CONCORDIA BUS ANNUAL REPORT 2007/2008^

KAPITEL02 Presenting Concordia Bus 04 Statement from the CEO 06 Vision, mission, goals and strategies 08 Market 12 Swebus 14 Concordia

Bus Finland 15 Concordia Bus Norway 16 Swebus Express 17 Concordia Bus Fleet 18 Sustainability 20 Management systems and share

data 21 Corporate governance 24 Board of Directors 25 Executive Management 26 Administration report 29 Consolidated income state-

ment 30 Consolidated balance sheet 31 Consolidated statement of changes in equity 32 Consolidated cash flow statement 33 Parent

Company income statement 34 Parent Company balance sheet 35 Parent Company statement of changes in equity 36 Parent Company

cash flow statement 37 Notes 58 Audit report 59 Addresses, Glossary and Definitions 60 Historical overview

KEY FINANCIAL RATIOS SEK M, unless otherwise stated 03/04* 04/05* 05/06** 06/07** 07/08**

Revenue 4,761 4,812 4,683 5,075 5,406Operating profit –155 –312 –344 –24 161

Profit after net financial items –463 –562 –794 –246 –16Profit after tax –409 –560 –795 –245 –15

Cash flow for the year 149 –169 2 117 211Cash and cash equivalents*** 346 175 231 351 529

Equity/assets ratio, % –9.7 –31.1 –0.6 6.7 5.7Equity –330 –873 –17 227 210

Equity per ordinary share –66 –174.6 –0.85 11.35 10.50* According to Annual Accounting Act

** According to IFRS*** Cash and cash equivalents include

blocked bank accounts.

KAPITEL

CONCORDIA BUS’S VALUES We keep our promises to customers We respect our employees – and earn their respect in return

We value good leadership We have integrity We are committed to quality

^^ ^^

CONCORDIA BUS WON ITS FIRST TRANSPORT CONTRACT

IN DENMARK, EFFECTIVE FROM AUTUMN 2008.

REVENUE FROM LONG-DISTANCE BUS TRANSPORT SERVICES AMOUNTED TO SEK 351 MILLION (365).

OPERATING PROFIT WAS SEK 19 MILLION (10).

REVENUE FROM CONTRACTUAL BUS TRANSPORT SERVICES IN NORWAY TOTALLED SEK 463

MILLION (443). OPERATING PROFITWAS SEK 23 MILLION (19).

REVENUE FROM CONTRACTUALBUS TRANSPORT SERVICES IN

FINLAND REACHED SEK 517 MILLION (409). OPERATING PROFIT

WAS SEK 9 MILLION (–9).

REVENUE FROM CONTRACTUAL BUS

TRANSPORT SERVICES INSWEDEN AMOUNTED TO

SEK 3,990 MILLION (3,668).OPERATING PROFIT WAS

SEK 153 MILLION (7).

REVENUE IN THE CONCORDIA BUS GROUP ROSE TO

SEK 5,406 MILLION (5,075).

FOR 2007 THE CONCORDIA BUSGROUP REPORTED AN

OPERATING PROFIT OF SEK 161 MILLION (–24).

THE CONCORDIA BUS GROUP WON CONTRACTS FOR 370 BUSES (194)

IN THE YEAR’S TENDERS

^

IN 2007 THE GROUP PURCHASED 133 BUSES (377)FOR A TOTAL OF SEK 306 MILLION (931)

UNDER FINANCE LEASES.

2 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Presenting Concordia Bus

. ..

.Sweden

Market leader. Swebus has 103 bus

transport contracts and 200 million

passengers in a market worth SEK 12

billion, of which 90% is deregulated.

Challenging car transports.

Norway

Top three. Concordia Bus Norway

has 8 bus transport contracts and 11

million passengers in a rapidly dereg-

ulating market worth SEK 11 bil-

lion. Around 30% of bus services are

competitively tendered. Challenging

car transports.

Finland

Top three. Concordia Bus Finland

has 45 bus transport contracts and

31 million passengers in a market

worth SEK 5 billion that is under-

going gradual deregulation. Approx-

imately 47% of bus services are com-

petitively tendered. Challenging car

transports.

Denmark

New operator. As of 2008, start of

the fi rst bus transport contract in a

fully competitive market worth SEK

6 billion. Challenging car transports.

LONG-DISTANCE TRAFFIC

Market leader. Swebus Express has

2.2 million passengers on 30 long-

distance bus lines. Challenging car,

air and rail transports.

BUS FLEET MANAGEMENT

Th e only Nordic specialist company.

Concordia Bus Fleet Group optim-

izes purchasing, management and

sales of the approximately 3,400

buses in the Group’s fl eet.

CONTRACTUAL BUS TRANSPORT SERVICES

C O N C O R D I A B U S 3

CONCORDIA BUS

CONCORDIA BUS FLEET

SWEBUS EXPRESSSWEDEN

SWEBUSSWEDEN

CONCORDIA BUS FINLAND

FINLAND

CONCORDIA BUS NORGE

NORWAY

CONCORDIA BUS DANMARK

DENMARK

ORGANIZATIONAL CHART

0

1,000

2,000

3,000

4,000

5,000

6,000

07/0806/0705/0604/0503/04

4,761

SEK M

4,812 4,6835,075

5,406

REVENUE OPERATING PROFIT TENDER HISTORY

PRESENTING CONCORDIA BUS

03/04 04/05 05/06 06/07 07/08

Total number of km driven (millions) 258 258 237 237 245

Number of employees 7,512 6,949 6,299 6,814 7,021

Number of buses 3,908 3,730 3,395 3,503 3,376

Number of km driven per bus 65,934 69,199 69,852 67,572 72,571

Revenue per bus 1.22 1.29 1.38 1.45 1.60

SHARE OF REVENUE SHARE OF OPERATING PROFIT

Contractual bustransports inSweden 74%

Contractual bustransports in

Norway 9%

Express bus transports 7%

Contractual bus transports in Finland 10%

Contractual bustransports inSweden 76%

Contractual bustransports in

Norway 11%

Express bus transports 9%

Contractual bus transports in Finland 4%

–400

–300

–200

–100

0

100

200

07/0806/0705/0604/0503/04

–155

SEK M

–312–344

–24

161

0

500

1,000

1,500

2,000

2,500

3,000

07/0806/0705/0604/0503/04

557

2,015

No. of buses

1,221

221

1,024

762

1,279

194

1,663

370

Tenders won by Concordia BusTenders won by others

4 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Earnings aided by resource-effi ciency and quality

Th e outlook for public bus transports is

bright. Already the most common mode of

public transport, it is growing steadily and

appears to be approaching a major modern

breakthrough. As municipalities and county

councils invest in their infrastructure, quality

aspects are slowly but surely gaining more

attention.

Th e future also looks promising for Con-

cordia Bus. Th e customers rely on our ser-

vices and we are gradually enhancing both

our products and our ability to do more with

less. Improved resource-effi ciency is one of

the main drivers behind our rapid earnings

growth, which is unparalleled in the industry.

Earnings up by more than SEK 200 million Concordia Bus delivered a fi nancial result

that is fully on par with the promised growth.

In the span of two years, we have improved

our operating result by a half million Swedish

kronor. Th e year’s increase was approximately

SEK 200 million, enabling the company to

post its fi rst-ever operating profi t.

An internal dialogue about the factors

that create success in our industry lies behind

the transformation of Concordia Bus. Every

day, I meet inspired employees that can serve

as role models for all of us in the company.

At each and every depot there are traffi c

supervisors, bus drivers, traffi c planners and

other staff who together give our customers

and clients the highest measured quality in

the industry. Th ey love their jobs and are

dedicated to doing them well. I am proud of

everything they have achieved and share their

sense of commitment.

The right transport services at the right cost I am very satisfi ed with the fi nancial develop-

ment and am convinced that there is still a

great deal more this company can accom-

plish. We have already taken several steps

along the way to creating even better bus

transports throughout the Nordic region and

a still more resource-effi cient and credible

Concordia Bus.

A provider of road transport services

stands or falls with its ability to develop and

deliver the services customers want at a price

that covers the related costs and provides a

STATEMENT FROM THE CEO

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 5

reasonable surplus. However, the existence of

a predefi ned transport network limits our

freedom to defi ne the product we deliver,

and means that good planning and resource-

effi ciency are decisive in meeting the set targets.

Th e perspective is almost ecological – we

should never use more resources than we

need. Th e point is not to expend more eff ort,

but to do everything more effi ciently than we

did yesterday and more effi ciently than our

competitors today.

I believe that the realignment of Concordia

Bus into a process-driven company was a

turning point. By measuring ourselves against

a set of carefully defi ned performance indic-

ators and making use of benchmarking, we

have been able to enhance our quality while

at the same time signifi cantly strengthening

our earnings.

Stealing market share from carsWe are not challenging the railways and have

no dispute with other providers of road trans-

port services, whether they operate in the

open market or enjoy the protection of a

granted concession. It is cars we all want to

steal market shares from, the thoughtless rec-

reational motorists and private automobiles

that day after day drive to and from work car-

rying only a driver. We are committed to

increasing the use of public transport for the

benefi t of the taxpayers and the environment,

as much as for our own sake.

A modern bus requires fewer than four

passengers to be an environmentally superior

alterative to the automobile. And even greater

environmental gains are possible by increas-

ing the number of passengers on the buses.

We and other major transport providers

are working strenuously to minimize environ-

mentally hazardous emissions and reduce

the use of fossil fuels. Th ese eff orts have been

successful and our long-term ambition at

Concordia Bus is to reach a point where our

operations are climate- and eco-neutral. In

the meantime, increased ridership on our

buses nonetheless has a faster and greater

eff ect without any cost to the county trans-

port authorities or the taxpayers.

Here, there is a natural affi nity of interests

between all players in the public transport

sector, whether clients or contractors. If we

and other operators are given better scope to

off er transport services that are truly customer-

driven, we can fi nally create the product

needed by society today and in the future.

Incentive agreements are the key Overly detailed tender documents that specify

not only the needs to be satisfi ed but also how

this is to take place are an everyday burden

for public transport operators. And when the

amount of compensation is also fi xed and

regulated on the basis of production, the

situation is further aggravated. Despite this,

so-called gross cost contracts have become

even more common than before. An already

shackled transport operator is left without

any incentive whatsoever to increase the

number of passengers or improve their satis-

faction.

Concordia Bus advocates wider use of

incentive agreements in the public transport

sector. It must be profi table for all parties

when the operator does everything right.

Higher quality transports that lead to more

passengers on the buses and lower environ-

mental impact should provide scope to sup-

plement the operator’s fi xed compensation

with a variable component based on ticket

revenues.

Our own profi tability is now stable and

expected to strengthen further. We have

proven our ability to calculate, win and

deliver on contracts better than most. Th e

internal risks are low, but there are external

risks that are beyond Concordia Bus’s con-

trol, particularly the price of fuel, environ-

mental requirements and access to qualifi ed

manpower.

I have already spoken of the company’s

many dedicated managers and employees,

but I am well aware that our employee pro-

grams have not yet reached all the way out to

the front lines where supervisor meets driver

and driver meets customer. Th e transport

contracts of the future require employees who

know what is expected of us all and can easily

follow up their performance. Th is is where we

are headed.

Ragnar Norbäck

President & CEO

STATEMENT FROM THE CEO

6 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Customer experience in focus

VISION, MISSION, GOALS AND STRATEGIES

The customer experience is at the core of Concordia Bus’s business. By realizing its objectives for perceived quality, the company can also meet its operating and fi nancial goals.

In the Nordic region there is a rising need,

and demand, for public transport. Competi-

tion for previously protected transport ser-

vices is contributing to growth in the dereg-

ulated segment of the market.

Concordia Bus is active exclusively in

road transport services, above all through

transport contracts awarded by public sector

agencies. Since the compensation payable

under these transport contracts is largely

fi xed, Concordia Bus is working to boost the

share of controllable revenue. A change of

this type raises the operator’s risk and respons-

ibility for encouraging customers to increase

their use of transport services.

Long-term goalsConcordia Bus sets goals in three diff erent

categories: Market goals, operating goals and

fi nancial goals. To reach each and every one

of these goals, the company has formulated a

number of diff erent strategies.

Market goals

• More than 80% satisfi ed customers.

• Market leader in selected segments of the

Nordic region and among the top three in

all four countries.

• More than one third of all scheduled road

transport services in the Nordic region.

• Highest quality rating among leading

public transport operators from the Insti-

tute for Quality Development, SIQ.

• Highest credibility among the clients.

Operating goals

• Motivated Employee Index of more than

80.

• Climate-neutral.

• Fewer than 1 personal injury per a

distance equal to 100 times the earth’s

circumference.

Financial goals

• Profi t margin of 3–5%.

• Return on capital employed of at least 10%.

• Return on equity of at least 15%.

• Equity/assets ratio of 25%.

• Cash fl ow that covers investment needs

and shareholder dividends.

StrategiesTh e strategies are divided into fi ve diff erent

areas: growth, market effi ciency, structure,

resource management and employee develop-

ment.

An increased undertaking in the local

transport service contracts is a key compon-

ent not only of Concordia Bus’s growth

ambitions but also for development in other

prioritized strategic areas. Th e company seeks

greater responsibility for the service off ering,

timetable and sales, as well as compensation

for both the provision of transport services

and the number of passengers. Concordia

Bus aims to grow both organically and

through increased penetration of existing

markets, but also via product diversifi cation

and by playing an active role in the anticip-

ated consolidation of the market.

Market effi ciency will be improved

through new transport solutions, ongoing

productifi cation, improved tender prepara-

tion, careful contract management and active

communication. A new communication plat-

form was launched in the past year and a new

graphic identity will be introduced in the

year ahead.

In every geographical market, Concordia

Bus strives to promote the existence of strong

industry organizations. Strategic partnerships

accelerate the company’s own pace of develop-

ment and assessment of the company’s fi nan-

cial and corporate structure satisfi es other

primarily fi nancial goals.

Because resource management is of cen-

tral importance to Concordia Bus and is a

critical competitive strength, the related strat-

egies cover a number of diff erent initiatives.

Resource optimization through fl eet manage-

ment, continuous development of the com-

pany’s already market-leading expertise in

traffi c planning and evaluation of the group-

wide services are a few strategic priorities in

the resource management area. Safety issues

also belong to this category, as do the increas-

ingly urgent and prioritized environmental

activities. However, process control and

benchmarking of effi ciency and performance

have the greatest impact of all.

Motivated employees are needed in every

part of the company’s operations, where the

shared values serve as a foundation for the

creation of a professional culture. Th e com-

pany encourages employee commitment and

strives to systematically utilize this commit-

ment and provide individual feedback on

work performance. Powers and responsibili-

ties must be absolutely clear and the decision-

making processes eff ective. Managers are

developed in accordance with established

leadership criteria and each employee is given

opportunities for personal development

through at least one yearly evaluation to-

gether with his or her manager and matching

of skills to work duties. Th e bus drivers are

trained in a way that refl ects the company’s

obligations to its customers and Concordia

Bus strives to be perceived as the industry’s

most attractive employer.

Increase in uniform working methodsTo realize the vision “Everyone wants to

travel with us” and achieve its goals, the com-

pany focuses on continuous improvement of

its working methods through benchmarking.

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 7

VISION, MISSION, GOALS AND STRATEGIES

In this context, customer-perceived quality is

the single most important factor and motivated

employees are vital for long-term success.

Concordia Bus has fi ve basic shared val-

ues that steer development of the company’s

working methods: Credibility, mutual

respect, good leadership, integrity and qual-

ity. Th ese values provide a platform not only

for the company’s day-to-day operations, but

also its strategies, goals and even its vision.

Better solutions through process controlTh e shared values also create a framework for

process control and a growing number of

group-wide working methods in production,

accounting, fi nance and administration.

Group-wide working methods are of major

importance, above all for quality manage-

ment and resource-effi ciency.

25 carefully selected performance indic-

ators make it possible to identify the areas

where the company is performing most suc-

cessfully. 17 interdisciplinary process teams

that involve 120 employees in nine main pro-

cesses evaluate alternative methods for

enhancing quality in everything the company

does. Each team is headed by a president or

member of the Executive Management.

When a routine is created or changed, the

results are documented and added to the

continuously revised and updated collection

of group-wide rules and routines known as

Policies & Instructions.

Successful benchmarking has enabled

recent years’ improvements in contract starts

and wind-ups, implementation of in-house

customer surveys and development of the

Green Journey pilot project.

In the past two years the share of group-

wide working methods has grown dramatic-

ally and now makes up around 25% of all

identifi ed processes, a share that is expected

to grow further.

VALUESFive shared values define the ethics applied in all parts of the Group’s operations, from internal activities to relations with external parties. They also describe how the company strives to conduct its activities in an efficient manner. Through sys-tematic monitoring, the management can deter-mine how firmly established the values are throughout the company.

WE KEEP OUR PROMISES TO THE CUSTOMERSOur customers see us as credible. The informa-tion we provide is perceived as timely and suffi-cient in scope. Our commitments are long term.

WE RESPECT OUR EMPLOYEES – AND EARN THEIR RESPECT IN RETURNOur company stands for equal treatment of all employees. Together we create a secure and con-genial working environment that stimulates initia-tive and ideas for improvement. We encourage health and development, and recognize achieve-ment. We react to a lack of respect towards to company and its employees.

WE VALUE GOOD LEADERSHIPWe have well defined leadership criteria. Our managers place the interests of our customers and the company first. We promote cooperation across borders and provide feedback on work performance. We can be trusted with confidences.

WE HAVE INTEGRITYAt Concordia Bus we comply with the applicable laws, rules and industry standards. We take our responsibility for the environment and society. Our relationships with business partners are characterized by mutual respect.

WE ARE COMMITTED TO QUALITYWe deliver results. Our services maintain the promised level of quality as a minimum require-ment. We use systematic follow-up and develop-ment of operations to ensure lasting correction of errors and deviations.

APPRECIATED The customers enjoy accessibi-lity, reliability and courteous service. The public transport authorities recognize the value of Concordia Bus’s advice. The drivers represent Concordia Bus’s approach to good custo-mer relations.

CREDIBLE Concordia Bus keeps its promi-ses, maintains a high level of safety and provides transport solutions that support society’s objectives for development of road transports.

RESOURCE-EFFICIENCY

Concordia Bus has a low pro-duction cost in relation to its delivered quality and offers effective solutions that also contribute to sustainable long-term development.

ROAD TRANSPORT

Concordia Bus provides scheduled transport services under contracts, in partnership or independently.

MISSION:AN APPRECIATED, CREDIBLE AND

RESOURCE-EFFICIENT PROVIDER OF ROAD TRANSPORT SERVICES

VISION: EVERYONE WANTS TO TRAVEL WITH US

^

8 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

By winning the Danish contract in 2008, Concordia Bus has made a breakthrough into a market worth approximately SEK 6 billion. This is equal to more than 20% of the entire deregulated market in the Nordic region, which is the company’s home market.

Th e public transport market in Sweden, Nor-

way, Denmark and Finland generates annual

revenue in the range of SEK 70 billion.

Scheduled bus transports account for more

than half of this total, or around SEK 40 bil-

lion, of which approximately SEK 28 billion

is tendered in open competition. Th is is Con-

cordia Bus’ market – scheduled competitively

tendered bus transport services for passengers

in the Nordic region.

With annual revenue of SEK 5.4 billion,

Concordia Bus is the largest bus transport

operator in the Nordic region and one of the

ten largest public transport companies in

Europe.

Young people the most frequent usersTh e majority of Concordia Bus’s customers

are passengers in urban traffi c. Surveys in

Sweden show that 70% of the population

uses public transport occasionally, with

women outnumbering men and young

people the most frequent users of all. Around

15% use public transport daily and an equal

share never use it. Industry surveys on cus-

tomer satisfaction among users of public bus

transports show that two of three are satisfi ed

or highly satisfi ed.

Convenience of cars still attractive 50 years have passed since the automobile

MARKET

A complex and evolving market

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 9

MARKET

POLITICIANS CUSTOMERIMAGE›

CLIENT OPERATORCONTRACT: 5–10 YEARS›

CO

ND

ITIO

NS

›

DE

LIV

ER

Y

››

IMAGE

Fee per km, hour and bus

Model for public procurement of

public transport services.

Th e rules for procurement of public bus transport services are

relatively similar in all four Nordic countries and are based on the

guidelines in the EU’s public procurements directive.

took over as favoured mode of transport in

the Nordic region. Despite eff orts by politi-

cians and transport companies, the public

transport sector’s market share has been stag-

nant at around 20% for decades. With few

exceptions, the situation is similar through-

out the EU. In other words, the foremost

competitor to bus transports by far is the car,

a costly alternative that leads to congestion

and increased environmental impact but

off ers a high level of convenience. Rail trans-

ports, with annual revenue of around SEK 7

billion in Sweden during 2006, are the domi-

nant competitor for long-distance travel.

Th e automobile is retaining or even

strengthening its grip on travellers every-

where, except for in the metropolitan areas.

For longer distances, signifi cantly more trav-

ellers choose the train than bus. Concordia

Bus’s long-distance bus transports have

focused on transports within or to and from

Sweden, and currently account for around

7% of the company’s total revenue. Revenue

in this category comes exclusively from the

individual customers, i.e. the passengers.

School bus transports are sometimes ten-

dered in connection with urban transports

and currently make up around 1.0% of oper-

ations in Concordia Bus, while transports to

and from airports account for 0.3%.

Th e Nordic public transport market gen-

erates annual revenue of around SEK 70 bil-

lion. A total of around 14,000 buses operate

in scheduled traffi c in the region. Concordia

Bus has a fl eet of 3,376 buses, down by 3.6%

compared to the end of fi scal 2006-2007.

Competition increasingPrior to 1989, public bus transport services in

the individual markets were not exposed to

competition and services were provided

under concessions that gave the operators

exclusive rights to all traffi c in a specifi c area

and to the revenue from this traffi c.

Although EU public procurement regula-

tions permit the award of concessions for an

unlimited period, today the transport author-

ities are putting nearly all contracts in both

Sweden and Denmark up for tender, while

the share is 47% in Finland and 31% in

Norway. Between 2008 and 2010 the open

market will grow substantially in Norway,

whereas development in Finland is progress-

ing more slowly.

Th e rising number of passengers is also

contributing to growth in the market. Th e

growth rate is currently highest in Sweden,

where it exceeds 5% annually. Without

exception, bus transport services in the capi-

tal city regions make up the largest single

market in each country and employ around

half of the total number of buses. In many

more sparsely populated regions, the use of

public transport is declining.

The Nordic modelTh e system for procurement and production

of public transport services is essentially the

same in the four Nordic countries.

Th e client, which is a politically

appointed public transport authority, has

overall responsibility for the provision of

public transport services in a particular

region. Today there are some 60 such author-

ities in the Nordic countries. Th e client also

decides whether to provide public transport

services under an existing concession or to

invite tenders through a public procurement.

