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As filed with the Securities and Exchange Commission on July 1, 2004



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 20-F/A

Amendment No. 1

o   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
ý   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2003
OR
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from        to      
Commission File Number 000-16977


STOLT-NIELSEN S.A.
(Exact name of Registrant as specified in its charter)


LUXEMBOURG
(Jurisdiction of incorporation or organization)


c/o STOLT-NIELSEN LIMITED
Aldwych House
71-91 Aldwych
London WC2B 4HN, England
(Address of principal executive offices)



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


Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares, no par value


Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None


        Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

Common Shares, no par value   54,949,387 *
Founder's Shares, no par value   13,737,346 **
*
The number of outstanding Common Shares excludes 7,688,810 Common Shares owned by a subsidiary, as of November 30, 2003.

**
The number of outstanding Founder's Shares excludes 1,922,203 Founder's Shares held by Stolt-Nielsen S.A., as of November 30, 2003.

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

        Yes ý    Noo

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

        Item 17 o    Item 18 ý





EXPLANATORY NOTE

        This Amendment No. 1 to our Annual Report on Form 20-F for the fiscal year ended November 30, 2003, or Amendment No. 1, amends our Annual Report on Form 20-F filed on June 16, 2004, for the purpose of revising:

which were inadvertently omitted from the Annual Report on Form 20-F filed on June 16, 2004.

This Amendment No. 1 consists of a cover page, this explanatory note, Item 5 (as amended), Item 6 (as amended) and Item 19 (as amended), the signature page and the required certifications of our chief executive officer and the chief financial officer.

Other than as expressly set forth above, this Amendment No. 1 does not, and does not purport to, amend, update or restate the information in any other item of the Annual Report on Form 20-F filed on June 16, 2004 or reflect any events that have occurred after the Annual Report on Form 20-F was filed on June 16, 2004.

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Item 5. Operating and Financial Review and Prospects

        This section discusses matters we consider important for an understanding of our financial condition and results of operations during the three fiscal years ended November 30, 2003. This discussion consists of:

        You should read this section in conjunction with the Consolidated Financial Statements and the notes thereto included in Item 18 of this Report.

Management Overview

        SNSA is a Luxembourg company. Together with our subsidiaries and investments, we are engaged primarily in three businesses: transportation; offshore construction; and seafood production, farming and processing. The transportation business is conducted through SNTG; the offshore construction business is carried out through SOSA and the seafood business is carried out through SSF. SNTG and SSF are wholly owned subsidiaries. We owned a 63.5% economic interest and a 69.2% voting interest in SOSA as of November 30, 2003. We have reduced our economic and voting interest in SOSA to 41.7% as of May 31, 2004 and have deconsolidated the activities of SOSA in our financial reports as of February 19, 2004, as we no longer have a controlling interest. Additionally, SSL provides a total marine procurement service whereby it can select, purchase and arrange delivery for a ship's needs for consumables, spare parts and other services. In April 2003, we sold substantially all of the assets of OLL to Elemica, Inc. OLL provided logistics software for the chemical and other bulk materials industries.

Description of our Businesses

SNTG

        SNTG is engaged in the worldwide transportation, storage and distribution of bulk liquid chemicals, edible oils, acids and other specialty liquids. SNTG is able to offer our customers a range of transportation and storage solutions on a worldwide basis, through our intercontinental parcel tanker, coastal parcel tanker, river parcel tanker, tank container, terminal and rail services.

        As of November 30, 2003, based on the size of the fleet, SNTG is one of the largest operators of parcel tankers in the world, and, based on the number of tank containers, is the largest operator in the tank container market. Parcel tankers and tank containers carry similar products, with parcel tankers typically used to transport cargo lots greater than 150 metric tons, while tank containers are typically more economical for transportation of smaller cargo lots.

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        We utilize our terminals as regional hubs to improve the operational efficiency of SNTG's parcel tankers. Our terminals offer storage and distribution services to the same customers that use our parcel tanker and tank container operations and can store and distribute the same products. We can reduce the amount of time our ships spend in port, when our customers use our terminal facilities. In this way we can operate more efficiently and ship more product. The terminals are not just available to our tanker customers but are independent third-party facilities, open to all customers and ship owners on a first-come-first-served basis. As of November 30, 2003, we owned and operated two tank storage terminals in the U.S., in Braithwaite, Louisiana and in Houston, Texas, and one in Santos, Brazil. These three facilities have a combined capacity of approximately 4.0 million barrels of liquid storage. As of November 30, 2003, our terminal operations also had interests in three ventures consisting of: (i) a 40% interest in the Stolthaven Westport Sdn. Bhd., a joint venture with the Bolton Group which has a terminal facility in Malaysia; (ii) a 37% interest in Dovechem Stolthaven Ltd., ("Dovechem"), a publicly-traded company listed on the Singapore stock exchange, with terminals and drum manufacturing interests in China, Singapore and Malaysia; and (iii) a 50% interest in Jeong—IL Stolthaven Ulsan Co. Ltd. which has a terminal facility in Ulsan, South Korea. The results of the joint ventures are accounted for under the equity method of accounting. On December 18, 2003 we sold our interest in Dovechem. For additional information on SNTG, please see Item 4. "Information on the Company—Business Overview—Stolt Nielsen Transportation Group."

SOSA

        SOSA is one of the largest offshore services contractors in the world in terms of revenue. SOSA designs, procures, builds, installs and services a range of offshore surface and subsurface infrastructure for the global oil and gas industry. It specializes in creating and applying innovative and efficient solutions in response to the technical complexities faced by offshore oil and gas companies as they explore and develop production fields in increasingly deeper water and more demanding offshore environments.

        SOSA provides services and products that add value for its customers throughout the entire life cycle of offshore oil and gas field exploration, development and production. SOSA's service capabilities are classified into (i) "SURF," which comprises engineering and construction work relating to oil and gas fields that are developed subsea (meaning the production wellhead is on the seabed), as opposed to surface installations (in which the production wellhead is above the surface on a platform); (ii) "Conventional," which comprises engineering and construction activities relating to above-water platforms attached to the seabed and their associated pipelines; (iii) "IMR," inspection, maintenance and repair, which comprises, among other things, platform surveys, debris removal and pipeline inspections using ROVs; (iv) "Trunklines," which comprises offshore installation of large-diameter pipelines used to carry oil or gas over long distances; and (v) "Corporate," which comprises all activities that serve more than one region and assets that have global mobility including construction and flowline lay support ships, ROVs, trenchers, ploughs and other mobile assets that are not allocated to any one region. SOSA also provides field decommissioning services at the end of the working life of an offshore oilfield.

        SOSA realigned its operating structure in 2003 from a product line focus to a regional focus with five regions: Africa, the Mediterranean and the Caspian Sea; Northern Europe and Canada; North America and Mexico; South America; and Asia and the Middle East. SOSA is listed on both Nasdaq in the U.S. and on the Oslo Børs in Norway. For additional information on SOSA, please see Item 4. "Information on the Company—Business Overview—Stolt Offshore."

SSF

        SSF produces, processes, and markets a variety of high quality seafood. SSF has salmon production sites in Norway, North America, Chile, and Scotland, salmon trout production sites in Norway and Chile, a tilapia production site in Canada, turbot production sites in Spain, Portugal, Norway, and

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France, a halibut production site in Norway, a Southern bluefin tuna ranching operation and production site in Australia and sturgeon and caviar production sites in the U.S. Although SSF has diversified into farming species other than salmon, salmon remains the primary focus. SSF has worldwide marketing operations with sales organizations covering the Americas, Europe, and Asia Pacific. SSF has built a substantial seafood trading and distribution business in the Asia Pacific region. SSF has also increased our focus on sales of processed seafood through our seafood centers. Seafood centers are value-added processing and servicing plants "in the market" closer to the consumers in densely populated areas. We believe we can improve our margins by delivering directly to retailers and restaurants seafood that is processed in portions that can be delivered directly to the end-consumer. The first of these seafood centers was opened in 1997 in Los Angeles, California and a second was opened in Stratford, Connecticut in 2001. In Europe, we acquired a smokery in Belgium in 2000, which we upgraded and expanded into a seafood center in 2003. For additional information on SSF, please see Item 4. "Information on the Company—Business Overview—Stolt Sea Farm."

Factors Affecting our Financial Condition and Results of Operations

Financial Matters

        SNSA is a holding company and conducts substantially all of its business through its subsidiaries. 2003 was a challenging year for us. For the year ended November 30, 2003, we reported a consolidated net loss of $316.0 million, which reflected a deterioration of $213.2 million as compared to the consolidated net loss of $102.8 million reported for 2002. We reported a net profit of $23.7 million in 2001.

        Although the operating results at SNTG continued to be profitable, these were overshadowed by the poor operating results at both SOSA and SSF. These negative results were exacerbated by challenging financial conditions at SNTG and SOSA. We have described these matters and the actions we have taken to address them in further detail below.

Operational Difficulties and Financial Restructuring at SOSA

        Significant operational and financial difficulties at SOSA contributed to its 2003 consolidated loss. For the year ended November 30, 2003, SOSA reported a net loss of $418.1 million, primarily due to cost overruns on several major projects and a number of smaller projects. There was an aggregate negative impact of $216.0 million on SOSA's net income attributable to changes in original estimates on major projects. Additionally, SOSA recorded impairment charges totaling $176.5 million against the carrying value of a number of ships, barges, mobile assets and onshore equipment. SOSA reported a net loss of $151.9 million in 2002, also due to unanticipated operational difficulties related to a number of major projects. Throughout 2003, SOSA experienced significant cost overruns on major projects, particularly in its AFMED region. These operational problems were exacerbated by SOSA's inability to recover cost over-runs that SOSA believed it was owed by customers with respect to work performed on major projects. For example, at the end of the second and third quarters of 2003, SOSA had recorded revenues of $83.4 million and $89.7 million, respectively, with respect to claims and variation orders that its customers had not yet agreed to pay. These difficulties made it challenging for SOSA to maintain compliance with the financial covenants contained in its credit facilities. During 2003, SOSA engaged in numerous discussions with and obtained waivers from the lenders under its existing credit facility agreements to avoid defaults with respect to the financial covenants contained in these facilities.

        While SOSA was engaged in discussions with its primary creditors to amend the financial covenants in its existing credit facility agreements, it also took measures to ensure that it had sufficient liquidity to fund its operations and to provide for a potentially protracted period of negotiation with certain major customers regarding settlement of claims and variation orders. These measures included borrowing to SOSA's maximum availability under its existing credit facility agreements and closing its positions under foreign exchange contracts, which had positive value. The increased level of borrowings at SOSA increased its consolidated debt. Additionally, to assist SOSA in obtaining bank waivers, in

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December 2002 we agreed to make a $50 million liquidity line (the "SNSA Liquidity Line") available to SOSA and in July 2003, we agreed to make a subordinated loan of $50 million to SOSA.

        Subsequent to the end of 2003, SOSA took a number of actions to address its financial situation. In February 2004, SOSA issued and sold 45.5 million SOSA Common Shares in a private placement that raised gross proceeds of $100.1 million. On April 20, 2004, SNTG converted the Subordinated Note issued by SOSA into SOSA equity. Additionally, on May 28, 2004 SOSA completed an equity offering which generated approximately $65.8 million in gross proceeds. Together, these measures have provided a $215.9 million increase in SOSA's shareholders equity before deduction of expenses. As of May 31, 2004, our ownership of SOSA was 41.7%.

        In February 2004, SOSA entered into the New Bonding Facility, which provided SOSA with the ability to offer bank guarantees and other forms of surety that are often required to bid on and win new business. In addition, SOSA entered into an Intercreditor Deed that incorporated changes to and superseded the covenants and security arrangements in its Existing Credit Facility Agreements. We believe that this will be sufficient to provide the bank guarantees that we expect SOSA will need in 2004, although we expect that SOSA will need to secure additional bonding facilities for 2005 and beyond. SOSA's recent history of losses and financial difficulties will make it more challenging to arrange any additional bonding that may be needed.

Financing Issues at SNTG and SNSA

        Since the beginning of 2000 to November 30, 2003, we have, through Stolt-Nielsen Transportation Group Ltd., a Liberian subsidiary ("SNTG (Liberia)") and other subsidiaries (including SNTG), provided new equity and debt funding of $164.0 million to SOSA, $257.0 million to SSF, and $55.0 million combined to OLL and SSL. This funding was provided from a combination of cash flow from SNTG operating activities and borrowings under our credit facilities. Additionally, we have provided guarantees of SOSA's obligations under its bank guarantee facilities, some of which are supported by collateral, up to an aggregate of $104.3 million as of November 30, 2003. Since that time, the aggregate amount of bank guarantees available to SOSA under these facilities has been reduced to $99.8 million as of May 31, 2004. As a result of our deconsolidation of SOSA and restrictions contained in our credit facilities, we are no longer providing funding to SOSA. We will continue to make the SNSA Liquidity Line available to SOSA through the end of the 2004 fiscal year, subject to restrictions in our credit agreements. For additional information on the SNSA Liquidity Line, please see Item 7. "Major Shareholders and Related Party Transactions—Related Party Transactions—Financial Interactions—$50 Million Liquidity Line (the SNSA Liquidity Line)." We also will continue to be obligated under the guarantees described above, until the guarantees expire.

        The use of SNTG operating cash flow, borrowings under our credit facilities, operating losses and asset write-downs over the past several years at SOSA and SSF and the maturities of our existing loans, left us in the second half of 2003 with limited liquidity and in potential breach of the financial covenants contained in our primary financing agreements, particularly our debt to tangible net worth ratios. As of November 30, 2003, we had cash and cash equivalents of approximately $68 million, exclusive of cash held by SOSA which we could not access at that time for use in SNTG and SSF, with little availability on our credit lines and a maturing $160 million revolving line of credit for which, at the time, we had an extension for repayment to December 15, 2003.

        During 2003, we engaged in numerous discussions with, and obtained waivers from, the creditors under certain of our existing financing agreements to avoid defaults with respect to the financial covenants contained in these agreements. At the end of 2003, we were in compliance with the financial covenants under our various credit agreements as a result of waiver agreements which were in effect through December 15, 2003. Ultimately, we announced on December 27, 2003 that we had received waivers providing for covenant relief through May 21, 2004 subject to certain conditions. These waiver

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agreements included increased interest rates for certain credit agreements. As a result of these financial issues, we incurred advisor and other fees and expenses of $6.2 million in 2003.

        On February 20, 2004, we allowed the waiver agreements with respect to our Senior Notes to terminate in accordance with their terms. We believe that we were in compliance with the terms of the Senior Notes as a result of the deconsolidation of SOSA and, therefore, no longer needed the waivers. Representatives of the holders of our Senior Notes informed us that the Senior Note holders believe that upon termination of the waiver agreement and the deconsolidation of SOSA, we were in breach of certain covenants under the Senior Notes. We have informed the representatives of the Senior Note holders that we disagree with these assertions. On June 16, 2004, we resolved the dispute with our Senior Note holders regarding the asserted defaults under the Senior Notes and entered into an agreement to amend the Senior Notes (the "Amendment Agreement"). Pursuant to the Amendment Agreement, a permanent waiver was granted by the Senior Note holders in respect of the defaults they asserted. For additional information, see "—Liquidity and Capital Resources—Indebtedness—The Senior Notes" and Note 29 to the Consolidated Financial Statements included in Item 18 of this Report. Certain of the other waivers obtained from other creditors also terminated on February 20, 2004, as a result of the termination of the waiver agreements with respect to our Senior Notes. Those remaining waivers not automatically terminated on February 20, 2004, terminated on May 21, 2004 upon expiration of the term of such remaining waivers. To date, no other creditors other than the Senior Note holders have informed us of any belief on their parts of any breach of covenants as a result of such waiver terminations.

        While we were engaged in discussions with our primary creditors to amend the financial covenants in our financing agreements, we also took measures to ensure that we had sufficient liquidity to fund our operations and make required payments with respect to maturing indebtedness. In August 2003, we completed a sale-leaseback transaction with respect to three 5,498 dwt ships built from 1998 to 2000, raising approximately $50 million. In December 2003, we sold our minority interest in Dovechem, which has interests in terminals and drum manufacturing in China and Southeast Asia, for gross proceeds of $24.4 million. Additionally, SSF concluded the sale of 200 metric tons of its Australian-government quota rights of Southern bluefin tuna for gross proceeds of $25.8 million. In conjunction with this transaction, such tuna quota rights were reacquired by SSF for an initial five year period at market rates to be set each year, with a renewal option for a further five year period again at annually agreed market rates. On January 26, 2004, we completed the sale of 7.7 million of our Common Shares to non-affiliated investors for gross proceeds of $104.2 million. The actions we have taken to improve our liquidity together with cash from SNTG's operations enabled us to make the following payments: (i) $56 million with respect to scheduled maturities of our Senior Notes in August 2003; (ii) $65 million to pay off an outstanding ship financing facility with certain Italian banks at maturity in August 2003; and (iii) $60 million to reduce a $180 million revolving credit facility, the remainder of which was refinanced by drawing down $120 million on a new $130 million five year revolving credit facility arranged by a consortium led by Deutsche Bank AG. Additionally, the deconsolidation of SOSA removed $387.5 million of debt from our consolidated balance sheet. As of November 30, 2003, our consolidated debt and capital lease obligations were $1,699.7 million. This was reduced to an estimated $1,266.3 million at May 31, 2004, primarily arising from the SOSA deconsolidation, but partially offset by the consolidation of Twelve Ships Inc. (which had debt obligations of approximately $70 million as of November 30, 2003). As of May 31, 2004, we had an estimated cash and cash equivalents of in excess of $140 million.

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Losses at SSF

        Our consolidated financial results have been negatively affected by the poor performance at SSF. SSF has recorded net losses of $78.4 million, $45.4 million and $14.2 million in each of the years 2003, 2002 and 2001. As more fully discussed below, the net loss in 2003 was largely due to three factors:

        In 2003, we discovered that an employee in SSF's Tokyo office had been engaging in what we believe to be improper transactions and unauthorized trading of seafood. More specifically, we believe the employee made purchases of substantial quantities of various species and represented to management that they were being simultaneously sold in the market. This, however, was not the case and consequently, we held significant inventories of several species at a time of declining prices. These inventories were ultimately sold for a loss. Additionally, we believe the employee engaged in various other improper transactions which had the effect of diverting funds from SSF for his direct or indirect benefit. The employee and all other individuals believed to be involved in the improper transactions and other unauthorized activities have since left SSF and certain other regional senior managers in the Asia Pacific region, who are not suspected of participating in such transactions and activities, have also left SSF. A new general manager for SSF Japan has been hired and a new interim President for SSF Asia Pacific has been reassigned from SSF Europe to manage the operations until a permanent President is appointed. We have made a claim under our fidelity insurance policy. This policy has a claim limit of $5 million, and in the absence of any acknowledgement of liability for the claim by the insurers, no insurance recovery has yet been accrued. In addition, although the Southern bluefin tuna ranching activity overall was profitable in the Asia Pacific region, selling prices for our own ranched Southern bluefin tuna were approximately 20% lower in 2003 than in 2002, and not all the tuna production was sold, while inventories of traded tuna products that we bought in the market in 2002, at higher prices, with the intent of selling were sold in 2003 at low or negative margins following further market price declines. SSF made lower of cost or market provisions totaling $11.1 million at the end of 2003 against remaining inventories of traded tuna and frozen salmon, trout and other species, to reflect the weaker markets in Asia at the time. The total combined impact of these factors resulted in SSF's Asia Pacific operations reporting a gross loss of $25.3 million in 2003 compared to a gross profit of $22.6 million in 2002. SSF's Asia Pacific operations outside of Japan generally operated with a positive gross profit in both 2003 and 2002.

        In the Americas region, two principal factors contributed to the poor results in 2003, despite improvements compared to 2002. First, both Chile and the North American farming regions experienced periods of unusually low harvests in 2003 as a consequence of, among other things, high fish mortalities in the previous year. Second, in 2003, due to a temporary shortage of fish, we often were obligated to ship salmon to key customers in North America in accordance with the terms of our marketing and distribution contracts, which at times required us to ship supplies in a manner that was not cost efficient. For example, at times we had to incur extra shipping and logistics costs to supply east coast produced salmon to the west coast and vice versa. As a result of these factors, we were not able to fully benefit from the improvement in prices in the Americas region. With the anticipated increase in harvests in 2004 and improved shipping and logistics processes, we do not anticipate this situation reoccurring. Finally, European market conditions were very poor in 2003, with salmon prices achieved by Norwegian and Scottish producers remaining at extremely low levels throughout most of the year.

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Factors Affecting SNTG

Parcel Tankers Market Dynamics

        In addition to industry regulations, the number of new ships delivered into the market and scrapping of older ships influence the supply of parcel tankers.

        It is becoming more difficult to utilize ships which are 20 to 25 years or older and there is increased pressure to scrap ships earlier than in the past. Certain jurisdictions in which our parcel tankers operate have accelerated the deadlines by which single-hull tankers must be phased out for the carriage of oil products. SNTG operates 14 ships built between 1976 and 1980 with single-sides/double bottoms, which will face such a deadline during 2005 and 2006. These deadlines do not apply to the carriage of chemicals, which constitutes a significant part of SNTG's business, so we have not determined precisely when we will scrap these ships. We may reassign such single-sided/double bottom ships to trade routes where there is no restriction. If it is not viable to utilize these ships economically in these alternative trade routes, we may scrap them. In the past we have not operated ships past 30 years of age, as the expense of maintaining ships of that age is significant. In addition to industry regulations, several of the major oil companies and certain chemical companies (including some of SNTG's customers) have placed restrictions on the maximum age of the ships carrying their cargoes. These age restrictions are typically set at 25 years, but there is a range depending on trade route, tonnage classification, inspection routines and the ship's condition, as rated by a surveyor of the applicable classification society (the classification society authorized by the country of registry certifies that the ships are safe and seaworthy on an annual basis). We manage our SNTG fleet within these restrictions by carefully matching our ships with customer requirements.

        To replace ships that are scrapped or reassigned into less demanding trading activities because of age, SNTG has entered into agreements with various Japanese ship owners for time-charters (operating leases) for nine stainless steel ships commencing during the period 2003 to 2006. These agreements are for an initial period of 59 months and include the option for SNTG to extend the agreements for up to nine additional years. SNTG also has the option to purchase each ship at predetermined prices, which we believe approximates fair market value, at any time after three years from the delivery of the ship. SNTG has commitments for the initial periods of these operating leases of approximately $242 million for the period 2004 through 2011.

