February 28, 2006**          | ** ** | **0**                  | ** ** | **0**                  | ** ** | **531**                               | ** ** | **(306**                                  | **)**      | **225**   | ** ** |

 

F-49

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**Note 12. Other provisions**
| ** **                                 | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|--------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Beginning  balance                         |       | 7                               |       | 6                               |       |
| Provisions for  restructuring              |       | 10                              |       | 7                               |       |
| Provisions  reversed against restructuring |       | (7                              | )          | (6                              | )          |
| **Ending balance**                         | ** ** | **10**                          | ** ** | **7**                           | ** ** |

 

**Note 13. Other non-currentliabilities**
| ** **                    | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|-------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **Finance  lease obligation** |       |                            |       |                            |       |
| Payment due 1  year           |       | 4                               |       | 6                               |       |
| Payment due 2-5  years        |       | 1                               |       | 3                               |       |
| **Total**                     | ** ** | **5**                           | ** ** | **9**                           | ** ** |

 

During the year endedFebruary 28, 2006, Swebus did not enter into any new finance leasingagreements.

The following is a schedule byyears of future minimum gross lease payments under finance leases together withthe present value of the net minimum lease payments as of February 28,2005:
| **Year ending**                         | ** ** | ** ** | ** ** |
|----------------------------------------------|------------|------------|------------|
| February 28,  2007                           |       | 3          |       |
| February 28,  2008                           |       | 2          |       |
| February 29,  2008                           | ** ** | **—** | ** ** |
| February 28,  2009                           |       | —     |       |
| February 28,  20010                          |       | —     |       |
| Later years                                  |       | —     |       |
| **Total  minimum gross lease payments**      | ** ** | **5**      | ** ** |
| Less: Amount  representing interest          |       | (1         | )          |
| **Present value of minimum lease  payments** | ** ** | **4**      | ** ** |

 

The leasing fees are based ondepreciation according to the annuity method and a floating interest rate. Theshort-term portion of the finance leasing obligation is classified as othercurrent liabilities.

**Note 14. Accrued expenses anddeferred income**
| ** **                                           | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Accrued expenses  and deferred income regarding CPTA |       | 137                             |       | 92                              |       |
| Accrued employee  costs                              |       | 202                             |       | 198                             |       |
| Accrued rental  charges                              |       | 3                               |       | 2                               |       |
| Other accrued  expenses and deferred income          |       | 115                             |       | 59                              |       |
| **Total**                                            | ** ** | **457**                         | ** ** | **351**                         | ** ** |

 

**Note 15. Pledged assets andcontingent liabilities**

In January 2004, Swebus’shareholder, Concordia Bus Nordic AB, issued EUR 130 (SEK 1,230) of 9.125%senior secured notes due August 1, 2009. Concordia Bus Nordic ABpledged its shares in certain of its subsidiaries, including Swebus, ascollateral for the senior secured notes, and Swebus, together with otheraffiliated companies, is a guarantor of the notes. In addition, Swebus hasgranted a SEK 100 floating charge over Swebus’ non-fixed assets as security forthe notes. The floating charge represents a general pledge of Swebus’ assets.The pledge arose from a loan received from Swebus’ shareholder. However, thesenior secured notes have first priority over this standing floating charge.

F-50

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**Note 16. Related party transactions**

Swebus does not own any buses.All buses are leased from external parties or internally from companies withinthe Concordia group. Buses leased internally are leased from SwebusBusco AB. All internal leases are classified as operating leases. Leasingfees charged from Swebus Busco to Swebus amounted to SEK 253, SEK 311and SEK 306 for the years ended February 28, 2006,February 28, 2005 and February 29, 2004, respectively.