Th is responsibility includes decision on time-

tables, ticket pricing and contract periods.

Th e diff erence between production costs and

operating revenue is covered by taxes.

Th e operator is the bus company that

provides transport services according to the

terms of the contract. Th is company can be

an international group, a small or mid-sized

privately owned company or an enterprise

owned by a municipality or county council.

Th e contract between the client and oper-

ator regulates the way in which transport ser-

vices are provided based on the terms and

conditions in the tender documents. It gener-

ally runs for a period of 5-8 years and the

operator typically receives payment on a gross

cost basis. Th e amount paid to the operator

under a gross cost contract is based solely on

the number of kilometers or hours driven,

while all ticket revenues go to the public

transport authority. A net cost contract

instead assigns the bulk of ticket revenues to

the operator. An incentive contract is a cross

between a gross cost and net cost contract,

and is based on the gross cost model but

allows the operator to increase its revenue if

the number of passengers rises. One thing all

three contract types have in common is that

the compensation is indexed over time to

refl ect changes such as rising fuel or payroll

costs.

London’s public transport system is organ-

ized according to principles similar to those

found in the Nordic countries. Areas of Eng-

land outside London are exposed to unlim-

ited competition, along the same lines as bus

freight transports in the Nordic countries.

Th e continental model for public bus trans-

port services is based on close cooperation

between the public and private sectors, which

is expressed through the guidelines for public

procurements described in EU legislation.

1 0 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

MARKET

›

Germany

CO

NT

RA

CT

PR

ICIN

G

TIME FROM START OF DEREGULATION

›

Norway

Finland

Sweden

Denmark

England

Level of compensation changes over timeContract pricing typically follows the curve

shown in the “Deregulation and pricing

cycle” diagram. Before deregulation begins in

a certain area, the level of compensation is

high. Because there is only one public trans-

port authority in each area, but often a large

number of bidders, an imbalance arises when

traffi c is tendered. In many cases, the span

between the highest and lowest bids is con-

siderable, sometimes so large that the lowest

is not even suffi cient to cover the bidder’s

costs. Regardless of the motives behind such

tactics, a gradual market correction takes

place so that the price increases over time. As

a result, the prices will fall relatively slowly

after the fi rst tender, and will then rise some-

what faster after bottoming out.

Concordia Bus believes that the market

will eventually consolidate into a small num-

ber of effi cient and quality-driven players. In

Denmark this has already taken place.

At the current price levels, ticket revenues

are not adequate to cover traffi c costs. Th e so-

called self-fi nancing ratio varies both between

countries and over time, but currently averages

at around 50–60% throughout the Nordic

region. Th e remainder is covered by tax rev-

enues. Th e degree of consolidation among

transport authorities is increasing, mainly as a

means for achieving scale economies.

Costs are rising faster than revenue, partly

as a result of surging fuel prices and a ten-

dency for transport solutions to become more

resource-intensive in the form of increased

driver time and empty transports. Due to

insuffi cient indexation in many contracts,

this cost growth is a problem for operators as

well.

SwedenNearly all scheduled public bus transports are

competitively tendered. Th e market is worth

approximately SEK 12 billion, which is

around 40% more than the second largest

Nordic market. Gothenburg, Luleå and

Västerås are the largest cities that do not con-

tract out all bus transports.

With a market share of 20% and 2,551

buses, Concordia Bus and Swebus are the

leading providers of public bus transports

tendered by county transport authorities. A

market share of over 50% makes Concordia

Bus and Swebus’s sister company Swebus

Express the leader in that small portion of

long-distance transports carried out by

express bus rather than rail. Th ese transports

and conducted on behalf of, and fully

fi nanced by, the individual customers.

Swedes are travelling more by car and by

public transport, both within and outside

Stockholm, which accounts for close to 45%

of all public transport in the country. Over

the past fi ve years, the number of trips by

public bus transport increased by around 5%.

Volumes in the underground system were

largely unchanged, while other rail-bound

traffi c rose by between 13% and 18%. Th e

underground, light rail and local trains all

had around 15% fewer passengers than the

buses.

Contracts for some 2,300 buses will be

opened for new tenders over the next three

years.

NorwayNorwegian public bus transports employ

some 7,000 buses and generate annual reve-

nue in the range of SEK 11.5 billion. Th e

share of competitively tendered transports is

growing and currently amounts to 31%,

equal to around 2,200 buses.

Concordia Bus Norway has a market

share of 17% of competitive public bus trans-

ports.

Th e market is relatively fragmented and

immature, with a large number of local oper-

ators. All international operators in the Nor-

dic region are also active in Norway. In the

coming three years, contracts for 1,835 buses

will be put to tender for the fi rst time. Th e

remaining non-competitive transports are

based on concession agreements.

FinlandTh e Finnish market for public bus transports

is worth the equivalent of SEK 5 billion. 47%

of this total, equal to approximately SEK 2.3

billion, is procured, above all through com-

petitive tendering of transports in the largest

cities of Helsinki and Turku. Th e country’s

third largest city, Tampere, has also started to

procure bus transports in open competition.

Concordia Bus Finland operates only in

the Helsinki region, where all transports are

procured in open competition. Helsinki mar-

ket is worth the equivalent of SEK 1.7 billion

and employs 1,205 buses.

Concordia Bus Finland is the market-

leader alongside the municipally-owned

Helb, while Veolia is number three. Th e com-

pany has enlarged its market share for the

third consecutive year and currently com-

mands 30% of the market, with 380 buses.

Without access to a well situated depot, the

company lacks opportunity to compete for

contracts in the Turku area where 80% of bus

transports are tendered competitively. Th e

situation is the same in the Tampere region.

Th ere are 964 buses in service outside the

three major cities, but none of these trans-

ports are tendered and no change is antici-

pated in the near future. A large share of this

traffi c consists of express buses operating

under exclusive concessions.

DenmarkIn the spring of 2008 Concordia Bus won its

fi rst tender in Denmark, a contract for 54

buses in the Copenhagen area eff ective from

the autumn of 2008.

Public bus transports in Denmark were

deregulated in the early 1990s and generate

an estimated SEK 6 billion in annual reve-

nue. All transports are competitively ten-

dered and close to half of the volume will

come up for bids within the next three years.

Th e latest measurements indicate a

decrease in use of public transport. Th e

underlying reasons are unknown, and it is

also uncertain whether this is a lasting trend.

UK-based Arriva acquired Veolia’s opera-

tions in 2007 and now operates around 1,600

buses with a market share of 52%. Keolis has

acquired 30% of Busslink (formerly SL-Bus)

in Sweden and also operates in Denmark

through City-Trafi k, which has a market

share of 9%.

DEREGULATION AND PRICING CYCLE

In Europe, only the UK has carried out more extensive

deregulation than the Nordic countries. In other parts of

Europe, most public transports are still conducted under

concessions with privately or publicly owned operators.

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 1 1

MARKNAD

ArrivaArriva is a listed British company that is

expanding outside the UK. In the Nordic

region, the company has traffi c in Sweden

and Denmark. Th e Nordic fl eet consists of

1,726 buses.

VeoliaVeolia is a listed French company that also

provides transport services on trains and

ferries. Th e company is the only operator

that has, or has had, scheduled traffi c in all

of the Nordic countries, but has now left

the Danish market. Th e fl eet consists of

1,579 buses.

Busslink/City-Trafi k/KeolisFrench Keolis is the principal owner of

Busslink, which formerly called SL-Buss

and was at that time wholly owned by

SLL. Today SLL has a holding of 30%. In

Denmark, Keolis owns the company City-

Trafi k. Th e fl eet consists of 1,613 buses.

Helb/City of HelsinkiTh e City of Helsinki’s bus company Helb

is the largest operator in the Helsinki

region and the second largest bus company

in Finland, after Koiviston Auto. Th e com-

pany has no operations outside Finland.

Th e fl eet consists of around 600 buses.

Nettbuss/NSBTh e Norwegian state railway operator

NSB own’s Norway’s largest bus company

Nettbuss. Th e company also has opera-

tions in Sweden (Orusttrafi ken, KR-trafi k

and Säffl ebussen) and Denmark. Th e fl eet

consists of 1,900 buses.

TideTide is a listed company with operations

in bus and boat transports in Norway.

Today the company is active mainly in

Bergen and Hordaland County. Th e fl eet

consists of around 1,000 buses.

Norgesbuss/Fosen/TorghattengruppenTorghattengrupen is a majority share-

holder in the listed company Fosen, which

also includes Norgesbuss. Th e corporate

group has no operations outside Norway.

Th e fl eet consists of 800 buses.

THE LARGEST OPERATORS

^

1 2 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Customer-driven in every dimension

Managing Director Jan Bosaeus

Annual revenue SEK 4,080 million (3,778)

Market share 30% (31%)

Number of passengers 200 million (190)

Number of employees 5,514 (5,425)

Number of buses 2,551 (2,758)

Number of km driven 185 million (178)

Competitors Busslink, Veolia, Arriva,

Orusttrafiken, etc.

Website www.swebus.se

The ability to offer secure and effi cient bus transports characterized by consideration and respect for the customer at all times is decisive for Swebus’s success. As the market leader, the company welcomes the chance to take greater responsibility for developing public transport in a more customer-oriented direction.

SWEBUS

Swebus 74%

SHARE OF CONCORDIA BUS’S REVENUE

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 1 3

Swebus’s vision is to be a word-class service

company. Th e Swedish unit of the group’s

contractual transport operations develops,

sells and produces public transport services

on contract on to some 20 clients in more

than 100 locations throughout Sweden. Th e

company is the market leader in Sweden,

with responsibility for nearly one in every

three bus journeys in the country.

Increased profi tabilityTh ree years ago Swebus adopted a plan for

gradual and sustainable earnings growth, a

plan the company has succeeded in realizing.

During these three years, operating profi t has

increased by more than SEK 350 million.

Profi tability is now stable and operating

profi t for the past fi nancial year reached SEK

73 million.

Th e current profi tability is proof that

Swebus has chosen the right path. When pro-

fessionalism, effi ciency and customer satisfac-

tion all improve, this is also visible in the

fi nancial results.

Swebus was formed through a merger

between three state-owned enterprises – SJ

Buss, GDG and Postens diligenstrafi k. At the

end of fi scal 2007–2008 the company had

around 100 transport contracts and approxi-

mately 8,000 employees working full time,

part time or on a contract basis. Th e majority

of these were drivers of the approximately

2,300 buses in scheduled traffi c. Th e 25%

largest contracts generated around 75% of

transport revenues. Service, maintenance and

local management/administration are carried

out in leased facilities.

A full 98% of transport revenues come

from the clients and only 2% from passenger

ticket purchases in a few individual contracts.

It is vital to increase the share of contracts

providing the operator with both fi xed com-

pensation and variable revenue based changes

in passenger volumes. Contracts with a large

incentive component result in lower tax

fi nancing.

Consolidated market sharesBecause the largest contracts in Sweden were

not subject to new tenders in the past year,

the dominant operators’ market shares

changed only marginally. Swebus, with 30%

of the market, is larger than its two closest

competitors combined. Busslink commands

18% of the market and Veolia 12%.

In the year’s tenders, Swebus extended its

contract with Kalmar County and was

awarded a new contract for urban traffi c in

Umeå. Th e contract on Gotland, where Swe-

bus is responsible for regional transports, will

be opened to new tenders 2008. In Stock-

holm the tenders for Märsta and Ekerö were

lost. Th e company lost its contract in Jön-

köping to a competitor that submitted a very

low bid.

In 2008 contracts will be tendered for

around 700 buses and in 2009 for an addi-

tional 840. Today Swebus operates around

25% of these transports.

Working for changePrice remains the decisive factor in most

transport contract tenders. In dialogue with

the clients, Swebus is working to reduce the

focus on fi xed price contracts and improve

the scope to off er the customer- oriented

transport services that are the company’s

business mission.

Th e client typically determines the time-

table. It would benefi t the customers, and in

a longer perspective also the client and tax-

payers, if the operator were instead given

responsibility for creating a timetable that

delivers maximum benefi t for the customers

and client based on certain pre-defi ned crite-

ria. Th e results of the 2007 Public Transport

Barometer survey support this argument.

Th e yearly survey, which is conducted by

the Swedish Public Transport Association

(SLTF) shows that customers value simplicity

in public transport services over reliability,

speed and security, which have always been

among the top customer priorities. Departure

times, on the other hand, are not listed among

the fi ve most important factors for customers.

Swebus is working to increase the share of

incentive contracts in the public transport

sector, among other things through the bus

operators’ industry organization.

Higher effi ciencyWhether the timetable is created by the client

or Swebus, good traffi c planning is critical for

the company to operate successfully. Th e per-

formance management system developed by

Concordia Bus is the most eff ective in the

industry, and the only one that makes up part

of a larger customer-oriented model for pro-

cess control.

In the past year Swebus further improved

its planning effi ciency. For the customers this

means better traffi c solutions, without ever

compromising on safety or security and

always with room for a comfort and con-

venience that contributes to a positive experi-

ence of the journey.

For the client, a high level of planning

effi ciency is synonymous with improved

transport services and a cost reduction that

can decrease the long-term need for tax sub-

sidies. It also provides scope to allocate

resources to an expanded service off ering that

attracts more customers.

One consequence of ineffi ciency is that

drivers are available to customers only for

around two thirds of their so-called driving

time. Th e remaining time is spent at the

depot, at the starting/end stops and during

empty transports. 13% of the total kilome-

ters driven by Swebus consist of empty trans-

ports, which means that every day Swebus is

forced to drive two times the Earth’s circum-

ference without any passengers onboard.

Proactive environmental effortsFrom a societal and the environmental per-

spective, bus transports are an excellent alter-

native. Buses off er environmental advantages

even when carrying only a few passengers,

and a reduced number of cars on the road

alleviates traffi c congestion and provides

greater scope for commercial transports,

bicyclists and pedestrians. Th e challenge for

Swebus lies in encouraging more people to

choose the bus as their mode of transport.

When it comes to the ability to pro-

actively seek new ways of maximizing re-

source-effi ciency in the environmental area

and meeting continuously escalating environ-

mental challenges, Swebus is a forerunner.

Th e company continuously measures and

takes action to reduce its environmental

impact, which will be presented for the fi rst

time in a comprehensive environmental report

during 2008. Swebus’s goal is to achieve a 20%

reduction in greenhouse gas emissions per pas-

senger by the year 2012 and to increase the use

of renewable energy in the company’s buses

and premises. In addition, the company has

joined forces with clients in an environmental

project to increase the number of passengers

and minimize empty transports.

Dedicated employeesDedicated employees that share Swebus’s

values and have the knowledge necessary to

develop the company’s operations in the right

direction are essential for success. Swebus

therefore works actively to foster both dedica-

tion and expertise. Several of the 25 perform-

ance indicators used by Swebus and the other

companies in the Concordia Bus Group are

aimed at providing both managers and other

employees with opportunities for personal

SWEBUS

1 4 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

CONCORDIA BUS FINLAND

Concordia Bus Finland has dramatic-ally increased its share of bus trans-ports in the Helsinki region, which accounts for half of the country’s total public transport volume. The company is also driving the develop-ment of the new generation of trans-port contracts that demand respons-iveness the needs of both clients and customers.

Finland’s local bus transports are subject to

extensive tendering only in and around the cit-

ies of Helsinki and Turku. Th e Helsinki market

is around eight times larger than that in Turku,

and in the past year Concordia Bus expanded

its share of this market from 25% to 30%. Th e

company operates around 380 buses.

Growing confi denceTh e Finnish market is fragmented and

marked by the very fi rst tender, which took

place in Helsinki during 1995 on conditions

that came to inhibit a mutually benefi cial

development for all parties. Transports are

often micromanaged based on considerations

other than customer needs and the bus com-

panies generally have no profi tability, which

is hampering adaptation of their operations

to modern demands on customer orien tation

and resource-effi ciency.

Concordia Bus Finland originally started

operations in the Helsinki region and still

works exclusively in this market. For the third

consecutive year, the company has been

A partner for tomorrow’s public transport authorities

Managing Director Tom Ward

Annual revenue EUR 56 million, equal to

SEK 530 million (414)

Market share 30% (25%)

Number of passengers 31 million (26)

Number of employees 805 (623)

Number of buses 380 (298)

Number of km driven 25.7 million (22.4)

Competitors Veolia Transport, Helsingin

Bussiliikenne, Westendin Linjat, Pohjolan

Liikenne

Website www.concordiabus.fi

entrusted with new transport contracts in the

region and is today number two after the

City of Helsinki’s own bus operator Helb.

Th e market in Turku is equally divided

between the municipal bus company and a

number of smaller operators.

In 2007 the City of Tampere carried out

its fi rst public tender of bus transport ser-

vices. Veolia made the winning bid, which is

limited to 5% of the city’s local buses. Over

the next three years transports corresponding

to around 1,000 buses will be tendered in the

Finnish market, of which more than 200 rep-

resent a net increase.

Long-term dialogueConcordia Bus Finland is gradually improv-

ing its resource-effi ciency and is continuously

increasing the share of buses of the highest

environmental standard, Euro 5 and EEV, in

its fl eet. Th e most important measure over

time is focused on maintaining a continuous

and constructive dialogue with the public

transport authorities in order to establish a

reputation as the best local transport com-

pany from both their own and a customer

perspective.

Like the three Scandinavian countries,

Finland is having diffi culty attracting its own

young people to choose a career as bus driver.

Foreign nationals are therefore a welcome

addition to the bus companies’ staff .

Concordia Bus Finland has a progressive

human resource policy. Scheduling with con-

sideration to the individual employee has

contributed to a working environment char-

acterized by good relations, a positive atmo-

sphere, well functioning cooperation with the

unions and falling sickness absence rates.

Concordia Bus Finland 10%

SHARE OF CONCORDIA BUS’S REVENUE

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 1 5

A platform for strong growth

Managing Director Geir Ledsten

Annual revenue NOK 416.2 million,

equal to SEK 491 million

Market share 17% (19%)

Number of passengers 11.5 million (9.8)

Number of employees. 700 (489)

Number of buses 330 (337)

Number of km driven 17.5 million (17.3)

Competitors Veolia, Norgesbuss, Tide

Website www.concordiabus.no

CONCORDIA BUS NORWAY

Competitive tenders in the Norwegian market are expected to increase by 85% over the next three years, and Concordia Bus is well positioned for rapid growth.

Th e deregulated segment of the Norwegian

market for scheduled public bus transports

expanded by 26% to 31% in 2007. Th e rate

of growth is expected to reach twice that level

during 2008-2009, mainly due to competi-

tive tendering for bus transports in the

Bergen region for the fi rst time.

In the initial phase of the Bergen tender,

the client Skyss in Hordaland County has

contracted Concordia Bus to operate 44 of

200 buses. Th is is well in line with the com-

pany’s ambition for development in Norway.

In the deregulated segment of the market,

Concordia Bus currently holds the number

three position with a market share of 17%.

Low consolidationNorgesbuss & Torghatten-gruppen, Veolia

and Concordia Bus together command more

than half of the deregulated market. At the

start of 2008, however, around 70% of the

Norwegian market was still regulated. Public

transport authorities in several counties have

started to collaborate in provision of bus

transport services and an ongoing process of

consolidation is also taking place among

independent local operators.

Although investments in public transport

are rising, buses are nonetheless losing market

shares to automobiles outside the major cit-

ies, making the environment one of several

losers. Customers, public transport authori-

ties, taxpayers, operators and others all have

an interest in a continued rapid transition to

competitive tendering, which results in more

needs-driven and resource-effi cient bus trans-

ports. So far, however, lowest price has been

the dominant selection criterion in most cases.

A qualifi ed partnerConcordia Bus Norway originates from the

former privately-owned Schöyens Bilcen-

traler, whose operations were concentrated in

Oslo and Akershus. Th e company now serves

the entire Østland area and will also be active

in Vestlandet starting in summer 2008.

As part of a group with the entire Nordic

region as its base, the company can serve as a

forerunner in the transformation of the Nor-

wegian bus market. In Concordia Bus Nor-

way, the public transport authorities have

access to a qualifi ed partner with a strong cus-

tomer focus and the resources to prepare ten-

ders, quality systems, etc., that meet high

quality standards. Quality in connection with

the launch of new transport contracts is high

and the statistics also indicate reliability in an

insignifi cant share of cancelled departures.

Employee turnover in the company is low

in view of the country’s powerful economic

growth and very low unemployment rate. At

the same time, sickness absence is decreasing.

Eff orts to improve the working environment

together with the union organizations have

high priority.

Concordia Bus Norway 9%

SHARE OF CONCORDIA BUS’S REVENUE

1 6 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Th e fundamental conditions for express bus

operations are completely diff erent from

those for local bus transports, mainly in that

revenue comes exclusively from the individ-

ual passengers.

At Swebus Express, express bus transports

consist of scheduled transports that cover a

distance of at least 100 km and cross a least

one county line. Unlike rail-bound transports,

there is no opportunity to benefi t from public

sector subsidies in this segment.

Swebus Express is the dominant player

above all on bus lines with a large customer

base, such as the Swedish triangle Stockholm-

Gothenburg-Malmö, and also operates to the

Norwegian and Danish capital cities.

Major challengesRail transports are the foremost competitor

for eco-conscious customers in the public

transport sector and, unlike express buses,

increased their volumes in 2007. Th e market

share for rail transports is estimated at

approximately 75%, while Swebuss Express

has around 5%. Including express bus trans-

ports, the company has a market share of over

50%.

Automobiles are a fi nancially and environ-

mentally inferior alternative to express bus

transports, but nonetheless gained ground in

the past year. Th rough an objectionary right,

the aff ected public transport authorities can

still prevent boarding and deboarding of indi-

vidual passengers within the same county.

Young people, students and seniors are the

key customer groups for Swebus Express, and

price is often the decision factor for their

choice. Sales take place to a growing extent

over the Internet, which provides convenience

for the customers and scope to keep prices low.

By purchasing a ticket 24 hours before depar-

ture, the customer is guaranteed a seat on the

bus.

Alongside the express product, Swebus

Express operates commuter transports

between Stockholm and Uppsala.

Increased effi ciencyIn the past year the company increased its

resource-effi ciency by revising the seat guar-

antee, reducing the number of owned buses

in service, winding up commuter lines and

other lines with weak demand, boosting the

share of online sales, reducing the number of

administrative staff and raising the share of

environmentally-friendly buses in the com-

pany’s own fl eet. Swebus Express has also

increased the number of campaigns and

special off ers.

Attractive offersTh e company strives to continuously optim-

ize the relative price advantages of its prod-

ucts, which is necessary in achieving a sus-

tainable improvement in customer satisfac-

tion and loyalty.

Swebus Express will continue enhancing

its resource-effi ciency through improved sup-

port systems, increased capacity utilization

and the purchasing of even more vehicles of a

high environmental standard. Th e company

also aims to strengthen its position through

attractive off ers to the customers.