        From 2004 to 2006, we expect growth in demand for parcel tankers to exceed the growth in supply of ships. Independent market sources projections of future demand growth for parcel tankers range from 3% to 4% annually. Based on independent market sources, we believe the total deep-sea fleet of parcel and chemical product tankers is composed of 774 ships totaling 20.3 million dwt. Of this fleet, our fleet, together with that of our 15 core competitors, is composed of 320 ships in excess of 10,000 dwt and totaling 8.4 million dwt. We refer to this as the "core fleet." We expect that over the period 2004 to 2006, 7.7% of the core fleet will be scrapped or downgraded as ships reach 30 years of age or are removed due to regulatory or customer restrictions. Within the same period, we expect new ship deliveries of approximately 14.0% of the current core fleet, with about half of these deliveries taking place in 2004. We do not expect these deliveries to increase significantly from 2004 to 2006 as numerous factors limit supply-side expansion. The cost of new parcel tankers has increased 10% to 20% over the last year as a result of the high steel price and in response to heavy orders for all ship types, with 100 million dwt of mid-to-large size tankers, dry bulk ships and containerships being ordered in 2003 compared to approximately 50 million dwt in 2002. Shipyard order books are generally full, with little capacity available before 2007. Shipyards are hesitant to quote pricing on ship deliveries three years in the future, as they incur considerable risk in the cost of steel (especially stainless steel for parcel tankers).

        The demand for parcel tankers may be affected by developments in the Chinese market, which has been a major source of demand growth in recent years, changes in the rules on classification of vegetable oils, and demand for transport of clean petroleum products ("CPP"). The CPP market is

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large with many ships operating in this sector. Some ships can be used in either the chemical market or this CPP market depending on earnings. The CPP market is more volatile with demand for transporting CPP such as gasoline, jet fuel and heating oil, driven by customer's short-term inventory balancing needs. The CPP market most recently peaked in early 2004 and continues to remain relatively strong. Chinese imports increased significantly in 2003 compared to 2002, particularly towards the end of the year. While this trend continued in early 2004, there were indications of slowing Chinese imports, although Indian and South American imports increased somewhat to compensate. In the event of a major disruption in the Chinese economy, import volumes would be reduced, impacting freight rates. The International Maritime Organization, a specialized agency of the United Nations, is responsible for improving maritime safety and preventing pollution from ships by establishing regulations for international shipping companies. The IMO has proposed changes in the rules on classification of vegetable oils that, if approved, would take effect in 2007. Should the rules come into force without further changes, a greater proportion of vegetable oils will have to be transported in ships rated "IMO 2" as opposed to the current product (oil) tankers. A ship rated IMO 2 is typically a chemical tanker built to meet international regulations for carriage of the more hazardous classes of chemicals. We believe that this should boost demand for parcel tankers, such as ours, that have the higher IMO 2 rating.

Trends in Spot Rates and Contracts of Affreightments

        Cargo may be transported on parcel tankers under Contracts of Affreightments, agreements between us and charterer to transport agreed volumes of product(s) during a given period at agreed rates, usually involving multiple shipments over a certain time period, typically one or two years or under a spot contract for a single shipment. Freight rates agreed on the basis of spot rates are highly correlated with the supply of and demand for ships (i.e., utilization rates of ships). Since COA rates are set for a specified time period, their changes generally lag spot rate changes, typically adjusting when COA are renewed. We had approximately 64% of our 2003 parcel tanker revenue generated from COA compared to spot rates. Therefore, we tend to benefit at a slower rate in a rapidly increasing spot rate market, compared to competitors that operate with a lower proportion of revenue generated from COA. The rate increases for COA, however, are locked in for an extended period of time due to the longer duration of COA. In the fourth quarter of 2003, spot rates began to climb in response to heavy demand for parcel tanker transport, particularly, for exports to China, India and Brazil. The increases also reflected increased imports of petroleum products into the U.S. While spot rates peaked early in 2004, most spot rates for chemicals remain high as of the second quarter 2004 with rates 20-35% above mid 2003 rates, at levels last seen six or more years ago. COA rates are also increasing. SNTG expects this trend to continue with the tight supply of available tonnage combined with the continued growth in the world economy bolstering both COA and spot rates.

Growth in the Tank Container Market

        When a company's shipping needs grow sufficiently to require larger shipments, our market experience indicates that tank containers become a more attractive shipping alternative as compared to conventional 55 gallon drums. Shipping commodities in tank containers results in lower shipping expenses due to increased cargo capacity compared to drums in a 20-foot dry box container, decreased handling expenses and, as drums must be disposed of, there is decreased exposure to risk of possible environmental contamination by using tank containers. It is our experience that as businesses and national economies grow, so does the demand for shipping by tank containers, which is a more reliable and more economical means of transportation than drums in a 20-foot dry box container. For example, we have experienced growth in shipments from both developed markets of Europe and North America and emerging markets such as China, Eastern Europe, the Middle East and India. We intend to continue to expand our tank container business in response to the needs of customers, particularly in the food grade and chemical markets. SNTG also expects to continue developing cleaning and maintenance facilities for tank containers. With the growth in the market, there has been an

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improvement in our container shipments to 74,615 loads in 2003 from 66,330 loads in 2002 and 59,762 loads in 2001, increasing in 2003 and 2002 by 12% and 11%, respectively, from each of the previous years. We expect continued strong shipment growth in 2004 as a result of our continuing sales and marketing initiatives and improving market conditions in Asia, North America and Europe along with further growth in our food grade business.

Bunker Fuel Costs

        The cost of bunker fuel, which is the fuel used for our ships, has historically been the largest portion of variable operating expenses in our shipping business. In 2003, bunker fuel for SNTG's tanker operations constituted approximately 20% of the total operating expenses for tankers. The increase in SNTG's operating expenses in 2003 was primarily due to increases in the price of bunker fuel. Bunker fuel prices have been increasing in the last three years. In 2003, the average price of bunker fuel purchased by SNTG was approximately $175 per ton. This compares to the average bunker fuel price for 2002 of approximately $144 per ton and for 2001 of approximately $139 per ton. We attempt to pass fuel price fluctuations through to our customers under COA. During 2003, approximately 63% of tanker revenue earned under COA included contract provisions intended to pass through fluctuations in fuel prices. The profitability of the remaining 37% of tanker revenue earned under COA was directly impacted by changes in fuel prices.

        Given the existing size and configuration of the Joint Service in 2003, we estimate that a 10% change in the price of bunker fuel per ton from average 2003 bunker fuel prices would result in a $6.4 million change in gross profit. This excludes gains or losses, which may arise from the impact of bunker hedge contracts and bunker surcharge clauses included in certain COA as well as the impact of changes in bunker prices on our regional fleets.

Legal Proceedings

        In 2003, we were involved in significant legal proceedings, primarily related to certain antitrust investigations described below. We incurred costs of approximately $15.5 million in 2003 to address these issues and expect that we will continue to incur significant costs until these matters are resolved. We also suffered significant distraction of management time and attention related to these legal proceedings. These matters are at early stages and it is, therefore, not possible for us to determine whether or not an adverse outcome is probable or, if so, what the range of possible losses would be. It is possible that we could suffer criminal prosecution, substantial fines or penalties or civil penalties, including significant monetary damages as a result of these matters. As of November 30, 2003 and February 29, 2004, we had not established any reserves for potential unfavorable outcomes related to these proceedings.

        Governmental Antitrust Investigations

        In 2002 we became aware of information that caused us to undertake an internal investigation regarding potential improper collusive behavior in our parcel tanker and intra-Europe inland barge operations. As a consequence of the internal investigation, we voluntarily reported certain conduct to the Antitrust Division of the U.S. Department of Justice, and the Competition Directorate of the European Commission.

        On February 25, 2003, we announced that we had been conditionally accepted into the DOJ's Corporate Leniency Program with respect to possible collusion in the parcel tanker industry. Pursuant to such program and provided the program's stated terms and conditions were met, including continued cooperation, we and our directors, officers and employees were promised amnesty from criminal antitrust prosecution and fines in the U.S. for anticompetitive conduct in the parcel tanker business. At the same time, we also announced that the EC had admitted us, our directors, officers and employees into its Immunity Program with respect to deep-sea parcel tanker and intra-Europe inland barge operations. Acceptance into the EC program affords us, our directors, officers and employees immunity

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from EC fines with respect to anticompetitive behavior, subject to our fulfilling the conditions of the program, including continued cooperation. In March 2004, the Antitrust Division voided the Amnesty Agreement and revoked our conditional acceptance into the DOJ's Corporate Leniency Program. We intend to vigorously challenge the Antitrust Division's decision. SNTG currently remains in the EC's Immunity Program.

        In February 2004, the Korea Fair Trade Commission and the Canadian Competition Bureau, each notified us that they had launched investigations of the parcel tanker shipping industry and SNTG. We have informed the KFTC and CCB that we are committed to cooperating fully with the investigations.

        Civil Litigation

        To date we are aware of 12 ongoing putative private class actions filed against SNSA and SNTG for alleged violations of antitrust laws. The actions set forth almost identical claims of collusion and bid rigging that track information in media reports regarding the DOJ and EC investigations. The suits seek treble damages in unspecified amounts and allege violations of the Sherman Antitrust Act and various state antitrust and unfair trade practices acts. Additionally, the Dow Chemical Company and Huntsman Petrochemical Corporation filed antitrust claims against us in the Federal District Court for the District of Connecticut. The claims track the allegations in the putative class actions described above and seek similar types of damages.

        We are also the subject of an ongoing putative civil securities class action in the U.S. District Court for the District of Connecticut. The complaint appears to be based significantly on media reports about the DOJ and EC investigations described above.

        Customer Outreach Matters

        We have actively engaged in discussion with a number of customers regarding the subject matter of the DOJ and EC antitrust investigations. A number of companies have indicated their support and some have expressed concerns. We have participated in business discussions and formal mediation with some customers seeking to address any concerns and avoid additional litigation. We have reached commercial agreements with several customers pursuant to which the customers have relinquished any claims arising out of the matters that are the subject of the antitrust investigations. Although the impact of these agreements is difficult to assess until they are fully performed over time, we expect that they will not have a material negative impact on SNTG's earnings or cash flows. If favorable market conditions continue in the future, these agreements may have a more positive financial impact over time than the commercial arrangements that they replaced. Based on our interaction with other significant customers, we expect to continue doing business with those customers on terms that reflect the market for our services.

        OFAC and Related Matters

        The U.S. Department of the Treasury's Office of Foreign Assets Control is investigating certain payments by SNTG of incidental port expenses to entities in Iran as possible violations of the International Emergency Economic Powers Act and the Iranian Transactions Regulations. In 2003, OFAC concluded an investigation of similar payments by SNTG to entities in the Sudan as possible violations of IEEPA and the Sudanese Sanctions Regulations. SNTG is cooperating fully with OFAC, and has implemented policies and procedures to comply with U.S. sanctions regulations. With respect to OFAC's Iran investigation, on April 3, 2002 OFAC issued a Cease and Desist Order to SNTG covering payments by SNTG of incidental port expenses involving unlicensed shipments to, from or involving Iran. OFAC's Iran investigation is currently pending and OFAC has not made any formal determination of whether a violation has occurred as a result of SNTG's payments of incidental port expenses to entities in Iran. With respect to OFAC's Sudan investigation, on March 20, 2003 SNTG settled the matter with OFAC for a payment of $95,000 by SNTG and without any determination by OFAC that SNTG's payments of incidental port expenses to entities in the Sudan violated U.S. sanctions regulations. We understand that, based on a referral from OFAC, the U.S. Attorney's Office in Connecticut has opened an investigation regarding whether our "trade with embargoed countries violated U.S. laws." We are cooperating fully with the U.S. Attorney's Office.

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        O'Brien Litigation

        In an action filed in the Superior Court in Connecticut, SNTG and its former chairman have been sued by a former employee, Paul E. O'Brien, who resigned in early 2002. The plaintiff in the O'Brien action, a former SNTG in-house counsel, seeks damages for constructive discharge and alleges that SNTG was engaging in ongoing "illegal antitrust activities that violated U.S. and international law against price fixing and other illegal collusive conduct." The O'Brien action also seeks an order allowing the plaintiff to disclose client confidences regarding these allegations and protecting the plaintiff from civil or disciplinary proceedings after such revelation. The complaint, as amended, does not specify the range of damages sought other than to state they are in excess of the $15,000 jurisdictional minimum.

        The legal proceedings are described in more detail below under Item 8, "Financial Information—Legal Proceedings."

Increased Security Requirements

        Our ships and terminals will need ship security certification before July 1, 2004. This is a global IMO requirement, which will be certified by the flag state for each ship and by the relevant authorities in the countries where the terminals are located. The U.S. authority responsible for implementation is the U.S. Coast Guard. We expect that the total cost of obtaining this certification for our fleet will be approximately $2 million. This includes both technical installations and training. SNTG has made the required changes to our ships and submitted the necessary documents for certification. We expect that all of our ships will be certified before the deadline. We are still implementing certain changes for terminals. We expect that our terminals will have filed for certification prior to the deadline, although there is no assurance that we will receive the required certification before the deadline. It is possible that many ports and terminal facilities, including some to which we typically ship, will not receive their certification in a timely manner. If one of our ships is coming from a port or terminal that has not been certified, this could cause delays at certified ports or terminals, which may result in a loss of revenues. It is also possible that if our terminals are not certified, they will be avoided by customers requiring storage facilities. It remains uncertain how the different administrations worldwide and, in particular, in the U.S. will handle this situation. We are seeking the inclusion of clauses in spot contracts, COA and term storage contracts to mitigate our risk and share the exposure with our customers with respect to ports and terminals that do not receive the necessary certification beginning July 1, 2004. There is no assurance, however, that we will be able to amend currently existing contracts to include this clause.

Factors Affecting SOSA

Investment by Major Oil Companies

        The market for SOSA's services is dependent upon the success of exploration and the level of investment in offshore exploration and production by the major oil companies. Such investment is cyclical in nature. Following a period of increasing oil prices in recent years, there has been a progressive increase in investment in offshore exploration and production by the major oil companies. The impact of this investment takes time to work through to the offshore construction sector. SOSA expects to see a continued expansion of demand in fiscal year 2004 for its services, with this trend continuing over the next few years. However, SOSA believes that, for offshore contractors to survive, the oil companies which make up their customer base will need to share more of the risks and rewards associated with offshore fixed price projects in challenging geographic areas. It is the strategy of SOSA to be a fixed price contractor, but it will not accept contractually onerous terms, which it has in the past. SOSA was less successful in fiscal year 2003 than in previous years in winning new contracts to replenish its order book, particularly for the third and fourth quarters of fiscal year 2004. This is partly attributable to the more stringent tendering practices adopted as well as other competitive factors. As a

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result, after eliminating other factors such as disposal of subsidiaries, revenues for SOSA in fiscal year 2004 are expected to be lower than 2003.

Ship Utilization

        SOSA has experienced a progressive decline over the past three years in the utilization of its deep-water and heavy construction ships and light construction and survey ships. This decline evidences surplus capacity in SOSA's fleet, which SOSA has reflected in impairment charges recorded in the fourth quarter of 2003 discussed below. The level of utilization of SOSA's ships is important because the fixed costs related to operating and maintaining such ships are incurred whether or not the ships are being used on construction projects. SOSA is addressing this overcapacity through a ship disposal program already under way. SOSA has already sold five ships and intends to sell three more. Utilization of deep-water and heavy construction ships was reduced in 2003 because of low market demand, additional drydock time, and additional unpaid transit time between regions. Utilization of light construction and survey ships was adversely affected by low market demand and additional drydock time. Additionally, in fiscal year 2002, the utilization of all ships was lower than 2001.

Revisions of Estimates on Major Projects

        During the course of multi-year projects, the accounting estimates for project performance for the current period and/or future periods may change. The effect of such a change, which can be upward as well as downward, is accounted for in the period of change or prior to the issuance of the financial statements. These revisions to estimates do not result in restating amounts in previous period. Revisions of estimates are calculated on a regular basis.

        In the year ended November 30, 2003, there was a negative impact of $216 million attributable to revisions of estimates on major projects as compared to $58.8 million in 2002 and a positive impact of $2.4 million in 2001. The most significant negative revision to estimates occurred on the projects identified below.

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        During 2003, SOSA modified its estimating, tendering and contracting procedures to reduce the amount of unanticipated costs and improve SOSA's ability to recover costs from its customers. Greater selectivity is exercised in choosing which tenders to respond to, and a thorough analysis of the commercial and operational risks as well as a detailed tender budget is prepared in order to facilitate the decision to tender. Careful consideration is given to vessel schedule conflicts and to the current backlog to ensure SOSA has sufficient resources.

Impairment Charges

        In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or the Disposed of Long-Lived Assets," long-lived assets, to be held in use, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. SOSA recognized aggregate impairment charges of $176.5 million in 2003 in respect of its tangible fixed assets. The impairment charge in 2003 comprised the following significant charges:

        In addition, included in "Equity in net income of non-consolidated joint ventures" are charges totaling $9.1 million in respect of SOSA's share of tangible fixed asset impairments recorded by three of SOSA's equity joint ventures. The 2002 charge of $4.0 million for impairment of fixed assets was made up of adjustments to the carrying value of several small fixed assets. For additional information on impairment, please see Note 5 to the Consolidated Financial Statements included in Item 18 of this Report.

Factors Affecting SSF

        SSF and its competitors in the aquaculture industry have, to varying degrees, experienced poor financial results during the last three years. Results, however, may vary greatly by region due to a variety of factors.

Supply and Demand Imbalances Impact Pricing

        A significant contributor to SSF's poor results, as well as to those of our competitors generally, is low market prices for salmon, trout and coho in most markets during most of the last three years. Pricing can vary greatly by region. For example, pricing in the U.S. market generally improved significantly starting in the spring of 2003, while pricing in the European market was weak throughout the year. Market prices are affected primarily by the level of supply and, as more fully discussed below, supply levels are affected by a number of factors, including the availability of financing for additional growth, diseases, other harmful natural conditions and the existence of barriers to free trade.

        The 1999 to 2000 period, for example, was a time of significant capital raising by aquaculture companies, particularly in Norway where several companies raised equity on the Oslo Børs. This capital raising in turn led in part to an increase in salmon production in years 2000 to 2003. According to a fish industry market consulting firm, the growth in worldwide harvests in the last three years has been 14.0%, 8.7% and 6.5% respectively. However, as a result of low prices, which were at least partially caused by this increase in supply, many farmers supplying the European market showed signs of liquidity problems and, in some cases, became insolvent. During 2003, in Europe, the banks and feed

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companies that finance the industry started to become more restrictive with the financing they provide. In 2004 we expect, based on publicly available sources, that European biomass will be reduced which, we believe, generally should result in less harvest and ultimately in improved prices in the European market.

        In contrast, in 2002 and early 2003 in the Americas region, disease and other natural conditions, reduced supply which led to improved pricing in 2003. In 2004, we expect that the combined growth of harvests in North and South America will be moderate, but possibly large enough to reverse some of the price gains in these regions in 2003.

        In addition, the occurrence of an undersupply in one region cannot always be addressed by shipping fish from an area of oversupply. Salmon produced in Norway, for example, is not sold into the U.S. market in any substantial quantity because of trade barriers and therefore does not materially impact supply and demand imbalances in the U.S. market.

Diseases and Other Natural Conditions

        Disease is a significant risk element facing companies in the aquaculture industry. Some of the major diseases facing fish farmers are: infectious salmon anaemia ("ISA"), which is caused by a virus and transmitted by infected fish or dead organic material; furunculosis which is caused by a bacteria and is transmitted through water or direct contact; and infectious hematopoeitic necrosis ("IHN"), which is caused by a virus that can be found in many farming sites. Additionally, the health and development of salmon is also threatened by very cold weather ("Superchill") sea lice, algae blooms, jellyfish infestations and predators, all of which occur naturally. These diseases and other natural conditions may result in fish mortalities, the need to destroy fish, or the early harvest of the fish at sizes suboptimal for the market. In the latter part of 2001 and most of 2002, the salmon aquaculture industry was negatively impacted by a very bad period of disease. In particular, we were affected by the following natural conditions in 2001 through 2003:

        We suffered the most significant mortalities due to diseases and other natural conditions in 2002. At the time of the mortalities, we must write off the costs of the inventory. A further financial impact of high mortalities, however, generally occurs up to 18 months following the mortalities, as that is typically when the fish that suffered the mortalities would have been harvested and sold. The mortalities from disease and other natural conditions that we suffered in North and South America in 2001 and 2002 reduced the available harvest in the Americas in 2003 when market prices for salmon experienced a significant recovery.

Barriers to Free Trade

        We operate in highly regulated markets in which price levels and production volumes are closely monitored and at times significantly restricted. These restrictions have had and could continue to have a significant impact on our results. The following identifies significant regulatory requirements applicable to us that have acted as barriers to free trade.

        Norway and European Union

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        In 1996, to avoid sanctions against Norwegian salmon farmers by the European Union, the Norwegian government imposed feed quotas and production regulations on Norwegian fish farmers in an attempt to reduce the growth in supply of Norwegian farmed salmon and, hence, the amount of Norwegian farmed salmon available for sale in the EU market. The EU market is the most significant market for Norwegian producers. To avoid further threats of duties against Norwegian salmon, in July 1997, the Norwegian government reached an agreement with the EU for a five-year period to regulate supplies of Norwegian salmon into the EU market. The EU Agreement expired in 2003, and no regulation imposed by the EU on export to the EU market of Norwegian farmed salmon exists as of today. The Norwegian government still maintains the feed quota and production regulations introduced in 1996.

        The quotas and regulations imposed by the Norwegian government and the EU Agreement had an adverse effect on the cost structure of Norwegian producers, including SSF, by limiting the capacity utilization of Norwegian fish farms. However, the Norwegian government has permitted annual increases of varying amounts (ranging from 8% to 10%) in the feed quotas, which progressively reduces the negative impact of the feed quota regime. When the EU Agreement terminated in May 2003, salmon prices in Europe dropped significantly, as the Norwegian producers increased production in an attempt to regain European market share. By the end of 2003, prices began to recover and prices have continued to increase in 2004.

        The Norwegian government has since proposed new rules for regulating the aquaculture industry, which would impose the existing feed quota and production regulations that are currently in effect, with new biomass regulations. In addition, the EU from time to time considers proposals that could have a negative impact on the Norwegian aquaculture industry and SSF's Norwegian operations.