Historically, Swebus has obtainedlong-term financing from its direct and indirect parent company ConcordiaBus AB and Concordia Bus Nordic AB who have external borrowings.Swebus has historically had receivables due from affiliated companies whichinclude certain non-interest bearing trade receivables. Swebus had liabilitiespayable to affiliated companies of SEK 453 at February 28, 2006 (of whichSEK 52 short-term), and liabilities payable to affiliated companies of SEK 235at February 28, 2005. Swebus had receivables due from affiliated companiesof SEK 634 (of which SEK 503 was short-term) at February 28, 2006 comparedto receivables of SEK 294 (of which SEK 4 was short-term) at February 29,2005. Interest expense to affiliated companies, net of interest income fromaffiliated companies was SEK 17, SEK 74, and SEK 8 for the years endedFebruary 28, 2006, February 28, 2005 and February 29, 2004,respectively.

**Note 17. Reconciliation to accounting principlesgenerally accepted in the United States of America**

Accounting policies used by theSwebus AB conform with Swedish GAAP which differ in certain significantrespects from U.S. GAAP. Below are descriptions of these differences and areconciliation of net loss, shareholder’s equity and cash flows to U.S. GAAP.
| ** **                           | ** ** | **Note** | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year ended  February 28, 2005** | ** ** | **Year ended  February 29, 2004** | ** ** |
|--------------------------------------|------------|----------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| **Net  loss under Swedish GAAP**     |       |     | ** ** | **(306**                                         | **)**      | **(321**                                         | **)**      | **(164**                                         | **)**      |
| Adjustments:                         |       |     |       |                                             |       |                                             |       |                                             |       |
| Restructuring                        |       | (b)      |       | —                                           |       | (6                                               | )          | 6                                                |       |
| Tax effect of  U.S. GAAP adjustments |       |     |       | —                                           |       | 2                                                |       | (2                                               | )          |
| **Net loss under U.S. GAAP**         |       |     | ** ** | **(306**                                         | **)**      | **(325**                                         | **)**      | **(160**                                         | **)**      |

 
| ** **                                        | ** ** | **Note** | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|---------------------------------------------------|------------|----------|------------|---------------------------------|------------|---------------------------------|------------|
| **Shareholder’s  equity under Swedish GAAP** |       |     | ** ** | **225**                         | ** ** | **31**                          | ** ** |
| Adjustments:                                      |       |     |       |                            |       |                            |       |
| Push-down  accounting                             |       | (a)      |       | 459                             |       | 459                             |       |
| Restructuring                                     |       | (b)      |       | —                          |       | —                          |       |
| Tax effect of  U.S. GAAP adjustments              |       |     |       | —                          |       | 0                               |       |
| **Shareholder’s equity under U.S.  GAAP**    |       |     | ** ** | **684**                         | ** ** | **490**                         | ** ** |

 

There were no significantdifferences between Swedish GAAP and U.S. GAAP in regards to reportingcash flows from operating, investing and financing activities in the statementsof cash flows. There were no significant non-cash investing or financingactivities during the years ended February 28, 2006, February 28, 2005 andFebruary 29, 2004 other than that Swebus entered into capital leasesresulting in the recognition of capitalized vehicle costs and related capitallease obligations of SEK 0 for the yar ended Ferbuary 28, 2006, SEK 0 for theyear ended February 28, 2005 and SEK 21 for the year endedFebruary 29, 2004.

There are no items of othercomprehensive income.

**(a)           Push-downaccounting**

Goodwill is recorded under U.S.GAAP whereas no goodwill is recorded for Swedish GAAP. The amount of goodwillfor U.S. GAAP purposes is a result of the fact that approximately SEK550 million of goodwill, which was created when Swebus was acquiredtogether with other affiliated companies on January 14, 2000, was notrequired to be pushed down to the financial statements of Swebus in accordancewith Swedish GAAP. U.S. GAAP requires such goodwill be pushed down since Swebusbecame wholly owned by one shareholder as a result of the acquisition.

Effective March 1, 2002,Swebus adopted Statement of Financial Accounting Standard (“SFAS”)No. 142, “Goodwill and Other Intangible Assets,” for U.S. GAAP purposes.SFAS No. 142 requires goodwill to no longer be amortized, but instead betested for impairment upon adoption of SFAS No. 142, as well as on anannual 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, for U.S.GAAP purposes, Swebus amortized goodwill balances over their estimated economiclives, not to exceed twenty years, and assessed the balances for impairmentwhenever events or changes in circumstances indicated

F-51

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that the carrying amounts may not be recoverable. SinceSwebus AB does not have any goodwill recorded under Swedish GAAP, theSwedish GAAP net loss does not include any goodwill amortization. Consequently,there is no adjustment necessary to reverse amortization recorded for SwedishGAAP to derive the net loss under U.S. GAAP.