Lowest price for long distance travel

Managing Director Joakim Palmkvist

Annual revenue SEK 355 million (367)

Market share > 50%

Number of passengers 2.2 million (2.5)

Number of employees 210 (239)

Number of buses 100 (110)

Number of km driven 17 million (19.2)

Competitors SJ, Säfflebuss

Website www.swebusexpress.se

SWEBUS EXPRESS

Swebus Express has continued to strengthen its position as the market leader in scheduled express bus transports. From a fi nancial perspect-ive, product development and effi -ciency improvements are making this product increasingly superior to car transports. Compared to rail travel, however, express buses are still a minor presence.

Swebus Express7%

SHARE OF CONCORDIA BUS’S REVENUE

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 1 7

Concordia Bus Fleet gives the Group a detailed overview of the Nordic region’s largest bus fl eet and greater leverage in bidding for transport contracts.

Concordia Bus Fleet bases all purchasing of

buses on dynamic calculations of the total cost

of ownership over the entire lifecycle of each

bus. Th e calculations take into account not

only the purchase price and fi nancing cost of

the buses, but also their resale value and costs

for fuel, service, spare parts, etc. Th is method

for purchasing vehicles provides far better con-

trol over an area that normally makes up

around 40% of a bus company’s total costs.

By acquiring all buses via a single company

Concordia Bus is able to exploit its scale econ-

omies while at the same time standardizing its

purchasing routines, which further improves

the scope to optimize operations.

At the time it was established in 2006,

Concordia Bus Fleet was the fi rst company of

its kind in the Nordic market. With a small

and highly specialized staff , Concordia Bus

Fleet purchases and fi nances buses in a fl eet

that is spread across four countries. Th e

Group’s central purchasing department then

handles the fi nal acquisition. Concordia Bus

Fleet optimizes utilization of the Group’s bus

fl eet to reduce both tied-up capital and the

need for new investments. Th is contributes to

satisfying the client’s requirements in the most

resource-effi cient manner possible. Handling

the buses in a separate company also ensures

greater transparency and security for the fi nan-

ciers.

Competitive total solution Concordia Bus’s operations are focused on

meeting the requirements in a large number of

multi-year transport contracts containing

individual and far-reaching demands on the

local traffi c and buses.

Th e detailed tender specifi cations put for-

ward by the transport authorities require extens-

ive system support in the operating companies.

Concordia Bus Fleet has developed a sophisti-

cated, comprehensive and robust model that is

used by the Group and its operating units.

Before making a bid, the operating com-

pany is assisted by Concordia Bus Fleet to cal-

culate exactly how the bus concept in the tender

in question should be structured to achieve a

cost advantage. Th rough effi cient resource allo-

cation, the need for new investments can be

reduced and the bid be made more competitive,

at the same time that the transport services

become more profi table. If the tender is won,

Concordia Bus Fleet provides the operating

company with a complete package consisting of

buses, fi nancing, administration and other bus-

related services. Th e concept is based on pre-

agreed market-based terms between the parties,

with both fi xed and variable compensation.

Flexibility through right of return Th e operating companies in the Concordia

Bus Group lease buses from Concordia Bus

Fleet with a right of return. If the operating

company wishes to adjust its bus fl eet during

the term of the contract, this can be done after

a short notice period. In the event that a com-

pany loses one of its transport contracts, it has

the right to cancel the lease according to a pre-

determined notice period and to return all of

the aff ected buses.

When a transport contract expires, the

buses are either sold or relocated. Th is right of

return during ongoing transport contracts

accelerates the elimination of excess capacity

in the operating companies, which thereby

achieve greater fl exibility and cost-awareness

and are able to maximize utilization of the bus

fl eet.

At the end of the fi scal year, close to 98%

of the buses were on lease to operating compa-

nies in the Concordia Bus Group. Th e remain-

ing buses were either for sale or, when deemed

more advantageous for internal optimization,

leased outside the Group. In the past fi scal year

Concordia Bus Fleet sold 260 buses.

Lower cost of acquisition Two years after its formation, Concordia Bus

Fleet has acquired and fi nanced buses for a

total of SEK 1.7 billion. Th is means that the

company has been responsible for the pur-

chase of nearly every fi fth bus in Sweden, Nor-

way and Finland. Th e acquisitions are fi nanced

through fi nance leases in which the contract

period is shorter than the useful life of the

buses, thereby reducing fi nancing risk. In the

past fi scal year the company acquired 392

buses from fi ve diff erent Swedish and foreign

manufacturers, and continuously evaluates

alternative suppliers.

Concordia Bus Fleet expects to acquire up

to 300 buses annually over the next three

years. In 2008 the company is conducting an

in-depth analysis of the fl eet that includes

every individual bus. Th e results will serve as

a basis for the proactive measures needed by

Concordia Bus to optimally meet the needs

of customers and clients in each part of the

Nordic market.

Total control reduces costs

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

20082007200620052004

Operating leasesFinance leasesOwned buses

Number

2,568

1,317

1,470

1,569

1,731

23

23

31 328

2,237

1,7951,562

1,216

512

1,648

BREAKDOWN OF BUSES BY TYPE OF FINANCING

CONCORDIA BUS FLEET

1 8 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Long-term sustainable travel

Concordia Bus works toward sustainable transport development with a focus on customer benefi t and innovation. The Group’s new environmental policy has provided the fi rst necessary platform for this process.

In 2007 Concordia Bus formulated and adopted

a group-wide environmental policy that refl ects

a commitment to developing public transport’s

benefi ts to society through continuous measures

to promote sustainable development.

As a next step, the management will choose

how to implement focus and integrate it with

both operating activities and process develop-

ment. Th e long-term target is for the company

to become climate-neutral.

Higher capacity utilization increases benefi tsBuses are environmentally superior to automo-

biles even when carrying only a few passengers.

Th e more people who choose the bus instead of

a car, the greater the environmental gains. In

order for bus transports to become climate-

neutral – on the road and in the workshops and

depots – energy consumption and emissions

must be further reduced.

Measures such as new fuels, new bus tech-

nology and fuel-effi cient driving can contribute

to increased sustainability, and transport effi -

ciency also has a direct infl uence on environ-

mental impact. Optimized timetables with a

minimum of unproductive time help to reduce

negative environmental eff ects, and pressure on

the environment is further alleviated by main-

taining the smallest possible distance between

the bus storage yards and the fi rst stop. Th e use

of energy, water, cleaning agents and chemicals

in connection with vehicle service is also signi-

fi cant from an environmental standpoint.

230 million passengersToday’s needs must be satisfi ed in a way that

makes it possible to also meet future needs. In

other words, all development must be sustain-

able in the long term.

Concordia Bus drives more people and more

buses than any other operator in the Nordic

countries. Every fi fth bus operated in the Nordic

region belongs to the company and around 5%

of all diesel fuel sold in the Nordic market is used

to transport its 230 million passengers. Th is rep-

resents a major environmental responsibility.

All three of the company’s defi ning charac-

teristics – appreciated, credible and resource-

effi cient – have a direct bearing on environ-

mental performance. In a longer perspective,

public transports without environmental

responsibility can never be perceived as reliable

or appreciated. Transport solutions that do not

support society’s ambitions for road traffi c lack

credibility. Th e resource-effi ciency requirement

means that low production costs must be com-

bined with high quality and eff ective solutions

that contribute to sustainable development.

In 2005 Swebus adopted an environmental

plan and began working according to an environ-

mental management system based on ISO

14001:2004, while the companies in Norway

and Finland were both already certifi ed to this

environmental standard.

Th e Group has an environmental council

consisting of the environmental directors of each

subsidiary. Th e environmental council draws up

guidelines for the Group’s joint environmental

eff orts. Every year, the aff ected employees in

each organization attend an environmental

course. Recurring audits are used to monitor

environmental activities and their results.

Integrated environmental aspects Th e new group-wide environmental policy

emphasizes the long-term nature of these meas-

ures. Environmental aspects must be coordi-

nated and integrated with the development of

processes, services, quality issues, etc., in order

to create lasting value for all stakeholders. Th e

commitment applies to all areas of activity, not

only bus transports.

Concordia Bus aims to be one of the most

eco-adapted alternatives for public transport and

long-distance bus travel. With a focus on cus-

tomers and innovation, the company strives to

be an industry leader in the development of sus-

tainable public transport.

Successful environmental work demands

clearly defi ned goals and continuous evaluation.

SUSTAINABILITY

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 1 9

SUSTAINABILITY

BREAKDOWN OF BUS FLEET BY ENGINE CLASS/EURO CLASS

BREAKDOWN OF BUSFLEET BY FUEL TYPE

EMISSIONS TONNES

Carbon dioxides 211,712

Nitrogen oxides 3,054

Particulates 39

Hydrocarbons 40

Diesel 96.17%Ethanol 2.37%

CNG/Biogas 1.44%

Electricity 0.02%

EEV 1.53%

Euro 0 0.51%

Euro 1 10.18%

Euro 2 42.82%Euro 3 32.68%

Euro 4 9.56%

Euro 5 2.74%

Environmental aspects are therefore integrated with

general business development, which means that tar-

gets are set at least yearly in connection with adop-

tion of the annual business plan and are followed up

systematically. For several years, the company has

worked actively to develop performance indicators

for the Group’s total environmental impact.

Th e environmental policy underlines a few areas

that are of particular importance for successful envir-

onmental management, such as responsible use of

energy, a reduced share of fossil fuels, conservation

of resources, an increase in the employees’ environ-

mental knowledge and encouragement of their

environmental initiatives.

Decreased fuel consumption Fuel consumption in the buses and their emissions

of greenhouse gases (GHGs) and particulates,

together with energy for heating, are the key focus

areas for environmental eff orts.

With the Nordic region’s largest bus fl eet and a

positive operating result, there is good potential to

act as a driving force for technological advances that

can reduce the environmental footprint of transport

services. Th e ongoing transition to increasingly eco-

effi cient buses and upgrading of existing buses is

also enabling these to meet modern environmental

standards.

Th e number of kilometers driven with passen-

gers rose by 3.4% in the past fi scal year despite a

decrease of 3.6% or 127 buses in the fl eet, mainly

thanks to improved transport effi ciency. Th e com-

pany’s total diesel consumption reached 94.3 mil-

lion liters, corresponding to 96% of the total num-

ber of kilometers driven. Total carbon dioxide emis-

sions amounted to 211,000 tonnes.

Concordia Bus collaborates with bus manufac-

turers and other suppliers to develop new genera-

tions of more resource-effi cient and innovative

vehicles and engines. In the current fi scal year, the

company will reduce its fuel consumption in exist-

ing transports by 2%. Emissions of carbon dioxide

are expected to decrease by 4,000 tonnes through

measures such as modernization of the bus fl eet,

improved maintenance, eco-adapted driving and

optimized use of the buses with the best environ-

mental performance.

Th e buses use Environmental Class 1 (EC1) diesel

with various additives to reduce fuel-generated emis-

sions. Of total fuel consumption, ethanol and CNG

accounted for an unchanged share of nearly 5%.

In several cities where Concordia Bus is respons-

ible for public transport, promising trials are under-

way to test new, natural fuel additives that reduce

emissions of both GHGs and particulates. By 2012,

GHG emissions will be reduced by 20% per passen-

ger kilometer.

Modernization of treatment plantsEnergy consumption at the depots is falling and will

be further reduced over the next three-year period.

Th e conversion from chemical to biological or

fresh water processes in the depots’ treatment plants

has resulted in a 50% decrease in hazardous emis-

sions. Modernization of the treatment plants is con-

tinuing in pace with the availability of new treat-

ment and recycling technology.

Each depot has an individual waste plan. When

a bus is scrapped, close to 90% of the components

are recovered.

Safety comes fi rstA high level of safety is vital in all of the company’s

transports, and in all other operating activities. Th e

traffi c safety policy expresses the company’s ambi-

tion to serve as a role model in traffi c. Safety-related

work is conducted systematically and as an integral

part of other operations.

Safety and security are the top priorities in day-

to-day bus transports, are take precedence over

comfort, convenience and punctuality. In 2007

Concordia Bus won an award in Sweden for its traf-

fi c safety eff orts including several thousand self-

administered speed checks that resulted in lower

driving speeds.

Th e buses undergo technical tune-ups and ser-

vice every 10,000 kilometers and have earned the

industry’s top scores in annual vehicle inspections

for the past two years. In addition, each bus is sub-

ject to a daily 29-point safety check that is per-

formed before entering service for the day.

Th e company’s active approach to safety

includes follow-up of threats and violence against

customers or staff and risks related to traffi c incid-

ents. An in-house developed computer system

handles data and contributes to a safe and secure

environment where traffi c fl ows smoothly without

disruptions.

2 0 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Management system

Share dataTh e Concordia Bus share is registered with

VPC AB (the Nordic Central Securities

Depository) and most of the approximately

30 shareholders hold their shares through the

safe custody departments of various banks.

SEB, Nordea and Danske Bank represent the

majority of shareholder holdings registered

with VPC.

Th e company has an agreement with

Carnegie to mediate buying and selling of the

shares in exchange for customary brokerage

commissions. However, the share has not

been listed on any stock exchange or other

public trading venue.

Most trading of the share takes place

through market makers in London, and is

not organized by the company. According to

information from these market makers, the

ordinary share was traded at a price of around

SEK 70 during the fi scal year. No trading of

the redeemable preference shares has come to

the company’s knowledge.

Th e largest holders of common shares in

Concordia Bus are:

• Bluebay Asset Management

• Bear Sterns Inc.

• Fidelity Funds

• Th ames River Capital

• Anchorage Capital

Th ese represent approximately 71% of the

total number of common shares.

Several of the largest shareholders in Con-

cordia Bus AB also hold bonds under the

bond loan issued by the subsidiary Concordia

Bus Nordic AB.

An integrated and process-oriented manage-

ment system ensures the company’s ability to

live up to the demands of customers and other

stakeholders.

Th e management system describes the way

in which Concordia Bus works in all parts of

its operations: management, product develop-

ment, customer contacts, initiation and wind-

up of transport contracts and internal support.

It safeguards the company’s ability to live up to

the demands of customers and other stake-

holders with regard to quality, the external

environment, safety, the working environ-

ment, fi nancial reporting, etc.

Follow-up ensures successTh ree components of follow-up ensure goal

attainment:

• Business plans

• Financial targets

• Process development

In special meetings, the executive manage-

ment and subsidiary managements monitor

goal attainment for the business plan and the

fi nancial targets, while the outcome for pro-

cess development is followed up in similar

meetings between the executive manage-

ment and process owners.

Th e subsidiaries are responsible

for setting long- and short-term

goals and action plans for their

operating activities. Th e process

teams defi ne the development objectives,

enabling each company to monitor both oper-

ating and developmental activities.

Th e group-wide process teams formulate

the documented working methods known as

Policies & Instructions. Th ese are then followed

up within the framework of quality control.

All companies in the Group apply the des-

ignated working methods and carry out indi-

vidual follow-up. It is the responsibility of

each company to address any areas where

shortcomings in implementation exist.

Quality controlQuality control is used to monitor that work is

proceeding according to plan. At Concordia

Bus this includes:

• Documentation of working methods

• Measurement of performance indicators,

internal audits, external audits

• Follow-up through case handling (cus-

tomer complaints, audit recommenda-

tions, proposed improvements, etc.)

• Documentation of measures to be taken

when defi ciencies are detected, for ex-

ample by recording decisions made at

management meetings.

Th e results of the company’s work on the Poli-

cies & Instructions and follow-up of their

implementation leads to both better fi nancial

results and more satisfi ed customers.

STRUCTURE OF CONCORDIA BUS’S MANAGEMENT SYSTEM

MAIN PROCESSES

– Policies

Cus

tom

ers,

pas

seng

ers,

need

s

Satisfi

ed

custo

me

r

SUB-PROCESSES

ACTIVITIES– Local instructions, checklists, templates

Product development

Purchasing Accounting &administration

IT & systemsdevelopment

Marketing & sales

Start-up/wind-up of transport production

Deliver transportproduction

WORD EXCEL

ManagementBusiness development & decision-making process

HR

InstructionsInstructions

Instructions

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 2 1

Concordia Bus AB (publ)) is a Swedish regis-

tered company domiciled in Stockholm. Th e

Group consists of fi ve subsidiaries that con-

duct bus operations, primarily related to pub-

lic transport in the Nordic countries, and two

administrative companies. Th is report per-

tains to the fi scal year 2007-2008 and pro-

vides an account of activities prior to the

2008 Annual General Meeting. Th e report

has not been audited by the company’s inde-

pendent auditors. Th e Board’s report on

internal control forms a separate section of

the corporate governance report.

Corporate governance requirementsCorporate governance in Concordia Bus is

regulated by Swedish law, primarily the

Swedish Companies Act and loan agreements

with bond holders.

Concordia Bus has undertaken to fulfi ll

the fundamental requirements for corporate

governance. Th is report describes company’s

corporate governance, management and

administration, as well as the manner in

which the Board ensures the quality of the

fi nancial statements and its cooperation with

the company’s independent auditors.

Corporate governance bodiesA number of diff erent bodies in the company

are responsible for control and corporate gov-

ernance. At the Annual General Meeting, the

shareholders exercise their voting rights, for

example in determining the composition of

the Board and election of auditors. Th e

Nomination Committee recommends can-

didates for election of Board members, the

Board Chairman and independent auditors.

Th e Board is responsible for the compa-

ny’s long-term development and strategy and

for controlling and evaluating day-to-day

operations. Th e Board appoints the President

of Concordia Bus AB, who is also the CEO.

Th e President is responsible for ensuring

that day-to-day operations are conducted in

accordance with the Board’s guidelines and

instructions. Th e president of each subsidiary

reports directly to the CEO and is responsi-

ble, in turn, for complying with the estab-

lished instructions and guidelines.

General meeting of shareholdersIn accordance with the Swedish Companies

Act and Concordia Bus’s articles of associa-

tion, the composition of the Board and other

matters to be addressed by the Annual Gen-

eral Meeting are determined by voting. Sup-

plementary voting rules might be found in

the shareholder agreements signed between

certain owners.

Resolutions by the Annual General Meet-

ing are normally passed by a simple majority.

In certain cases, however, the Swedish Com-

panies Act requires a specifi c level of atten-

dance to form a quorum or a particular voting

majority. At the Annual General Meeting, the

shareholders have the opportunity to pose

question about the company and its results for

the past year. Representatives from the Board,

executive management and auditors are norm-

ally present to answer these questions. Share-

holders and other stakeholders can also write

to the Board or executive management by e-

mail, via the website www.concordiabus.com

or by letter to: Concordia Bus AB, Solna

Strandväg 78, SE-171 54 Solna, Sweden.

2007 Annual General MeetingAt the Annual General Meeting on 30 May

2007, 6.35% of the shareholders and 7.75%

of the voting rights were represented. Th e

Board and management of Concordia Bus

AB were present. Th e following resolutions

were passed:

• Th e incumbent Board was re-elected

• Th e income statements and balance

sheets of the Parent Company and Group

were adopted

• Th e members of the Board of Directors

and the President were discharged from

liability for the 2006–2007 fi scal year

• Th e amount of Board fees was established

• Th e principles for remuneration and

other terms of employment for senior

executives were approved

2008 Annual General MeetingConcordia Bus has preliminarily scheduled

the Annual General Meeting for 28 May

2008.

Board of DirectorsTh e task of the Board of Directors is to pro-

mote healthy business development and ade-

quate control of the company’s operations.

Th e composition of Concordia Bus’s Board of

Directors, and the fees and attendance of each

member, are presented in the table below.

Aside from the reported benefi ts and

remuneration, the members of the Board are

covered by a stock option program. Th e

Board in full also serves at the company’s

Audit Committee.

Th e Board of Concordia Bus AB is

responsible for the organization and adminis-

tration of the company’s aff airs. Th e Board

shall consist of at least three and at most ten

members. From among its members the Board

has appointed a Chairman, who according to

Swedish law may not simultaneously hold the

position of President of the company.

One of the Board’s most important tasks

is to ensure good management, monitoring

and control of the company’s operations in

order to create value for the shareholders,

customers, employees and other stakeholders.

The Board’s formal work plan and independence Th e Board has adopted a formal work plan

for its activities that describes how duties are

Corporate governance report

SEK thousand Regular fees Extra fees Meeting attendance Shareholding

Chairman

Jan Sjökvist 650,000 – 100% –

Members

Jan Sundling 175,000 – 100% –

Rolf Lydahl 175,000 – 100% –

Gina Germano 0 – 0% –

Deputy

Thomas Naess 0 – 100% –

2 2 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

to be divided between the Board, its commit-

tees and the President. Th e Board evaluates the

formal work plan at least once yearly.

Th e incumbent Board was elected by an

Extraordinary General Meeting in 2005 as a

result of changes in the Group’s ownership

structure. All Board members but one are

deemed independent in relation to the com-

pany, its management and major shareholders.

Gina Germano is employed by Bluebay Asset

Management, which is a shareholder in Con-

cordia Bus AB.

Board activities 2007–2008

Th e following matters were addressed by the

Board during the year:

• Capital structure

• Deregistration from the SEC

• Establishment in

Board committeesNomination Committee

Th e Nomination Committee submits propos-

als to the Annual General Meeting regarding

the Chairman of the Meeting, the number of

Board members, fees to Board members, elec-

tion of Board members, appointment of audi-

tors and fees to auditors. Concordia Bus has no

formal Nomination Committee, which is a

deviation from the recommendations in the

Swedish Code of Corporate Governance

regarding the composition of the Nomination

Committee. Proposals for Board members and

auditors are prepared in consultation with the

major shareholders.

Remuneration Committee

Concordia Bus has chosen not to appoint a

Remuneration Committee since the Board in

its entirety addresses matters relating to remu-

neration in an annual evaluation of Board

performance.

Audit Committee

Th e Board has chosen not to appoint any separ-

ate Audit Committee, and the Board in its

entirely instead comprises the company’s Audit

Committee. Th e task of the Board, in coopera-

tion with the management and auditors, is to

ensure that the Group’s fi nancial reporting is

correct, fair, relevant, transparent, consistent

and in compliance with the applicable rules

and recommendations.

Th e Board ensures that the management

identifi es the risks associated with the compa-

ny’s operations. Furthermore, the Board stays

informed about and provides views on the

organization and prioritization of external and

internal audit activities in the Group in order

to ensure that these maintain a high profes-

sional standard are characterized by impartial-

ity and integrity.

Th e Board follows up matters arising from

audit work, including individual matters for

which auditing activities are deemed to be jus-

tifi ed.

Th e Board meets with the independent

auditors at least once a year.