        U.S.

        In 1991, the U.S. imposed a tax on gutted salmon from Norway. The tax rate is a 28.3% anti-dumping duty and a countervailing duty of 2.3%. The tax was reviewed and upheld in 1999. Each exporter may negotiate with the U.S. government concerning reduced taxes. We have not obtained such reduced taxes.

        In 1998, following a formal complaint by certain U.S. salmon farmers, the DOC instigated an anti-dumping review against the Chilean salmon farming industry with respect to salmon sold into the U.S. market. The largest producers were investigated, including Eicosal, which we acquired in 2001. Eicosal initially received a 10.69% duty. Since 1998, the large producers have been subject to annual reviews for dumping behavior, and following the three subsequent annual reviews, Eicosal's duty was eliminated. In April 2003, U.S. salmon producers representing 85% of U.S. Atlantic salmon production filed a request for a changed circumstances review with the DOC, on the basis of having no interest in the continuance of the anti-dumping measures. As a result of the subsequent review by the DOC, the anti-dumping measures were revoked in July 2003.

Environmental and Public Relations Issues

        The aquaculture industry has increasingly faced environmental and consumer challenges regarding such issues as the effects of escaping fish on native fish populations, the spread of disease and parasites, such as sea lice, the impact of antibiotics given to farmed fish, synthetic pigmenting agents in the feed which farmed salmon metabolize to give them a pink color and the presence of chemical residues contained in farmed salmon such as PCBs, dioxin and other residue. These environmental and consumer challenges are expected to increase in the future and could lead to litigation against SSF and more stringent government regulation of the aquaculture industry and SSF, each of which could require SSF to change its fish farming practices and incur additional costs.

        For instance, in 2003, a U.S. federal court ruled that SSF's operations in Maine violated the Clean Water Act for operating without a discharge permit. As a result, the court required SSF to pay a

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penalty of $50,000 and imposed operating restrictions which required, among other things, SSF to suspend farming on specified sites until 2006 and required SSF to cease farming all non-North American stock from its hatcheries, in order to allow the surrounding waters to decontaminate. As a result of these operating restrictions, SSF's stockings in 2003 were reduced by approximately 200,000 fish and $468,000 of inventory was written off. In addition, SSF estimates that the court-mandated fallowing will reduce stockings in 2004 by approximately 900,000 fish. See also "Item 8. Financial Information—Legal Proceedings" for a description of certain legal proceedings affecting SSF.

Non-Salmon Species Have Not Offset Losses in Salmon Operations

        Over the past several years, SSF's turbot operations have produced consistent profitable results generally with stable prices, costs and volumes. SSF's turbot operations, however, are still relatively small, accounting for $24.6 million of revenues in 2003. SSF's ranching of Southern bluefin tuna has also generally performed well since it was acquired in 2001, but the major market for such premium tuna, Japan, experienced sharp price erosion in 2003. Prices for bluefin tuna reached record levels in 2002, and this attracted sharply higher volumes of Northern bluefin and other premium tuna species to the market. This, in turn, caused an oversupply, major reduction in price levels and a build up in levels of inventory by sellers who hoped to avoid losses. The clearing of inventories into the market, and reduction in supply from Europe due to less favorable prices, is likely to take several years and so prices are not expected to recover substantially for some time. Additionally, sales of Southern bluefin tuna comprise a relatively small business for SSF, accounting for $23.5 million in revenue in 2003. Results for SSF's other farmed species, which include halibut, sturgeon, cod and tilapia, are not currently profitable, and revenues and volumes are relatively small in relation to salmon, trout, Southern bluefin tuna, and turbot.

Inflation

        Our business transactions in high-inflation countries are almost entirely denominated in stable currencies, such as the U.S. dollar and inflation therefore does not materially affect our consolidated financial results.

Currency Fluctuations

        Our reporting currency is the U.S. dollar. The U.S. dollar is the functional currency of our most significant businesses. Our exposure to currency rate fluctuations affects both our operating costs and net investments in foreign subsidiaries. We do not use derivative instruments to hedge the value of investments in foreign subsidiaries. The net translation adjustments arising on the above currency exposures were gains of $25.6 million, $37.9 million and $8.6 million for the years 2003, 2002, and 2001, respectively. These net translation adjustments are recorded in Accumulated Other Comprehensive Income (Loss) in the Consolidated Statements of Shareholders' Equity.

        Stolt-Nielsen S.A.'s functional and reporting currency, as well as that of a majority of SNTG's activities, is the U.S. dollar.

        In SOSA, the majority of net operating expenses are denominated in the functional currency of the individual operating subsidiaries. The two functional currencies of the companies that comprise the NEC region are the Norwegian kroner and the British pound, respectively. The U.S. dollar is the functional currency of the most significant subsidiaries within the other SOSA regions.

        In SSF, the functional currencies of significant subsidiaries include the U.S. dollar, the Norwegian kroner, the British pound, the euro and the Japanese yen.

        Because revenues and expenses are not always denominated in the same currency, we enter into forward exchange and option contracts to hedge capital expenditures and operational non-functional currency exposures for periods consistent with the committed exposures. Our currency exposure policy

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prescribes the range of allowable hedging activity. The changes in the fair value of the derivative instruments we use are offset by corresponding changes in the fair value of the underlying exposures being hedged. All of our derivative instruments are over-the-counter instruments entered into with major financial credit institutions. Our derivative instruments are primarily standard foreign exchange forward contracts, which subject us to a minimum level of exposure risk and have various maturities not to exceed 60 months. We do not consider that we have a material exposure to credit risk from third parties failing to perform according to the terms of derivative instruments. We do not engage in foreign currency speculation. Further details are included in Note 26 to the Consolidated Financial Statements included in Item 18 of this Report.

Application of Critical Accounting Policies

        We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to: principles of consolidation, revenue and cost recognition; asset impairments; contingencies and litigation; and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of the Consolidated Financial Statements. Our significant accounting policies are more fully described in Note 2 to the Consolidated Financial Statements included in Item 18 of this Report. The policies described below and those contained in Note 2 to our Consolidated Financial Statements should be considered in reviewing our Consolidated Financial Statements, notes to Consolidated Financial Statements and this Item 5.

Principles of Consolidation

        Our consolidated financial statements include the financial statements of all majority-owned companies, unless we are unable to control the operations, after the elimination of all significant intercompany transactions and balances.

        SNTG operates the Joint Service, an arrangement for the coordinated marketing, operation, and administration of tankers owned or chartered by the Joint Service, which consists of participants in the deep-sea intercontinental parcel tanker market. Net revenue available for distribution to the participants is defined in the Joint Service Agreement among the participants as the combined operating revenue of the ships which participate in the Joint Service, less combined voyage expenses, overhead costs, and commission to outside brokers. The net revenue is distributed proportionately by SNTG to each participant according to a formula which takes into account each ship's cargo capacity, its number of operating days during the period, and an earnings factor assigned. For the years ended November 30, 2003, 2002, and 2001, SNTG received approximately 80%, 80% and 74%, respectively, of the net revenues of the Joint Service. The financial statements of the Joint Service have been consolidated in the accompanying Consolidated Financial Statements, with a provision included in tanker operating expenses for the amount of profit distributed to the minority participants. These provisions were approximately $66.9 million, $71.9 million, and $100.3 million for the years ended November 30, 2003, 2002, and 2001, respectively, and include amounts distributed to non-consolidated joint ventures of SNTG of $38.4 million, $40.5 million, and $42.0 million.

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Revenue and Cost Recognition

SNTG

        For SNTG's parcel tanker operations, the operating results of voyages still in progress at the end of the reporting period are estimated and prorated over the period of the voyage. A voyage is comprised of one or more "voyage legs." SNTG estimates revenue and cost for each leg based on available actual information, current market parameters such as fuel cost and customer contract portfolios, and relevant historical data such as port costs. Revenue and cost estimates are updated continually through the voyage to account for changes in voyage patterns, when more current data is obtained, or when final revenue and cost data is known. The consolidated balance sheet reflects the portion of the results occurring after the end of the reporting period. As of November 30, 2003 and 2002, deferred revenues of $24.1 million and $25.2 million, respectively, are included in "Accrued voyage expenses" in the consolidated financial statements. As discussed above under "Principles of Consolidation," the financial statements of the Joint Service operated by SNTG are consolidated in our financial statements, with a provision included in tanker operating expenses for the amount of profit distributed to the minority participants of the Joint Service.

        Revenues for SNTG's tank container operations relate primarily to short-term shipments, with the freight revenue and estimated expenses recognized when the tanks are shipped, based upon negotiated contract rates. Our expense estimates are based on available historical information. Additional miscellaneous revenues earned from other sources, such as further ground transportation services that customers may require, are recognized after completion of the shipment.

        Revenues for terminal operations consist of rental income for the utilization of storage tanks by SNTG's customers, with the majority of rental income earned under long-term contracts. These contracts generally provide for fixed rates for the use of the storage tanks and/or the throughput of commodities pumped through the facility. Revenues can also be earned under short-term agreements contracted at spot rates. Revenue is recognized over the time period of usage, or upon completion of specific throughput measures, as specified in the contracts.

SOSA

        Substantially all of SOSA's projects are accounted for on the percentage-of completion method, which is standard for SOSA's industry. Under the percentage-of-completion method, estimated contract revenues are accrued based on the ratio of costs incurred to date to the total estimated costs, taking into account the level of physical completion. Provisions for anticipated losses are made in the period in which they become known. Contract revenues and total cost estimates are reviewed and revised periodically as work progresses and as change orders are approved, and adjustments based on the percentage of completion are reflected in contract revenues in the reporting period, when these estimates are revised. To the extent that these adjustments result in a reduction or elimination of previously reported contract revenues or costs, SOSA would recognize a charge against current earnings that may be significant depending on the size of the project or the adjustment.

        The percentage-of-completion method requires SOSA to make reasonably dependable estimates of progress toward completion of such contracts and contract costs. As discussed in "Factors Affecting SOSA—Revisions of Estimates on Major Projects" in 2002 and 2003, SOSA experienced frequent and significant deterioration of results as compared with original estimates with respect to results relating to a number of projects, including the Conoco CMS 3, Bonga, Burullus and OGGS projects. Although actual results differed significantly from original estimates on these projects, SOSA does not believe its original estimates were unreliable. Rather, SOSA believes it sufficiently assesses its business risks in a manner that allows it to evaluate the outcomes of its projects for purposes of making reasonably dependable estimates. Nevertheless, SOSA's business risks have involved, and will continue to involve, unforeseen difficulties, including weather, economic instability, labor strikes, localized civil unrest, and engineering and logistical changes, particularly in major projects. SOSA does not believe its business is

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subject to the types of inherent hazards described in American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP") No. 81-1 "Accounting for Performance of Construction—Type and Certain Production—Type Contracts," that would indicate that the use of the percentage-of-completion method is not preferable.

        If SOSA was unable to make reasonably dependable estimates, it would be obliged to use the "zero-estimate-of-profit' method or the "completed contract' method. Under the zero-estimate-of-profit method, SOSA would not recognize any profit before a contract is completed. Under the completed contract method, all costs, revenues and profits are accumulated in the balance sheet accounts until project completion. In order to centralize its expertise on making estimates of contract revenues and contract costs, SOSA has established a separate estimating department in the AFMED region. If SOSA continues to experience adverse developments in the AFMED region, SOSA may not be able to establish that it can develop reasonably dependable estimates of its progress toward completion of such contracts, contract revenues and contract costs. If SOSA is unable to continue to use the percentage-of-completion method of accounting, its earnings may be materially adversely impacted, resulting in, among other things, a potential default under its existing credit facility agreements.

        A major portion of SOSA's revenue is billed under fixed-price contracts. Due to the nature of the services performed, variation orders and claims are commonly billed to the customers in the normal course of business and are recognized as contract revenue where recovery is probable and can be reasonably estimated. In addition, some contracts contain incentive provisions based upon performance in relation to established targets, which are recognized in the contract estimates when the targets are achieved. Many of the delays and cost overruns discussed in "Factors Affecting SOSA—Revisions of Estimates on Major Projects" were the subject of claims and variation orders. Throughout 2003, SOSA had significant difficulty resolving these claims and variation orders, and a significant amount of judgment was required to assess collectibility.

SSF

        SSF recognizes revenue either on dispatch of product to customers, in the case of sales made on Free On Board ("FOB") processing plant terms, or on delivery of product to customers, where the terms of the sale are Cost, Insurance and Freight ("CIF") and Delivery Duty Paid ("DDP"). The amount recorded as revenue includes all amounts invoiced according to the terms of the sale, including shipping and handling costs billed to customers, and is after deductions for claims or returns of goods, rebates and allowances against the price of the goods, and bad or doubtful debt provisions and write-offs.

        SSF capitalizes all direct and indirect costs of producing fish into inventory. This includes depreciation of production assets and farming overheads up to a site or farming regional management level. We account for normal mortalities (mortalities that are natural and expected as part of the life cycle of growing fish) by removing the biomass from the records, so that the accumulated capitalized costs are spread over the lower remaining biomass. We account for abnormal mortalities (higher than natural or expected mortalities due to disease, accident or any other abnormal cause) by removing the biomass from the records and writing off the accumulated costs associated with that biomass at the time of the mortality.

        We recognize costs in the profit and loss account as the fish are harvested and sold, based on the accumulated costs capitalized into inventory at the start of the month of harvesting, and in proportion to the number of fish or biomass of fish harvested as a proportion of the total at the start of the period. We expense harvesting, processing, packaging and freight costs, which comprise most of the remaining operating expenses, in the period in which they are incurred.

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OLL and SSL

        OLL and SSL have various types of fee income, including non-refundable subscription fees, transaction fees, and service fees. Subscription fees that are billed in advance are recorded as revenue over the subscription period. Transaction fees that are based upon the number or value of transactions are recorded as earned as the related service transactions are performed.

Impairment of Tangible Fixed Assets, Goodwill and Other Intangibles

        In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets" and SFAS No. 144, "Accounting for Impairment or Disposal of Long-lived Assets," long-lived assets to be held and used are required to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are periodically reviewed for impairment. Prior to the implementation of SFAS No. 142 and SFAS No. 144 and through November 30, 2002, we followed SFAS No. 121 "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed of" for the review and determination of the impairment of tangible fixed assets, goodwill and other intangibles. In performing the review for recoverability under SFAS No. 121, we determined a current market value for the asset or estimated the future cash flows expected to result from the use of the asset and its eventual disposition. Under SFAS No. 121, the projected undiscounted future cash flows were less than the carrying amount of the asset, the asset was deemed impaired. The amount of the impairment is measured as the difference between the carrying value and the fair value of the asset.

Impairment of Investments in Non-consolidated Joint Ventures

        We review our investments in non-consolidated joint ventures periodically to assess whether there is an "other than temporary" decline in the carrying value of the investment. We consider whether there is an absence of an ability to recover the carrying value of the investment by reference to projected undiscounted cash flows for the joint venture. If the projected undiscounted future cash flow is less than the carrying amount of the asset, the asset is deemed impaired. The amount of the impairment is measured as the difference between the carrying value and the fair value of the asset.

Recognition of Provisions for Legal Claims, Suits and Complaints

        In the ordinary course of our business, we are subject to various legal claims, suits and complaints. We, in consultation with internal and external advisers, will provide for a contingent loss in the financial statements if we determine that the contingency has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. In accordance with SFAS No. 5, "Accounting for Contingencies", as interpreted by Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 14, "Reasonable Estimation of the Amount of a Loss," if we have determined that the reasonable estimate of the loss is a range and that there is no best estimate within the range, we will make a provision equal to the lower amount of the range. The provision is subject to uncertainty and no assurance can be given that the amount provided in the financial statements is the amount that will be ultimately settled. Our results may be adversely affected if the provision proves not to be sufficient. The significant legal claims and lawsuits against us are discussed in Factors Affecting SNTG—Legal Proceedings" and Item 8. "Financial Information—Legal Proceedings."

Income taxes

        We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires that the deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that the deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of the entire deferred tax asset will not be realized.

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        As a part of the process of preparing consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax exposure together with assessing deferred tax assets and liabilities based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review deferred tax assets for recoverability and, if it is more likely than not that the deferred tax asset is unrecoverable, we establish a valuation allowance based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. If we continue to operate at a loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable and deductible, we could be required to establish a valuation allowance, based on a test of recoverability, against all or a significant portion of our deferred tax assets resulting in a substantial increase in our effective tax rate and a material adverse impact on our operating results.

Impact of Recent Accounting Standards

        In November 2002, the FASB issued Interpretation No. 45,"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). This interpretation requires certain disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements of FIN 45 are effective for periods ending after December 15, 2002. The initial recognition and initial measurement requirements of FIN 45 are effective prospectively for guarantees issued or modified after December 31, 2002. SOSA recorded the fair value of guarantees provided in respect of joint ventures amounting to $0.7 million as of November 30, 2003.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of SFAS No. 123." This statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of that Statement to require prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation. We are continuing to account for stock-based compensation according to Accounting Policy Bulletin ("APB") No. 25, and have disclosed the effects of SFAS No. 123 on reported income in Note 2 to the consolidated financial statements, "Stock-Based Compensation."

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("VIE") ("FIN 46"). The objective of the interpretation is to provide guidance for identifying controlling financial interest established by means other than voting interest. It requires consolidation of a VIE by an enterprise that holds such a controlling financial interest (the primary beneficiary). It is intended to require consolidation of VIEs only if those VIEs do not effectively disperse the risk and benefits among the various parties involved. On December 24, 2003, the FASB issued a revision of FIN 46 ("the Revised Interpretation" or "FIN 46R"). The Revised Interpretation modified both the proposed modifications and other decisions previously issued through certain FASB Staff Positions and supercedes the original FIN 46 to include (i) deferring the effective date for certain VIEs, (ii) providing additional scope exceptions for certain VIEs, (iii) clarifying the impact of troubled debt restructurings on the requirements to consider (a) whether an entity is a VIE or (b) which party is a primary beneficiary, and (c) providing additional guidance on what constitutes a variable interest. We will apply the interpretation to pre-existing VIEs in 2004. FIN 46 and FIN 46R will require certain of our leases to be recorded on the balance sheet, as disclosed further in Note 18, "Variable Interest Entities."

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        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. The adoption of SFAS No. 150 did not have a material impact on our financial position or results of operations.

        In December 2003, the FASB revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits (revised 2003)." The revised standard does not change the measurement and recognition provisions of SFAS No. 87 or SFAS No. 106, but adds significant new disclosure requirements. Additional disclosure requirements include enhanced information related to plan assets, investment strategies and policies, rationale used to determine rate of return, measurement date information, and information on pension obligation including expected future benefit payments. This statement will not be effective for us until the year ending November 30, 2004.

        In May 2004, the FASB issued Staff Position ("FSP") No. 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003" ("FSP No. 106-2"). FSP No. 106-2 will supersede FSP No. 106-1 which permits the deferral of recognizing the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 in the accounting for postretirement health care plans under SFAS No. 106 and in providing disclosures related to the plan required by SFAS No. 132. We have elected the deferral provided by FSP No. 106-1 and we are evaluating the magnitude of the potential favorable impact of FSP No. 106-2 on the financial statements. Amounts included in Note 22 for the accumulated postretirement benefit obligation and net periodic postretirement benefit cost do not reflect any amount associated with the subsidy. FSP No. 106-2 is effective for the first interim or annual period beginning after June 15, 2004.

Strategic Outlook

        The following outlook section provides a general framework for our strategic principles for fiscal year 2004.

Strategic Operational Priorities

SNTG

        SNTG's mission is to provide our customers with the best value in bulk liquid logistics, earn a fair return on the capital employed, and act ethically and responsibly towards our stakeholders around the world.

        Parcel Tankers

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        Tank Containers

        Terminals


SOSA

        SOSA's mission is to design, procure, fabricate, install and maintain complete subsea pipeline and riser systems for the global offshore oil and gas industry.

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SSF

        SSF's mission is to be the preferred supplier of quality seafood to our customers in all the markets we serve and to create sustainable wealth for our stakeholders. We are focusing on the issues identified below as key elements in our business strategy:

Financial Management

        Since the beginning of 2000, through November 30, 2003, we have, through SNTG (Liberia) and other subsidiaries (including SNTG), provided funding through capital contributions and inter-company debt of $164.0 million to SOSA, $257.0 million to SSF, and $55.0 million combined to OLL and SSL. This funding was provided from a combination of cash flow from SNTG operating activities as well as the use of our credit facilities. In addition, we have provided guarantees of SOSA's obligations under its bank guarantee facilities, some of which are supported by collateral of up to an aggregate of $104.3 million as of November 30, 2003. Since that time, the aggregate amount of bank guarantees available to SOSA under these facilities has been reduced to $99.8 million as of May 31, 2004. As a result of the financial and operational difficulties at SOSA and SSF, we intend to protect the value and financial condition of SNTG by no longer providing additional financial support for SOSA and limiting

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future financial support for SSF. As part of this strategy, we reduced our equity ownership in SOSA and we deconsolidated SOSA in the first quarter of 2004 and raised additional equity in SNSA.

        As of November 30, 2003, we held a 63.5% economic interest and 69.2% voting interest in SOSA, resulting in the full consolidation of SOSA's financial statements in our consolidated balance sheet and statement of operations with recognition of the minority interest in SOSA in each statement. On February 13, 2004, SOSA completed a private placement of 45.5 million new SOSA Common Shares for gross cash proceeds of approximately $100 million. In addition, all 34 million SOSA Class B Shares owned by us were converted to 17 million new SOSA Common Shares. On February 19, 2004, we sold 2 million of our previously directly owned SOSA Common Shares in a private placement transaction to an unaffiliated third party. The shares were sold at the then current market price of 24 Norwegian kroner per share with proceeds of $6.7 million received on February 25, 2004. The above transactions reduced our economic and voting interest in SOSA to 41.1% as of February 19, 2004 (and as of February 29, 2004, the end of our first quarter), resulting in the deconsolidation of SOSA as of mid-February 2004. We have applied the equity method of accounting for the remaining SNSA investment in SOSA subsequent to deconsolidation.

        On January 26, 2004, we sold 7.7 million SNSA Common Shares, for aggregate gross proceeds of $104 million to non-affiliated investors. The Common Shares, which were held in treasury, were priced at 92.75 Norwegian kroner per share, or approximately $13.50 per share.