Upon the adoption of SFASNo. 142, the transition provisions of SFAS No. 141, “BusinessCombinations,” also became effective requiring, in certain circumstances, thereclassification of amounts between recognized goodwill and other intangiblesrelating to previous business combinations. The transition provisions of SFASNo. 141 did not affect any of Swebus’ previously reported goodwill underU.S. GAAP.

Under SFAS No. 142, the U.S.GAAP goodwill impairment test is performed at the reporting unit level and iscomprised of two steps. The initial step is designed to identify potentialgoodwill impairment by comparing an estimate of the fair value of theapplicable reporting unit to its carrying value, including goodwill. Swebus’measurement of fair value is based on an evaluation of both future discountedcash flows, consistent with those utilized in Swebus’ annual planning process,and public company trading multiples. If the carrying value exceeds fair value,a second step is performed, which compares the implied fair value of theapplicable reporting unit’s goodwill with the carrying amount of that goodwill,to measure the amount of goodwill impairment, if any. Subsequent reversal of arecognized impairment loss is prohibited.

Upon adoption of SFASNo. 142, Swebus performed transitional impairment tests of goodwill under U.S.GAAP. As a result of these impairment tests, no impairment charges wererecognized at the date of adoption. Subsequent annual impairment tests areperformed, at a minimum, on goodwill in conjunction with Swebus’ annualplanning process. No impairments were recorded under U.S. GAAP as a result ofthe annual impairment tests.

**(b)           Restructuring**

For Swedish GAAP, Swebus recordeda restructuring provision of SEK 6 million at February 29, 2004,relating to one-time employee termination costs pertaining to the close-down ofoperations in Gothenburg, Sweden which occurred after February 29, 2004.As the employees continued working for longer than a minimum retention periodto receive the termination benefit, the termination costs was deemed to havefuture benefit under U.S. GAAP. As a result, under U.S. GAAP, the terminationcosts could not be recognized as a provision at February 29, 2004.Instead, the fair value of the obligation at February 29, 2004 wasrecognized for U.S. GAAP ratably over the estimated remaining service period ofthe employees. During the year ended February 28, 2005 this restructuringprovision has been dissolved.

**(c)           Changesin shareholder’s equity under U.S. GAAP**
| ** **                                            | ** ** | **Shareholder’s  Equity** | ** ** |
|-------------------------------------------------------|------------|--------------------------------|------------|
| **Shareholder’s  equity March 1, 2002**          | ** ** | **748**                        | ** ** |
| Group contribution  from shareholder                  |       | 151                            |       |
| Tax effect on  group contribution from shareholder    |       | (42                            | )          |
| Net loss                                              |       | (123                           | )          |
| **Shareholder’s  equity February 28, 2003** | ** ** | **734**                        | ** ** |
| Group  contribution from shareholder                  |       | 172                            |       |
| Tax effect on  group contribution from shareholder    |       | (48                            | )          |
| Net loss                                              |       | (160                           | )          |
| **Shareholder’s  equity February 29, 2004**      | ** ** | **698**                        | ** ** |
| Group  contribution from shareholder                  |       | 162                            |       |
| Tax effect on  group contribution from shareholder    |       | (45                            | )          |
| Net loss                                              |       | (325                           | )          |
| **Shareholder’s  equity February 28, 2005**      | ** ** | **490**                        | ** ** |
| Shareholders  contribution                            |       | 500                            |       |
| Tax effect on  group contribution from shareholder    |       | 0                              |       |
| Net loss                                              |       | (306                           | )          |
| **Shareholder’s equity February  28, 2006**      | ** ** | **684**                        | ** ** |

 