AuditorsTh e independent auditors are elected by the

shareholders at the Annual General Meeting to

serve for a period of four years. Th e auditors

report to the shareholders at the company’s

Annual General Meeting, and:

• keep the Board informed about the plan-

ning, scope and content of the annual audit,

• examine the annual accounts to assess their

accuracy, completeness and conformity

with generally accepted accounting prac-

tices and relevant accounting principles,

and report their conclusions,

• inform the Board of work that has been

performed in addition to auditing services,

remuneration for such services and other

circumstances of signifi cance in assessing

the independent status of the auditors.

Th e company’s independent auditor is Ernst &

Young AB, which was elected in 2005. Th e

Auditor-in-Chief is Erik Åström, Authorized

Public Accountant.

Th e task of the independent auditor is to

examine the administration of the Board and

the President and the company’s annual report

and accounting records. Ernst & Young

reports continuously to the Board and execu-

tive management and to the local company

managements. Ernst & Young is engaged only

for consulting services decided and approved

in advance by the Board.

Corporate governance objectivesConcordia Bus closely monitors international

developments in the corporate governance

area. Th e company strives to continuously

adapt its corporate governance guidelines and

instructions in accordance with leading inter-

national standards and practices and the Swed-

ish Code of Corporate Governance.

Values in the company

Th e fi ve fundamental values adopted by Con-

cordia Bus in 2005 express the ethics applied

in all parts of the Group’s operations, from

internal activities to relations with external

parties. Th ese also describe how operations are

to be conducted in an effi cient manner.

Th e values are reviewed annually through

an employee survey, internal evaluations of

operations and the planned employee perform-

ance review. In this manner, the executive

management can gain an idea of how fi rmly

established the values are among the employ-

ees. Deviations from violations of these values

are reported to the immediate superior.

For more information about the values, visit

www.concordiabus.com.

Internal control over fi nancial reporting 2007/2008Th is report has been prepared in accordance

with Section 3.7.2 of the Swedish Code of

Corporate Governance, which means that the

report covers only internal control over fi nan-

cial reporting.

Th e Board is not required to submit an

opinion on the eff ectiveness of internal control

Shareholders

Annual General Meeting

Executive Management

Company managements

Auditors Nomination Committee

BOARD OF DIRECTORSRemuneration Committee

Audit Committee

››

›

›

›

›

›

›

CORPORATE GOVERNANCE REPORT

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 2 3

and the report is not required to be examined

the company’s independent auditor.

Application

Concordia Bus shall steer its eff orts, in an effi -

cient manner, to produce reliable and accurate

fi nancial statements for external publication.

For Concordia Bus, reliable and accurate

fi nancial reporting mean that:

• the accounting policies are appropriate

and conform to International Financial

Reporting Standards (IFRS)

• reporting on the results of operations is

informative and provides an appropriate

level of detail

• the reporting correctly shows the under-

lying transactions and events, and with a

reasonable degree of certainty refl ects the

company’s actual results, fi nancial position

and cash fl ow.

Risk assessment

Th e primary risks arising in connection with

fi nancial reporting include fraud, loss or

embezzlement of assets, improper favoring of

a third party at the expense of the company

and other risks related to material misstate-

ments in the valuation of assets, liabilities, rev-

enue and expenses or deviations from the dis-

closure requirements.

Th e Group uses the same type of risk

assessment for all processes. Th is takes place in

three stages and is initiated by a management

review. Th e basis for assessment is a present sit-

uation analysis of the Group and the manage-

ment’s previous experience. Th e risks that are

deemed to have a material eff ect on fi nancial

reporting are classifi ed as high risks, and those

that are deemed to have an immaterial eff ect

are classifi ed as low risks.

At the second stage, the high risks in opera-

tions are assessed in connection with a mapping

of sub-processes. Experts from the processes

perform a detailed valuation of all risks in each

process. Th e working process is as follows:

1. Identify risks and assign them to the rel-

evant process stage:

• Describe the current preventive measures

• Evaluate their probability/impact/proba-

bility of detection

• Calculate risk values

2. For high risk values, propose improvement

measures

Th is means that the management’s assessment

of a risk many be given a lower value by the

operation in question, just as a risk that is not

assessed by the management can be given a

high value by the operation.

Th e fi nal stage of the process is to compile all

identifi ed risk values and present them at a

meeting of the executive management. Th e

management then decides on a prioritization of

highly valued risks and allocates resources to

manage these. Risks with low values are archived

on a risk list for reassessment at the latest in con-

nection with the following year’s risk assessment.

Risk assessment according to this method

was started in 2005 and supplemented in

2006. In the 2007 review, it was assessed

whether earlier years’ risks still apply in the

same order of priority.

Internal control

Th e risk assessment provides the opportunity

to take preventive action. High risks are prior-

itized and result in measures to reduce or elim-

inate them. Th e use of controls and control

points ensures that preventive measures are

taken in all Group companies.

Th e company has a number of controls for

approval and authorization of business trans-

actions. In operating activities these controls

are applied on a daily basis, and signifi cant

accounting policies are applied by all Group

companies in the preparation of fi nancial

accounts and reports. Established routines

steer review and analysis of fi nancial reporting

at all levels in the Group, which is important

in ensuring the accuracy of the reports.

Control is exercised through established

policies and instructions that are formulated

in group-wide process teams. Th ese teams also

decide on important control points for ensur-

ing the quality of fi nancial reporting.

Control environment

Th e company’s control is based on a group-

wide and process-oriented management system.

Th e purpose is to ensure a corporate culture

characterized by integrity and that the company

does not compromise on its ethical values.

Th e management system includes the

employees’ experience, skills, attitudes, ethical

values and perceptions about the division of

powers and responsibilities in the organization.

Th e management system illustrates how

the Group works in key areas. Th e control

environment is made up of each operation’s

main processes and related policies and

instructions at both the Group and local level.

Th e process owners propose preventive action,

development measures and improvements in

the process. Th e managements of the various

operations are responsible for implementing

and following up this work and addressing any

shortcomings.

Communication and information

Th e communication plan ensures that the

control points are communicated to the

intended target groups. Th e information in

each control point describes the company’s

actions in the control and how deviations are

reported and followed up. Th e process owner

is responsible for ensuring that information

about group-wide methods is provided to the

entire organization.

Th e line organization holds regular meetings

at the function or area level. New policies and

instructions are always presented at these meet-

ings as part of their implementation. Written

communication is distributed primarily via the

intranet, where information is updated immedi-

ately and the management system and group-

wide policies and instructions are presented.

Monitoring

Th e fi nancial risks that are deemed to be high

are monitored mainly within the respective

process. A control function is built into the

risk’s control point, allowing the operation

itself to ensure that the risk is being managed

as planned.

In addition, the company performs regular

internal audits to ensure that the control

points are working eff ectively. In 2007 Con-

cordia Bus carried out two group-wide in-

ternal audits and some 20 company-specifi c

internal audits using employees specially

trained for this task. Th e purpose of these

internal audits is to establish a stable control

environment in the company and to ensure

that application and monitoring are carried

out in key areas of operations. Th e company’s

principle is that every process should have

control functions that support follow-up

activities. In this respect, the internal audit

serves as a complementary instrument for

ensuring that operations are conducted in

accordance with formal decisions.

Th e results of the internal audits are

reported to both the Board and the executive

management.

Changes in operations that may infl uence

internal control are assessed annually and

reported to the Board.

CORPORATE GOVERNANCE REPORT

24 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Jan Sjöqvist

Born in 1948 Board Chairman. Chairman of ODEN Anläggningsentreprenad. Board member of Stora Enso, Green Cargo and Aspen. Former President and CEO of NCC. M.B.A.

Jan Sundling

Born in 1947President of Green Cargo 2001–07. Currently active as Chairman of the Association of Swedish Train Operators, the Swedish Maritime Administra-tion and TAF/TSI Deployment Board. Board mem-ber of Amapola Flyg, Salenia Air Cargo, COOP Sverige, Concordia Bus, Corem Property Group and Cargonet.

Rolf Lydahl

Born in 1945Chairman of Jernhusen, IndeCap and SwedCarrier. Board member of AP fastigheter, TradeDoubler and Steneken. Former President of Probo, Execu-tive Vice President of Nordstiernan and responsi-ble for Credit Suisses’s representation office in Stockholm. M.B.A. (Stockholm School of Economics)

Gina Germano

Born in 1966American citizen. Senior portfolio manager at Bluebay Asset Manage-ment since 2002. Former portfolio manager at Lazard Asset Management and analyst at Morgan Stanley. Master’s degree from Lund University, degrees from Boston University and Northwestern University.

Advisor the Board of DirectorsJörgen Andersson

Born in 1946Former cabinet member. Chairman of Nordiske Etanproduktion, Safe Return and Connect Syd. Board member of Eco-Heating.

BOARD OF DIRECTORS

The Board of Concordia Bus consists of four members, of whom the Chairman and two other members have an independent status in relation to the shareholders. One member represents the largest shareholder, Bluebay Asset Management.

Jan Sjöqvist Jan Sundling Rolf Lydahl Gina Germano

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 2 5

Ragnar Norbäck

Born in 1955 CEO of Concordia Bus ABEmployed since 2004Previously employed by Sandvik, Adidas, TNT, Linjebuss, Volvo and American Express. M.Sc.Eng.

Per Skärgård

Born in 1957CFO of Concordia Bus ABEmployed since 2004Previously employed by Warner Lambert, Netnet, Danzas-ASG and DHL. B.Sc.Econ.

Jan Bosaeus

Born in 1960MD of Swebus ABEmployed since 2002Previously employed by SMA Maskin AB, Engson Maskin AB and Kalmar LMV Sverige AB. Marketing economist

Joakim Palmkvist

Born in 1964MD of Swebus Express ABEmployed since 2006Previously employed by OnOff, ElGiganten, Ticket resebyrå and Synoptik.Marketing economist

Tom Ward

Born in 1956MD of Concordia Bus Finland Oy Employed since 2004Previously employed by Huolintakeskus Oy, Scansped Oy, MPS Management Consulting and Oy Scan-Auto. Business economist

Geir Ledsten

Born in 1962MD of Concordia Bus Norge ASEmployed since 2007Previously employed by C.Tybring-Gjedde AS, Narvesen AS, Coop Norge AS, AS Kellox/Loxkel AS and Oslo Taxi BA, among others.Economist

Michael Karlsson

Born in 1956 MD of Concordia Bus Fleet ABEmployed since 2006Previously employed by SEB Finans, NCM Kreditförsäkring, GE Capital Equipment Finance and Key Equipment Finance. M.B.A.

Sjur Brenden Born in 1961Marketing and Purchasing Director, Concordia Bus ABEmployed since 2001Previously employed by Linjebuss Sverige AB, AS Sporveisbussene and Concordia Bus Norge AS.M.B.A.

EXECUTIVE MANAGEMENT

The Executive Management of Concordia Bus consists of the CEO, CFO, the President of Concordia Bus Fleet and the presidents of each subsidiary.

Ragnar Norbäck Per Skärgård Jan Bosaeus Joakim Palmkvist

Tom Ward Geir Ledsten Michael Karlsson Sjur Brenden

2 6 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Th e Board of Directors and the President of

Concordia Bus AB (publ) hereby present the

annual report and consolidated fi nancial state-

ments for operations during the fi scal year

from 1 March 2007 to 29 February 2008. Th e

results of the year’s operations in the Group

and the Parent Company are presented in the

following income statements, balance sheets,

cash fl ow statements, statements of changes in

equity and notes. All items are expressed in

millions of kronor (SEK M) unless otherwise

stated. Th e fi scal year covered by this annual

report ended on 29 February 2008 and is

referred to as 2007/2008.

Ownership structureConcordia Bus AB is a public limited com-

pany (corporate identifi cation number

556576-4569 domiciled in Stockholm), is

owned by some 30 shareholders and is the

overall Parent Company of the Concordia

Bus Group.

Nature and focus of operationsConcordia Bus AB’s operations, which are

conducted through subsidiaries, consist of

the provision of contractual bus transport

services to public transport authorities in

Sweden, Norway and Finland. Th rough its

Danish subsidiary Concordia Bus AB has

been awarded a contract in Denmark, eff ect-

ive after the end of the fi scal year. In addition

to contractual bus transports, Concordia Bus

operates a network of express bus services to

consumers in Sweden. Operations in Sweden

are conducted through the wholly owned

subsidiaries Swebus AB and Swebus Express

AB. In Finland, operations are conducted

through Concordia Bus Finland Oy and in

Norway through Concordia Bus Norway AS

(name changed from Ingeniør M.O. Schøy-

ens Bilcentraler AS during the year). Further-

more, Conocordia Bus AB has a wholly

owned subsidiary in Denmark, Concordia

Bus Denmark ApS.

Th e wholly owned operating subsidiaries

are owned via a subordinate holding com-

pany, Concordia Bus Nordic Holding AB,

which in turn owns the subsidiaries’ operat-

ing parent company, Concordia Bus Nordic

AB (publ). Concordia Bus AB also has a

wholly owned subsidiary for management of

the bus fl eet, Concordia Bus Fleet AB, which

leases buses to the operating companies.

Signifi cant events during the yearTh e year’s operating profi t for the Concordia

Bus Group is reported at SEK 161 million,

compared to SEK –24 million the year

before. Th e improvement is attributable to

increased revenue, a stronger contract port-

folio, higher effi ciency in operations and

reduced capital costs for vehicles.

Following approval by the option holders,

Concordia Bus AB has deregistered Concor-

dia Bus Nordic Holding AB from the SEC

with eff ect from January 2007.

Contractual transports in Sweden

Total revenue during the fi scal year amounted

to SEK 3,990 million (3,668). Operating

profi t was SEK 153 million (7). Th e weak

operating result from earlier years is explained

by older transport contracts with unfavorable

compensation and/or operating conditions.

Th e improvement in earnings is partly due

to enhanced operating effi ciency and partly

to a stronger contract portfolio and reduced

vehicle costs.

Contractual transports in Norway

Revenue reached SEK 463 million (443) and

operating profi t was SEK 23 million (19).

Operating profi t was negatively aff ected by

higher costs arising from an overheated labor

market, which resulted in a shortage of

employees during the year.

Contractual transports in Finland

Revenue totaled SEK 517 million (409).

Operating profi t was SEK 9 million (–9). Th e

positive earnings trend is due to the signing

of new contracts, the wind-up of old and

unprofi table contracts and higher effi ciency

in transport operations. Revenue rose by

around 26%, leading to market share of

approximately 31% at the end of the fi scal

year.

Contractual transports in Denmark

Operations in Denmark are represented by

Concordia Bus Denmark ApS, which has made

bids for transport contracts in connection with

tenders in Denmark. One transport contract

was won during the year and will go into force

during the next fi scal year.

Express, long distance transports

Revenue is reported at SEK 351 million (365)

and operating profi t at SEK 19 million (10).

Express has once again successfully defended

its market share in terms of revenue. Compe-

tition has intensifi ed and price pressure has

Annual report and consolidated fi nancial statementsAdministration report

1 March 2007– 1 March 2006– 29 Feb 2008, 28 Feb 2007, in accordance in accordance with IFRS with IFRS

Revenue, SEK M 5,406 5,075

Operating profi t/loss, SEK M 161 –24

Profi t/loss for the year, SEK M –15 –245

Number of employees 7,021 6,814

Number of buses 3,376 3,503

Investments excl. fi nance leases, SEK M 33 98

Cash fl ow from operating activities, SEK M 251 138

Equity/assets ratio 5.7% 6.7%

Two-year key fi gures for operations:

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 2 7

continued. Th ese operations were changed

during the year through modifi cation of the

product off ering and new methods for pro-

duction management, which led to an

improvement in earnings compared to the

previous year. Th e company’s priorities for

the coming period consist mainly of more

ambitious marketing and additional meas-

ures to boost earnings.

Fleet Management and central functions

Th e Group’s bus fl eet is controlled and man-

aged by the two companies Concordia Bus

Fleet AB and Swebus Busco AB. Th e buses

are made available to the Group’s operating

bus companies through lease contracts. Con-

cordia Bus Fleet is responsible for tender and

fi nancing of the Group’s buses. In the past

year a total of 133 buses (377) were acquired

for a total of SEK 306 million (931) and were

fi nanced through fi nance leases.

Aside from management functions, the

head offi ce contains service function such as

IT, legal aff airs and purchasing, which are

debited to the various Group companies

based on market prices. Th e cost of non-

debited management functions and other

items amounted to SEK 43 million (59).

Divested operations

Via the sub-group Concordia Bus Nordic

AB, Concordia Bus AB sold all of the shares

in Interbus AB to Strömma Turism & Sjöfart

AB during the preceding fi scal year. Th is sale

has aff ected the comparative prior year infor-

mation in that Interbus is included in the

year-earlier fi gures with revenue of SEK 141

million and an operating profi t of SEK 8 mil-

lion.

MarketTh e Concordia Bus Group is active in public

bus transports, most of which consists of

publicly tendered transport services that are

operated by subsidiaries in the diff erent

countries. In addition, a separate subsidiary

operates express bus transports in open com-

petition mainly within Sweden.

Th e market for tendered public transport

services was previously highly exposed to

price dumping in bids and fl awed indexing

systems for revenue calculation. However, the

conditions for profi tability are gradually

improving thanks to the combined eff ects of

a smaller number of operators with more

commercial goals and progressively better

and more effi cient tendering processes.

All operations require permits for opera-

tion of passenger transports. All subsidiaries

hold the necessary permits.

Financing, liquidity and cash fl owIn January 2007 an earlier mezzanine loan

was repaid following the issue of new shares

for a total of SEK 510 million. A redeemable

preference share granting entitlement to a

guaranteed annual dividend of 16.5% was

issued with pre-emptive rights for the existing

shareholders. Th e company issued fi ve mil-

lion shares of the new type at a subscription

price of SEK 102 each.

Th e Group’s fi nancial expenses decreased

by SEK 24 million (244) compared to the

previous year, mainly due to the repayment

of a mezzanine loan for EUR 45 million.

Th e Group recorded foreign exchange

losses of SEK 8 million for the past fi scal year,

compared to exchange gains of SEK 39 mil-

lion the year before.

Investments and depreciationTh e Group’s investments during the year con-

sisted primarily of bus acquisitions, which

were fi nanced through leases. Cash-fi nanced

investments amounted to SEK 33 million

(98). Via its subsidiary Concordia Bus Fleet

AB, the Group has entered into fi nance lease

contracts with a historical cost of SEK 306

million (931) and these have been classifi ed

as fi xed assets in the balance sheet. Th e lease

commitment has been reported as a liability

in the balance sheet. Depreciation and inter-

est expenses are recognized in the income

statement.

During the year, the Group sold buses for

a value of SEK 58 million (90), correspond-

ing to 260 buses (374). Th e sale resulted in a

capital gain of SEK 0 million (–16).

EmployeesTh e average number of employees in the

Group during the period was 7,021 (6,814).

In all countries where Concordia Bus AB has

operations, collective agreements are applied

in accordance with the trade union that rep-

resents employees in the industry where each

company is active. Th ere are well established

practices and traditions for the way in which

working hours, compensatory terms, infor-

mation and cooperation are negotiated and

applied between employee representatives

and the company.

Th e Concordia Bus Group uses programs

focusing on values and employee relations in

order to boost the employees’ motivation at

work and ultimately improve the quality of

services to the customers.

Cooperation with external stakeholdersTh e Concordia Bus Group’s subsidiaries are

dependent on certain suppliers, primarily in

the vehicle and energy sectors, to conduct

their operations. Purchasing agreements are

signed mainly at the Group level, and the

individual subsidiaries enter into agreements

with specifi c manufacturers only for the sup-

ply of diesel. Th is is done partly because no

functioning retail trade for fuels exists, and

partly because the subsidiaries are extremely

dependent on regular fuel deliveries in order

to conduct transports in a reliable manner.

Environmental impact of operationsNew buses are normally equipped with envir-

onmentally upgraded engines and add-on

equipment for exhaust emission control, and

are therefore compliant with future emissions

standards well before these go into eff ect. In

its permanent facilities, the Group invests in

environmental enhancements such as new

and improved cleaning facilities in the bus

washes. Goal-oriented eff orts are also made

to minimize total emissions through reduced

fuel consumption and a transition to new

and better fuel products.

Th e Group conducts operations subject

to reporting requirements under the Swedish

Environmental Code such as bus washing

ADMINISTRATION REPORT

2 8 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

and storage of engine fuels, gas, waste oil and

lead batteries. Th e environmental impact of

these operations consists mainly of water

emissions from the bus washes.

In connection with the takeover and

transfer of operations, the facilities in ques-

tion undergo environmental inspection to

determine the company’s environmental lia-

bility and impact. Th ese operating companies

carry out minor decontamination actions as

needed. So far, no signifi cant decontamina-

tion liability has been found with respect to

the Group’s own operations.

Disputes During the year, the subsidiary Swebus AB

appealed tenders in Jönköping, on Gotland

and in Stockholm. After the end of the fi scal

year, there was a remaining tender dispute

with SL (Storstockholms Lokaltrafi k) regard-

ing quality evaluation in connection with

tendering of the Märsta and Ekerö traffi c

areas in Stockholm. After the end of the fi scal

year, the Supreme Court denied Swebus a

review permit, whereby the dispute was con-

cluded and Swebus defi nit ively lost the con-

tract. Th e Group is not involved in any other

signifi cant disputes.

Trading of the company’s sharesConcordia Bus AB has an agreement with

Carnegie regarding trading of the company’s

shares. Under the agreement, Carnegie medi-

ates buying and selling of the shares in return

for customary brokerage commissions. How-

ever, the share is not listed on any exchange

or other public trading venue.

Risk managementTh e Group is primarily exposed to interest

rate risk as a consequence of the company’s

fi nance and operating leases and the compa-

ny’s loans. Among other things, the lease

charges and loans are based on variable mar-

ket interest rates.

Th e Concordia Bus Group is exposed to

exchange rate fl uctuations on its bond loan,

which is denominated in EUR. Th e Group’s

fi nance policy states that all foreign exchange

exposure on interest payments during the

coming 12-month period must be at least

50% hedged. Th is foreign exchange expos-

ure, excluding currency hedging, represents

a potential foreign exchange loss of more

than SEK 3 million in the event of a 10%

depreciation of SEK. Th e Concordia Bus

Group is also exposed to a potential foreign

exchange loss on the total value of the bond

loan, which in such case will be unrealized

until the bond loan matures. Negotiations

have been initiated regarding the necessary

credit limits to enter into derivative contracts

for currency hedging.

Th e Group is also exposed to exchange

rate fl uctuations through its purchasing of

diesel, which is traded on the international

commodities marketing US dollars. Th rough

revenue indexation clauses in its contracts

with public transport authorities, the Group

receives partial compensation for changes in

the diesel price. According to internal calcu-

lations, this index compensation reduces

exposure to diesel price movements by 57%.

Concordia Bus has used diesel derivatives dur-

ing the fi scal year to cover diesel price risk in

excess of indexation in the transport contracts.