        On February 12, 2004, SOSA and certain of its subsidiaries entered into a New Bonding Facility with certain financial institutions for the issuance of bank guarantees of up to $100 million. The issuance of bank guarantees under this New Bonding Facility is subject to a number of conditions, and is available to SOSA for a period of 18 months.

        On February 19, 2004 we announced that the deconsolidation of SOSA, combined with our own equity offering, would allow us to achieve compliance with the financial covenants in the original borrowing arrangements with our primary creditors. We subsequently allowed the waiver agreement with respect to our Senior Notes to expire on February 20, 2004. Representatives of the holders of our Senior Notes informed us that the Senior Note holders believed that upon the termination of the waiver agreement and the deconsolidation of SOSA, we were in breach of certain covenants of the Senior Notes. We informed the representatives of the Senior Note holders that we disagreed with these assertions. On June 16, 2004, we resolved the dispute with our Senior Note holders regarding the asserted defaults under the Senior Notes and entered into an agreement to amend the Senior Notes. Pursuant to the Amendment Agreement, a permanent waiver was granted by the Senior Note holders in respect of the defaults they asserted. For additional information, see "—Liquidity and Capital Resources—Indebtedness—The Senior Notes" and Note 29 to the Consolidated Financial Statements included in Item 18 of this Report.

        On March 30, 2004, we entered into a five-year $130 million revolving credit facility arranged by a consortium led by Deutsche Bank AG. The facility was initially used to repay an existing revolving credit facility led by DnB NOR Bank ASA, which was originally due on November 26, 2003, and was extended by agreement with the bank group. The interest rate paid on the new facility ranges from a rate of LIBOR+1.5% to LIBOR+1.9%, based on our consolidated debt to consolidated EBITDA ratio.

        As a result of these activities, which were partially offset by the consolidation of Twelve Ships Inc. (which had debt obligations of approximately $70 million as of November 30, 2003), our consolidated debt decreased from $1,699.7 million on November 30, 2003 to an estimated $1,266.3 as of May 31, 2004. As of May 31, 2004, we had an estimated cash and cash equivalents of in excess of $140 million. We are currently limiting capital expenditures, closely monitoring working capital, will no longer provide funding for SOSA and are limiting funding for SSF.

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        The options available to us in the event that operational results fall below expectations or we were to be required to pay large fines or penalties as a result of the antitrust proceedings or otherwise include (i) raising new unsecured debt to repay existing debt, (ii) raising new secured debt, primarily by refinancing our Houston terminal as well as using our currently uncollateralized Braithwaite terminal, (iii) engaging in sale leaseback transactions, (iv) raising equity, (v) seeking approval from existing lenders to defer existing scheduled loan repayments, (vi) deferring discretionary capital expenditures, (vii) selling assets including our shares in SOSA (subject to the terms of the Amendment Agreement for the Senior Notes), and (viii) seeking to obtain waivers of covenant breaches were they to arise. There can be no assurance that we will be able to complete any of these actions.

        Subsequent to the end of 2003, SOSA took a number of actions to address its financial situation. In February 2004, SOSA issued and sold 45.5 million SOSA Common Shares in a private placement that raised gross proceeds of $100.1 million. On April 20, 2004, SNTG converted the Subordinated Note issued by SOSA into SOSA equity. Additionally, on May 28, 2004 SOSA completed an equity offering which generated approximately $65.8 million in gross proceeds. Together, these measures have provided a $215.9 million increase in SOSA's shareholders equity before deduction of expenses. As of May 31, 2004 our ownership of SOSA was 41.7%.

Outlook for Fiscal Year 2004

SNTG

        Tanker revenue and income from operations are expected to increase in 2004, as the market turnaround that began in the fourth quarter of 2003 continues. We expect rates to remain at above 2003 levels due to an increase of demand outpacing available supply, with sustained demand from stronger economic growth. We expect costs to remain relatively flat in 2004, although we anticipate cost pressures from continued high bunker fuel prices, a weak U.S. dollar and inflationary pressure from suppliers, as well as additional legal expenses due to antitrust investigations and legal proceedings.

        We expect to maintain our high tank container utilization of around 80% during 2004. We expect demand to remain strong in our main operating regions of Europe, Asia and North America and we expect that the tank container fleet size will be increased during 2004 in line with this increased demand, either through strategic purchasing of new tank containers, leasing of tank containers or acquiring and repairing used tank containers. While there is a constant focus on preserving margins, we expect to see upward pressure on operating expenses, particularly in the area of ocean freight and trucking services. It is anticipated that the relative weakness in the U.S. dollar will also continue to negatively impact results, because most of our tank container revenues are earned in U.S. dollars while a significant portion of our costs are incurred in non-U.S. dollar currencies.

        There continues to be strong demand for storage at all of SNTG's wholly owned storage terminals in Houston, Braithwaite, and Santos, and we anticipate close to full utilization for 2004. We completed an expansion in Santos in 2003 and we expect to complete a further expansion in Houston in early 2004. We will therefore experience the full year effect on operating revenue and operating expenses in 2004. We will add further capacity to all three terminals during 2004, although given the long period of time for the expected completion of construction, we do not expect these expansions to have any significant impact on earnings during 2004. The joint venture terminals in Ulsan, South Korea and Westport, Malaysia are both expected to remain profitable during 2004. Overall, we expect that income from terminal operations will be higher in 2004 than in 2003.

SOSA

        SOSA's credit facilities contain various financial covenants, including but not limited to, minimum consolidated tangible net worth, maximum consolidated debt to net worth and maximum consolidated debt to EBITDA. These financial covenants and the terms of SOSA's existing credit facility agreements were amended by the Intercreditor Deed. SOSA's latest forecasts for fiscal year 2004 indicate that there

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will be a narrow margin of compliance with its debt to EBITDA ratio covenant at the end of the fourth quarter of 2004. SOSA's ability to remain within its covenants is dependent on (i) its operating performance, (ii) its ability to recover variation orders and claims from customers where additional contract costs are incurred and (iii) the success of its plans to divest certain assets and businesses.

        SOSA has consequently made contingency plans in the event that it is unable to comply with its covenants as follows: (i) it has the option of raising unsecured debt finance as an alternative means of repaying bank facilities; (ii) it can defer discretionary capital expenditures; (iii) it has the option of raising further equity; and (iv) it can seek to obtain a waiver of covenant breaches if they were to arise.

        Some of the disputes over claims and variation orders were resolved after 2003 year-end, but because they relate to events that occurred prior to November 30, 2003, the impact of the settlements on the OGGS and Burullus projects was accounted for as a receivable in 2003. Significant additional costs to completion have been identified on the Sanha Bomboco and Bonga projects in March 2004. However, there were some strong regional performances, particularly in the NEC region, where offshore activity was exceptionally high, and the SAM region.

        SOSA was less successful in 2003 than in previous years in winning new contracts to replenish its order book, and its backlog at February 17, 2004 stood at $849 million, of which $556 million is expected to be executed in 2004. This compares to a backlog at February 17, 2003 of $1.5 billion, of which $1.0 billion was for 2003. Starting in December 2003, SOSA changed its definition of backlog to exclude future revenues from letters of intent and options and only to include signed agreements. As of March 31, 2004, SOSA has in excess of $900 million of additional recently awarded contracts in 2004, including the Langeled and Greater Plutonio contracts.

        In 2004, SOSA expects ship utilization to decline further due to the lack of demand for certain ships and barges, most notably the LB200 pipelay barge, which is expected to have a dry-dock for approximately 60 days in fiscal year 2004 and to remain unutilized until the start of the Langeled project in 2005. The overall utilization rate is expected to improve if the current ship disposal program is successful in eliminating surplus ship capacity, but the outlook was not sufficiently favorable as to obviate the need to record impairment charges in fiscal year 2003 against certain assets which are held for use, notably the LB200, the Seaway Kestrel and the Seaway Explorer.

SSF

        We expect an increase in SSF revenues in 2004 as a result of expected higher salmon and trout prices in Europe and an increase in farming volumes both in the Americas and Europe regions. Prices in the Americas region already recovered in 2003, compared to 2002 and 2001, and we expect slightly lower prices going forward. The price recovery was primarily caused by a reduction in the North American harvest, as a result of disease problems in the earlier years, combined with a modest increase in Chilean harvest. In Europe, we expect prices in 2004 to improve over prices in 2003, primarily due to expected lower Norwegian production in 2004.

        The expected volume increases in 2004 for SSF salmon operations overall are a result of the expansion of our Chilean operations, and anticipated recovery from the low 2003 salmon harvests due to diseases in 2001 and 2002 in Norway and the east coast of Canada. In the UK, improved planning and operations have enabled us to maximize the use of our existing assets. The only region where we expect to experience lower volumes in 2004 is the west coast of Canada, due to disease problems occurring in earlier periods. Production of SSF's other marine species is expected to be stable.

        The cost of producing salmon is expected to decrease in Chile, Norway and the UK, remain stable in the east coast of Canada and increase in the west coast of Canada. The cost of feed is approximately 40% to 45% of SSF's operating costs. Our feed cost is affected by the cost of raw material used in producing the feed, which costs the feed manufacturers are able to pass on to their customers. While we expect to see a reduction in the base price of feed, there is the risk that the cost of feed may

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increase due to a cost increase in the raw materials. Our ability to pass on increases in our feed costs to our customers is dependent on the supply and demand balance for our products.

        We expect improved profit margins from our processing and marketing operations in 2004. Overall, SSF expects better performance in 2004.

Results of Operations

        Presented below is a summary of our consolidated financial data for fiscal years 2003, 2002 and 2001:

For the years ended November 30,
(in millions)

  2003
  2002
  2001
 
Operating Revenue   $ 3,026.4   $ 2,908.1   $ 2,741.6  
Operating Expenses     2,938.2     2,640.1     2,389.8  
   
 
 
 
Gross Profit     88.2     268.0     351.8  
  Equity in net (loss) income of non-consolidated joint ventures     (11.1 )   14.0     13.0  
  Administrative and general expenses     (241.7 )   (210.6 )   (209.5 )
  Impairment of tangible fixed assets     (176.5 )        
  Write-off of goodwill     (2.4 )   (118.0 )    
  Write-off of Comex trade name             (7.9 )
  Restructuring charges     (18.4 )   (9.6 )    
  (Loss) gain on disposal of assets, net     (1.4 )   10.3     14.3  
  Other operating (expense) income, net     (6.5 )   (3.2 )   1.2  
   
 
 
 
(Loss) Income from Operations     (369.8 )   (49.1 )   162.9  
Interest Expense, net     (92.8 )   (93.1 )   (113.9 )
Foreign Currency Exchange Gain (Loss), net     13.4     1.2     (2.0 )
Income Tax Provision     (15.3 )   (18.0 )   (27.6 )
Minority Interest     148.5     56.2     4.3  
   
 
 
 
Net (Loss) Income   $ (316.0 ) $ (102.8 ) $ 23.7  
   
 
 
 
(Loss) Earnings per Common Share                    
  Basic   $ (5.75 ) $ (1.87 ) $ 0.43  
  Diluted   $ (5.75 ) $ (1.87 ) $ 0.43  
   
 
 
 

Consolidated Results of Operations

        The following discussion summarizes our results of operations for 2003 compared to 2002 and 2002 compared to 2001. For additional information about our results of operations for our three main businesses, please see "Business Segment Information" below.

Operating Revenue

        In 2003, we had consolidated operating revenue of $3.0 billion, compared to $2.9 billion in 2002 and $2.7 billion in 2001. Our consolidated operating revenue increased by $118.3 million or 4.1% in 2003 compared to 2002, and increased by $166.5 million or 6.1% from 2002 compared to 2001.

        Operating revenue in 2003 increased in all three of our major businesses. SNTG's increase in operating revenue in 2003 was largely attributable to the increase in revenue from the tank container division, reflecting an improvement in shipment volumes in 2003 due to increased demand in North America, Europe and Asia Pacific, and a larger fleet of tank containers. The increases in volume more than compensated for pricing pressures experienced in 2003. SNTG's tanker revenues improved due to increased volume of cargo shipped and strengthening of chemical spot market rates. SOSA contributed to the increase in operating revenue in 2003 as it worked through its high level of backlog in 2003 and

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SSF also contributed to the increase due to an increase in salmon prices in the Americas region, and higher volumes in the European region. Notwithstanding the increase, SSF's reserves also reflected a low level of harvests in the Americas and a weak seafood trading market in Asia.

        Operating revenue in 2002 increased primarily as a result of continued growth in the market for SOSA's services, particularly on major projects in the AFMED region, in addition to increased year-on-year revenue from the Paragon Companies, which were acquired during 2001. Operating revenue for SSF also increased in 2002, primarily due to a large increase in Asia Pacific trading activities and due to the inclusion of the Eicosal acquisition in Chile made in the middle of 2001. These increases more than offset a decline in operating revenue at SNTG. SNTG revenue in 2002 declined from 2001 primarily due to the loss of revenue following the sale of the Chicago and Perth Amboy storage terminals in late 2001. Additionally, there was a decline in SNTG's tanker revenues arising from a softening in the clean petroleum products market which in turn led to SNTG's redelivery of all of our time-chartered product tankers, reducing the overall average fleet size from 2.55 million dwt in 2001 to 2.32 million dwt in 2002.

Gross Profit

        We reported a gross profit of $88.2 million, $268.0 million and $351.8 million in 2003, 2002 and 2001, respectively. Our consolidated gross profit decreased by $179.8 million in 2003 compared to 2002 and decreased by $83.8 million in 2002 compared to 2001. Gross margins in 2003, 2002 and 2001 were 2.9%, 9.2% and 12.8%, respectively.

        The decrease in gross profit and gross margins during 2003 compared to 2002 was primarily attributable to the increase in operating expenses at SOSA on several major projects. It also reflected poor performance at SSF as a result of significant losses at SSF's Asia Pacific region. SNTG gross profit margin declined from 20.9% in 2002 to 19.9% in 2003, due to the inability to pass all cost increases, primarily related to bunker fuel and freight, back to customers and the increase in lease rental expense in 2002 and 2003 as a result of the parcel tanker sale/leaseback transactions. For SNTG in 2003, while 64% of our parcel tanker revenue was generated from COA, only 63% of this tanker revenue was earned under contracts that allowed SNTG to pass through higher bunker fuel costs to our customers. SSF gross profit declined by $28.1 million from 2002 to 2003, reflecting losses from what we believe to have been improper trading of seafood in SSF's Tokyo office, and high operating costs in the Americas.

        The decrease in gross profit and gross margins during 2002 compared to 2001 was also due to the increase in operating expenses of SOSA with respect to several major projects. SNTG gross margin in 2002 of 20.9% was similar to the gross margin in 2001 of 21.0%. SSF gross profit declined by $15.4 million in 2002, mainly due to low market prices for sales of trout and coho in the Americas region and low market prices for salmon.

Equity in Net (Loss) Income of Non-consolidated Joint Ventures

        Our equity in the net (loss) income of non-consolidated joint ventures was a loss of $11.1 million in 2003, compared to income of $14.0 million in 2002 and income of $13.0 million in 2001. The net loss in 2003 was partially due to a provision of $7.5 million for impairment of SNTG's investment in the U.S. cabotage fleet joint venture, Stolt Marine Tankers LLC. This was a joint venture involving the operation of two ships in the U.S. registered coastal fleet. In light of continued operating losses and diminished prospects to trade successfully, we negotiated an exit agreement with our joint venture partner, Marine Transport Corporation. This exit agreement was completed subsequent to year-end on December 19, 2003. The impairment charge was determined as a result of concluding this exit agreement shortly after year-end. In addition, our 2003 loss includes an impairment charge of $10.4 million on the investment in Dovechem in anticipation of its sale in December 2003. Further declines in equity in net (loss) income in non-consolidated joint ventures arose from deteriorating

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results from the SOSA joint ventures which included charges of $9.1 million relating to tangible fixed asset impairments, in particular a $6.6 million charge for NKT Flexibles. The slight increase in earnings in 2002 was due to the higher results across all SNTG tanker and terminal joint ventures in 2002 compared to 2001 partially offset by the lower results from the SOSA joint ventures.

Administrative and General Expenses

        Administrative and general expenses increased to $241.7 million in 2003 from $210.6 million in 2002 and $209.5 million in 2001. The increase in 2003 was mainly due to additional legal costs at SNTG of $15.5 million associated with the DOJ and EC antitrust investigations and related legal proceedings. Additionally, the 2003 increase reflects costs incurred in connection with our financial restructuring, including that of SOSA, and increased reported overhead costs at SOSA and SSF due to the weakening U.S. dollar. The increased costs were partially offset by lower costs related to SSL and OLL, the latter of which was sold in April 2003.

        The slight increase in 2002 was mainly due to higher costs at SOSA and SSF due to the weakening U.S. dollar, partially offset by lower costs at SNTG arising from the cost reduction program instituted in early 2002 with savings primarily generated by a reduction in the number of employees, and lower costs related to OLL and SSL. The administrative and general expenses as a percentage of operating revenue has increased in 2003 to 8.0% after decreasing in 2002 to 7.2% from 7.6% in 2001.

Impairment of Tangible Fixed Assets

        In accordance with SFAS No. 144, long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. SOSA recognized aggregate impairment charges of $176.5 million in 2003, which related to an impairment charge of: (i) $44.2 million against the carrying amount of certain ships offered for sale; (ii) $55.7 million against the carrying amount of a separate trunkline business unit established in the fourth quarter of fiscal year 2003; (iii) $42.7 million to reduce to zero the carrying value of a system started in June 1995 for the design and fabrication of a high quality ship-mounted welding system; (iv) $28.8 million against the carrying amount of certain ships and other offshore equipment; and (v) $5.1 million to reduce to the expected sales price the carrying amount of certain equipment located at the Lobito fabrication yard on long-term lease to Sonamet, and which was sold to Sonamet after the end of 2003. For additional information on the asset impairment charges, please see Note 5 to the Consolidated Financial Statements included in Item 18 of this Report. There were no other tangible fixed asset impairment charges recorded in 2002 or 2001.

Write-off of Goodwill

        We incurred goodwill write-offs of $2.4 million in 2003, which were related to SSF's operations on the east coast of Canada and Chile. This represented a significant reduction from the goodwill write-offs of $118.0 million in 2002. The 2002 write-offs totaling $118.0 million were related to: (i) with respect to SOSA, $103.0 million related to Ceanic Inc., a corporation which SOSA acquired in 1998, $1.8 million relating to NKT Flexibles, a SOSA joint venture, and $1.6 million relating to PT Komaritim Indonesia, SOSA's Indonesian subsidiary; (ii) with respect to SSF, $7.8 million relating to the UK and U.S. (Maine) farming operations and $0.7 million relating to other corporate investments in SSF; (iii) with respect to SNTG, $3.1 million relating to Challenge International S.A. in France. We did not incur any goodwill write-offs in fiscal year 2001.

        SSF performed annual impairment reviews in 2003 on all remaining goodwill. Consequently, we recorded an impairment charge of $1.3 million against goodwill with respect to SSF's operations in the east coast of Canada as a result of continuing poor results in that region. We recorded an additional write-down of goodwill of $0.8 million related to SSF's operations in Chile as a result of a revised assessment of future expected results in that operation. The remaining $0.3 million related to the

31



write-off of goodwill associated with our corporate investment in Midt-Finnmark Smolt AS, a SSF joint venture.

        The largest portion of the goodwill that was written off in 2002 related primarily to acquisitions made by SOSA. During the year ended November 30, 2002, the continuing poor returns obtained on certain investments made in 1998 and 1999 led SOSA to perform an impairment review of all goodwill recorded in connection with Ceanic, NKT Flexibles and PT Komaritim, resulting in a combined total of $106.4 million in goodwill impairment charges. During the year ended November 30, 2002, the continuing poor results obtained in salmon farming activities also led SSF to perform an impairment review of all goodwill related to operations acquired in such activities. As a result, we recorded impairment charges totaling $7.8 million against goodwill, of which $6.3 million related to the entire remaining goodwill on the acquisition of two subsidiaries in Scotland. The remaining $1.5 million of the impairment charge related to the write-off of goodwill arising on the acquisition of DE Salmon in the state of Maine, U.S.

        In early 1997, SNTG acquired the tank container operations of Challenge International S.A., a company based in France. During the year ended November 30, 2002, management of Stolt-Nielsen Transportation Group SAS, the French subsidiary operating these tank container assets, agreed to dispose of the primary asset of the company, being its fleet of tank containers. On the basis of this disposal of the assets by the French subsidiary, we undertook an impairment review of the goodwill on this acquisition and we recorded an impairment charge of $3.1 million.

        For additional information on the goodwill write-offs, please see Note 6 to the Consolidated Financial Statements included in Item 18 of this Report.

Write-off of Comex Trade Name

        In 2001, in light of the increased worldwide recognition of the Stolt Offshore name, SOSA ceased using the Comex name and, as such, determined that the value of the Comex trade name had been impaired. SOSA, therefore, recorded a charge of $7.9 million, before minority interest impact, in its results of operations in 2001 for the write-off of the trade name.

Restructuring Charges

        In 2003, we had total restructuring charges of $18.4 million. SOSA recognized restructuring charges of $16.2 million related to the implementation of its new management team's plan for SOSA's financial recovery, which included the restructuring of SOSA's cost and asset base. The first stages of the plan for financial recovery, involving changes in SOSA's personnel, operating structure and business processes, were substantially completed in the second half of fiscal year 2003. These costs reflect $13.2 million in personnel and redundancy costs to reduce the total workforce by 21% from its then existing level of 7,000. Approximately 1,100 positions are affected as a result of the asset disposal program, and a further head count reduction of 400 is planned through restructuring SOSA's regional businesses. SOSA also incurred real estate costs of $2.7 million for lease rentals and leasehold improvement write-offs, and $0.3 million for professional fees in connection with asset disposals.

        In 2001, SNTG embarked upon a major strategic initiative to improve the utilization of assets, divest non-core assets and reduce the cost base. One aspect of this initiative was an overhead reduction effort, announced in January 2002. The restructuring program resulted in costs incurred during 2003 of $2.2 million and 2002 of $9.6 million associated with the overhead reduction program. The SNTG restructuring program in 2002 included the termination of 108 employees and the relocation of 27 employees.

        There were no restructuring charges incurred in 2001.

        For additional information on the restructuring charges of SOSA and SNTG, please see Note 8 to the Consolidated Financial Statements included in Item 18 of this Report.