F-52

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

***Consolidationof Variable Interest Entities***

InDecember 2003, the U.S. Financial Accounting Standards Board (“FASB”) issuedFASB Interpretation No. 46 (revised December 2003), “Consolidation ofVariable Interest Entities,” (“FIN 46R”) which addresses the consolidation ofvariable interest entities by business enterprises. Variable interest entitiesare entities in which either the equity investment at risk is not sufficient toabsorb the probable losses without additional subordinated financial supportfrom other parties, or the investors with equity at risk lack certain essentialcharacteristics of a controlling interest. Under FIN 46R, Swebus mustconsolidate any variable interest entity in which Swebus holds variableinterests and is deemed the primary beneficiary. Portions of the requirementsof 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 February28, 2005 under the transition rules. The adoption of the remaining provisionsof FIN 46R during the year ended February 28, 2005 did not have a significanteffect on Swebus’ financial position or results of operations reported inaccordance with U.S. GAAP.

***RevenueArrangements with Multiple Deliverables***

In May2003, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensuson Issue No. 00-21 “Revenue Arrangements with Multiple Deliverables” (“EITF00-21”), providing further guidance on how to account for multiple elementcontracts. EITF 00-21 was effective for all arrangements entered into by Swebuson or after March 1, 2004. The adoption of EITF 00-21 during the year endedFebruary 28, 2006 did not have a significant effect on Swebus’ financialposition or results of operations reported in accordance with U.S. GAAP.

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

InDecember 2004, the FASB issued SFAS No. 153, “Exchanges of Non-Monetary Assets —an amendment of APB Opinion No. 29” (“SFAS 153”). Accounting Principles Board (“APB”)Opinion No. 29, “Accounting for Nonmonetary Transactions” provided an exceptionto the basic fair-value measurement principle for exchanges of similarproductive assets. That exception required that some nonmonetary exchanges,although commercially substantive, be recorded on a carryover basis. SFAS 153eliminates the exception to fair value for exchanges of similar productiveassets and replaces it with a general exception to fair-value measurement forexchange transactions that do not have commercial substance—that is,transactions that are not expected to result in significant changes in the cashflows of the reporting entity. SFAS 153 is effective prospectively for Swebusin accounting for nonmonetary asset exchanges which occur on or after March 1,2006 for U.S. GAAP purposes.

***Accounting Changes and Error Corrections***

In May2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections -a replacement of APB Opinion No. 20 and FASB 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 that mostvoluntary changes in accounting principle be recognized by including in netincome of the period of the change the cumulative effect of changing to the newaccounting principle. SFAS 154 is effective for accounting changes andcorrections of errors made by Swebus on or after March 1, 2006 for U.S. GAAPpurposes, except that SFAS 154 does not change the transition provisions of anyexisting accounting pronouncement, including those that are in a transitionphase as of March 1, 2006.

**Note 18.   Accounts receivable**

Accounts receivable and relatedallowance for doubtful accounts was as follows:
| ** **                             | ** ** | **February 28, 2006** | ** ** | **February 28, 2005** | ** ** |
|----------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Accounts  receivable                   |       | 364                             |       | 265                             |       |
| Less: Allowance  for doubtful accounts |       | (14                             | )          | (15                             | )          |
| **Net accounts receivable**            | ** ** | **350**                         | ** ** | **250**                         | ** ** |

 

As Swebus’ customers areprimarily governmental, Swebus has not experienced significant uncollectibilityproblems historically. Changes in the allowance for doubtful accounts were asfollows:
| **Allowance for doubtful accounts receivable:** | ** ** | **Year Ended  February 28, 2006** | ** ** | **Year Ended  February 28, 2005** | ** ** | **Year Ended  February 29, 2004** | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| Beginning  balance                                                  |       | (15                                              | )          | (8                                               | )          | (1                                               | )          |
| Additions to  allowance charged to expense                          |       | 1                                                |       | (8                                               | )          | (7                                               | )          |
| Accounts  receivable written off against the allowance              |       | 0                                                |       | 1                                                |       | 0                                                |       |
| **Ending balance**                                                  | ** ** | **(14**                                          | **)**      | **(15**                                          | **)**      | **(8**                                           | **)**      |

 

F-53

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