Based on the budgeted diesel consump-

tion and estimated index compensation, an

increase in the diesel price by USD 1 per

tonne would raise the net diesel cost by SEK

0.2 million for the following fi scal year.

Signifi cant events after the end of the fi scal yearNo signifi cant events have occurred since the

end of the fi scal year.

Anticipated future developmentConcordia Bus AB’s fi nancial development in

the past year was stronger than anticipated,

for which reason the company has revised its

fi nancial forecast assumptions. Th ese take

into account the current fi nancial trend,

which indicates additional favorable oppor-

tunities for improved earnings growth. A

profi t increase of 5–10% annually is awaited

for the 2008–2010 fi scal years. In the follow-

ing two years, the margin is expected to

improve by 1–2 percentage points annually.

As a result, the profi t margin can lie between

3% and 5% before interest expenses on the

current bond loan.

Concordia Bus AB will continue to strive

for an improved capital structure.

IFRS and the company’s accounting standardsTh e consolidated fi nancial statements have

been prepared in accordance with the Inter-

national Financial Reporting Standards

(IFRS) issued by the International Account-

ing Standards Board (IASB). Th e Parent

Company applies the same accounting stan-

dards as the Group, except for in those cases

described under the heading “Accounting

policies of the Parent Company”. Any devia-

tions that that exist are a result of the Swedish

Annual Accounts Act’s limitations on the

scope for IFRS conformity in the Parent

Company and in certain cases also tax con-

siderations. Th e company’s accounting poli-

cies are presented in Note 1.

Parent Company

Th e Parent Company reported a pretax profi t

of SEK 14 million (–62). Th e Parent com-

pany had nine employees during the year.

Allocation of profi ts

Funds available for allocation by the Annual General Meeting (SEK)

Share premium reserve 492,239,445

Accumulated defi cit –128,759,629

Profi t for the year 20,288,936

Total 383,768,752

The Board of Directors proposes that the company’s profi ts be allocated as follows:

To be paid to the shareholders as a dividend of SEK 17.88 per preference share 89,400,000

To be carried forward to new account 294,368,752

Total 383,768,752

For more information about the results and

fi nancial position of the Group and the Par-

ent Company, see the following income state-

ments, balance sheets and notes.

ADMINISTRATION REPORT

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 2 9

1 March 2007– 1 March 2006–SEK M Note 29 Feb 2008 28 Feb 2007

Net revenue 1, 2, 3 5,320 4,986

Other operating income 86 89

TOTAL REVENUE 5,406 5,075

OPERATING EXPENSES

Fuel, tires and other consumables 4 –1,162 –1,110

Other external expenses 4, 5, 6 –1,118 –1,125

Personnel expenses 4, 7 –2,701 –2,548

Capital loss/gain on the sale of fi xed assets 0 –16

Depreciation/amortization and impairment losses 8 –264 –300

OPERATING PROFIT/LOSS 1, 2 161 –24

PROFIT/LOSS FROM FINANCIAL INVESTMENTS

Profi t/loss from shares in group companies 29 – –13

Interest income and similar profi t/loss items 9 15 7

Interest expense and similar profi t/loss items 10 –192 –216

PROFIT/LOSS AFTER FINANCIAL ITEMS –16 –246

Income tax expense 11 1 1

PROFIT/LOSS FOR THE YEAR –15 –245

Of which, attributable to equity holders of the Parent Company –15 –245

Earnings per share before dilution (SEK) 22 –5 –13

Earnings per share after dilution (SEK) 22 –5 –13

Average number of common shares before dilution 22 20,000, 20,000

Average number of common shares after dilution 22 20,000 20,000

Consolidated income statement

3 0 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Consolidated balance sheet

SEK M Note 29 Feb 2008 28 Feb 2007

ASSETS

Fixed assets

Goodwill 12 683 674

Costs for improvements on third-party properties 13 4 5

Equipment, tools, fi xtures and fi ttings 13 30 31

Vehicles 13 1,647 1,624

Non-current receivables 16 1 1

Total fi xed assets 2,365 2,335

Current assets

Inventories 17 36 28

Trade receivables 18 539 441

Other current receivables 48 60

Deferred expenses and accrued income 19 103 188

Blocked bank accounts 20 74 109

Cash and cash equivalents 20 455 242

Total current assets 1,255 1,068

TOTAL ASSETS 1, 2 3,620 3,403

EQUITY AND LIABILITIES

Equity attributable to equity holders of the Parent Company 21 210 227

Non-current liabilities

Bond loan 25 1,206 1,181

Other liabilities 25 1,008 817

Provisions for pensions and similar commitments 23 43 52

Other provisions 24 45 52

Total non-current liabilities 2,302 2,102

Current liabilities

Bond loan 25 – 1

Liabilities to credit institutions 25 107 81

Trade payables 199 204

Other current liabilities 26 134 139

Accrued expenses and prepaid income 27 668 649

Total current liabilities 1,108 1,074

Total liabilities 3,410 3,176

TOTAL EQUITY AND LIABILITIES 1,2 3,620 3,403

PLEDGED ASSETS AND CONTINGENT LIABILITIES 28

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 3 1

Consolidated statement of changes in equity

Accumulated Other defi cit incl. contributed Translation profti/loss for TotalSEK M Share capital capital differences the year equity

Opening equity, 1 March 2006 20 1,672 32 –1,741 –17

Translation difference – – –8 – –8

Total items not recognized directly in equity – – –8 – –8

Profi t/loss for the year – – – –245 –245

Total income and expenses during the year – – –8 –245 –253

Premium for share options – 0 – – 0

New share issue 5 505 – – 510

Issue expenses – –13 – – –13

Total transactions with shareholders 5 492 – – –497

Closing equity, 28 February 2007 25 2,164 24 –1,986 227

Translation difference – – 11 – 11

Total items not recognized directly in equity – – 11 – 11

Profi t/loss for the year – – – –15 –15

Total income and expenses during the year – – 11 –15 –4

Premium for share options – 0 – – –

Dividend – – – –13 –13

Total transactions with shareholders – – – –13 –13

Closing equity, 29 February 2008 25 2,164 35 –2,014 210

3 2 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

1 March 2007– 1 March 2006–SEK M Note 29 Feb 2008 28 Feb 2007

Cash fl ow from operating activities

Profi t/loss after fi nancial items –16 –246

Adjustments for non-cash items;

– Depreciation/amortization and impairment losses 8 264 300

– Allocation of capitalized borrowing costs 10 10

– Capital gains/losses 0 29

– Unrealized exchange gains/losses 15 –19

– Other items –15 2

Paid tax 1 2

Cash fl ow from operating activities before changes in working capital 259 78

Cash fl ow from changes in working capital

Change in inventories 17 –8 2

Change in operating receivables –1 –64

Change in operating liabilities 1 122

Cash fl ow from operating activities 251 138

Cash fl ow from investing activities

Divestment of operations 29 – 19

Change in blocked bank accounts 20 38 –6

Investments in buildings and land, vehicles, equipment, tools, fi xtures and fi ttings excl. fi nance leases 13 –33 –98

Sale of buildings and land, vehicles, equipment, tools, fi xtures and fi ttings 58 90

Cash fl ow from investing activities 63 5

Cash fl ow from fi nancing activities

New share issue – 497

Dividend paid –13 –

New borrowings – 32

Repayment of liabilities to credit institutions – –511

Amortization of fi nance lease liability –90 –44

Cash fl ow from fi nancing activities –103 –26

Cash fl ow for the year 211 117

Cash and cash equivalents at beginning of year 242 128

Cash fl ow for the year 211 117

Exchange rate difference 2 –3

Cash and cash equivalents at end of year 20 455 242

Th e cash fl ow statement is presented in accordance with the indirect method. Th e reported cash fl ow includes transactions that result in incoming and outgoing payments.

Th e Concordia Bus Group has received interest income of SEK 14 million (5) and paid interest expenses of SEK 167 million (239) during the year.

Consolidated cash fl ow statement

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 3 3

1 March 2007– 1 March 2006–SEK M Note 29 Feb 2008 28 Feb 2007

Other operating income 33 31

TOTAL REVENUE 1, 3 33 31

OPERATING EXPENSES

Other external expenses 5 –16 –31

Personnel expenses 7 –18 –

OPERATING PROFIT/LOSS 1, 2 –1 0

PROFIT/LOSS FROM FINANCIAL INVESTMENTS

Interest income from group companies 15 29

Interest expense and similar profi t/loss items 10 – –91

PROFIT/LOSS AFTER FINANCIAL ITEMS 14 –62

Income tax expense 11 6 1

PROFIT/LOSS FOR THE YEAR 20 –61

Parent Company income statement

3 4 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Parent Company balance sheet

SEK M Note 29 Feb 2008 28 Feb 2007

ASSETS

Financial assets

Shares in group companies 14 1,772 1,772

Receivables from group companies 15 221 211

Total fi nancial assets 1,993 1,983

Total fi xed assets 1,993 1,983

Current assets

Receivables from group companies 39 22

Other current receivables 2 4

Deferred expenses and accrued income 19 1 2

Total current receivables 42 28

Cash and cash equivalents 20 53 50

Blocked bank accounts 20 1 –

Total current assets 96 78

TOTAL ASSETS 1 2,089 2,061

EQUITY AND LIABILITIES

Equity 21

Share capital 25 25

Statutory reserve 1,672 1,672

Total restricted equity 1,697 1,697

Accumulated defi cit/non-restricted equity 21

Share premium reserve 492 492

Accumulated defi cit –128 –70

Profi t/loss for the year 20 –61

Total accumulated defi cit/non-restricted equity 384 361

Total equity 2,081 2,058

Current liabilities

Bond loan 25 – 1

Trade payables 1 –

Liabilities to group companies 3 1

Accrued expenses and prepaid income 27 4 1

Total current liabilities 8 3

TOTAL EQUITY AND LIABILITIES 1 2,089 2,061

PLEDGED ASSETS AND CONTINGENT LIABILITIES 28

Pledged assets 1,242 1,063

Contingent liabilities – –

Total pledged assets and contingent liabilities 1,242 1,063

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 3 5

Parent Company statement of changes in equity

Other non- Share restricted equity Statutory premium incl. profi t/loss SEK M Share capital reserve reserve for the year Total equity

Opening equity, 1 March 2006 20 1,672 – –74 1,618

Group contributions received – – – 5 5

Tax effect on group contributions received – – – –1 –1

Total items not recognized directly in equity – – – 4 4

Profi t/loss for the year – – – –61 –61

Total income and expenses during the year – – – –57 –57

Premium for share options – 0 – – 0

New share issue 5 – 505 – 510

Issue expenses – – –13 – –13

Total transactions with shareholders 5 – 492 – 497

Closing equity, 28 Feb 2007 25 1,672 492 –131 2,058

Group contributions received – – – 22 22

Tax effect on group contributions received – – – –6 –6

Total items not recognized directly in equity – – – 16 16

Profi t/loss for the year – – – 20 20

Total income and expenses during the year – – – 36 36

Dividend – – – –13 –13

Total transactions with shareholders – – – –13 –13

Closing equity, 29 Feb 2008 25 1,672 492 –108 2,081

3 6 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Parent Company cash fl ow statement

1 March 2007– 1 March 2006– SEK M Note 29 Feb 2008 28 Feb 2007

Cash fl ow from operating activities

Profi t/loss after fi nancial items 14 –62

Adjustments for non-cash items;

– Change in interest receivable –11 13

– Change in interest payable 25 0 33

Cash fl ow from operating activities before changes in working capital 3 –16

Cash fl ow from changes in working capital

Change in inventories 17 – –

Change in operating receivables –14 31

Change in operating liabilities 6 –7

Cash fl ow from operating activities –5 8

Cash fl ow from investing activities

Change in blocked bank accounts –1 –

Cash fl ow from investing activities –1 –

Cash fl ow from fi nancing activities 22

Dividend paid –13 –

Group contributions received 22 –

New share issue – 497

New borrowings – 32

Repayment of liabilities to credit institutions – –511

Cash fl ow from fi nancing activities 9 18

Cash fl ow for the year 3 26

Cash and cash equivalents at beginning of year 50 24

Cash fl ow for the year 3 26

Cash and cash equivalents at end of year 20 53 50

Th e cash fl ow statement is presented in accordance with the indirect method. Th e reported cash fl ow includes transactions that result in incoming and outgoing payments.

Th e Parent Company has paid interest expenses of SEK 0 million (110). Th e Parent Company has not paid any tax during the year.

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 3 7

Notes

NOTE 1 Company information and accounting policies

Company informationConcordia Bus AB is a public limited company (corporate identifi cation number

556576-4569, domiciled in Stockholm) that is owned by some 30 shareholders,

and is the overall Parent Company of the Concordia Bus Group (Concordia). Th e

address of the head offi ce is Solna Strandväg 78, SE-171 54 Solna, Sweden.

Concordia Bus AB’s operations, which are conducted through subsidiaries,

consist of the provision of scheduled contractual bus transport services to public

transport authorities in Sweden, Norway and Finland. Aside from contractual bus

transports, Concordia Bus AB also off ers extensive express bus services throughout

large parts of Sweden.

Concordia Bus AB is a holding company whose primary asset consists of the

investment in Concordia Bus Nordic Holding AB (with subsidiaries). Th is means

that the company’s ability to pay interest and amortize its debts is conditional on

the transfer of profi ts from the underlying operations.

Th e consolidated fi nancial statements were approved for publication by deci-

sion of the Board on 22 April 2008.

Th e consolidated income statement and balance sheet will be subject to adop-

tion by the Annual General Meeting on 28 May 2008 in Stockholm.

Compliance with norms and lawsTh e consolidated fi nancial statements are presented in accordance with the Inter-

national Financial Reporting Standards (IFRS) established by the International

Accounting Standards Board (IASB) which have been endorsed by the European

Commission for application in the EU. Th e Parent Company applies the same

accounting standards as the Group except for in those cases specifi ed below under

“Accounting policies of the Parent Company”. Any deviations that that exist are a

result of the Swedish Annual Accounts Act’s limitations on the scope for IFRS con-

formity in the Parent Company and in certain cases also tax considerations. Further-

more, the Swedish Financial Accounting Standards Council’s recommendation RR

30:06, Supplementary Rules for Consolidated Financial Statements, has been applied.

Basis of presentationAssets and liabilities are recognized at historical cost, except for certain fi nancial

assets and liabilities which are stated at fair value or amortized cost. Th e income

statement is presented by cost type.

Principles of consolidationTh e consolidated fi nancial statements include all companies in which Concordia

Bus AB directly or indirectly holds more than 50% of the votes other otherwise has

a controlling infl uence.

Th e consolidated fi nancial statements are prepared in accordance with the pur-

chase method of accounting, whereby the subsidiaries’ assets and liabilities, includ-

ing deferred tax liabilities, are recognized at fair value according to an acquisition

analysis prepared on the acquisition date. If the cost of acquisition for the shares in

the subsidiary exceeds the fair value of the company’s identifi able net assets accord-

ing to the acquisition analysis, the diff erence is recorded as goodwill and is tested

for impairment at least annually. Only profi ts arising after the acquisition date are

included in consolidated equity. Subsidiaries are consolidated from the date on

which control is transferred to the Group and cease to be consolidated from the

date on which control is transferred out of the Group.

Transactions to be eliminated on consolidation All intra-group receivables and liabilities, income or expenses, and unrealized gains

or losses arising on transactions between group companies are eliminated in full in

presentation of the consolidated fi nancial statements.

Transactions in foreign currencyTransactions in foreign currencies are translated to the functional currency at the

rate of exchange ruling on the transaction date. Th e functional currency is the cur-

rency of the primary economic environment in which the group company oper-

ates. Monetary assets and liabilities in foreign currency are translated to the func-

tional currency at the closing day rate. Foreign exchange diff erences arising on

translation are recognized in the income statement. For the fi nancial statements of

subsidiaries with a functional currency other than SEK, all balance sheet items are

translated at the closing day rate of exchange while income statement items are

transacted at the average rate during the year.

Functional currency and presentation currencyTh e functional currency of the Parent Company is Swedish kronor (SEK), which is

also the presentation currency of the Parent Company and the Group. Th e consolid-

ated fi nancial statements are thus presented in SEK. All amounts are rounded off to

the nearest million, unless otherwise stated.

Critical accounting estimates and assumptionsTh e preparation of fi nancial statements in conformity with IFRS requires the use of

certain critical accounting estimates and assumptions that aff ect the reported

amounts of assets, liabilities, pledged assets and contingent liabilities, as well as

income and expenses, during the reporting period.

Certain assumptions about the future and certain estimates and judgments on

closing date are of special signifi cance for the valuation of assets and liabilities in

the balance sheet. Th e risk for changes in carrying amounts during the coming year

due to a possible need for changes in estimates and assumptions is deemed to lie

primarily in the following areas.

Impairment of goodwillIn assessing the recoverable amount of cash-generating units for testing of goodwill

impairment, several assumptions about future conditions and estimates of variables

have been made.

Provisions for onerous contractsIn the Group’s provisions for onerous contracts, under which the contractual reve-

nues are not suffi cient to cover the direct and allocable costs necessary for fulfi ll-

ment of the contractual obligations, several assumptions about future conditions

and estimates of variables have been made.

Excess vehicles (buses)In assessing whether to measure excess vehicles (not used in traffi c) at fair value,

management has made a number of assumptions about future conditions and alter-

natives for relocation and estimates about future resale values.

Th e preparation of fi nancial statements also requires judgments in the applica-

tion of accounting policies and classifi cation of items. On the issuance of prefer-

ence shares, the issued amount has been classifi ed as equity based on an assessment

of the conditions for these in relation to the criteria in IAS 32, which defi ne what is

a liability and what is equity.

Changes in published standards effective during the fi scal yearIFRS 7, “Financial Instruments: Disclosures and the concurrent amendments to

IAS 1 Presentation of Financial Statements”, requires extensive disclosures about

fi nancial instruments. IFRS 7 has no impact on classifi cation and valuation of the

Group’s fi nancial instruments.

IFRIC 8, “Scope of IFRS 2”, requires testing of transactions where an entity

makes share-based payments and the identifi able consideration given appears to be

less than the fair value of the equity instruments granted or liability incurred to

determine whether they fall within the scope of IFRS 2. Th is interpretation has no

impact on the Group’s historical fi nancial reports.

3 8 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

IFRC 10, “Interim Financial Reporting and Impairment”, concludes that

where an entity has recognized an impairment loss in an interim period for good-

will or an investment in either an equity instrument or a fi nancial asset carried at

cost, that impairment should not be reversed in subsequent interim or annual

fi nancial statements. Th is interpretation has no impact on the Group’s historical

fi nancial reports.

New accounting standardsTh e following new standards and amendments eff ective for periods beginning on

or after 1 January 2008 have not been applied for 2007. Th ese are not expected to

have any impact on the consolidated fi nancial statements other than increased dis-

closure requirements.

IFRS 8, “Operating Segments” requires operating segments to be identifi ed on

the basis of the company’s system of internal fi nancial reporting to key manage-

ment personnel.

Amendments to IAS 1, “Presentation of Financial Statements”, requires the

presentation of all non-owner changes in equity (comprehensive income) either in

one statement of comprehensive income or in two statements (a separate income

statement and a statement of comprehensive income). Components of compre-

hensive income may not be presented in the statement of changes in equity.

Segment reportingConcordia Bus is active in two business areas; contractual transports and long-dis-

tance transports between selected cities (express transports). Contractual transports

are operated in large parts of Sweden and in metropolitan areas of Finland and

Norway. Th e bulk of revenue comes from contracts with public transport authori-

ties that represent the various counties. In nearly all cases, the public transport

authorities receive ticket revenues and the operator receives a fi xed amount of com-

pensation as payment for the contracted services. Swebus Express traffi cs certain

predetermined routes throughout Sweden. Revenue is generated by the sale of tick-

ets to the passengers. Some of the companies also conduct contract traffi c mainly

by using vehicles and personnel during periods when these are not occupied in reg-

ular transport operations.

Th e Group’s operations are steered and reported primarily by business segment

and secondarily by geographical market. Th e accounting policies used by the

reporting segments at the same as those applied in the consolidated fi nancial state-

ments. Concordia Bus evaluates operations in each business segment based on

operating profi t for each reporting business segment and normally reports sales and

transfers between business segments on a third-party basis, i.e. valued at market

prices. Sales are attributed to the geographical location where the assets that gener-

ated the revenue are reported.

Group-wide functionsCosts for group-wide support functions such as IT, systems administration and

legal aff airs, etc., are allocated to the operating entities and countries according to

the degree of utilization and are included in operating profi t. General administra-

tive expenses, costs for the head offi ce and other costs that arise at the central level

and are attributable to the entire company are not included in entity’s profi t or loss.

Th e operating assets in each entity include all operating assets that are used by the

entity, primarily intangible assets, tangible assets, inventories and trade receivables.

Most of these assets are directly attributable to the respective entity. Th e operating

liabilities in each entity include all operating liabilities that are used by the entity,

accrued expenses and prepaid income. Most of these liabilities are directly attribut-

able to the respective entity. Estimated deferred tax and external and internal loans

are not included in the entity’s capital employed.

Revenue recognitionTh e majority of Concordia’s revenue is attributable to contracts with public trans-

port authorities (PTAs) with a term of 5-8 years. Th e PTA contracts are generally

designed so that Concordia receives a fi xed fee in return for services performed.

Ticket revenues do not accrue to Concordia, but are forwarded to the PTAs. Most

of the PTA contracts are of the gross cost contract type, in which compensation is

based exclusively on the number of kilometers or hours driven and is entirely unre-

lated to the number of passengers. Under certain contracts, Concordia receives

compensation based on the services performed, while other contracts provide Con-

cordia with remuneration in advance. Regardless of the payment fl ows in the con-

tractual operations and the basis for compensation, Concordia recognizes the reve-

nue evenly over the term of the contract, before indexation. Th e amount of compen-

sation is often tied to certain cost indices in order to compensate the operators for

cost increases during the term of the contract. Th e compensation is adjusted during

the term of the contract due to changes in these indices. Concordia adjusts its reve-

nues during the contract period according to the agreed indexation formula. Certain

of Concordia’s PTA contracts are designed so that all or part of the compensation is

based on the number of passengers, so-called net cost contracts. Revenue from these

contracts is recognized on the date when the passenger travels with Concordia.

Revenues from express transports consist of ticket revenues from the passen-

gers. For express transports, revenue is recognized on the date when the passenger

travels with Concordia.

Th e revenues also include revenues for rents, fuel sales and maintenance ser-

vices. Revenues from these activities are recognized when the goods are delivered

and the services performed or, in cases where revenues are obtained through operat-

ing leases, they are distributed evenly over the term of the lease.

All revenues are reported excluding value added tax.