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Net (Loss) Gain on Disposal of Assets

        In 2003, we had a net loss of $1.4 million related to asset disposals. SNTG recorded a loss of $5.4 million on the sale of investments in the shares of two publicly traded companies in The Netherlands, Vopak and Univar. This loss was partially offset by a net gain of $4.4 million related to the sale of OLL's assets to Elemica, Inc. The net gain was mainly comprised of the realization of a previously deferred gain from the sale of OLL shares to Aspen Tech, less the recognition of an asset impairment charge on Aspen Tech shares. At the end of the fourth quarter of 2003, SSF sold 200 metric tons of Southern bluefin tuna quota rights in Australia for $25.8 million. In conjunction with this transaction, such tuna quota rights were reacquired by SSF for an initial five-year period at market rates to be set each year, with a renewal option for a further five-year period again at annually agreed market rates. The tuna quota rights have an indefinite life. The deferred gain of $15.3 million on a pretax basis, and $11.0 million on an after tax basis, on the transaction is being amortized over the initial period of five years, starting on December 1, 2003.

        In 2002, SOSA sold the assets of Big Inch Marine Systems, Inc. for a pretax gain of $8.0 million. SNTG also sold other assets with a net pretax gain of $2.3 million, including approximately $1.1 million primarily associated with the sale of an apartment in Singapore.

        In November 2001, we sold SNTG's tank storage terminals in Perth Amboy and Chicago for a pretax gain of $12.2 million, $7.3 million after tax. Under the terms of the sale agreement we have retained responsibility for certain environmental contingencies, should they arise during the covered period which ended two years after the closing date, in connection with these two sites. As of November 30, 2003, no liabilities have been incurred, and we do not anticipate any such contingencies to be incurred in the future. The Chicago terminal property has been leased under a long-term agreement with the Illinois International Port District. In addition, as part of the Chicago sale, we assigned our rights to the terminal property to a third party. We also sold other assets for a net pretax gain of $2.1 million, primarily related to a gain of $1.2 million on the sale of assets of Hard Suits Inc., a specialized diving company of SOSA.

Other Operating (Expense) Income

        In 2002, SSF incurred fish stock mortalities and submitted a claim of $6.9 million to its insurers under its fish stock mortality insurance policies for a recovery of the excess loss above the annual deductible under the policy. SSF had submitted a similar claim in 2001 that was accepted and paid. Of the $6.9 million claim in 2002, SSF reserved $1.6 million in 2002 as a provision for a claim reduction that SSF estimated it may have to agree upon to obtain a timely settlement. The insurers, while not formally declining to pay the 2002 claim, have raised arguments challenging their obligation to pay. No agreement was reached between SSF and these insurers during 2003. SSF has therefore made the decision to revise its estimate in this matter and to fully reserve the claim in 2003 to reflect our estimated recoveries until such time as an amount is agreed and accepted, or an arbitrator determines an amount of payout. In 2003, SSF also recorded provisions at its Americas region for the closure of hatcheries of $0.8 million and for future site retirement costs of $0.4 million.

Income (Loss) from Operations

        In 2003, we had a loss from operations of $369.8 million, compared to a loss of $49.1 million in 2002. In 2001, we reported income from operations of $162.9 million. The loss from operations in 2003 was largely attributable to the losses at SOSA and SSF. In particular, these losses reflect the $176.5 million in impairment charges recognized by SOSA, the negative revisions on several large loss-making contracts at SOSA, the large unfavorable variance at SSF primarily due to the poor results of our Asia Pacific region, the additional costs incurred in the Americas region to fulfill the requirements of various marketing and distribution contracts, and the impairment charges recognized by SNTG of $17.9 million in total for our investments in Dovechem and Stolt Marine Tankers LLC.

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The increase in administrative and general expenses of $31.1 million was primarily due to antitrust and other investigation related legal expenses, financial restructuring costs and a weakening of the U.S. dollar. The loss incurred in 2002 was largely attributable to $118.0 million in goodwill write-offs, primarily related to acquisitions by SOSA, the low market prices experienced by SSF in its Americas and European regions, the loss-making turnkey projects at SOSA, and $9.6 million of restructuring charges incurred by SNTG.

Net Interest Expense

        Net interest expense decreased to $92.8 million in 2003 from $93.1 million in 2002 and $113.9 million in 2001. The decrease in 2003 reflected lower interest expense at SNTG due to the full-year impact in 2003 of the 12 parcel tanker sale/leaseback transaction and the additional sale/leasebacks of parcel tankers completed in 2003, which was partially offset by increases in interest expense for SOSA and SSF due to higher debt levels. The $20.8 million decrease in interest expense in 2002 was due to lower rates and the sale/leaseback of 12 parcel tankers in March 2002 resulting in lower interest payments, despite higher debt levels. The SNTG sale/leaseback transactions lowered interest expense in 2003 and 2002, but increased our lease rental payments that are included in operating expenses.

Foreign Currency Exchange Gain (Loss), Net

        For 2003, we had a foreign currency exchange gain of $13.4 million, compared to a gain of $1.2 million in 2002 and a loss of $2.0 million in 2001. The increase of $12.2 million in 2003 compared to 2002 was a result of SSF's redesignation of certain long-term non-functional currency intercompany loans within the SSF group (which are eliminated in consolidation) from long-term and permanent in nature to non-permanent. The redesignation of such loans was due to the deterioration in the SSF group's liquidity situation and related restrictions on additional funding from SNTG to SSF. Following this redesignation, SSF prospectively recognized $13.7 million in foreign currency exchange gains in 2003.

Income Tax Provision

        The 2003 results included a tax provision of $15.3 million compared to $18.0 million in 2002 and $27.6 million in 2001. In 2003, the tax provision primarily related to the SSF tax provision of $15.6 million, including $8.0 million in the Americas region of which $5.0 million related to a deferred tax asset write-off, $2.7 million in Norway for a deferred tax asset write-off, and taxes on profits in Iberia of $1.4 million and in Asia Pacific of $2.4 million. In addition, SOSA recorded a tax benefit of $0.6 million in 2003 and SNTG recognized a tax provision of $0.3 million.

        The SOSA tax benefit in 2003 is comprised primarily of a charge for revenue based withholding taxes of $6.6 million and a deferred tax benefit of $7.3 million. SOSA has recognized deferred tax assets for net operating loss carryforwards ("NOLs") in Norway and the UK. While SOSA has NOLs in several other countries, it has recorded valuation allowances against the corresponding deferred tax assets in those instances where SOSA does not consider it more likely than not that future taxable profits to realize the corresponding tax benefit exist.

        The SNTG tax provision in 2003 declined by $8.8 million from the 2002 amount of $9.1 million, mainly due to tax benefits recognized in 2003 in connection with the increased antitrust and other investigation related legal fees and the write-off of our investment in Stolt Marine Tankers LLC.

        In 2002, the tax provision primarily related to losses incurred by SOSA and SSF for which no benefit was recognized and an increase in the valuation allowance against our net deferred tax assets. These items were offset, in part, by a release of certain deferred tax liabilities associated with the UK shipping companies of SOSA that have elected to join the UK tonnage tax regime and the impact of U.S. and non-U.S. shipping income not subject to tax.

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        SOSA recorded a net tax charge of $8.2 million in 2002, compared to a net tax charge of $20.6 million in 2001. The tax charge in 2002 included withholding taxes of $14.0 million imposed by tax authorities in certain countries. Additionally, in the NAMEX region, SOSA did not recognize a deferred tax asset for the losses incurred, and took a further $10.8 million valuation allowance against the deferred tax asset brought forward from 2001 because of the continuing losses in the region. SOSA also reviewed its position under the UK tonnage tax regime whereby taxable income is calculated by reference to the tonnage of the vessel, and released a further $21.3 million of deferred tax liability in respect of fixed asset temporary differences. This was partially offset by a valuation allowance against its net operating losses, primarily in the U.S., due to the uncertainty of SOSA's ability to generate sufficient future taxable earnings to realize the tax benefit of offsetting the prior operating loss carryforwards.

Minority Interest

        Minority interest was $148.5 million, $56.2 million and $4.3 million in the 2003, 2002 and 2001, respectively. The increase of $92.3 million in 2003 compared to 2002 was primarily due to the minority interest portion of the increased losses at SOSA partially offset by an increase in the minority share of net income of certain SOSA subsidiaries. The increase of $51.9 million in 2002 compared to 2001 was entirely due to the increased losses in SOSA.

Net Income (Loss)

        As a result of the various factors described above, we reported a net loss of $316.0 million or $5.75 per share in 2003, as compared to a loss of $102.8 million or $1.87 per share in 2002 and net income of $23.7 million or $0.43 per share in 2001.

Business Segment Information

        We report information about our subsidiaries on a consolidated basis. This means that our results include the results of all subsidiaries, which SNSA, either directly or indirectly, controls.

        In addition to reporting on a consolidated basis, we have three reportable segments from which we derive revenues: SNTG, SOSA and SSF.

        The "Corporate and Other" category includes corporate-related expenses, the minority interest in SOSA, and the results of OLL, SSL and all other operations not reportable under the other segments. The reportable segments reflect our internal organization and are strategic businesses that offer different products and services.

Operating Revenue by Business Segments

For the years ended November 30,
(in millions)

  2003
  2002
  2001
Operating Revenue                  
  Stolt-Nielsen Transportation Group                  
    Tankers   $ 762.1   $ 747.2   $ 818.1
    Tank Containers     254.7     227.6     214.4
    Terminals     63.9     58.5     78.4
   
 
 
    Total     1,080.7     1,033.3     1,110.9
  Stolt Offshore     1,482.3     1,437.5     1,255.9
  Stolt Sea Farm     461.8     435.7     374.4
  Corporate and Other     1.6     1.6     0.4
   
 
 
  Total   $ 3,026.4   $ 2,908.1   $ 2,741.6
   
 
 

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Gross Profit (Loss) by Business Segment

For the years ended November 30,
(in millions)

  2003
  2002
  2001
Gross (Loss) Profit                  
  Stolt-Nielsen Transportation Group                  
    Tankers   $ 146.5   $ 151.2   $ 162.7
    Tank Containers     45.8     43.8     40.8
    Terminals     22.7     20.9     30.1
   
 
 
    Total     215.0     215.9     233.6
  Stolt Offshore     (108.3 )   42.5     94.4
  Stolt Sea Farm     (20.1 )   8.0     23.4
  Corporate and Other     1.6     1.6     0.4
   
 
 
  Total   $ 88.2   $ 268.0   $ 351.8
   
 
 

Income (Loss) from Operations by Business Segment

For the years ended November 30,
(in millions)

  2003
  2002
  2001
 
Income (Loss) from Operations                    
  Stolt-Nielsen Transportation Group                    
    Tankers   $ 57.8   $ 83.2   $ 97.7  
    Tank Containers     18.7     18.7     17.7  
    Terminals     7.3     18.9     36.1  
   
 
 
 
    Total     83.8     120.8     151.5  
  Stolt Offshore     (380.5 )   (123.6 )   36.4  
  Stolt Sea Farm     (63.7 )   (27.8 )   (0.4 )
  Corporate and Other     (9.4 )   (18.5 )   (24.6 )
   
 
 
 
  Total   $ (369.8 ) $ (49.1 ) $ 162.9  
   
 
 
 

Results of Operations per Segment

SNTG

        Tankers

        As of November 30, 2003, SNTG owned and/or operated 125 ships, representing 2.08 million dwt. Of this total, 63 ships participated in the Joint Service, a contractual arrangement managed by SNTG for the coordinated marketing, operation, and administration of tankers owned or chartered by the Joint Service participants in the deep-sea, inter-continental market. The 63 ships included in SNTG's owned and/or operated fleet include 15 ships that are owned by parties other than SNTG and four ships that SNTG time-charters from third parties. Seven of the ships which operate in the Joint Service are owned by NYK Stolt Tankers, S.A., a joint venture in which SNTG has a 50% interest. The

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remaining ships provide regional services. The composition of the fleet at November 30, 2003 was as follows:

 
  Number of
ships

  Millions of
dwt

  % of the Joint
Service net
revenue for the
year ended
November 30, 2003

Joint Service:            
Stolt-Nielsen Transportation            
  Group Limited   44   1.42   80.61
NYK Stolt Tanker S.A.   7   0.17   10.85
Barton Partner Limited   1   0.01   1.10
Bibby Pool Partner Limited   5   0.08   5.45
Unicorn Lines (Pty) Limited   2   0.03   1.99
   
 
 
    59   1.71   100.00
Time-chartered ships   4   0.12    
   
 
   
Total Joint Service   63   1.83    
Ships in regional services   62   0.25    
   
 
   
Total   125   2.08    
   
 
   

        Earnings available for distribution to the Joint Service participants are defined in the Joint Service agreement as the combined operating revenue of the ships, which participate in the Joint Service, less combined voyage expenses, overhead costs, and commission to outside brokers. Joint Service earnings are distributed proportionately to each participant according to a formula, which takes into account each ship's cargo capacity, number of operating days during the period and an earnings factor.

        In our results of operations, SNTG tanker revenues include 100% of the operating revenue of the Joint Service, and tanker operating expenses include all voyage costs associated with the participating ships, as well as the earnings distributed to the other participants in the Joint Service. The distributions made to minority participants in the Joint Service for 2003, 2002, and 2001 were $66.9 million, $71.9 million and $100.3 million, respectively, and include amounts distributed to non-consolidated joint ventures in 2003, 2002 and 2001 of $38.4 million, $40.5 million and $42.0 million, respectively. After factoring in such costs and distributions associated with other participants in the Joint Service, SNTG received approximately 80%, 80%, and 74% of the net earnings of the Joint Service in 2003, 2002, and 2001, respectively.

Operating Revenue

        SNTG tanker operating revenue in 2003 increased 2% to $762.1 million from $747.2 million in 2002, which was an 8.7% decrease from $818.1 million in 2001. The changes in operating revenue in 2003 and 2002 were primarily due to changes in volume of cargo shipped and the strengthening, in 2003, of chemical spot rates. Cargo carried, excluding non-consolidated joint ventures, in 2003 was 23.0 million tons, an increase of 3% from 22.4 million tons in 2002, which was a decrease of 12% from 25.4 million tons in 2001. The 2003 volume increase reflects higher utilization of SNTG's ships, despite the average fleet size decreasing 7% from 2.32 million dwt in 2002 to 2.16 million dwt in 2003. SNTG's fleet in 2002 decreased 9% from an average of 2.55 million dwt in 2001. The decrease of operating revenue in 2002 from 2001 was attributable to the softening of the CPP market leading SNTG to redeliver time-chartered product tankers as demand weakened in this sector of the market in the second half of 2002.

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Gross Profit

        SNTG's tanker operations had gross profits of $146.5 million, $151.2 million, and $162.7 million in 2003, 2002, and 2001, respectively, and gross margins of 19.2%, 20.2%, and 19.9%, in 2003, 2002 and 2001, respectively. The decrease in gross profits in 2003 reflected increased expenses that outpaced the increase in operating revenue. In fiscal year 2002, the decrease in gross profit as compared to 2001 was in line with the decline in operating revenue. SNTG tanker operations had operating expenses in 2003 of $615.6 million compared to $596.0 million in 2002 and $655.4 million in 2001. The increase in operating expenses in 2003 was primarily due to increases in the price of bunker fuel. In 2003, bunker fuel for SNTG's tanker operations constituted approximately 20% of the total operating expenses for tankers, an increase from 2002 and 2001 when bunker fuel was 17% of total operating expenses. The average price of bunker fuel purchased by SNTG during 2003 was approximately $175 per ton. This compares to the average bunker fuel price for 2002 of approximately $144 per ton and $139 per ton in 2001. SNTG attempts to pass fuel price fluctuations through to our customers under COA, typically one year in duration. In 2003, 64% of tanker revenue was under COA with the remaining 36% derived from voyages based on spot rates. The percentage of revenue from COA was 67% in 2002 and in 2001 was lower than 2003 and 2002 at 54%. During 2003, approximately 63% of tanker revenue earned under COA included contract provisions intended to pass through fluctuations in fuel prices. The profitability of the remaining 37% of tanker revenue earned under COA was directly impacted by changes in fuel prices. In addition, the increase in expenses was caused by the full-year impact of the sale/leaseback of 12 parcel tankers in 2002 and additional sale/leasebacks of parcel tankers in 2003 as well as the weakening of the U.S. dollar. Substantially all of tanker revenue is collected in U.S. dollars and a significant portion of costs, in particular certain crew costs, port expenses and dry docking charges are incurred in non-U.S. dollar currencies. Therefore, in 2003 when the value of the U.S. dollar declined, tanker operations were adversely impacted.

        An important measure of performance in many shipping companies, including SNTG, is the sailed-in rate per ship per day. The sailed-in rate may be calculated for a single ship or for a fleet of ships and is calculated as operating revenue, less voyage expenses, which are expenses that may vary depending on the ship or fleet's voyage pattern. The most significant voyage expenses include bunker fuel, port charges, marketing overhead, commissions paid to brokers, and expenses associated with subletting excess cargo to other shipping companies. The sailed-in rate is measured before any costs associated with the owning and management of the ships. Owning and management costs generally do not vary depending on the voyage pattern and include crew costs, maintenance and repairs, insurance, depreciation and interest expense. As such, within many shipping companies, including SNTG, the sailed-in rate is considered an important market measurement, which encompasses rates or prices, volumes, and utilization of how the ship and/or fleet is deployed. As part of our quarterly earnings release, we publish the Sailed-In Time-Charter Index for the Joint Service. The Sailed-In Time-Charter Index for the Joint Service is an indexed measurement of the sailed-in rate for the Joint Service and was set at 1.00 in the first quarter of 1990 based on the sailed-in rate per ship per day at the time. During the period of 1990 to 2003, the average annual Sailed-In Time-Charter Index ranged from a high of 1.35 in 1995 to a low of 0.93 in 1999 and averaged 1.10 over this period. The average Sailed-In Time-Charter Index for 2003, 2002 and 2001 was 1.03, 1.07 and 1.09, respectively. For 2003 the Sailed-In Time-Charter Index decreased approximately 4% from 2002, after decreasing 2% in 2002 from 2001. Based on the configuration of the Joint Service fleet as of May 31, 2004, we expect that a 5% change in the Sailed-In Time-Charter Index from the average 2003 figure of 1.03 would generally result in a change in our gross profit of $15 million to $17 million. As Sailed-In Index is a measurement for the Joint Service only, this sensitivity excludes any impact of changes in sailed-in rates for our regional fleets, which may or may not move in tandem with sailed-in rates for the Joint Service.

        Ship owning costs associated with SNTG's ships in the Joint Service increased by 2% in 2003 from 2002, after decreasing 2% in 2002 from 2001. The variance in ship owning costs between the years was

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a result of the change in fleet composition and improved purchasing practices, offset by a weakening U.S. dollar and higher insurance expenses.

Tank Containers

Operating Revenue

        Operating revenue in 2003 was $254.7 million, a 12% increase from $227.6 million in 2002, which was a 6% increase from $214.4 million in 2001. The improvement in 2003 and 2002 was attributable to increased demand in our major markets of North America, Europe and within the Asia Pacific. Increased sales and marketing initiatives led to growth in our food grade business formed in 2002 and in growing markets such as Eastern Europe, China, the Middle East and India. With the growth in the markets, there has been an improvement in volume of our container shipments in 2003 and 2002. In 2003 we moved 74,615 container shipments, an increase of 12% from the 66,330 container shipments moved in 2002, which was an 11% increase in shipments of 59,762 in 2001. The increases were primarily due to increased shipments in North America, Europe and Intra-Asia in 2003 and 2002 as compared to 2001. The 6% increase in revenues from 2001 to 2002 was less than the increase in shipments due to pricing pressures.

        SNTG was able to meet the growth in demand by increasing the number of tank containers in our fleet while improving the fleet's overall utilization to 79% in 2003 as compared with 77% in 2002 and 70% in 2001. The significant improvement in 2002 and further in 2003 was the result of improved global market conditions and the implementation of sophisticated fleet optimization and forecasting software. By the close of fiscal year 2003, SNTG owned or operated a fleet of 15,999 tank containers, a 7% increase from the 14,955 tank containers owned or operated at the end of 2002 which itself was a 5% increase from the 14,184 tank containers controlled at the end of 2001. SNTG increased the number of tank containers in 2003 by leasing additional tank containers to meet the increase in overall demand and the continued growth of the food grade activity.

Gross Profit

        SNTG's tank container operation had gross profit of $45.8 million, $43.8 million and $40.8 million in 2003, 2002 and 2001, respectively and gross margins of 18%, 19% and 19% in 2003, 2002 and 2001 respectively. Margins decreased slightly in 2003 due to downward pricing pressure in our markets from Asia and South America and increased movement of empty tank containers to meet the increased demand in our major markets in North America, Europe and within Asia Pacific. The decrease was only partially offset by increased shipments, as well as the resulting improvements in utilization of our tank containers.

        SNTG's tank container operating expenses in 2003 were $208.9 million compared to $183.8 million in 2002 and $173.6 million in 2001. The increase in operating expenses in 2003 was primarily due to an increase in tank container rental costs resulting from the increased number of tanks operated, an increase in the freight and associated costs to move loaded tank containers reflecting from the increased number of shipments and an increase in the costs resulting from a greater number of tank container required to be repositioned during the year. Furthermore, additional operating expenses were incurred due to rising fuel expenses and the decline in the value of the U.S. dollar against most global currencies.

        Offsetting some of the increases in operating expenses was the continued reduction in the average leasing cost for tanks for 2003, which was 1% lower than 2002 due to a change in the mix of long-term and short-term leases. The leasing cost for 2002 was 7.3% lower than 2001.

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Terminals

Operating Revenue

        Operating revenue in 2003 was $63.9 million, an increase of $5.4 million or 9%, from $58.5 million in 2002, which in turn was a decrease of $19.9 million from $78.4 million in 2001. In November 2001, SNTG sold the Perth Amboy and Chicago terminals. They were sold as part of an initiative to divest non-strategic assets as the synergy between these terminals and the tanker division was limited given that SNTG ships infrequently called at these terminals. SNTG is focused on expanding the terminals in key locations such as Houston, Braithwaite and Ulsan, South Korea to maximize the synergy between SNTG's parcel tankers and the terminals. The expansions in the three owned terminals account for $1.9 million or 3% of the revenue increase in 2003 as compared to 2002, with the remaining 6% increase primarily a result of a full year of operations in 2003 of Braithwaite's initial expansion. With the expansions in Houston and Santos completed toward the end of 2003, the full year effect on operating revenues will only be felt in 2004.