LeasesIn the consolidated fi nancial statements, leases are classifi ed as either fi nance or

operating leases. A lease is classifi ed as a fi nance lease if it transfers substantially all

the risks and rewards incident to ownership to the lessee. All other leases are classi-

fi ed as operating leases. Assets held under fi nance leases are recorded as fi xed assets

in the consolidated balance sheet. Th e obligation to pay future lease charges is rec-

ognized as a liability. At commencement of the lease term, all assets and liabilities

are measured at the lower of fair value and the present value of minimum lease pay-

ments. Assets held under fi nance leases are depreciated on a straight-line basis over

their estimated useful lives according to the same valuation principles used for sim-

ilar asset groups, which do not follow the payment periods in the lease contracts. In

the company’s assessment, the benefi ts earned from the leased vehicles extend for

longer than the related fi nancial obligation. Th e fi nance lease payments are appor-

tioned between the fi nance charge and reduction of outstanding liability to pro-

duce a constant periodic rate of interest on the remaining balance of the liability for

each period. In the income statement, the fi nance charge is recognized as amortiza-

tion and interest expenses. For operating leases, no assets or liabilities are recog-

nized in the balance sheet. In the income statement, the lease payments are recog-

nized as an expense on a straight-line basis over the lease term.

DepreciationDepreciation of tangible assets is based on the historical costs and estimated useful

lives of diff erent groups of fi xed assets. Depreciation is charge out on a straight-line

basis over the useful life of the assets down to an estimated residual value. For assets

acquired during the year, depreciation is calculated from the acquisition date.

Applied useful lives

Computers 3 years

Offi ce equipment and furniture 5 years

Vehicles Standard buses, 14 years

Long-distance buses, 10 years

Special buses, according to individual valuation

Remodeling in leased premises 5 years, but not exceeding the term of the lease

Financial income and expensesFinancial income and expenses consist of interest income on bank deposits and

receivables, interest expense on loans and realized and unrealized gains and losses

attributable to fi nancing.

Income taxesTh e Groups’s income taxes consist of current tax and deferred tax. Current tax

refers to tax payable or receivable with respect to the year’s profi t or loss. Deferred

tax is calculated according to the balance sheet method on the basis of temporary

Cont’d. NOTE 1

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 3 9

diff erences between the carrying amount of an asset or liability and its tax base and

tax on the Group’s tax loss carryforward. Deferred tax is computed according to the

applicable tax rate in each country. Deferred tax assets are recognized only to the

extent that it is probable that these can be utilized against future taxable profi ts.

Tax laws in Sweden and Finland permit provisions to special reserves and

funds which constitute temporary diff erences. Within specifi ed limits, this enables

companies to retain reported profi ts in the company without immediate taxation

of these profi ts. Th e untaxed reserves are not subject to taxation until they are dis-

solved. During years when the operations make a loss, however, the untaxed

reserves can be utilized to cover losses without giving rise to any taxation. In the

Group’s balance sheet, untaxed reserves are divided between equity and deferred tax

liabilities. In the income statement, deferred tax is reported among other things as

tax attributable to the year’s change in untaxed reserves.

Intangible assetsIn cases where the fair value of purchase consideration given for operations or

shares in subsidiaries exceed the fair value of net assets acquired, the diff erence is

recorded as goodwill. Goodwill is no longer amortized but is instead tested for

impairment at least annually.

Tangible assetsTh e carrying amounts of the Group’s fi xed assets are reviewed regularly to look for

any indication that an asset may be impaired. If there is an indication of impair-

ment, the asset’s net selling price and value in use are calculated. Net selling price

consists of the amount recoverable on the sale of the asset less costs to sell.

A fi xed asset is considered to be impaired when its carrying amount exceeds the

present value of future cash fl ows from the asset. Th e impairment loss consists of

the diff erence between the asset’s present value and carrying amount. For fi xed

assets held for sale, the impairment loss is calculated as the diff erence between the

estimated selling price less costs for disposal and the carrying amount of the asset.

InventoriesInventories are stated at the lower of cost and fair value on a First-In, First-Out

(FIFO) basis. Th e necessary provisions are made for obsolescence, partly on a case-

by-case basis and partly through collective assessment.

Financial assets and liabilities and other fi nancial instruments Financial instruments are initially measured at cost, corresponding to fair value

including transaction costs for all fi nancial instruments aside from those in the cat-

egory of fi nancial assets and liabilities measured at fair value through profi t or loss.

Subsequent to initial recognition, the accounting treatment of fi nancial liabilities

depends on how they are classifi ed, as described below.

A fi nancial asset or liability is recognized in the balance sheet when the com-

pany initially becomes party to the contractual provisions of the instrument. Trade

receivables are recorded in the balance sheet when an invoice has been issued.

Financial liabilities are recognized when the counterparty has performed and there

is contractual obligation to pay, even if no invoice has been received. Trade payables

are recorded when an invoice has been received.

A fi nancial asset is derecognized from the balance sheet when the company’s

rights under the agreement are realized, expire or the company has relinquished

control of the asset. Th e same applies to a part of a fi nancial asset. A fi nancial liabil-

ity is derecognized from the balance sheet when the obligation specifi ed in the

agreement is discharged or otherwise extinguished. Th e same applies to a part of a

fi nancial liability.

At each reporting date, the Group assesses whether there is objective evidence

of impairment for a fi nancial asset or group of fi nancial assets.

Financial assets and liabilities at fair value through profi t or lossAssets and liabilities in this category consist of derivatives measured at fair value

with fair value changes through profi t or loss.

Currency derivatives (forward exchange contracts and currency swaps) entered

into in order to hedge currency exposure in interest payments on the bond loan are

reported according to hedge accounting, i.e. the profi t/loss eff ects attributable to the

derivative instruments are recognized on the same date as the foreign exchange eff ects

on the underlying commercial fl ow are realized. Outstanding currency derivatives

that do not meet the criteria for hedge accounting are measured at fair value with fair

value changes through other fi nancial items in the income statement.

Interest derivatives (interest rate caps) entered into in order to achieve the desired

fi xed interest period in lease liabilities are reported according to hedge accounting, i.e.

the profi t/loss eff ects attributable to the derivative instruments are recognized on the

same date as the underlying item. Interest derivatives that do not meet the criteria for

hedge accounting are measured at fair value with fair value changes through other

fi nancial items in the income statement.

Loans and receivablesAfter individual assessment, trade receivables are reported in the amount in which

they are expected to be received after deduction of doubtful debts, which are

assessed on a case-by-case basis. When the expected maturity is short, the receivable

is recognized at face value without discounting. Impairment losses on loans and

receivables are recognized in operating expenses

Blocked bank accountsBlocked bank accounts consist of deposits to secure bank guarantees and lease con-

tracts. Among other things, bank guarantees have been furnished as security for

Concordia Bus Nordic AB´s pension liability, Concordia Bus Norge AS’s obliga-

tions in respect of transport contracts in Oslo, Swebus AB and Swebus Express ABs

obligations pursuant to the Travel Guarantee Act and Swebus’s obligations in

respect of electricity purchases. Swebus has deposited funds under a lease contract

for a bus.

Cash and cash equivalentsCash and cash equivalents consist of comprise cash in hand and at bank.

Other fi nancial liabilitiesLiabilities are classifi ed as other fi nancial liabilities, which means that these are ini-

tially measured at the amount received less transaction costs and are subsequently

measured at amortized cost according to the eff ective interest rate method.

Trade payables are classifi ed as other fi nancial liabilities. Trade payables have a

short expected maturity and are measured at face value without discounting.

Determining recoverable amountTh e recoverable amounts of fi nancial assets in the categories of held-to-maturity

investments and loans and receivables measured at amortized cost are calculated as

the present value of future cash fl ows discounted at the eff ective rate in force on ini-

tial recognition of the asset. Assets with a time to maturity of less than one year are

not discounted.

Impairment losses on held-to-maturity investments and loans and receivables

measured at amortized cost are reversed if a later increase in the recoverable amount

can be objectively attributed to an event occurring after the date of the impairment

loss.

Provisions A provision is recognized in the balance sheet when the Group has a present obliga-

tion (legal or constructive) that has arisen as a result of a past event, it is probable

that an outfl ow of resources will be required to settle the obligation and the amount

can be estimated reliably. When the timing eff ect of payment is signifi cant, provi-

sions are measured at discounted present value using a pre-tax discount rate that

refl ects current market assessments of the time value of money and the risks specifi c

to the liability.

Termination benefi tsA provision is recognized on the termination of employees only if the company is

demonstrably committed to terminate an employee or group of employees before

the normal retirement date. In the event of termination, the company draws up a

detailed plan including at least the place of work, positions and approximate num-

ber of persons aff ected, as well as the amount of compensation for each employee

category or position and the time of the plan’s implementation.

Cont’d. NOTE 1

4 0 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

Onerous contractsA large share of the Group’s revenue relates to contracts with public transport

authorities with a term of 5-8 years. Th e terms of these contracts normally stipulate

that the amount of revenue shall be adjusted upwards according to an established

index, either the consumer price index or various other producer price indices. As a

result of changed conditions and when costs increase more than revenues, these

contracts can become onerous contracts in which the contractual revenues are not

suffi cient to cover the direct and allocable costs necessary for fulfi llment of the con-

tractual obligations. A provision for future losses is then made in the period when

the management has identifi ed the contract as an onerous contract. Th e loss is cal-

culated by including direct and indirect costs attributable to the contract including

depreciation of buses used to fulfi ll the contractual obligations. Provisions are made

at the public transport authority level in cases where there is a natural connection

between the various contracts. Many contracts make use of joint resources which

are often diffi cult to allocate between the contracts. Th e contracts can also be

related for other reasons, for example in tenders for packages of contracts where

certain are profi table and others loss-making but the transaction as such generates a

surplus.

Future third-party obligationsProvisions are made for damages that of occurred, but have not been settled, to the

Group’s own vehicles or vehicles owned by third parties. Th e provision shall cover

future obligations to third parties.

Future environmental obligations Provisions are made for future environmental obligations on leased land and facili-

ties that are, or have been, used in operations.

PensionsTh e Group has both defi ned contribution and defi ned benefi t pension plans. In the

defi ned contribution pension plans, Concordia pays a pays a fi xed contribution

according to plan and has no further obligation to pay post-employment contribu-

tions. Under the defi ned contribution plans for Concordia Bus Norge AS and

Concordia Bus Nordic AB, benefi ts are paid to former employees on the basis of

fi nal salary and years of service. Th e Group bears the risk for ensuring that the con-

tractual benefi ts are paid.

Pension obligations for most of the Swedish operations are covered by a

defi ned benefi t pension plan of the multi-employer type. Th e plan is insured in the

mutual insurance company Alecta. Th e Group has not had access to suffi cient

information to report its proportional share of the defi ned benefi t obligation and of

the plan assets and expenses. Th e plan is therefore reported as a defi ned contribu-

tion plan, which means that benefi ts paid are recognized as an expense. In the

Swedish operations, there is also a defi ned benefi t pension plan that is funded.

Th e Group’s net obligation under defi ned benefi t plans is determined sepa-

rately for each plan according to the Projected Unit Credit Method. Th is means

that the obligation is calculated as the present value of expected future pension pay-

ments. Th is obligation is compared to the fair value of plan assets and the diff erence

is recognized as a liability/asset with respect to accrued actuarial gains/losses. Th e

calculation of future payments is based on actuarial assumptions that include life

expectancy, future salary increases, employee turnover and factors of signifi cance

for the choice of discount rate.

Changes in and deviations from the actuarial assumptions normally lead to

actuarial gains or losses. Actuarial gains and losses are recognized only when the

accumulated gain or loss exceeds 10% of the higher of the present value of plan

obligations and the fair value of plan assets. If the accumulated gain or loss falls

below the above-mentioned limit, the excess portion is recognized in income or

expense over the expected average remaining working lives of the participating

employees.

When valuation leads to an asset for the Group, the recognized value of the

asset is limited to the net total of unrealized actuarial losses and past service costs

and the present value of any benefi ts available in the form of refunds or reductions

in future employer contributions to the plan.

Cash fl owTh e cash fl ow statement has been prepared med based on the income statement and

other changes between the opening and closing balances in the balance sheet, taking

into account translation diff erences. Cash and cash equivalents in the cash fl ow state-

ment include cash in hand, driver receipts and bank deposits.

Accounting policies of the Parent CompanyTh e Parent Company applies the same accounting policies as the Group aside from

those exceptions and additional stated in the Swedish Financial Accounting Stand-

ards Council’s recommendation RR32:06, Accounting for Legal Entities. Any devi-

ations that that exist are a result of the Swedish Annual Accounts Act’s limitations on

the scope for IFRS conformity in the Parent Company.

Group contributions for legal entitiesTh e Parent Company reports Group contributions in accordance with a statement

from the Swedish Financial Accounting Standards Council’s Emerging Issues Task

Force. Group contributions are reported in accordance with their fi nancial signifi c-

ance. Th is means that Group contributions paid to minimize the Group’s overall tax

burden are reported directly in retained earnings less the current tax eff ect.

Cont’d. NOTE 1

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 4 1

NOTE 2 Segment reporting

Revenue by business segment

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Contractual transport services – Sweden, external customers 3,990 3,668

Contractual transport services – Norway 463 443

Contractual transport services – Finland 517 409

Total contractual transport services 4,970 4,520

Express, long-distance transports 351 365

Interbus, external customers – 114

Total other transports 351 479

Other revenue and group eliminations 85 76

Total revenue 5,406 5,075

Operating profi t/loss by business segment

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Contractual transport services – Sweden 153 7

Contractual transport services – Norway 23 19

Contractual transport services – Finland 9 -9

Total contractual transport services 185 17

Express, long-distance transports 19 10

Interbus – 8

Total other transports 19 18

Total bus operations 204 35

Central functions and other items –43 –59

Total operating profi t/loss 161 –24

Assets by business segment

SEK M 29 Feb 2008 28 Feb 2007

Contractual transport services – Sweden 2,279 2,353

Contractual transport services – Norway 577 532

Contractual transport services – Finland 332 222

Total contractual transport services 3,188 3,107

Express, long-distance transports 170 139

Interbus – –

Total other transports 170 139

Total bus operations 3,358 3,246

Parent Company and intra-group eliminations 262 157

Total assets 3,620 3,403

Liabilities by business segment

SEK M 29 Feb 2008 28 Feb 2007

Contractual transport services – Sweden 1,615 1,581

Contractual transport services – Norway 152 131

Contractual transport services – Finland 217 100

Total contractual transport services 1,984 1,812

Express, long-distance transports 84 60

Interbus – –

Total other transports 84 60

Total bus operations 2,068 1,872

Parent Company and intra-group eliminations 1,342 1,304

Total liabilities 3,410 3,176

Investments in tangible and fi nancial assets by business segment

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Contractual transport services – Sweden 84 930

Contractual transport services – Norway 57 61

Contractual transport services – Finland 141 15

Total contractual transport services 282 1,006

Express, long-distance transports 38 16

Interbus – –

Total other transports 38 16

Total bus operations 320 1,022

Parent Company and intra-group eliminations 19 15

Total investments 339 1,037

Investments in tangible and fi nancial assets consist of fi nance leases for SEK 306

million (931) which have no eff ect in liquidity in the business segment.

Depreciation/amortization by business segment

1 March 2007– 1 March 2006 –SEK M 29 Feb 2008 28 Feb 2007

Contractual transport services – Sweden 210 233

Contractual transport services – Norway 17 24

Contractual transport services – Finland 23 19

Total contractual transport services 250 276

Express, long-distance transports 8 11

Interbus – 6

Total other transports 8 17

Total bus operations 258 293

Parent Company and intra-group eliminations 6 7

Total depreciation/amortization 264 300

4 2 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

Revenue by country

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Sweden 4,408 4,201

Norway 476 460

Finland 522 414

Total revenue 5,406 5,075

Assets by country

SEK M 29 Feb 2008 28 Feb 2007

Sweden 2,711 2,649

Norway 577 532

Finland 332 222

Total assets 3,620 3,403

Investments in tangible and fi nancial assets by country

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Sweden 141 961

Norway 57 61

Finland 141 15

Total investments 339 1,037

Investments in tangible and fi nancial assets consist of fi nance leases for SEK 306

million (931) which have no eff ect in liquidity in the business segment.

Cont’d. NOTE 2

NOTE 3 Revenue

Revenue includes other operating income, which consists primarily of revenue from leasing, the sale of fuel and diesel and revenue from workshop services to external customers.

Group Parent Company

1 March 2007– 1 March 2006– 1 March 2007– 1 March 2006–Breakdown of revenue, SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Revenue from bus operations 5,299 4,961 – –

Leasing, external workshop services and diesel sales 21 25 – –

Other revenue 86 89 33 31

Total revenue 5,406 5,075 33 31

Sales to Group companiesRevenue in the Parent Company includes sales of SEK 33 million (31) to group companies. Sales to one major customer represent 20& (28%) of total revenue.

NOTE 4 Cost of services sold

Th e cost of services sold consists of personnel expenses, depreciation of buses and other direct costs.

Group Parent Company

1 March 2007– 1 March 2006– 1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Compensation to drivers 2,394 2,321 – –

Depreciation and lease charges on buses 638 697 – –

Other direct costs 1,514 1,483 – –

Total 4,546 4,501 – –

NOTE 5 Other external expenses

Group Parent Company

1 March 2007– 1 March 2006– 1 March 2007– 1 March 2006–Fees and compensation to auditors (SEK th) 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Ernst & Young

Auditing services 2,290 2,775 401 286

Non-auditing services 351 40 186 –

Total 2,641 2,815 587 286

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 4 3

Auditing services refer to examination of the consolidated fi nancial statements, the accounts and the administration of the Board of Directors and the President of the com-

pany, other tasks incumbent on the company’s auditor, and advice or other assistance prompted by observations from such audits or the performance of other such tasks. All

other work is classifi ed as non-auditing services.

Purchases from group companiesTh e Group’s operating expenses include purchases of SEK 0 million (0) from other companies in the corporate group to which Concordia Bus AB belongs. Th e Parent Com-

pany’s operating expenses include purchases of SEK 5 million (31) from group companies.

NOTE 6 Leases

Finance leases

Group

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Opening cost 1,248 942

Accumulated depreciation –123 –37

Total 1,125 905

During the year, the Group entered into fi nance lease contracts for SEK 306 million (931) via the subsidiary Concordia Bus Fleet AB. All lease contracts are valued according

to the same depreciation rules as the corresponding asset groups.

Th e following table summarizes the present value of the Concordia Bus Group’s fi nance lease obligations and their expected maturities at 29 February 2008. Parent Company

has no direct fi nance lease commitments.

Within Longer Total one year 1–3 years 4–5 years than 5 years

Vehicles (buses) 1 031 107 232 236 456

Operating leases

Group Parent Company

1 March 2007– 1 March 2006– 1 March 2007– 1 March 2006–Lease charges, SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

The year’s lease charges (operating leases) 390 422 – –

Th e Concordia Bus group holds 1,621 buses (1,624) under operating leases, which corresponds to a nominal lease liability of SEK 1,458 million (1,869). Th e Group also

holds 15 properties in which the company conducts operations under operating leases.

Group Parent Company

Present value of future lease payments, SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Present value of future lease payments

–Vehicles (buses) 939 976 – _

–Properties, etc. 24 32 – –

Total 963 1,008 – –

Th e following table shows the depreciation component of the lease charge based on the assumption that the contracts will be renewed on expiry of the initial lease period. Th e

Parent Company has not direct lease commitments.

LongerSEK M Within one year 1–3 years 4–5 years than 5 years

Vehicles (buses) 237 414 351 379

Properties 8 16 – –

Total 245 430 351 379

Cont’d. NOTE 5

4 4 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

Th e following table shows future lease payments (nominal amounts) for operating

leases on buses at 29 February 2008, given that all buses are held until the end of

the contract term;

SEK M

28 February 2009 244

28 February 2010 256

28 February 2011 189

28 February 2012 188

28 February 2013 157

Later 424

Total 1,458

NOTE 7 Personnel

Group Parent Company

1 March 2007– 1 March 2006– 1 March 2007– 1 March 2006– 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Average number of employees 7,021 6,814 9 –

of whom, men 6,108 5,841 7 –

of whom, women 913 973 2 –

Finland 717 623 – –

of whom, men 673 585 – –

of whom, women 44 38 – –

Norway 506 489 – –

of whom, men 465 464 – –

of whom, women 41 25 – –

Denmark 2 – – –

of whom, men 2 – – –

of whom, women – – – –

Sweden 5,796 5,702 9 –

of whom, men 4,968 4,792 7 –

of whom, women 828 910 2 –

Salaries and other remuneration (of which, bonus), SEK M

Sweden, boards and senior executives1) 13 (5) 11 (5) 8 (4) –

Other employees in Sweden 1,508 (9) 1,469 (0) 3 (0) –

1,521 (14) 1,480 (5) 11 (4) –

Subsidiaries abroad

Finland, board and president 2 2 – –

Finland, other employees 235 187 – –

Norway, board and president 2 2 – –

Norway, other employees 208 192 – –

Denmark, board and president – – – –

Denmark, other employees 1 – – –

TOTAL 1,969 1,863 – -

Payroll overheads 679 636 6 –

Of which, pension costs for other employees 131 78 1 –

Of which, pension costs for boards and presidents 2 3 1 –

1) The fi gures for the Group refer to the boards and presidents of all Swedish group companies..

Cont’d. NOTE 6

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 4 5

Board members and senior executives

Group Group 29 Feb 2008 28 Feb 2007

Number Of whom, men Number Of whom, men

Board of Directors 21 95% 20 95%

Presidents and other senior executives 32 91% 26 81%

Board members and senior executives

Parent Company Parent Company 29 Feb 2008 28 Feb 2007

Number Of whom, men Number Of whom, men

Board of Directors 4 75% 4 75%

Presidents and other senior executives 2 100% – –

Parent CompanyNo disclosures about sickness absence are provided since the number of employees

is fewer than 10.

Remuneration to senior executivesIn the event of termination of employment, senior executives in the Concordia Bus

Group are entitled to a maximum of 12 monthly salaries. As a rule, there is a

6-month mutual term of notice between the company and the senior executive.

Furthermore, additional compensation in a maximum amount of 6 monthly sala-

ries is payable in the event of termination on the part of the company. Senior exec-

utives include the President and CFO of the Parent Company and the presidents of

the Group’s subsidiaries. During the year, an agreement was signed with the presi-

dent of one subsidiary.

Pensions benefi ts of the PresidentTh e retirement age for the President of the Parent Company is 62 years. Pension

expenses for the company are reduced to 90% of salary on retirement at the age of

62–63 years, 80% of salary on retirement at the age of 63–64 years and 70% of sal-

ary on retirement at the age of 64–65 years. Concordia Bus AB’s obligations to its

presidents ceases on retirement, 65 years of age. Pension expenses consist of defi ned

benefi t pensions, for which the premium is equal to 30% of pensionable salary.