        Total storage capacity of our wholly owned facilities at the end of 2003 was 4.0 million barrels (630,700 cubic meters) as compared to 3.4 million barrels (537,700 cubic meters) and 2.5 million barrels (403,500 cubic meters) at the end of 2002 and 2001, respectively. Average capacity utilization was 97% in 2003, 97% in 2002, and 95% in 2001. The higher average capacity utilization in 2003 and 2002 as compared to 2001 was mainly due to increased activity at the Houston and Santos terminals, as well as the positive impact from the sale of the Chicago terminal, which had a lower average utilization.

Gross Profit

        Gross profit of SNTG's terminal operations was $22.7 million, $20.9 million, and $30.1 million, in 2003, 2002, and 2001, respectively. Gross margins were 36%, 36%, and 38% for 2003, 2002 and 2001, respectively. The improvement of gross profit from 2002 to 2003 was primarily a result of the expansions of the Braithwaite and Santos terminals. The decline of gross profit from 2001 to 2002 was attributable to the sale of the Chicago and Perth Amboy terminals.

        Operating expenses in 2003 were $41.2 million, an increase of $3.6 million, from $37.6 million in 2002, which in turn was a decrease of $10.7 million from $48.3 million in 2001. The increase in operating expenses in 2003 was primarily due to the impact of full year operations at the expanded Braithwaite terminal and increased salary and wages, employee benefit programs, utility costs and wastewater treatment costs at the Houston terminal. The decrease of operating expenses in 2002 was primarily due to the sale of the Chicago and Perth Amboy terminals, which was offset to some extent by the start up costs at the Braithwaite terminal. Gross margins remained stable in 2003 due to improved margins for the Braithwaite terminal offsetting a decline in the margin for the Houston terminal. The margins at the Braithwaite terminal increased as a result of increased capacity utilization and higher customer activity levels while in the Houston terminal revenues remained relatively constant and expenses increased. Margins fell in 2002 from 2001 due to a slight decline in the margin for the Houston terminal resulting from increased wastewater treatment costs and the higher infrastructure costs incurred with respect to the new storage capacity at the Braithwaite terminal.

SOSA

        Summary of SOSA's major projects for fiscal years 2003, 2002, and 2001:

 
   
Angostura project   A lump sum Conventional project offshore Trinidad and Tobago (NAMEX region), under execution during 2003 to 2004 for BHP Billiton.

Bonga project

 

A lump sum SURF project offshore Nigeria (AFMED region), executed during 2001 to 2004 for SNEPCO.
     

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Burullus project

 

A lump sum SURF project offshore Egypt (AFMED region) executed during 2001 to 2003 for the Burullus Gas Company.

Conoco CMS 3 project

 

A lump sum SURF project offshore the UK (NEC region) executed during 2001 to 2003 for ConocoPhillips (UK) Ltd.

Duke Hubline project

 

A combined lump sum and day rate Conventional project in the U.S. (NAMEX region), executed during 2002 to 2003 for Algonquin Gas Transmission Company, a subsidiary of Duke Energy Field Services LLC.

Erha project

 

A lump sum SURF project offshore Nigeria (AFMED region), to be executed during 2002 to 2006 for ExxonMobil Nigeria ("EEPNL").

Girassol project

 

A lump sum SURF project offshore Angola (AFMED region), comprising the building and installation of two riser towers in 1,400 meters of water and the installation of associated pipelines and umbilicals, executed during 1998 to 2003 for a consortium led by Total Angola. This project was performed as a joint venture with Saipem S.A.

OGGS project

 

A lump sum Conventional offshore gas gathering system project offshore Nigeria (AFMED region), executed during 2002 to 2004 for Shell Petroleum Development Company of Nigeria Limited ("SPDC"), acting on behalf of itself and partners, including the Nigerian National Oil Company.

Sanha Bomboco project

 

A lump sum Conventional project offshore Angola (AFMED region) under execution during 2002 to 2004 for ChevronTexaco led by Cabinda Gulf Oil Company ("CABGOC").

Shell EA project

 

A lump sum SURF project executed during 2001 to 2003 for Shell in Nigeria (AFMED region).

Skirne Byggve project

 

A lump sum SURF project offshore Norway (NEC region) executed during 2002 to 2003 for Total.

Yokri project

 

A lump sum Conventional project in Nigeria (AFMED region) under execution during 2001 to 2004 jointly with a local partner for SPDC, acting on behalf of itself and partners, including the Nigerian National Oil Company.

Operating Revenue

        Operating revenue increased slightly to $1,482.3 million in 2003 from $1,437.5 million in 2002, as SOSA worked through a high level of backlog. Operating revenue in fiscal year 2002 increased to $1,437.5 million from $1,255.9 million in 2001. This reflected the continued growth in the market for SOSA's services, particularly on major projects in AFMED, in addition to increased year-on-year revenue from the Paragon Companies.

        Operating revenue for 2003 was $44.8 million higher than 2002. In the AFMED region, operating revenue decreased marginally in fiscal year 2003 to $673.8 million. The continued high level of activity in West Africa on the major projects was the main driver for the sustained high level of revenue, generating 64% of the revenues for fiscal year 2003. In the NEC region, operating revenue increased to $387.6 million in fiscal year 2003, with the region reporting particularly high activity in the Norwegian sector of the North Sea. The NAMEX region reported operating revenue in fiscal year 2003 increased marginally to $200.6 million. The IMR activity levels were higher than prior years as a result of continued hurricane repair work in the first quarter related to damage to offshore installations from Hurricane Lili in the Gulf of Mexico. This was partially offset by SURF activity levels which were lower

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than the previous year due to lack of a dedicated SURF ship available in the NAMEX region. Operating revenue in the SAM region increased in fiscal year 2003 to $56.0 million. The increase was mainly due to the very high ship utilization on the two long-term charter contracts operating in the SAM region. Operating revenue in the AME region increased marginally in fiscal year 2003 to $26.8 million. The majority of the AME revenue in fiscal year 2003 was derived in Indonesia, where the activity levels were still lower than expected and well below the high level achieved in fiscal year 2001. Corporate operating revenue increased marginally in fiscal year 2003 to $137.5 million due to higher sales achieved by Serimer DASA on offshore welding work for customers other than SOSA and stable revenue levels in the Paragon Companies.

        Operating revenue in the AFMED region was $702.7 million in fiscal year 2002, up from $520.2 million in fiscal year 2001. The increase from year 2001 to 2002 was largely due to high levels of activity in Nigeria, partially offset by lower revenue in Angola and lower activity on an offshore project for a consortium led by Total Angola. In the NEC region, operating revenue increased to $335.6 million in fiscal year 2002 from $325.3 million in fiscal year 2001. In the Norwegian sector, there was a difficult market situation in both 2002 and 2001, with no significant conventional lump sum or pipelay projects. The small increase in 2002 revenue was mainly related to the activity level in the subsea construction market. In the UK sector in 2002, there was a continuation of the increased project activity from 2001. Operating revenue in the NAMEX region decreased to $190.5 million in 2002 from $276.7 million in 2001. This was due to reduced activity on the pipelay project for Gulfstream Natural Gas LLC that was completed in early 2002, and reduced subsea construction activity as a result of depressed market conditions. There was an upturn in activity in the final quarter of 2002 to repair damage caused by Hurricane Lili. Operating revenue in the SAM region in 2002 increased slightly in 2002 to $52.0 million from $50.5 million in fiscal year 2001 due to the continued good performance and stable utilization levels of the long-term charters. Operating revenue in the AME region in 2002 decreased by $13.7 million to $25.7 million from $39.4 million in 2001 due to a downturn in the market for construction and shallow water work in Indonesia and drill support ROV work throughout the AME region. Corporate operating revenue increased in fiscal year 2002 to $131.0 million from $43.8 million in 2001. Of this increase, $68.7 million is attributable to the inclusion of revenues from both Paragon Engineering Services, Inc. and Paragon Litwin for a full financial year. In 2001, these businesses were only consolidated for part of the year subsequent to each respective acquisition.

Gross (loss) profit

        In 2003 SOSA reported a gross loss of $108.3 million. This is mainly due to negative revisions on several large loss-making contracts, including the Bonga, OGGS, Sanha Bomboco and Burullus projects. Settlement on all outstanding claims and variation orders on the OGGS and Burullus projects was achieved with the respective customers in fiscal year 2004, and the impact has been fully reflected in fiscal year 2003 results because the settlements related to work completed before November 30, 2003.

        In 2003, the gross profit in the AFMED region was depressed by the continuing losses on legacy projects in West Africa and Egypt. These projects were characterized by low margins at the tender stage, further adversely affected by operational difficulties and cost overruns. The outcome of protracted negotiation over disputed variation orders and claims were in included in the 2003 result. In the NEC region, favorable results were achieved on a number of Norwegian and UK sector projects, particularly the Vigdis project extension and the BP Madoes and Mirren projects. The successful resolution of the Allseas Corrib project in the first quarter of 2004 is reflected in the 2003 results, as well as a provision for costs relating to umbilical cable repair in the Norwegian sector. In the NAMEX region, substantial losses incurred in the Duke Hubline project were only partly offset by profitable results on a number of smaller, principally day rate jobs. The SAM region reported substantial favorable gross margins on long-term contracts involving the Seaway Condor and the Seaway Harrier, reflecting SOSA's local expertise. The AME region suffered continuing weak gross margins in many of

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its numerous small projects in what continues to be a very competitive geographical segment. The Corporate region reported favorable gross margins on two of the stand-alone business units, particularly Serimer Dasa, but the favorable margins were offset by poor results in the Paragon Companies.

        The gross profit for 2002 was $42.5 million compared with a gross profit of $94.4 million in fiscal year 2001. This degradation in trading performance was due to loss-making turnkey projects, mainly the OGGS and Burullus projects in the AFMED region. In 2002, the gross profit in the NEC region included an adverse variance attributable to the Conoco CMS 3 project. Seabed soil conditions encountered during the project differed significantly from those that had been anticipated, leading to significant increases in the duration of work and associated expenditures. In the NAMEX region, there were improved results in 2002 on subsea construction projects. The deterioration in the AME region in fiscal 2002 from 2001 was attributable to a drop in market conditions for construction and drill support ROVs. Corporate gross profit was lower in 2002 because revenue earned by certain ships and equipment did not cover fixed costs.

SSF

Operating Revenue

        Operating revenue in 2003 increased 6% to $461.8 million from $435.7 million in 2002, which was a 16% increase from $374.4 million in 2001. The increase in operating revenue in 2003 is a result of a combination of factors with offsetting effects. In the Americas region, overall volumes harvested in 2003 were lower on the west coast of Canada than in 2002 due to shortages of fish. The shortages resulted from extraordinary mortalities in earlier years caused by viral and parasitic infections. Additionally, there were shortages in Chile due to poor growing conditions for the fish in the early part of the 2003 and disease. However, fish prices in the Americas increased from 2002 to 2003, due to a reduction in industry supply from Canada and zero growth from Chile in the first half of the year, so that overall operating revenue in the Americas region increased. In Europe, harvested volumes increased generally in Norway and the UK due to the recovery from extraordinary fish mortalities in 2001 that adversely affected harvested volumes in 2002. The increase in harvested volumes in Europe, partially drawn by the lifting of EU restrictions, reflected better use of existing assets, better growing conditions, and changes in the harvest planning and husbandry practices, which resulted in more biomass of fish being available for harvest. Although a generally weak pricing environment persisted, particularly for salmon produced in Norway, in 2003, operating revenue increased, with an increase in harvested volumes. Volumes and prices in the Iberia region were steady from 2002 to 2003, but the euro strengthened so the results reported in U.S. dollars were higher and resulted in an 18% increase in operating revenue in this region. In the Asia Pacific region, volumes overall in 2003 decreased mainly due to reduced sales volumes in Japan where we deliberately cut back our trading business as a result of operational and liquidity issues, and poor prices for the bulk frozen trout and coho businesses. The price of Southern bluefin tuna also decreased in 2003 from 2002. Overall, SSF operating revenue in Asia Pacific decreased by 8% in 2003 from 2002.

        The increase in operating revenue in 2002 was primarily due to increased activity in the Asia Pacific trading operations, as well as the inclusion of a full year of results for Eicosal in Chile which was acquired in July 2001. Operating revenue for 2002 in the Norway region fell 13% primarily due to a shortage of volumes following a disease outbreak in 2001.

        The total volume of Atlantic salmon, salmon trout and coho sold, in gutted whole fish equivalent metric tons, assuming an average 60% yield on processed products sold and excluding volumes sold intercompany into Asia Pacific, was 97,800 metric tons in 2003, 93,700 metric tons in 2002 and 72,800 metric tons in 2001. Of the metric tons sold, 61,300 metric tons, 59,600 metric tons and 51,100 metric tons, in 2003, 2002 and 2001, respectively, was from SSF's own production, the remainder being sourced from other producers. The increase in volume of SSF's own production in 2003 mainly reflects the increases in harvests in Europe, as described above. The increase in volume of SSF's own

43



production in 2002 mainly reflects the additional volumes from the acquisition in 2001 of Eicosal in Chile.

Gross Profit (Loss)

        SSF incurred a gross loss of $20.1 million in 2003, and gross profits of $8.0 million and $23.4 million in 2002 and 2001, respectively. Gross margins were (4%) in 2003, 2% in 2002 and 6% in 2001.

        The gross loss incurred in 2003 primarily reflects a very large adverse swing in Asia Pacific, mainly due to poor market conditions for trout, coho, and bluefin tuna in Japan as well as trading activities and other transactions in Japan that we believe were improper and unauthorized.

        In 2003, we discovered that an employee in SSF's Tokyo office had been engaging in what we believe to be improper transactions and unauthorized trading of seafood. More specifically, we believe the employee made purchases of substantial quantities of various species and represented to management that they were being simultaneously sold in the market. This, however, was not the case and, consequently, we held significant inventories of several species at a time of declining prices. These inventories were ultimately sold for a loss. Additionally, we believe the employee engaged in various other improper transactions which had the effect of diverting funds from SSF for his direct or indirect benefit. The employee and all other individuals believed to be involved in the improper transactions and other unauthorized activities have since left SSF and certain other regional senior managers in the Asia Pacific region, who are not suspected of participating in such transactions and activities, have also left SSF. A new general manager for SSF Japan has been hired and a new interim President for SSF Asia Pacific has been reassigned from SSF Europe to manage the operations until a permanent President is appointed. We have made a claim under our fidelity insurance policy. This policy has a claim limit of $5 million, and in the absence of any acknowledgement of liability for the claim by the insurers, no insurance recovery has yet been accrued. In addition, although the Southern bluefin tuna ranching activity overall was profitable in the Asia Pacific region, selling prices for our own ranched bluefin tuna were approximately 20% lower in 2003 than in 2002, and not all the tuna production was sold while inventories of traded tuna products that we bought in the market in 2002, at higher prices, with the intent of selling were sold at low or negative margins in 2003 following further market price declines. SSF made lower of cost or market provisions totaling $11.1 million at the end of 2003 against remaining inventories of traded tuna and frozen salmon, trout and other species, to reflect the weaker markets in Asia at the time. The total combined impact of these factors resulted in SSF's Asia Pacific operations reporting a gross loss of $25.3 million in 2003 compared to a gross profit of $22.6 million in 2002. SSF's Asia Pacific operations outside of Japan generally operated with a positive gross profit in both 2003 and 2002.

        Partly offsetting the reduction in gross profit in Asia Pacific was a substantial improvement in the Americas region. Although volumes overall were approximately 10% lower in 2003 than in 2002, market prices were significantly higher as a result of lower industry harvests in Canada and no industry growth in Chile in the first half of 2003. Additionally, farming production costs were lower on the east coast of Canada due to improved farming management practices, although this was partially offset by higher marketing and distribution costs as a result of our efforts to fulfill contractual obligations despite the regional imbalances of production. In Europe, margins were better in 2003 compared to 2002, despite mostly lower selling prices in 2003, due to better management of the European marketing function, the lifting of the EU Agreement's minimum import prices and a better product mix than in 2002. Partially offsetting this were lower of cost or market provisions SSF made to selected inventories in the Americas and UK, and its halibut operations totaling $1.8 million, primarily due to low market prices for these specific products.

        The reduction in gross profit in 2002 reflects reductions mainly in the Americas region and in Norway. In the Americas in 2002, sales of trout and coho, which were part of the acquisition of Eicosal

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which was completed in mid 2001, were made at low or negative margins due to the very low market prices at the time. In addition, SSF's west coast activities in the Los Angeles seafood center suffered a sharp fall in margins. In Europe, prices in 2002 were lower compared to 2001. Gross profits in Asia Pacific increased overall due to the substantial increase in volumes traded, although margin percentages were slightly reduced due to the change in the mix of business done towards lower margin business, and squeezed profitability due to the strong Norwegian kroner and the effect on input purchase costs.

Corporate and Other

OLL and SSL

        In April 2003, we completed the sale of substantially all of the assets of OLL to Elemica, Inc., the leading chemical industry consortium. Under the terms of the agreement, Elemica acquired the full technology platform and the ongoing business operations of OLL. Based on the terms of the sale, we realized a net gain in 2003 of $4.4 million, included in "(Loss) gain on disposal of assets, net" in the consolidated statement of operations. The net gain was mainly comprised of the realization of a previously deferred gain from the sale of OLL shares to Aspen Tech, less the recognition of an asset impairment charge on Aspen Tech shares. Through the time of sale, OLL's 2003 revenues were $0.6 million and costs were $3.4 million compared to $1.0 million and $9.5 million for a comparable period in 2002.

        SSL increased its revenues to $1.0 million in 2003 compared to $0.6 million in 2002. SSL signed a three-year agreement with BP Shipping in July 2003 for the licensing of its SeaManager™ procurement platform and for implementation services for the BP Shipping fleet. SSL also lowered operating costs to $5.4 million in 2003 from $6.9 million in 2002 by reducing headcount and more efficiently managing information technology development and sales efforts. Reduced information technology spending and the slow economy considerably reduced technology software related spending by many potential customers and continued to negatively impact sales efforts. We anticipate that the cash flow for SSL will continue to improve in 2004.

Liquidity and Capital Resources

Principal Sources of Liquidity

        During 2003, 2002 and 2001 we met our cash needs through a combination of (i) cash generated from operations, (ii) borrowings from commercial banks, (iii) financing through sale/leasebacks of assets, and (iv) asset sales.

        SNTG generally operates with negative working capital, which reflects the collection/payment cycle. Invoicing, for the tanker business usually takes place at or shortly after loading, while expenses that are invoiced and paid within normal business terms are typically paid near or subsequent to the end of a voyage. SOSA requires working capital, as expenditures are often incurred on an ongoing basis throughout a project while customers are typically billed only when a specified level of progress is achieved on a project. In SSF, the production cycle for Atlantic salmon takes two to four years, and for various other farmed fish species many more years; therefore, SSF requires working capital to finance inventory.

        Since the beginning of 2000 to November 30, 2003, we have through SNTG (Liberia) and other subsidiaries (including SNTG) provided new debt and equity funding of $164.0 million to SOSA, $257.0 million to SSF, and $55.0 million combined to OLL and SSL. This funding was provided from a combination of cash flow from SNTG operating activities as well as the use of our credit facilities. In addition, we have provided guarantees of SOSA's obligations under its bank guarantee facilities, some of which were supported by collateral. The facilities provided for bank guarantees of up to an aggregate of $104.3 million as of November 30, 2003. Since that time the aggregate amount of bank

45



guarantees available to SOSA under these facilities has been reduced to $99.8 million as of May 31, 2004.

        The use of SNTG operating cash flow and our financing capacity, combined with operating losses and asset write-downs over the past several years in SOSA and SSF and the maturities of our existing loans, left us in the second half of 2003 with limited liquidity and in potential breach of certain financial covenants with our lenders. In August 2003, we paid $121.4 million of maturing debt: $65.0 million of debt used to finance the building of certain ships and $56.4 million on our Senior Notes. These payments significantly reduced the amount of available credit remaining under our two revolving credit facilities, as it was necessary to borrow from these facilities to pay the maturing debt. In November 2003, we had $180 million maturing under a revolving credit facility with a bank syndicate led by DnB NOR Bank. Despite taking measures which included borrowing to our maximum availability under our existing bank credit facility agreements, selling certain assets, completing a sale and leaseback of three ships and closing our positions under foreign exchange contracts, which had positive value, sufficient cash and credit facilities were not available to repay the maturing $180 million facility. We were unable to negotiate a refinancing of the $180 million revolving credit facility with the existing bank syndicate. Additionally, our liquidity problems at this time were exacerbated by the fact that financial institutions that had provided an aggregate of about $113 million of uncommitted lines of credit to our local operations throughout the world as of the end of the second quarter, May 31, 2003, began to require that we repay all outstanding balances under these lines of credit. As of the end of the third quarter, August 31, 2003, we had a total of $76 million outstanding under such uncommitted lines of credit. By the end of the 2003 fiscal year we had repaid $39 million of such outstanding amounts and were in discussions with the providers of those lines with respect to a repayment schedule on the remaining amounts.

        During this time, we engaged in numerous discussions with the creditors under our existing financing agreements regarding amendments to these facilities or waivers to avoid defaults with respect to the financial covenants contained in these facilities, in particular, the ratio of consolidated debt to consolidated tangible net worth. We sought and obtained a series of waivers. These waiver agreements included increased interest rates for certain credit agreements. The waiver agreements with the bank syndicate providing the $180 million revolving credit facility included repayment extensions to provide time for us to replace this revolving credit facility. As of November 30, 2003, we were in compliance with the provisions of our financing agreements, but only as a result of the waivers that our creditors had granted to us. Ultimately, we announced on December 27, 2003 that we had received further waivers providing for covenant relief through May 21, 2004 subject to certain conditions.

        In January 2004, we sold 7.7 million of our Common Shares in a private placement for aggregate proceeds of $104.2 million to non-affiliated investors. The Common Shares, which were held in treasury, were priced at 92.75 Norwegian kroner per share, or approximately $13.50 per share.

        Also in the first quarter of 2004, we completed certain transactions that resulted in the deconsolidation of SOSA. See "Financial Problems at SOSA" below. On February 19, 2004, we announced that the deconsolidation of SOSA combined with our equity offering would allow us to achieve compliance with the financial covenants in the original borrowing arrangements with our primary creditors. We subsequently allowed the waiver agreement with respect to the Senior Notes to expire on February 20, 2004. Representatives of the holders of our Senior Notes informed us that the Senior Note holders believed that upon the termination of the waiver agreement and the deconsolidation of SOSA, we were in breach of certain covenants of the Senior Notes. We informed the representatives of the Senior Note holders that we disagreed with these assertions. On June 16, 2004, we resolved the dispute with our Senior Note holders regarding the asserted defaults under the Senior Notes and entered into an agreement to amend the Senior Notes. Pursuant to the Amendment Agreement, a permanent waiver was granted by the Senior Note holders in respect of the defaults they asserted. For additional information, see "—Liquidity and Capital Resources—Indebtedness—The

46



Senior Notes" and Note 29 to the Consolidated Financial Statements included in Item 18 of this Report. Certain of the waivers obtained from the creditors also terminated on February 20, 2004 as a result of the termination of the waiver agreements with respect to our Senior Notes. Waivers that did not automatically terminated on February 20, 2004, terminated on May 21, 2004 in accordance with their terms. To date, no other creditors, other than the Senior Note holders, have informed us of any belief on their parts of any breach of covenants as a result of such waiver terminations.

        On March 30, 2004, we entered into a five-year $130 million revolving credit facility arranged by a consortium of banks led by Deutsche Bank AG. The facility was used to repay the $180 million revolving credit facility, which was originally due on November 26, 2003, and was extended by agreement with the banking group. The interest rate paid on the facility ranges from a rate of LIBOR+1.5% to LIBOR+1.9%.

Financial Problems at SOSA

        Significant operational and financial difficulties at SOSA contributed to its 2003 consolidated loss. For the fiscal year ended November 30, 2003, SOSA reported a net loss of $418.1 million, primarily due to cost overruns on several major projects and a number of smaller projects. There was an aggregate negative impact of $216.0 million on SOSA's net income attributable to changes in original estimates on major projects. Additionally, SOSA recorded impairment charges totaling $176.5 million against the carrying value of a number of ships, barges, mobile assets and onshore equipment. SOSA reported a net loss of $151.9 million in 2002, also due to unanticipated operational difficulties related to a number of major projects. Throughout 2003, SOSA experienced significant cost overruns on major projects, particularly in its AFMED region. These operational problems were exacerbated by SOSA's inability to recover cost over-runs that SOSA believed it was owed by customers with respect to work performed on major projects. These difficulties made it challenging for SOSA to maintain compliance with the financial covenants contained in its credit facilities. During 2003, SOSA engaged in numerous discussions with and obtained waivers from the lenders under its Existing Credit Facility Agreements to avoid defaults with respect to the financial covenants contained in these facilities.

        While SOSA was engaged in discussions with its primary creditors to amend the financial covenants in its Existing Credit Facility Agreements, it also took measures to ensure that it had sufficient liquidity to fund its operations and to provide for a potentially protracted period of negotiation with certain major customers regarding settlement of claims and variation orders. These measures included borrowing to SOSA's maximum availability under its Existing Credit Facility Agreements and closing its positions under foreign exchange contracts, which had positive value. To assist SOSA in obtaining bank waivers, in December 2002, we agreed to make a $50 million SNSA liquidity line available to SOSA and in July 2003, we agreed to make a subordinated loan of $50 million to SOSA.

        Subsequent to the end of the year, SOSA took a number of actions to address its financial situation. On February 19, 2004, SOSA issued and sold 45.5 million Common Shares in a private placement that raised gross proceeds of $100.1 million. On April 20, 2004, SNTG converted the Subordinated Note that it made to SOSA into SOSA equity. Additionally, on May 28, 2004, SOSA completed an equity offering which generated approximately $65.8 million in gross proceeds. Together, these measures have provided a $215.9 million increase in SOSA's shareholders' equity before deduction of expenses.

        In February 2004, SOSA entered into the New Bonding Facility, which provided SOSA with the ability to offer bank guarantees and other forms of surety that are often required to bid on and win new business. Additionally, SOSA entered into an Intercreditor Deed that incorporated changes to and superseded the covenants and security arrangements in its Existing Credit Facility Agreements. We believe that this will be sufficient to provide the bank guarantees that SOSA will need in 2004, although we expect that SOSA will need to secure additional bonding facilities for 2005 and beyond. SOSA's recent history of losses and financial difficulties will make it more challenging to arrange any additional bonding that may be needed.

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Financial Outlook

        Subsequent to the end of 2003 we took a number of actions that significantly improved our financial position:

        These actions improved our consolidated debt to consolidated tangible net worth ratio, allowing us to regain compliance with the financial covenants contained in our financing agreements.

        To improve our financial position going forward, we are taking the following actions:

        We believe that our cash flow from operations and available credit facilities will continue to provide the cash necessary to satisfy our working capital requirements and capital expenditures, as well as to make scheduled debt repayments and satisfy our other financial commitments to at least the end of fiscal 2004.

        The options available to us in the event that operational results fall below expectations or we incur significant unanticipated costs or expenses, such as large fines or penalties as a result of the antitrust proceedings or otherwise include: (i) raising new unsecured debt to repay exiting debt; (ii) raising new secured debt, primarily by refinancing our Houston terminal as well as using our currently uncollateralized Braithwaite terminal; (iii) engaging in sale leaseback transactions; (iv) raising equity; (v) seeking approval from creditors to defer existing scheduled loan repayments; (vi) deferring discretionary capital expenditures; (vii) selling assets including our shares in SOSA (subject to the terms of the Amendment Agreement for the Senior Note holders); and (viii) seeking to obtain a waiver of covenant breaches were they to arise.

        At November 30, 2003, our cash and cash equivalents totaled $150.0 million, which included $81.9 million of SOSA cash and cash equivalents. The $150.0 million cash balance was an increase from the prior year level of $22.9 million, primarily resulting from the draw down of the majority of our available credit facilities. Total consolidated debt including short-term and long-term debt and capital lease obligations amounted to $1,699.7 million at November 30, 2003, of which $1,246.9 million was secured by ships and other assets with a net carrying value of $1,492.5 million and $452.8 million was unsecured. Of the total debt outstanding at November 30, 2003, $387.5 million of short-term and long-term debt and capital lease obligations was owed by SOSA. Total consolidated operating lease

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commitments, as of November 30, 2003, were $604.8 million, and $99.5 million of the total operating lease commitments were SOSA's.

        Through May 31, 2004, we have made debt payments of $216.9 million and interest payments of about $41.6 million on our total debt outstanding as of November 30, 2003 (excluding SOSA debt and interest payments). This included repayment of the remaining balance of $160 million on the $180 million DnB NOR Bank credit facility. Our scheduled principal and interest payments, excluding SOSA, for the remainder of 2004 are approximately $146.7 million and $37.4 million, respectively. For 2004, debt will increase by $69.7 million due to the new accounting rules that require us to consolidate an off-balance sheet synthetic lease with respect to 12 ships. For additional information please see
"—Off-balance Sheet Arrangements—Lease with Twelve Ships Inc." In addition, on March 30, 2004, we entered into a $130 million five-year secured revolving facility with various lending institutions, including Deutsche Bank AG, as agent. As a result, as of May 31, 2004, total debt after deconsolidation of SOSA is estimated to be $1,266.3 million and our available cash balances are estimated to be in excess of $140 million. We are also obligated to make payments under long-term operating lease agreements for the remainder of 2004 that total approximately $70 million.

        We have extended to SOSA a committed line of credit in the amount of $50 million pursuant to a facility agreement effective as of December 1, 2002 for working capital and other corporate purposes, referred to as the SNSA Liquidity Line. This line remains available to SOSA until November 28, 2004. However, we have informed SOSA that our ability to fund a draw down under the SNSA Liquidity Line is limited by the terms of our existing credit facilities and may be prohibited in certain circumstances. SOSA has advised us that it does not expect to utilize the SNSA Liquidity Line.

        Our financing agreements include various financial covenants. Some of our financing agreements provide for a cross default in the event of a material default in another agreement. It is also possible that a default under a credit facility agreement or the New Bonding Facility could result in a default under one of our financing arrangements. This, in turn, could cause a cross default under one or more of our other financing arrangements. In the event of a default that extends beyond the applicable remedy or cure period, creditors may exercise their remedies including accelerating repayment of amounts due to them or seizing the collateral securing the debt. If this were to occur, we could not pay off such indebtedness and could be forced to seek protection under available insolvency or reorganization laws and regulations. We are currently negotiating with our lenders under the financing agreement that contains a cross default provision relating to a SOSA material default to remove such cross default provision, although we can not assure you that we will succeed.

        As of November 30, 2003, our loan agreements provide for cumulative limitations on certain payments including dividend payments, share repurchases, and investments and advances to non-consolidated joint ventures and other entities. Based on such limitations, we are currently unable to pay any dividend, repurchase our shares or make investments in or advances to joint ventures or other entities.

Cash Flows

Summary Cash Flows

  2003
  2002
  2001
 
 
  (in thousands)

 
Net cash provided by operating activities   $ 81,515   $ 136,633   $ 123,069  
Net cash used in investing activities     (12,216 )   (28,164 )   (244,361 )
Net cash (used in) provided by financing activities     55,850     (110,708 )   117,600  
Effect of exchange rate changes on cash     2,017     247     (213 )
   
 
 
 
Net increase (decrease) in cash and cash equivalents   $ 127,166   $ (1,992 ) $ (3,905 )
   
 
 
 

Cash Flows from Operating Activities

        Cash flow from operations is derived principally from the collection of receivables due from customers under contracts for SOSA and under COA and spot contracts for SNTG. SSF's cash flow

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from operations is derived mainly from collection of receivables due from customers. In 2003, we generated cash from operating activities of $81.5 million. This compares with $136.6 million and $123.1 million in 2002 and 2001, respectively. The movements between years are mainly due to the relative operational performances and working capital requirements in those years.

Cash flows from Investing Activities and Capital Expenditures

        Net investing activities utilized $12.2 million in 2003, compared to $28.2 million in 2002 and $244.4 million in 2001. Significant investing activities during 2003 were (i) capital expenditures, described further below, of $88.1 million, which were lower than previous years primarily as a result of completing a multi-year parcel tanker new building program in 2002 and the completion of certain SOSA ship upgrades in 2002, and (ii) a $25.4 million increase in restricted cash, which, based on agreement with our creditors, was placed in escrow on November 13, 2003, to be available for drawdown by SOSA under its committed liquidity line, but which was released back to us, with interest, on February 12, 2004. Offsetting these uses of cash were (i) proceeds of $102.7 million principally from the sale/leaseback transaction with respect to three parcel tankers ($55.8 million), sale of investments in Vopak and Univar ($16.5 million) and the sale of Southern bluefin tuna quota rights at SSF ($25.8 million), and (ii) $11.0 million of net receipts from affiliates of SOSA and SNTG. Capital expenditures for the year include (i) capital expenditures of $12.8 million for the terminal at Braithwaite, (ii) refurbishing and upgrades of existing assets including parcel tanker life extension dockings, refurbishment of tank containers, expansion of the terminal at Houston, net and cage replacements for the SSF and improvement of various SOSA assets, and (iii) the acquisition and upgrade of SSF facilities in Spain and Belgium. See "Factors Affecting our Financial Condition and Results of Operations—Financial Matters—Financing Issues at SNTG and SNSA" for information on the sale of the Southern bluefin tuna quota.

        Significant investing activities during fiscal year 2002 were (i) capital expenditures of $122.6 million, as described in further detail below, and (ii) payment of $60.6 million for the settlement of share price guarantees by SOSA which were agreed to as part of SOSA's December 1999 purchase of French offshore construction and engineering company, ETPM. Offsetting these expenditures were $97.7 million in proceeds from the sale of ships and $30 million from the sale of tank containers, which were both part of sale and leaseback transactions, as well as $30 million in sales of other assets, for $158.0 million in total. Capital expenditures for the year include (i) final payments of $11.7 million for a newly built tanker, (ii) capital expenditures of $8.8 million for the terminal at Braithwaite, (iii) refurbishing and upgrades of existing assets including parcel tanker life extension dockings, remanufacture of tank containers, development and implementation of an internet-based operating system in the tank container business, ship upgrades and improvements at SOSA, and (iv) various projects for SSF including the acquisition and upgrade of SSF facilities in Chile, Hong Kong, Norway and the UK.

        Net investing activities utilized $244.4 million in 2001. Significant investing activities during the year were (i) capital expenditures of $202.9 million, as described in further detail below, (ii) acquisitions of subsidiaries, primarily at SSF as previously discussed, for $80.7 million, and (iii) payments of $31.2 million for investments in affiliates and others. Offsetting these expenditures were (i) $77.0 million of proceeds from sale of assets ($69.7 million for the sale of Perth Amboy and Chicago terminals), and (ii) $2.5 million for the decrease of restricted cash deposits. Capital expenditures for the year include (i) progress-payments on new buildings under construction and final delivery payment on one Spanish new building for SNTG, (ii) the purchase of new tank containers, and (iii) progress payments of $43 million on the construction of a terminal at Braithwaite.

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Capital Expenditures

        Capital asset expenditures by business over the last three years are summarized below. There were no significant divestitures during the three-year period.

 
  2003
  2002
  2001
 
  (In millions)

SNTG:                  
  Tankers   $ 11   $ 17   $ 43
  Tank Containers     2     3     9
  Terminals     24     19     58
   
 
 
  Total SNTG     37     39     110
SOSA     22     55     63
SSF     29     29     26
Corporate and Other             4
   
 
 
  Total SNSA   $ 88   $ 123   $ 203
   
 
 

Cash Flows from Financing Activities

        Net cash provided by financing activities totaled $55.9 million in fiscal year 2003 compared to $110.7 million in fiscal year 2002 and $117.6 million in fiscal year 2001. The principal uses of cash for financing activities in fiscal year 2003 were repayments of long-term debt and capital leases totaling $239.4 million which included $102 million of ship mortgage payments, $56.4 million of payments on the Senior Notes, $80 million of payments on SOSA bank credit facilities, $13.8 million payment of 2002 dividends, and $13.5 million for the repurchase of shares by SOSA that had been issued as consideration in connection with the purchase of SOSA's interest in NKT Flexibles. In connection with such acquisition, SOSA had guaranteed that such shares would achieve certain minimum values by a certain date and repurchased the shares for the guaranteed price. The significant source of 2003 funding included an increase of $147.1 million in loans payable to banks as a result of us drawing down our available credit facilities.

        The principal uses of cash for financing activities in fiscal year 2002 were (i) the repayment of long-term debt and capital leases of $134.0 million which included $51 million of ship mortgage payments, $37 million of payments on unsecured notes, $14 million of payment for tank container leases and $24 million in SOSA capital lease payments, (ii) $13.8 million payment of 2001 dividends and (iii) $56.5 million of payments in connection with the repurchase of shares by SOSA. The significant sources of 2002 funding included proceeds of $50.2 million from issuance of long-term debt related, primarily, to an SNTG ship financing and an increase of $45.2 million in borrowings from banks.

        Net cash provided by financing activities totaled $117.6 million in 2001. The principal uses of cash were the repayment of long-term debt of $82.2 million and payment of dividends of $13.8 million. The significant sources of 2001 funding included (i) increase of $77.5 million of long-term debt, consisting of an additional $70 million drawdown on an existing line of credit by SOSA that is secured by first mortgages on certain ships with a negative pledge on other existing SOSA assets, (ii) increase of $144.2 million in loans payable to banks, and (iii) $1.3 million in proceeds from the exercise of stock options for the shares of SNSA and of SOSA.

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Indebtedness

        Our total consolidated debt was $1,699.7 million, $1,652.1 million and $1,692.8 million as at November 30, 2003, 2002 and 2001, respectively, as set forth in the table below:

(in thousands)

  2003
  2002
  2001
Long-term debt (including current portion)   $ 1,220,151   $ 1,319,385   $ 1,383,819
Capital lease obligations (including current portion)     98     692     24,952
Short-term bank loans     479,448     331,985     284,043
   
 
 
Total debt   $ 1,699,697   $ 1,652,062   $ 1,692,814
   
 
 

Short-Term Debt

        Short-term debt consists of debt obligations to banks maturing within one year, general operating lines of credit and bank overdraft facilities. At the dates reported, it also included drawdowns under facilities established to support bids made by SOSA on new projects. Because of the deconsolidation of SOSA, such drawdowns will not be included going forward. Amounts borrowed pursuant to these facilities bear interest at rates ranging from 1.05% to 11.4% for 2003, from 1.0% to 12% for 2002 and from 1.4% to 7.8% in 2001. The weighted average interest rate was 2.4%, 2.5% and 4.7% for the years ended November 30, 2003, 2002 and 2001, respectively.

Long-Term Debt and Capital Lease Obligations

        Long-term debt consists of our Senior Notes, debt secured by our mortgages on our ships and bank debt. It does not include the off-balance sheet arrangement discussed below. Our capital lease obligations consist primarily of equipment leases. Our long-term debt and capital lease obligations were approximately $1,220.2 million, $1,320.1 million and $1,408.8 million as of fiscal year end 2003, 2002 and 2001, respectively, as set forth below:

(in thousands)

  2003
  2002
  2001
 
Long-term debt   $ 1,220,151   $ 1,319,385   $ 1,383,819  
Capital lease obligations     98     692     24,952  
Less: Current maturities     (242,582 )   (165,067 )   (133,016 )
   
 
 
 
    $ 977,667   $ 1,155,010   $ 1,275,755  
   
 
 
 

        Annual principal payments of long-term debt and capital lease obligations for the debt balance as of November 30, 2003 is as follows:

(in thousands)

   
2004   $ 242,582
2005     483,718
2006     156,279
2007     106,169
2008     77,207
Thereafter     154,294
   
    $ 1,220,249
   

The Senior Notes

        Our wholly owned subsidiary, SNTG (Liberia), is the borrower on three separate issuances of Senior Notes. We have guaranteed SNTG (Liberia)'s obligations under each series of the Senior Notes. The first series of notes was issued in two tranches in 1996 in the aggregate principal amount of $187 million (the "1996 Notes"). The first tranche of $30 million was paid upon maturity on November 30, 2002. The outstanding 1996 Notes have a final maturity on August 31, 2006. On August 31 of each year until repayment in full, a required principal payment in respect of the 1996 Notes in the amount of $31.4 million is due and payable. As of November 30, 2003, there was an aggregate principal amount of $94.2 million outstanding under the 1996 Notes. The second series of

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notes was issued in 1997 in the aggregate principal amount of $125 million with a final maturity on August 31, 2007 (the "1997 Notes"). On August 31 of each year until repayment in full a required principal payment in respect of the 1997 Notes in the amount of $25 million is due and payable. As of November 30, 2003, there was an aggregate principal amount of $100 million outstanding under the 1997 Notes. The final series of notes was issued in 1998 in the aggregate principal amount of $216 million with a final maturity on June 18, 2013. Of this amount, $201 million reflect series A 1998 Notes ("Series A Notes") and $15 million reflect series B 1998 Notes ("Series B Notes"). In respect of the Series A Notes, on June 18 of each year until repayment in full of the Series A Notes, a required principal payment in respect of such notes in the amount of $40.2 million is due and payable. In respect of the Series B Notes, a required principal payment of $6.0 million is due on June 18 of 2009 and 2010, followed by annual principal payments of $1.0 million for years 2011, 2012, and 2013. As of November 30, 2003, the full principal amount remained outstanding under the 1998 Notes. The stated interest rates are 8.48% on the 1996 Notes, 7.51% on the 1997 Notes, 6.96% on the Series A Notes and 7.11% on the Series B Notes, but are subject to adjustment based on the ratio of specified debt to consolidated tangible net worth. The 1996 and 1997 Notes bear fixed interest rates as of November 30, 2003 of 9.48% and 8.51% respectively. The 1998 Series A Notes and Series B Notes bear fixed interest rates of 7.96% and 8.11% respectively. During the 2004 fiscal year, principal payments under the Senior Notes in the amount of $40.2 million are due on June 18, 2004 and $56.4 million are due on August 31, 2004.

        Each of the three agreements evidencing the Senior Notes contains substantially similar affirmative and negative covenants. These covenants include covenants requiring minimum levels of consolidated tangible net worth, not more than a 2.0:1.0 ratio of consolidated debt to consolidated tangible net worth and not more than a 2.0:1.0 ratio of consolidated debt less unsecured debt of SNTG (Liberia) to consolidated tangible net worth. Furthermore, the covenants include restrictions on: the payment of dividends and the purchase of stock; mergers and the sale of assets; placement of liens on the stock of subsidiaries of SNTG (Liberia) (which includes most of our subsidiaries, including SNTG and SSF); guarantees on obligations of non-subsidiaries subject to certain exceptions; and transactions with affiliates. In September 2003, SNTG (Liberia) obtained waivers under each note agreement of compliance with the consolidated debt to consolidated tangible net worth ratio. Subsequent waiver agreements extended the effectiveness to November 26, 2003, then to December 15, 2003, and finally to May 21, 2004.

        On February 20, 2004, the waiver agreements with respect to the Senior Notes were terminated. Representatives of the holders of our Senior Notes informed us that the Senior Note holders believed that upon termination of the waiver agreement and the deconsolidation of SOSA, we were in breach of each of: (i) the consolidated debt to consolidated tangible net worth covenant; (ii) the limitations on dividends and stock purchases; (iii) the limitations on consolidations and mergers and sales of assets; and (iv) the limitation on guaranties under the Senior Note agreements. We informed the representatives of the Senior Note holders that we disagreed with these assertions.

        On June 16, 2004, we resolved the dispute with our Senior Note holders regarding the asserted defaults under the Senior Notes and entered into the Amendment Agreement to amend the terms of the Senior Notes. Pursuant to the Amendment Agreement, a permanent waiver was granted by the Senior Note holders in respect of the defaults they have asserted. The Amendment Agreement also provided us with a $50 million restricted payment basket for investments in joint ventures (other than investments in SOSA). Of this basket, $25 million would be available on the modification of the Senior Notes as contemplated in the Amendment Agreement and the remaining $25 million would become available when we make all scheduled amortization payments due on the Senior Notes in 2005.

        In return for the waiver granted by the Senior Note holders and the increase in the permitted investment basket, we agreed to pay an aggregate consent fee of approximately $1.3 million and additional annual fees equal to, at the time of determination, 1% of the outstanding principal amount

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of the Senior Notes. In addition, we have granted the Senior Note holders a security interest in our SOSA and SSF shares and certain inter-company balances owed to us by SSF.