Pensionable salary consists of basic salary as long as the president remains in the

company’s employment. Termination benefi ts are pensionable.

Vacation for the PresidentTh e President is entitled to 30 vacation days per year.

Sick pay for the PresidentTh e President is insured up to 90% of salary for a maximum of 365 days per calen-

dar year, with no qualifying days.

Other employment benefi ts of the PresidentAside from the described taxable benefi ts, there is also healthcare insurance. Th e

President is covered by the issued share option programs, which are reported under

the heading “Share option programs”.

Remuneration to the Board Chairman and membersRemuneration to the Chairman and other members of the Board is paid according

to the decision of the Annual General Meeting. No remuneration in excess of that

decided by the Annual General Meeting is paid. Th e President receives no Board

fees. Th e members of the Board are covered by the issued share option programs,

which are reported under the heading “Share option programs”.

Remuneration and other benefi ts during the year

Group

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Board Chairman

Jan Sjöqvist 0.6 0.6

Board members

Gina Germano 0.0 0.0

Jan Sundling 0.2 0.2

Rolf Lydahl 0.2 0.2

President

Ragnar Norbäck 3.6 3.6

Total 4.6 4.6

During the year, Concordia Bus AB paid pension benefi ts to former Board mem-

bers in an amount of SEK 0.1 million. Former Board members are entitled to life-

long compensation from the company.

Share option programsConcordia Bus AB has issued two share option programs. Program 1, issued on

24 June 2005, consisted of 1,052,000 share options, and Program 2, issued on

8 November 2005, consisted of 304,569 share options. Each share option grants

the right to subscribe for 1 share.

Common Subscription Subscription shares price, SEK period

Program 1 1,052,000 22 1 June 2008– 30 Sept 2008

Program 2 304,569 49 8 Nov 2008– 22 Nov 2008

Total 1,356,569

Program 1 has been granted to senior executives in Concordia Bus AB and its sub-

sidiaries, while Program 2 has been primarily granted to the member of the Board

of Concordia Bus AB.

Th e share options correspond to an increase of 6.8% in the common shares.

Th e price of the share options has been calculated according to the Black & Scholes

model based on the following assumptions:

Program 1 Program 2

Share price SEK 10.85 SEK 20.71

Exercise price SEK 22.81 SEK 34.41

Share option price SEK 0.05 SEK 0.44

Risk-free interest rate 2.4% 2.4%

Maturity 3 years 3 years

No dividends have been assumed in valuation of the share options. Th e assessment

has been based on theoretical calculations of the share option’s value. Th e future

volatility of the share has been assessed with consideration to historical volatility in

comparable companies.

Cont’d. NOTE 7

4 6 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

NOTE 8 The year’s depreciation/impairment losses on tangible assets

Group

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Buildings and land 2 2

Equipment, tools, fi xtures and fi ttings 13 15

Vehicles 249 283

Total 264 300

NOTE 9 Other interest income and similar profi t/loss items

Group

1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007

Other fi nancial income 1 1

Other fi nancial expenses 14 6

Total 15 7

Th e Group earns interest on its bank deposits according to an interest rate based on

the banks’ daily investment interest rates. Of the above interest income and similar

profi t/loss items, SEK 14 million (5) was paid during the year.

NOTE 10 Interest expense and similar profi t/loss items

Group Parent Company

1 March 2007– 1 March 2006– 1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Interest expenses – liabilities to credit institutions –58 –20 – –

Interest expenses – bond loan –111 –219 – –110

Allocation of capitalized borrowing costs –10 –10 – –

Other fi nancial expenses –5 –6 0 –

Realized and unrealized exchange gains/losses, net –8 39 0 19

Total –192 –216 0 –91

Paid interest expenses amounted to SEK 167 million (239).

NOTE 11 Income tax

Group Parent Company

1 March 2007– 1 March 2006– 1 March 2007– 1 March 2006–SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Current tax – – – –

Deferred tax 1 1 6 1

Total 1 1 6 1

Group Parent Company

1 March 2007– 1 March 2006– 1 March 2007– 1 March 2006–Reconciliation between paid tax and applicable tax rate, SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Reported profi t before tax –16 –246 14 –62

Tax according to the applicable tax rate 4 69 –4 17

Tax effect of non-deductible expenses 1 –1 – –

Tax effect on sale of shares held for business purposes – 4 – –

Defi cit/surplus for which no deferred tax is recognized –4 –71 10 –16

Total 1 1 6 1

Th e corporate tax rate is 28% in Sweden, Norway and Denmark and 26% in Finland. Tax is computed on based on profi t/loss for the year plus non-deductible expenses and

other tax adjustments. At 29 February 2008 the Concordia Bus Group had unutilized loss carryforwards amounting to SEK 1,768 million (1,636). Th e loss carryforwards of

SEK 1,598 million in Sweden can be used for an unlimited period of time.

Th e subsidiary Concordia Bus Finland Oy Ab has total tax loss carryforwards of SEK 125 million (104), equal to approximately EUR 13 million (11), of which SEK 10

million can be utilized until 2011, SEK 4 million until 2012, SEK 14 million until 2013, SEK 23 until 2014, SEK 20 until 2015, SEK 18 million until 2016, SEK 17 million

until 2017, and SEK 19 million during the current accounting period.

Th e subsidiary Concordia Bus Norge AS has total tax loss carryforwards of SEK 43 million (4), equal to approximately NOK 36 million (4), of which all can be utilized

for an unlimited period of time

Concordia Bus Danmark AS has total tax loss carryforwards of SEK 2 million (2), equal to approximately DKK 2 million (2), which can be utilized for an unlimited

period of time.

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 4 7

Temporary differences resulted in deferred tax assets/liabilities in the following items.

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Deferred tax liability

Excess depreciation – – – –

Goodwill arising through business combinations – – – –

Deferred tax assets

Total in respect of loss carryforwards 493 487 – –

Provisions for onerous contracts – 1 – –

Impairment losses on receivables – – – –

Reporting of fi nance leases –4 –3 – –

Other temporary differences 1 1 – –

Uncapitalized deferred tax assets –489 –485 – –

Total 1 1 – –

Cont’d. NOTE 11

NOTE 12 Intangible assets

Group

Goodwill, SEK M 29 Feb 2008 28 Feb 2007

Historical cost

Opening balance 674 699

Sales and disposals – –19

Exchange rate differences 9 –6

Closing accumulated cost 683 674

Th e Group’s management has carried out impairment tests and found no indica-

tion of impairment for consolidated goodwill. Th e test has been performed with

respect to each operating unit and is based on the respective company’s profi t/loss

before amortization/depreciation, return multiples, discounted cash fl ows, 12%

return, future 5-year forecasts and existing and future market shares. Th e growth

rate has been estimated at 2% per year and business segment. In the management’s

assessment, reasonable and possible changes in the above variables would not have

such signifi cant eff ects that they would individually reduce the recoverable amount

to a level lower than the carrying amount.

NOTE 13 Tangible assets

Group Parent Company

Costs for improvements on third-party properties, SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Historical cost

Opening cost 8 6 – –

Purchases 0 4 – –

Sales and disposals 0 –2 – –

Closing accumulated cost 8 8 – –

Accumulated depreciation

Opening accumulated depreciation –3 –2 – –

Sales and disposals 0 1 – –

The year’s depreciation –1 –2 – –

Closing accumulated depreciation –4 –3 – –

Closing carrying amount 4 5 – –

4 8 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

Group Parent Company

Equipment, tools, fi xtures and fi ttings, SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Historical cost

Opening cost 157 230 – –

Purchases 11 18 – –

Sales and disposals –29 –79 – –

Translation difference 0 –1 – –

Reclassifi cation – –8 – –

Sale of operation – –3 – –

Closing accumulated cost 139 157 – –

Accumulated depreciation

Opening accumulated depreciation –126 –200 – –

Sales and disposals 29 78 – –

The year’s depreciation –12 –15 – –

Translation difference 0 1 – –

Reclassifi cation – 7 – –

Sale of operation – 3 – –

Closing accumulated depreciation –109 –126 – –

Closing carrying amount 30 31 – –

Group Parent Company

Vehicles, SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Historical cost

Opening cost 3,219 3,011 – –

Purchases 328 1,015 – –

Sales and disposals –358 –746 – –

Translation difference 5 –13 – –

Sale of operation – –48 – –

Closing accumulated cost 3,194 3,219 – –

Accumulated depreciation

Opening accumulated depreciation –1,510 –1,914 – –

Sales and disposals 252 628 – –

The year’s depreciation –240 –243 – –

Translation difference –1 7 – –

Sale of operation – 12 – –

Closing accumulated depreciation –1,499 –1,510 – –

Accumulated impairment losses

Opening accumulated impairment losses –85 –56 – –

Sales and disposals 48 13 – –

The year’s impairment losses –11 –42 – –

Closing accumulated impairment losses –48 –85 – –

Closing carrying amount 1,647 1,624 – –

Impairment losses refer to excess buses whose carrying amounts exceed their fair market value.

Th e year’s purchases include assets acquired through fi nance leases amounting to SEK 306 million (931). Th e total historical cost of the Group’s fi nance lease contracts

amounts to SEK 1,248 million (942).

Cont’d. NOTE 13

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 4 9

NOTE 14 Shares in group companies (Parent Company)

Parent Company

SEK M 29 Feb 2008 28 Feb 2007

Historical cost

Opening balance 2,176 2,176

Closing balance 2,176 2,176

Parent Company

SEK M 29 Feb 2008 28 Feb 2007

Accumulated impairment losses

Opening balance –404 –404

Closing balance –404 –404

Closing carrying amount 1,772 1,772

Corporate No. of Profi t/loss Holding Nominal Book valueSEK M ID number Equity shares for the year % value 29 Feb 2008

Concordia Bus Fleet AB (Stockholm) 556031-1812 17 70,000 20 100 7 16

Concordia Bus Nordic Holding AB (Stockholm) 556028-1122 842 300 –55 100 0 1,756

Subsidiaries of Concordia Bus Nordic Holding AB

Operating companies

Concordia Bus Nordic AB (Stockholm) 556031-8569 271 160,000 –35 100 16

Swebus Busco AB (Stockholm) 556583-0527 171 1,000 –71 100 0

Swebus Express AB (Stockholm) 556358-3276 13 5,000 10 100 5

Swebus AB (Stockholm) 556057-0128 245 3,000 97 100 0

Subsidiary of Swebus AB

Swebus Serviceresor AB (Stockholm) 556416-2419 1 1,000 0 100 0

Foreign subsidiaries

Concordia Bus Finland Oy Ab (Helsinki) 0505988-8 36 2,000 2 100 0

Subsidiaries of Concordia Bus Finland Oy Ab:

Concordia Bus Finland West Oy Ab (Helsinki) 2175179-4 0 2,500 0 100 0

Concordia Bus Finland South Oy Ab (Helsinki) 2175178-6 0 2,500 0 100 0

Concordia Bus Finland East Oy Ab (Helsinki) 2175186-6 0 2,500 0 100 0

Concordia Bus Norge AS (Oslo) 915768237 119 750 0 100 9

Subsidiaries of Concordia Bus Norge AS:

Concordia Bus Norge AS (Oslo) 992097353 –2 100 –2 100 0

Concordia Bus Denmark ApS (Copenhagen) 29513376 –2 1,250 –2 100 0

Property companies

Swebus fastigheter AB (Stockholm) 556031-3354 21 10,000 1 100 1

Subsidiaries of Swebus Fastigheter AB:

Alpus AB (Stockholm) 556011-8571 1 10,000 0 100 1

Malmfältens Omnibus AB (Stockholm) 556032-0359 1 960 0 100 0

Enköping-Bålsta Fastighets AB (Stockholm) 556012-9388 0 1,500 0 100 0

Dormant companies

Arlanda buss AB (Stockholm) 556030-5335 0 1,000 0 100 0

Billingens Trafi k AB (Stockholm) 556027-3137 2 14,000 0 100 1

Enköping-Bålsta Trafi k AB (Stockholm) 556410-2894 1 1,000 0 100 0

Hälsinge Wasatrafi k AB (Stockholm) 556039-2622 0 1,550 0 100 0

AB Härnösandsbuss (Stockholm) 556029-8258 0 3,000 0 100 0

Karlstadsbuss AB (Stockholm) 556051-2039 4 3,000 0 100 3

AB Kristinehamns Omnibusstrafi k (Stockholm) 556043-6445 1 9,000 0 100 1

Saltsjöbuss AB (Stockholm) 556210-1500 0 2,500 0 100 0

Swebus Service AB (Stockholm) 556041-6736 1 1,000 0 100 0

Swebus Västerås AB (Stockholm) 556115-9988 1 5,100 0 100 1

Tumlare Buss AB (Stockholm) 556068-5975 0 1,010 0 100 0

Wasatrafi k AB (Stockholm) 556048-9188 0 2,400 0 100 0

Total 1,772

5 0 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

NOTE 15 Receivables from group companies

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Historical cost

Opening cost – – 211 255

The year’s change – – 10 –44

Closing accumulated cost – – 221 211

NOTE 16 Other non-current receivables

Group Parent Company

Other fi nancial receivables, SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Other non-current receivables 1 1 – –

Total 1 1 – –

NOTE 17 Inventories

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Finished goods 36 28 – –

Total 36 28 – –

Th e Group’s inventories consist primarily of fuel, representing 65% (56%) of the total value inventories and spare parts.

NOTE 18 Trade receivables

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Trade receivables 548 449 – –

Provisions for doubtful debts –9 –8 – –

Total 539 441 – –

Age structure of trade receivables

Trade receivables Due during the Due within Due withinSEK M 29 Feb 2008 reporting period < 30 days 31–60 days

Trade receivables 548 76 341 131

Total 548 76 341 131

Provisions for doubtful debts

Group

SEK M 29 Feb 2008 28 Feb 2007

Opening balance –8 –15

The year’s reversal 3 7

Credit losses – –

The year’s provision –4 –

Total –9 –8

Provisions for doubtful debts are based on individual assessment of the risk of loss

per contract or country.

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 5 1

NOTE 19 Deferred expenses and accrued income

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Accrued transport revenues – transport contracts 35 56 – –

Other deferred expenses 68 132 1 2

Total 103 188 1 2

Accrued transport revenues refer mainly to earned but not yet invoiced compensation for transport services performed.

NOTE 20 Cash and cash equivalents and blocked bank accounts

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Cash and cash equivalents 455 242 53 50

Blocked bank accounts 74 109 1 –

Th e item cash and cash equivalents consist of the company’s checking accounts tied to the Group account, in which Concordia Bus Nordic AB is the principal account holder.

Blocked bank accounts consist of deposits to secure bank guarantees and lease contracts. Among other things, bank guarantees have been furnished as security for Concor-

dia Bus Nordic’s pension liability, Concordia Bus Norge AS’s obligations under transport contracts in Oslo, Swebus and Swebus Express’s obligations pursuant to the Trans-

port Guarantee Act and Swebus AB’s obligations regarding electricity purchases. Swebus AB has deposited funds under a lease contract for a bus.

NOTE 21 Changes in equity

Share capitalAccording to the articles of association for Concordia Bus AB, the share capital

shall amount to not less than SEK 15,000,000 and not more than SEK

60,000,000. Th e company’s shares are issued in two classes, common shares and

preference shares. Th e common shares grant the right to one vote and the prefer-

ence shares to one-tenth of one vote each.

All preference shares, 5,000,000, with a quota value of SEK 1 each, were issued

at a price of SEK 102, and the common shares, 20,000,000 with a quota value of

SEK 1 each, are fully paid up. Th ere are share option programs for senior executives

which can have a dilutive eff ect on the share capital. No treasury shares are held by

the company or its subsidiaries.

Each preference share entitles the holder to an annual dividend in an amount

equal to 16.5% of SEK 102 plus accrued and capitalized but unpaid dividends at

5 January and 5 July. No dividends are paid on the common shares until those on

the preference shares have been paid. In the event of the company’s dissolution or

liquidation, amounts available for distribution to the company’s shareholders

should be allocated as follows:

• Firstly, to the holders of preference shares in an amount corresponding to

accrued and capitalized but unpaid dividends on the preference shares for the

period until the date of the decision to dissolve or liquidate the company.

• Secondly, to the holders of preference shares in an amount corresponding to

SEK 102 per preference share.

• Th irdly, to the holders of preference shares in an amount corresponding to

the premium that may be paid, whereby the date of the decision to dissolve or

liquidate the company shall be the same as the date of the Board’s decision to

redeem the shares.

Th e available amount then remaining for distribution is divided equally between

the common shares.

Th e preference share does not entail the right to redemption. If the company

decides on the redemption of preference shares after 4 January 2010, redemption

will take place at a price equal to the issue price of SEK 102 each. If redemption

takes place prior to this date, it will take place at a higher predetermined price. Th e

redemption about per preference share shall be;

• SEK 102 plus a premium corresponding to 5.0% of SEK 102, plus such

accrued and capitalized but unpaid dividends, if the Board or Annual General

Meeting decides on redemption during the period from 5 January 2007 to

4 January 2008.

• SEK 102 plus a premium corresponding to 3.0% of SEK 102, plus such

accrued and capitalized but unpaid dividends, if the Board or Annual General

Meeting decides on redemption during the period from 5 January 2008 to

4 January 2009.

• SEK 102 plus a premium corresponding to 1.0% of SEK 102, plus such

accrued and capitalized but unpaid dividends, if the Board or Annual General

Meeting decides on redemption during the period from 5 January 2009 to

4 January 2010.

• SEK 102 plus such accrued and capitalized but unpaid dividends, if the Board

or Annual General Meeting decides on redemption during the period from

4 January 2010.

Consequently, if redemption takes place on 1 February 2010 the redemption

amount per preference share shall be SEK 102 plus accrued and capitalized but

unpaid dividends.

Concordia Bus’s total capital consists of equity and borrowed capital. Th e

company’s objective is to generate profi ts for the shareholders by increasing the

value of managed equity. Changes in the managed equity are shown below. Th ere

are no external capital requirements other than those set out in the Swedish Com-

panies Act. Concordia Bus currently has no dividend policy. Th e conditions for

borrowed capital are described in Note 25.

Reconciliation of share capital, SEK M Common Preference shares shares

Opening balance 20,000,000 5,000,000

Closing balance 20,000,000 5,000,000

5 2 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

Common Subscription SubscriptionShare options shares price, SEK period

Board of Directors 304,569 49 8 Nov 2008– 22 Nov 2008

Senior executives 1,052,000 22 1 March 2008– 22 Nov 2008

Total 1,356,569

ReservesTh e reserves reported in the Group consist of exchange rate diff erences arising on

the translation of subsidiaries with a fi nancial currency other than SEK. Th e Group’s

accumulated exchange rate diff erences amount to SEK 35 million (24). Th e year’s

change, SEK 11 million, is the combined eff ect of the Swedish krona’s change in

value against EUR and NOK on the translation of equity in foreign operations.

DividendTh e dividend is proposed by the Board in accordance with the Swedish Companies

Act and is approved by the Annual General Meeting. Th e dividend is recognized by

the Parent Company as a decrease in non-restricted equity only when the payment

has been made to the shareholders.

NOTE 22 Earnings per share

Group

1 March 2007– 1 March 2006– 29 Feb 2008 28 Feb 2007

Average number of common shares during the period 20,000 20,000

Reported profi t/loss (SEK M) –15 –245

Cumulative right to dividends on preference shares (SEK M) –89 –13

Adjusted profi t/loss (SEK M) –104 –258

Earnings per share (SEK) –5 –13

Earnings per share are calculated by dividing profi t/loss for the year adjusted for

cumulative rights to dividends by the average number of common shares.

NOTE 23 Provisions for pensions and similar commitments

Group Parent Company

29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Opening balance 52 66 – –

The year’s change –9 –14 – –

Closing balance 43 52 – –

Th e discount rate is based on the estimated discount rate on the yield produced by

domestic government bonds.

Th e annual rate of salary increase refl ects expected future salary increases as a

combined eff ect of infl ation and years of service. Th e future pension increase rate

refl ects the expected percentage of employees, by age group, who will leave the

company through natural attrition.

Th e expected average remaining term of service is estimated based on the

employees’ current age distribution and the expected employee turnover rate.

Indexation of pension benefi ts refl ects the infl ationary rate in each country,

Norway and Sweden.

Th e Concordia Bus Group’s pension expenses amounted to SEK 132 million

(81), of which SEK –1 million (–4) refers to defi ned benefi t plans.

The key actuarial assumptions used in calculation of the pension liability were as follows:

SEK M 29 Feb 2008 28 Feb 2007

Discount rate 4.2–4.5% 4.0–4.35%

Expected return on plan assets 5.5% 5.35%

Expected annual rate of salary increase 4.1% 4.2%

Expected rate of pension increase 2.0% 1.8%

Pension expenses are included in personnel expenses, and consist of the following:

Group

SEK M 29 Feb 2008 28 Feb 2007

Current service costs 2 2

Interest expense 7 7

Expected return on plan assets –7 –7

Actuarial gains/losses, net –3 –6

Prior service costs – –

Social security contributions – –

Net pension expense –1 –4

Specifi cation of how the assets and liabilities recognized in the balance sheet are calculated:

Group

SEK M 29 Feb 2008 28 Feb 2007

Present value of defi ned benefi t obligations that are fully or partly funded 138 139

Present value on balance sheet date of defi ned benefi t obligations that are fully unfunded and secured through credit insurance 34 38

Unrecognized actuarial gains/losses, net 15 10

Fair value of plan assets on the balance sheet date –145 –136

Social security contributions 1 2

Other – –1

Net liability at end of year 43 52

The year’s change in the pension liability:

Group

SEK M 29 Feb 2008 28 Feb 2007

Net liability at beginning of year 52 66

Exchange rate difference – –

Net pension expense for the period –9 –4

Expected pension expenses – –10

Social security contributions – –

Other – –

Net liability at end of year 43 52

Cont’d. NOTE 21

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 5 3

Breakdown of plan assets

Actual market value of plan assets on the balance sheet date:

Group

SEK M 29 Feb 2008 Percent 28 Feb 2007 Percent

Fixed-income securities, cash and cash equivalents 78 54 80 59

Shares and other investments 67 46 56 41

Total 145 100 136 100

Future paymentsTh e pension liabilities are secured partly through blocked bank accounts and partly

through credit insurance.

Given the applied actuarial assumptions, Concordia expects the following paid

benefi ts over the coming fi ve-year period.

Group

Future payments, SEK M 2008 2009 2010 2011 2012

Expected paid benefi ts 14 14 14 13 13

NOTE 24 Other provisions

Group

Other provisions, SEK M 29 Feb 2008 28 Feb 2007

Provisions for onerous contracts 8 6

Provisions for damage to vehicles and third parties 30 40

Provisions for environmental obligations 7 6

Total 45 52

Group

Provisions for onerous contracts, SEK M 29 Feb 2008 28 Feb 2007

Opening balance 6 18

Reversal – –15

The year’s provisions 2 3

Closing balance 8 6

Group

Provisions for damage to vehicles and third parties, SEK M 29 Feb 2008 28 Feb 2007

Opening balance 40 31

Reversal –10 –

The year’s provisions – 9

Closing balance 30 40

Group

Provisions for environmental obligations for lease land and facilities, SEK M 29 Feb 2008 28 Feb 2007

Opening balance 6 2

Reversal – –

The year’s provisions 1 4

Closing balance 7 6

Cont’d. NOTE 23

NOTE 25 Interest-bearing non-current liabilities

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Bond loan “Senior Subordinated Notees” 11% – 1 – 1

Bond loan “Senior Secured Notees” 9.125% 1,220 1,204 – –

Finance lease liabilities 1,115 898 – –

Capitalized borrowing costs –14 –23 – –

Total 2,321 2,080 – 1

Less, current portion –107 –82 – –1

Total 2,214 1,998 – –

Non-current liabilities include corporate bonds issued by Concordia Bus Nordic AB in an amount of EUR 139 million. Th e corporate bonds carry fi xed interest at a rate of

9.125% that is paid semi-annually (on 1 February and 1 August). Th e corporate bonds mature in full for payment in August 2009.

In connection with the issuance of corporate bonds for a total of EUR 130 million, Concordia Bus Nordic AB and its subsidiaries have undertaken to fulfi ll a number of

fi nancial covenants. Among other things, these fi nancial covenants mean that Concordia Bus Nordic AB and its subsidiaries have limited opportunities to raise additional

loans, enter into fi nance lease or sale and leaseback contracts, carry out certain types of investments and divest assets. Furthermore, these covenants create certain restrictions

on payment of dividends by Concordia Bus Nordic AB and its subsidiaries. See also Note 32 regarding the company’s fi nancing. All of these covenants were fulfi lled at 29 Feb-

ruary 2008.

Capitalized borrowing costs refer to expenses arising in connection with raising of loans. Th ese are expensed on a straight-line basis over the term of a loan, unless the loan

is redeemed in advance, in which case the capitalized charge is expensed in full.

Cont’d. NOTE 24

5 4 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

Non-current liabilities will be repaid according to the following:

Group Parent Company

29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Within 1 year 107 82 – 1

Within 1–3 years 1,430 1,353 – –

Within 3–5 years 229 171 – –

Within 5–6 years 235 474 – –

after 6 years 320 – – –

Total borrowing 2,321 2,080 – 1

Less, current portion –107 –82 – –1

Non-current portion of borrowing 2,214 1,998 – –

Interest rate and currency composition of borrowing

Nominal Amount in Interest, weighted Loan currency amount SEK million average value

Corporate bonds, EUR 130 1,220 9.125

Finance leases liabilities, SEK 1,115 1,115 4.58

Total loan liability 2,335

NOTE 26 Other current liabilities

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Employee withholding tax 54 52 – –

Other current liabilities 80 87 0 –

Total 134 139 0 –

NOTE 27 Accrued expenses and prepaid income

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Prepaid income – transport contracts 165 164 – –

Accrued salaries 242 228 3 –

Other accrued personnel expenses 106 87 1 –

Accrued interest expenses 9 8 – –

Other accrued expenses 146 162 – 1

Total 668 649 4 1

NOTE 28 Pledged assets and contingent liabilities

Group Parent Company

SEK M 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Pledged assets for bond loan

Pledged assets pertaining to shares/net assets in subsidiaries 830 683 – –

Other pledged assets 687 800 – –

Chattel mortgages 117 117 – –

Other pledged assets and contingent liabilities

Lease obligations – – 1,242 1,063

Total 1,634 1,600 1,242 1,063

Cont’d. NOTE 25

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 5 5

Aside from the above, Concordia Bus AB is guarantor for Swebus AB’s transport

obligations to Storstockholms Lokaltrafi k. Concordia Bus Nordic AB is guarantor

for Concordia Bus Finland Oy Ab’s transport obligations to YTV.

As collateral for the corporate bonds of EUR 130 million, Concordia Bus

Nordic AB has pledged the shares in the operating subsidiaries, foreign subsidiaries

and property companies, the buses owned by Swebus Busco AB and Concordia

Bus Norge AS and Concordia Bus Norge’s operating receivables and equipment.

Furthermore, the subsidiaries have granted chattel mortgages in an amount of SEK

117 million as collateral, and have furnished guarantees for the Parent Company’s

obligations under the corporate bonds.

Th e following shares in subsidiaries had been furnished as security at 29 February

2008:

• Concordia Bus Nordic AB

• Swebus Fastigheter AB

• Swebus AB

• Concordia Bus Finland Oy Ab

• Swebus Busco AB

• Concordia Bus Norge AS

• Swebus Express AB

• Alpus AB

• Enköping-Bålsta Fastighets AB

• Malmfältens Omnibus AB

Th e following assets were pledged at 29 February 2008:

• Alpus AB has pledged chattel mortgages in the amount of SEK 600,000,

• Enköping-Bålsta Fastighets AB has pledged chattel mortgages in the amount

of SEK 2,400,000,

• Malmfältens Omnibus AB has pledged chattel mortgages in the amount of

SEK 2,500,000,

• Concordia Bus Finland Oy Ab has pledged chattel mortgages in the amount of

EUR 1,194,134,

• Swebus AB has pledged chattel mortgages in the amount of SEK 100,000,000,

• Swebus Busco AB has pledged its buses in a total amount of SEK 490,858,844,

• Concordia Bus Norge AS has pledged its assets in a total amount of SEK

182,726,898.

In connection with issuance of the corporate bonds, the following shares in subsidiaries have been pledged:

Group Parent Company

29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

Shares in Swebus Fastigheter AB 21 21 – –

Shares in Swebus AB 245 149 – –

Shares in Swebus Express AB 13 14 – –

Shares in Concordia Bus Finland Oy Ab 36 34 – –

Shares in Swebus Busco AB 171 240 – –

Shares in Concordia Bus Norge AS 344 225 – –

Total 830 683 – –

NOTE 29 Profi t/loss from shares in group companies

Group

Divestment of operations, SEK M 29 Feb 2008 28 Feb 2007

Goodwill – 18

Goodwill arising on the acquisition of the net assets of a business – 1

Tangible assets – 36

Inventories – 1

Other current assets – 17

Cash and cash equivalents – 15

Other liabilities – –43

Purchase price – 45

Purchase price paid in cash – 45

Selling expenses paid – –3

Buyout of fi nance lease contracts – –8

Cash and cash equivalents in sold operations – –15

Effect on the Group’s cash and cash equivalents – 19

Th e purchase price of SEK 45 million for Interbus includes shares in the company

and the sale of 10 owned buses and three buses held under fi nance leases.

NOTE 30 Financing and fi nancial risk management

All risk management is handled centrally in accordance with a fi nance policy estab-

lished by the Board of Directors. Th e Concordia Bus Group uses derivative instru-

ments as part of its fi nancial risk management to limit currency, interest rate and

diesel price exposure. At 29 February 2008, the company had no derivative instru-

ments pertaining to currency and raw material risks, since the company had not

received the necessary credits to enter into derivative contracts.

Th e Concordia Bus Group is mainly exposed to the following risks:

• Interest rate risk

• Credit and counterparty risk

• Currency risk

• Raw material risk

• Infl ation

• Operating risks

Hedging policyTh e company’s hedging policy is designed to ensure predictability and reduce vola-

tility in liquidity and operating expenses in a cost-eff ective manner. Th e hedging

policy states that the company shall enter into hedge contracts for fuel, currency

and interest rate exposure.

Derivative contracts Currency derivatives (forward exchange contracts and currency swaps) entered into

in order to hedge currency exposure in interest payments on the bond loan are

reported according to hedge accounting, i.e. the profi t/loss eff ects attributable to the

derivative instruments are recognized on the same date as the foreign exchange

eff ects on the underlying commercial fl ow are realized. Outstanding currency deriv-

atives that do not meet the criteria for hedge accounting are measured at fair value

with fair value changes through other fi nancial items in the income statement.

Interest rate derivatives (interest rate caps) entered into in order to achieve the

desired fi xed interest period in lease liabilities are reported according to hedge

accounting, i.e. the profi t/loss eff ects attributable to the derivative instruments are

recognized on the same date as the underlying item. Interest derivatives that do not

meet the criteria for hedge accounting are measured at fair value with fair value

changes through other fi nancial items in the income statement.

Cont’d. NOTE 28

5 6 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

NOTES

Interest rate riskInterest rate risk refers the risk that movements in market interest rates will nega-

tively aff ect the Group’s net interest income. Th e rate at which interest rate fl uctua-

tions aff ect net interest income depends on the fi xed interest period of the loans.

Th e Group is primarily exposed to interest rate risk through the company’s fi nance

and operating leases. Th e lease charges are based, among other things, on a variable

interest rate. In order to reduce interest rate exposure, Concordia Bus AB has

entered into interest rate derivatives which fi xed the interest rate for a portion of

the interest liability. Th e outstanding derivatives at 29 February 2008 amounted to

SEK 3,720 million. All derivatives will expire on 27 February 2009.

Credit and counterparty riskTh e Group’s fi nancial transactions give rise to credit risks in relation to fi nancial

counterparties. Concordia Bus’s fi nance policy states that credit risk shall be limited

by only accepting counterparties with high credit ratings and through established

limits. Commercial credit risks are limited by a diversifi ed customer base with high

credit ratings. Provisions have been made for trade receivables deemed as doubtful,

and have aff ected operating profi t/loss.

Currency riskCurrency exposure arises in connection with payment fl ows in foreign currency

(transaction exposure) and on the translation of foreign subsidiaries’ income state-

ments and balance sheets to SEK (translation exposure).

Transaction exposure – Th e Concordia Bus Group is exposed to exchange rate

movements on its bond loan, which was raised in EUR. Th e Group’s fi nance policy

states that all currency exposure for the coming 12 months shall be hedged. An

exchange loss of more than SEK 3 million in the event of a 10% SEK devaluation

shall be hedged in an amount of at least 50%. Concordia has not received the nec-

essary credits to enter into derivative contracts to implement currency hedges.

Based on the Group’s interest payments in EUR, totaling EUR 12 million for

the coming 12 months, interest expenses would increase by SEK 11 million in the

event of a 10% devaluation of SEK against EUR at 29 February 2008.

Th e Group is also exposed to exchange rate movements through its purchases

of diesel. Diesel is traded in the international commodities markets in US dollars.

Th rough revenue indices in its contracts with public transport authorities, the

Group is partly compensated for fl uctuations in diesel prices. According to calcula-

tions, this index compensation reduces exposure to diesel price fl uctuations by

57%. Th e Concordia Bus Group had no diesel derivatives at 29 February 2008.

Based on the budgeted diesel consumption, a 10% devaluation of SEK against

USD would increase the diesel cost by SEK 12 million for the following fi scal year.

Translation exposure – Concordia Bus’s currency exposure on translation of

foreign subsidiaries is normally not hedged.

Raw material riskTh e Group is exposed to movements in raw materials through its purchases of diesel.

Diesel is traded in the international commodities markets in US dollars. Th rough

revenue indices in its contracts with public transport authorities, the Group is

partly compensated for fl uctuations in diesel prices. According to calculations, this

index compensation reduces exposure to diesel price fl uctuations by 57%. Th e

Concordia Bus Group had no diesel derivatives at 29 February 2008. Based on the

budgeted diesel consumption, an increased of USD 1 in the diesel price per tonne

would increase the diesel cost by approximately SEK 0.2 million for the following

fi nancial year. Th e calculation includes the estimated index compensation.

Infl ationInfl ation had no signifi cant impact on operations during the year. Since the terms

of the contracts include compensation for costs through the agreed indices (which

include infl ation), which do not exactly follow the cost trend in the industry, full

compensation is currently not received for cost increases since the industry’s costs

are rising faster than the amount of compensation received through indexation

from the public transport authorities.

Operating risksOperating risk is the risk for a loss due to shortcomings in internal routines and

systems. Concordia Bus’s risk management is based on a number of internally

established rules and guidelines, as well as policies adopted by the Board. Key nor-

mative documents include the fi nance policy, instructions for authorization and

other instructions. Th e company carries out continuous controls to regulate and

secure powers and responsibilities in day-to-day operations. Th e subsidiaries have

their own instructions which are based on the rules applied by the Parent Company.

NOTE 31 Financial instruments

Carrying amount

The Group’s fi nancial assets, SEK M 29 Feb 2008 28 Feb 2007

Loans and receivables

Non-current receivables 1 1

Trade receivables 539 441

Other receivables 48 60

Financial assets and liabilities at fair value through profi t or loss

Interest swaps – –

Total Group 588 502

Carrying amount

The Group’s fi nancial liabilities, SEK M 29 Feb 2008 28 Feb 2007

Other fi nancial liabilities

Interest-bearing liabilities, pensions 43 52

Interest-bearing liabilities, loans 2,311 2,080

Trade payables 199 204

Other liabilities 134 139

Financial assets and liabilities at fair value through profi t or loss

Interest swaps – –

Total Group 2,687 2,475

Carrying amount

The Parent Company’s fi nancial assets, SEK M 29 Feb 2008 28 Feb 2007

Loans and receivables

Receivables from group companies, interest-bearing 260 233

Other receivables 2 4

Financial assets and liabilities at fair value through profi t or loss

Interest swaps – –

Total Parent Company 262 237

Carrying amount

The Parent Company’s fi nancial liabilities, SEK M 29 Feb 2008 28 Feb 2007

Other fi nancial liabilities

Liabilities to group companies, interest-bearing 3 1

Other liabilities 1 1

Financial assets and liabilities at fair value through profi t or loss

Interest swaps – –

Total Parent Company 4 2

Cont’d. NOTE 30

NOTES

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 5 7

Interest rate derivativesTh e following interest rate derivatives (interest swaps) existed at 29 February 2008:

FixedAmount, SEK th Hedged amount interest rate Maturity date Market value, SEK th

Interest rate cap, SEK 620,000,000 5.05% 27 Feb 2009 231

Interest rate cap, SEK 620,000,000 5.30% 31 Oct 2008 33

Interest rate cap, SEK 620,000,000 5.35% 30 Sep 2008 14

Interest rate cap, SEK 620,000,000 5.35% 29 Aug 2008 12

Interest rate cap, SEK 620,000,000 4.60% 30 April 2008 0

Interest rate cap, SEK 620,000,000 4.55% 28 March 2008 184

Interest rate cap, SEK 620,000,000 4.55% 29 Feb 2008 0

Fair valueTh e carrying amounts of fi nancial assets and liabilities essentially correspond to

their fair values. Fair value is determined on the basis of offi cial market quotes on

the balance sheet date. If none such exist, fair value is determined through dis-

counting of future cash fl ow by the listed market interest rate for the respective

maturities or through some other method which is deemed to provide the best esti-

mated of fair value in each individual case. Financial assets and liabilities are trans-

lated to SEK at the exchange rate prevailing on the balance sheet date.

In the spring of 2003 the subsidiary Concordia Bus Nordic AB issued a bond

loan in a nominal amount of EUR 130 million, under the rules of the US Securi-

ties and Exchange Commission. Th e interest yield on the bond capital is 9.125%

per year. Since the issue, Goldman Sachs in London has organized trading of the

bonds. Th e traded fair value of the bonds indicates a value at least equal to the

nominal amount.

Average Balance sheet date

1 March 2007– 1 March 2006–Exchange rates 29 Feb 2008 28 Feb 2007 29 Feb 2008 28 Feb 2007

EUR 9.3664 9.2164 9.3825 9.263

NOK 1.1782 1.1444 1.1895 1.142

DKK 1.2566 1.2358 1.2590 1.243

NOTE 32 Related party transactions

One member of Concordia Bus AB’s Board of Directors has been appointed by

Blue Bay Asset Management, which holds approximately 27% of the shares in

Concordia Bus AB. Th e Board member has not received any fees in her capacity as

Board member.

Concordia Bus Nordic AB has a debt to Concordia Bus AB amounting to SEK

213 million. Interest of SEK 4 million (61) was capitalized during the year.

Th e Group has a share option program that covers the Parent Company’s

Board of Directors, 304,569 options, and senior executives, 1,052,000 options.

Th e senior executives are the Parent Company’s President and CFO and the presi-

dents of the subsidiaries. All share options have been valued according to the Black

& Scholes method, and each share option grants the right to subscribe for one new

share in the company. Th e share options correspond to an increase of 6.8% in the

share capital

With regard to other remuneration to the Board of Directors and senior execu-

tives, see Note 7.

Stockholm 22 April 2008

Jan Sjöqvist Gina Germano

Chairman of the Board

Rolf Lydahl Jan Sundling Ragnar Norbäck

President

Our audit report was presented on 22 April 2008

Ernst & Young AB

Erik Åström

Authorized Public Accountant

Cont’d. NOTE 31

5 8 C O N C O R D I A B U S A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8

Audit reportTo the Annual General Meeting of Concordia Bus AB

Corporate identifi cation number 556576-4569

I have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of

Directors and the President of Concordia Bus AB for the year 1 March 2007 – 29 February 2008. Th e annual accounts and

the consolidated accounts of the company are included in the printed version of this document on pages 25–57. Th e board of

directors and the President are responsible for these accounts and the administration of the company as well as for the applic-

ation of the Annual Accounts Act when preparing the annual accounts and the application of international fi nancial report-

ing standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. My

responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on my

audit.

I conducted my audit in accordance with generally accepted auditing standards in Sweden. Th ose standards require that I

plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of

material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the

accounts. An audit also includes assessing the accounting principles used and their application by the Board of Directors and

the President and signifi cant estimates made by the Board of Directors and the President when preparing the annual accounts

and consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the con-

solidated accounts. As a basis for my opinion concerning discharge from liability, I examined signifi cant decisions, actions

taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any Board

member or the President. I also examined whether any Board member or the President has, in any other way, acted in contra-

vention of the Companies Act, the Annual Accounts Act or the Articles of Association. I believe that my audit provides a

reasonable basis for my opinion set out below.

Th e annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the

company’s fi nancial position and results of operations in accordance with generally accepted accounting principles in Swe-

den. Th e consolidated accounts have been prepared in accordance with international fi nancial reporting standards IFRSs as

adopted by the EU and the Annual Accounts Act and give a true and fair view of the Group’s fi nancial position and results of

operations. Th e statutory administration report is consistent with the other parts of the annual accounts and the consolidated

accounts.

I recommend to the annual meeting of shareholders that the income statements and balance sheets of the Parent Com-

pany and the Group be adopted, that the profi t of the Parent Company be dealt with in accordance with the proposal in the

statutory administration report and that the members of the Board of Directors and the President be discharged from liability

for the fi nancial year.

Stockholm, 22 April 2008

Ernst & Young AB

Erik Åström

Authorized Public Accountant

A N N U A L R E P O R T 2 0 0 7 / 2 0 0 8 C O N C O R D I A B U S 5 9

Addresses

Concordia Bus AB

Solna Strandväg 78SE-171 54 SOLNASweden

Concordia Bus Nordic Holding AB

Solna Strandväg 78SE-171 54 SOLNASweden

Concordia Bus Nordic AB

Solna Strandväg 78SE-171 54 SOLNASweden

Swebus AB

Solna Strandväg 78SE-171 54 SOLNASweden

Concordia Bus Norway AS

Lysaker Torg 12Postboks 54N-1324 LYSAKERNorway

Concordia Bus Finland OY

Klovinpellontie 5FIN-02180 ESPOOFinland

Swebus Express AB

Österängsvägen 3SE-550 05 JÖNKÖPINGSweden

Concordia Bus Fleet AB

Solna Strandväg 78SE-171 54 SolnaSweden

Glossary

Client/Public transport authority

A public sector authority that has been given responsibility for organizing procurement of public transport services in a certain area, normally a county. Awards transport contracts after evaluation of submitted bids.

Concession

Transport contract awarded to a certain operator by a public transport authority without competitive tendering. Not possible after deregulation of the public transport market.

Customers

Passengers, i.e. those who use our services regard-less of whether they pay for the trip directly or via a public transport authority.

Euro 0 – Euro 5, EEV

Different generations of emissions classes for diesel engines.

Express bus

Scheduled long-distance transports that cross at least one county line. In connection with permit-ting, the affected public transport authorities have an objectionary right. An independent operator’s revenue comes exclusively from the passengers.

Gross cost contracts

A transport contract in which the client compensates the operator only for the number of kilometers or hours driven. Ticket revenues go to the client.

Incentive contract

A transport contract in which the client provides the operator with a certain share of variable com-pensation. Based on mutual trust and aimed at achieving better results through higher quality and efficiency. The amount of compensation to the operator increases in proportion to the number of passengers.

Indexation

Recalculation of fixed compensation per kilometer or hour for a new period under a transport contract based on a weighted index for inflation in cost cate-gories that are significant for the operator.

Net cost contract

A transport contract in which the client compen-sates the operator primarily through ticket revenues.

Operator

A provider of public transport services.

Other operating revenue

Sales of primarily fuel and workshop services to external customers.

Transport contract

An agreement between a client and a contractor to perform a specific service at a pre-agreed price. At Concordia Bus a contract with a public transport authority, normally for a period of 5–8 years, to produce public transports at a fixed price with agreed indexation conditions.

Defi nitions

Average number of employees

The number of hours paid divided by normal working hours for a full-time employee.

Earnings per share

Profit for the year adjusted for dividends on p reference shares divided by the average number of common shares.

Earnings per share after full dilution

Profit for the year adjusted for dividends on prefer-ence shares divided by the average weighted num-ber of common shares.

Equity/assets ratio

Shareholders’ equity as a percentage of total assets at the end of the fiscal year.

Net investments

Acquisition cost of investments in fixed assets less sales value of divested fixed assets.

Production: Concordia Bus in association with n3prenör. Printing: Strokirk-Landströms, 2008. Translation: GH Language Solutions ABThe annual report is printed on environmentally friendly FSC-labelled paper. The Forest Stewardship Council (FSC)

promotes environmentally appropriate, socially beneficial and economically viable management of the world’s forests.

6 0 C O N C O R D I A B U S

Each subsidiary in the Concordia Bus Group

serves its own market, and each has a history that

refl ects the developments and conditions for its

own road transports. When the transport con-

tract in Denmark goes into eff ect in 2007, the

operator will benefi t from the Group’s ability to

successfully unite the best from three diff erent

countries and cultures. Th e Norwegian operation

was originally a privately-owned company, the

Swedish a government agency and the Finnish a

municipal enterprise. Today they are all part of a

modern process-driven company with shared

values, strong management and a commitment

to good service.

2008 Danmark vunnet anbud 2008

^Concordia Bus AB

Solna Strandväg 78SE-171 54 Solna

Sweden

Tel +46 8 546 300 00Fax +46 8 546 300 55

www.concordiabus.com