        Pursuant to the Amendment Agreement, the 1% fee will be reduced by 50% after the 2005 amortization payments are made if the Senior Note holders do not agree at that time to release all of the collateral under the Senior Notes, at the Senior Note holders' option. Upon the reduction of the principal amount of the Senior Notes to $200 million or less, the collateral will be released to the extent that the value of the collateral exceeds 125% of the aggregate principal amount of the Senior Notes, it being understood that if at any time after such release the value of the collateral drops below 110% of the aggregate principal amount of the Senior Notes, we must either (i) provide additional collateral or (ii) offer to repay an amount of Senior Notes at par, in each case, in order that the value of the collateral will be at least 125% of the aggregate principal amount of the Senior Notes. All collateral will be released and the 1% or 0.50% fee, as the case may be, terminated if SNSA receives an investment grade rating on the Senior Notes.

The Stolt Fleet Loan with Danish Ship Finance

        On November 20, 2002, we entered into a term loan agreement with Danish Ship Finance as lender in connection with the financing of 14 previously financed oceangoing ships. The new term loan agreement combined the 14 refinancings without changing the financial terms of the individual loans while making adjustments to reflect a change in ship ownership structure within certain of our indirect wholly owned subsidiaries. Stolt Tankers Finance B.V., our wholly owned subsidiary, is the borrower under this facility and each financing of a ship is segregated into its own tranche under the loan agreement. The aggregate outstanding balance of all tranches under this loan agreement as of November 30, 2003 was $301 million. Each tranche bears its own interest rate, ranging from 2.1% to 8.6%, and each tranche has its own repayment schedule. During the 2004 fiscal year, the aggregate amount of all mandatory principal repayments due is $38.8 million. The loan agreement matures on November 25, 2013.

        Each of the 14 oceangoing ships is mortgaged by the respective owner of such vessel as security in support of the aggregate amount of all loans. Each such owner is an indirect wholly owned subsidiary and has, in support of the borrower's obligations under the loan agreement, also granted a security interest in the earnings and insurances generated by the operation of its respective vessel (or in the case of insurances, pledged the proceeds received in respect of damage to or loss of such vessel). The obligations of the borrower under the loan agreement are also guaranteed by SNSA, SNTG (Liberia) and each owner of a vessel mortgaged in support of such obligations.

        The facility contains affirmative and negative covenants, including, but not limited to: ship maintenance requirements; asset value coverage tests requiring the fair market value of all the ships mortgaged in support of the borrower's obligations under the loan agreement to at all times be at least 125% of the total debt outstanding under the loan agreement; restrictions on the transfer of ownership of any mortgaged ship; restrictions on borrowings by the borrower not contemplated by the loan agreement; limitation on the grant of a security interest in the assets of the borrower or any mortgaged vessel owner; and limitation on the grant of a security interest in the shares of stock of SNTG (Liberia), the borrower, SNTG and certain other of its subsidiaries.

The Stolt Achievement Loan with Danish Ship Finance and DVB Bank AG

        On May 20, 2003 a term loan agreement, collateralized by a mortgage on the Stolt Achievement, with Danish Ship Finance as agent and co-lender and DVB Bank AG acting as the other co-lender was adjusted to reflect a change in ownership structure within certain of our indirect wholly owned subsidiaries. The loan on the Stolt Achievement bears interest at LIBOR plus 0.65% and had an outstanding balance as of November 30, 2003 of $35.7 million. In December 2003, this interest rate was further increased by 100 bps through letter agreement with Danish Ship Finance and DVB Bank AG. The terms of the loan agreement, including, without limitation, the affirmative and negative covenants, are substantially similar to those in the Stolt Fleet Loan described above. Semi-annual principal payments of $1.8 million are due each May and November. The loan agreement matures in November, 2013.

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The $275 Million Revolving Credit Facility

        On July 19, 2001, we entered into the $275 million secured revolving loan facility with various banks party thereto, including HSBC Investment Bank plc as facility agent. There was $250 million outstanding under this facility as of November 30, 2003. The interest rates applicable to loans under this facility range from LIBOR plus 0.85% to LIBOR plus 1.25% depending upon the level of consolidated indebtedness to consolidated EBITDA. In September 2003, this interest rate range was increased by 100 basis points ("bps") effective as of August 31, 2003. Furthermore, in December 2003, the waiver agreement again amended the applicable interest rate range by providing for a temporary 75 bps increase during the time that the mortgaged ship value was less than 125% of the indebtedness outstanding under the facility provided that such further increase would only be effective during the period of such shortfall.

        The facility matures on July 19, 2006. SNTG (Liberia) is the borrower under this facility. There are no scheduled repayments of principal under this facility other than at maturity. Seven oceangoing ships are mortgaged as security in support of the $275 million revolving credit facility and, in addition, the owners of the mortgaged ships have each granted a security interest in the earnings and insurance proceeds generated by their respective mortgaged ship. SNSA and each owner of a mortgaged ship under this facility are guarantors of the obligations of the borrower under the facility.

        The facility contains affirmative and negative covenants, including, but not limited to, financial covenants requiring minimum levels of consolidated tangible net worth, maintenance of a maximum ratio of consolidated debt to consolidated tangible net worth of 2.0:1.0, maintenance of a minimum ratio of consolidated EBITDA to consolidated interest expense of 2.0:1.0, as well as a mortgaged ship value equal to 125% of the indebtedness outstanding under the facility. The facility also sets forth, among other things: ship maintenance requirements; limitation on additional liens on the assets of the mortgaged ship owners; limitations on mergers and sales of assets; and restrictions on the ability of certain subsidiaries of the borrower to incur debt or enter into synthetic leases other than with another member of our consolidated group. As of May 31, 2004, the outstanding balance under the facility was $240 million, the maximum available based on the value of the ship collateral.

The $240 Million Revolving Credit Facility

        On November 26, 1996, we entered into a $240 million multicurrency revolving facility with various banks party thereto, including DnB NOR Bank as facility agent. The interest rate applicable to the loans under this facility ranged from LIBOR plus 0.35% to LIBOR plus 0.40% depending upon the date of calculation. For the first five years the facility drawings accrued interest at LIBOR plus 0.35% and for the remaining two years interest accrued at 0.40%. In September 2003, this interest rate was further increased by 100 bps through amendment effective as of August 31, 2003. The interest rate was further increased by 100 bps through amendment effective December 15, 2003 and by an additional 60 bps effective December 29, 2003.

        The facility was originally scheduled to mature on November 26, 2003 but was extended by amendment until May 21, 2004. SNTG (Liberia) was the borrower under this facility. On March 30, 2004, we repaid the amounts which remained outstanding under this facility ($140 million at the time) with the proceeds received from our new $130 million revolving loan facility referred to below and from available cash. As of November 30, 2003, the total outstanding amount under the facility was $160 million.

        Ten oceangoing ships were mortgaged as security in support of the $240 million multicurrency revolving facility agreement, and, in addition, the owners of the mortgaged ships each granted a security interest in the earnings and insurance proceeds generated by their respective mortgaged ship.

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We and each owner of a mortgaged ship under this facility were guarantors of the obligations of the borrower under the facility. Upon repayment of the amounts due under the facility agreement, the ships were released from their security interests and were thereafter pledged, together with a previously unencumbered vessel, in support of the $130 million revolving loan facility described below.

$130 Million Revolving Credit Facility

        On March 30, 2004, we entered into a $130 million five-year secured revolving facility with various lending institutions, including Deutsche Bank AG as agent. The interest rate applicable to the loans under this facility range from LIBOR plus 1.50% to LIBOR plus 1.90% depending upon the level of consolidated indebtedness to consolidated EBITDA. The proceeds of this facility were used to repay the outstanding borrowing under the $240 million multicurrency revolving facility referred to above. As of March 30, 2004, $120 million of this facility was drawn, the current maximum loan availability. Under the terms of the facility $10 million is unavailable for drawdown until the $50 million SNSA Liquidity Line terminates on November 28, 2004. Also under the terms of the facility, the maximum loan availability is reduced every six months by $9.3 million beginning September 2004 and any amount borrowed and repaid may be reborrowed. We have mortgaged 11 ships as security in support of the obligations of the borrower under this facility and the subsidiaries owning these vessels have also granted security interests in the earnings and insurance proceeds generated by such vessels.

        The facility contains affirmative and negative covenants, including, but not limited to, financial covenants requiring minimum levels of consolidated tangible net worth, maintenance of a maximum ratio of consolidated debt to consolidated tangible net worth of 2.0:1.0, maintenance of a minimum ratio of consolidated EBITDA to consolidated interest expense of 2.0:1.0, as well as mortgaged ship value equal to 125% of the indebtedness outstanding under the facility. The facility also sets forth among other things; ship maintenance requirements, limitation on additional liens on the assets of the mortgaged ship owners, limitations on mergers and sales of assets, restrictions on investments, restrictions on loans and advances to SSF, prohibition of advances to SOSA under the existing liquidity line agreement and restrictions on the ability of certain subsidiaries of the borrower to incur debt or enter into synthetic leases other than with another member of our consolidated group.

        We and each owner of a mortgaged ship under this facility are guarantors of the obligations of the borrower under the facility.

The $65 Million Loan Agreement

        On August 14, 1998, we entered into a $65 million loan agreement with various banks party thereto, including Citibank International Plc as agent to finance the construction of three oceangoing vessels. The interest rate applicable to the loans under the facility was LIBOR plus 0.5%. The loan agreement matured and was repaid on August 14, 2003. Our wholly owned subsidiary, Finanziaria Marittima S.r.L. was the borrower under this facility.

        The three oceangoing ships were mortgaged as security in support of the $65 million loan agreement, as well as party to charter arrangements entered into for the benefit of the lenders under this loan agreement. Upon repayment of the loan agreement the ships were released from their security interests and were subsequently sold in connection with a sale-leaseback transaction arranged by Dr. Peters GmbH & Co. described below.

        For additional information on our long-term debt and capital lease obligations, please see Note 14 to the Consolidated Financial Statements included in Item 18 of this Report.

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Houston Port Development Bonds and Facility Sale-Leaseback

        On January 1, 1989, $9.6 million in port development adjustable tender Marine Terminal Refunding Revenue Bonds were issue on our behalf by the Port Development Corporation to various investors for financing the expansion of our port terminal located in Houston. We also entered into a letter of credit agreement in order to issue a letter of credit for the benefit of the trustee and the holders of the port development bonds to support payments under such bonds. Our wholly owned subsidiary Stolthaven Houston, Inc. is the obligor under the letter of credit agreement. The bonds mature in 2011. On February 1, 1997, we amended the terms of the letter of credit agreement and replaced the former agent thereon with the Canadian Imperial Bank of Commerce. As of November 30, 2003 there were no amounts drawn on the issued letter of credit.

        In support of the bonds, Stolthaven Houston, Inc. has also entered into a mortgage of the property on which the Houston port is situated and has granted a security interest in the proceeds generated by operation of the port facilities. We have guaranteed Stolthaven Houston, Inc.'s obligations under the letter of credit agreement.

        Stolthaven Houston, Inc. is required to comply with certain affirmative and negative covenants provided in the letter of credit agreement, including, without limitation, property maintenance requirements, limitations on mergers and limitation of transfer of assets. We are required to comply with certain affirmative and negative covenants provided in the guaranty, including, without limitation, certain financial reporting requirements and financial covenants requiring minimum levels of consolidated tangible net worth and maintenance of a maximum ratio of consolidated debt to consolidated tangible net worth of 2.0 to 1.0.

        On June 2, 2004, the bonds were redeemed and the note holders were paid in full. This mandatory redemption was made after the letter of credit supporting the notes could not be extended.

        On January 29, 1998 we entered into a sale-leaseback arrangement with respect to the Houston port terminal property. This transaction was agented by the Canadian Imperial Bank of Commerce. From and after November 30, 2003 until expiration of the lease, approximately $66 million in lease payments are due from Stolthaven Houston, Inc. In 2004, lease payments totaling $2.0 million are due.

        We have guaranteed the lease payments. A leasehold mortgage has been granted on the port facility to secure our obligations in favor of the note holders under the owner-trustee loan agreement.

        The underlying agreement contains covenants applicable to us and Stolthaven Houston, Inc., as lessee, and the guarantors, including, without limitation, restrictions on mergers. In addition, we are required to comply with certain financial covenants requiring minimum levels of consolidated tangible net worth and maintenance of a maximum ratio of consolidated debt to consolidated tangible net worth of 2.0 to 1.0.

        The lease will terminate on January 29, 2005 and the lessee at such time is required to pay $64 million together with all accrued and unpaid interest and fees thereon.

SSF Overdraft Facility

        On November 27, 1995, we entered in to a multi-currency overdraft loan facility with DnB NOR. This facility has been amended 10 times, with the latest amendment effective as of March 31, 2004. The facility is segregated into two tranches. Tranche A is a revolving loan tranche and Tranche B is an overdraft loan tranche. As of March 31, 2004 Tranche A loans accrue interest at the Norwegian Interbank Offered Rate ("NIBOR") plus 3.0% for drawings in NOK and LIBOR plus 3.0% for drawings in other currencies available in the London Interbank Eurocurrency market. As of March 31,

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2004, Tranche B rates for debit amounts is equal to the DnB NOR Bank's prime debit rate less 3.0% (and the rate for Tranche B credit amounts is equal to DnB NOR Bank's prime credit rate less 1.0%.). Stolt Sea Farm A/S is the borrower under each tranche and its obligations under the facility are guaranteed by SNTG (Liberia) and Stolt-Nielsen S.A. as guarantors of first and second resort, respectively. The borrower is subject to certain covenants, including, without limitation, reporting requirements and limitations on mergers. The borrower has granted a security interest in favor of its stock of live fish and other inventory.

        There are no scheduled repayments other than on the maturity date of the facility. This committed facility has been regularly renewed on an annual basis. Beginning in fiscal year 2004, the loan renewal period was reduced to three months with a February 29, 2004 maturity date. On maturity, the loan was renewed for a six-month period, with August 31, 2004 becoming the new maturity date. At each renewal, the terms, including the maximum loan amount, have been subject to change. Since November 30, 2003 the facilities maximum loan amount has been reduced from a high of about $29.2 million in 2003 to approximately $22.0 million currently.

Contractual Obligations

        We have various contractual obligations, some of which are required to be recorded as liabilities in our Consolidated Financial Statements, including long-term debt and capital lease commitments. Our operating leases, performance guarantees and other executory contracts are not required to be recognized as liabilities on our balance sheets. Other purchase obligations were not material. The following summarizes our significant contractual obligations as of November 30, 2003, including those reported in our balance sheet and others that are not:

(in millions)

  Total
  Less than
1 yr.

  2–3 yrs.
  4–5 yrs.
  More than
5 yrs.

Contractual cash obligations:                              
Long-term debt obligations   $ 1,220.1   $ 242.5   $ 640.0   $ 183.4   $ 154.2
Capital lease obligations     0.1     0.1            
Operating leases     604.9     119.4     242.8     160.0     82.7
   
 
 
 
 
Long Term Fixed Rate Debt Interest Payments(1)     157.9     50.2     69.1     28.3     10.3
   
 
 
 
 
Total contractual cash obligations:   $ 1,983.0   $ 412.2   $ 951.9   $ 371.7   $ 247.2
   
 
 
 
 

(1)
Includes only fixed rate long-term debt since variable rate debt depends on the interest rate at future periods.

Operating Leases

        Our operating lease commitments were $604.9 million as of the end of fiscal year 2003, as compared to $595.4 million at the end of fiscal year 2002 and $216.7 million at the end of fiscal year 2001. As of November 30, 2003, we were obligated to make payments under long-term operating lease agreements for tankers, land terminal facilities, tank containers, barges, construction support, diving support, survey and inspection ships, equipment and offices. Certain of the leases contain clauses requiring payments in excess of the base amounts to cover operating expenses related to the leased assets.

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Operating Lease Commitments

        Minimum annual lease commitments, including the SSF tuna quota rights commitment as discussed in Note 7 to the Consolidated Financial Statements included in Item 18 of this Report, and sublease income under agreements which expire at various dates through 2011 are as follows:

(in thousands)

   
 
2004   $ 119,418  
2005     119,769  
2006     123,074  
2007     85,239  
2008     74,764  
thereafter     82,592  
   
 
      604,856  
Less—sub-lease income     (28,327 )
   
 
Total   $ 576,529  
   
 

        For additional information on our operating leases and certain of the specific commitments that are included in the above table, please see Note 17 to the Consolidated Financial Statements included in Item 18 of this Report and "Off-Balance Sheet Arrangements" below.

Sale/Leaseback of Three Parcel Tankers

        In the third quarter of fiscal year 2003, we sold three chemical parcel tankers, with a net book value of $51.1 million, for $50 million in cash proceeds to Dr. Peters Gmbh. Such tankers were also leased back, and the resulting loss of $1.1 million of the sale/leaseback transaction was recorded in the operating results for fiscal year 2003 and is included in "(Loss) gain on disposal of assets, net." As of November 30, 2003, we were obligated to make minimum lease payments under the charter hire agreements for the three tankers of approximately $51.1 million, expiring in 2008.

Time-charter of Nine Ships

        To replace ships that may be scrapped or reassigned into less demanding trading activities because of age, we have entered into agreements with various Japanese ship owners for time-charters (operating leases) for nine stainless steel ships commencing during the period 2003 to 2006. These agreements are for an initial period of 59 months and include an option to extend the agreements for up to nine additional years. We also have the option to purchase each ship at predetermined rates at any time after three years from the delivery of the ship. We have commitments for the initial periods of these operating leases of approximately $242 million for the period 2004 through 2011, which are included in the operating lease commitment schedule above.

Off-Balance Sheet Arrangements

        In addition to the obligations recorded on our balance sheet, we have certain commitments and contingencies that may result in future cash requirements that are not recorded on our balance sheet. In addition to the long-term debt, capital lease obligations and operating leases discussed above, these off-balance sheet arrangements consist of arrangements with VIEs, guarantees of third-party debt, and the retained and contingent interests discussed below. For additional information about our commitments and contingent liabilities, please see Notes 18, 19 and 20 to our Consolidated Financial Statements included in Item 18 of this Report.

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Lease with Twelve Ships Inc.

        We have sold 12 parcel tankers to a VIE, Twelve Ships Inc., with 3% of contributed outside equity, which was established for the sole purpose of owning the ships. The ships are mortgaged by the VIE as collateral for the related financing arrangement described below. The holders of the financing arrangement retain the risk and the reward, in accordance with their respective ownership percentage.

        On March 27, 2002 we entered into a synthetic lease arrangement with respect to twelve of our chemical parcel tankers. Upon consummation of the transaction the tankers were sold to Twelve Ships Inc., as described above, which financed the acquisition of such tankers through both the issuance of equity and debt to certain financial institutions. The facility is agented by DnB NOR Bank. Our wholly owned subsidiary Stolt Tankers Leasing, B.V. is the charterer of each vessel subject to the lease and as of November 30, 2003 owed $64.3 million in payments under such charters to Twelve Ships Inc. Payments due under the charters in 2004 will amount to $21.6 million. Upon expiration of the charter, the tankers may be repurchased from Twelve Ships Inc. for a residual value of $12.0 million.

        We have guaranteed the obligations of the charterer. The chemical tankers are subject to mortgages for the benefit of the Twelve Ships Inc. debt.

        The facility contains affirmative and negative covenants applicable to the charterer and the guarantors, including, but not limited to a minimum required consolidated tangible net worth, a maximum ratio of consolidated debt to consolidated tangible net worth of 2.0 to 1.0, and a minimum ratio of consolidated EBITDA to consolidated interest expense of 2.0 to 1.0. Other covenants applicable to the charterer and the guarantors include: limitations on merger and sales of assets; limitations on changes in management; limitations on sale of the charterer; and requirements as to maintenance of the vessels. Under the requirements of FIN 46, we have determined that the entity would be classified as a VIE and, as such, we will be required to consolidate the entity in our financial statements for fiscal year 2004.

        As of November 30, 2003, Twelve Ships Inc. had property, plant and equipment of $40 million, net of the previously deferred gain, debt obligations of $69.7 million and equity from unaffiliated third parties of $1 million.

Equipment Lease Agreements

        Under two tank container leases, one entered as of May 25, 2000 and the other as of March 27, 2002, Stolt Tank Containers Leasing Ltd., as lessee, owes approximately $82.3 million in lease payments over the course of the respective leases, including the return option costs, to Pitney Bowes Credit Corporation, Dresdner Kleinwort Wasserstein Leasing, Inc., ORIX Financial Services and John Hancock Life Insurance Company. We have guaranteed the obligations of the lessee under each lease and we are subject to certain negative covenants which include: restrictions on the sale or encumbrance of the lessee's capital stock; restrictions on merger and sale of assets; and a financial covenant specifying the maximum ratio of consolidated debt to consolidated tangible net worth. The lessee is also subject to covenants, including, without limitation, maintenance of the leased equipment and limitation on assignment of the leases. The leases relate to the lease of 2,701 and 2,185 tank containers, respectively. The lease relating to the 2,701 tank containers bore interest as of November 30, 2003 at a fixed rate of 8.9% and the lease relating to the 2,185 tank containers bore interest as of November 30, 2003 at rate of LIBOR plus 4% or 5.1%. Each of these interest rates was increased by 100 bps in December 2003 through amendment. Payments under the leases in 2004 are expected to amount to $9.8 million. The term of the 2000 lease is scheduled to expire in May 2007 and the term of the 2002 lease is scheduled to expire in March 2007.

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Commitments Relating to Disposed Terminals

        In November 2001, we sold SNTG's tank storage terminals in Perth Amboy and Chicago. Under the terms of the sale agreement, we have retained responsibility for certain environmental contingencies, should they arise during the covered period which ended two years after the closing date, in connection with these two sites. As of November 30, 2003, we have not been notified of any such contingencies having been incurred and neither do we anticipate any such contingencies being incurred in the future. The Chicago terminal property has been leased under a long-term agreement with the Illinois International Port District. In addition, as part of the Chicago sale, we assigned our rights to the terminal property to a third party. We are contingently liable if the third party does not return the facility in acceptable condition at the end of the sublease period, on June 30, 2026. For additional information, please see Note 19 to the Consolidated Financial Statements.

Performance Guarantees

        SOSA arranges for bank guarantees, which collectively refers to performance bonds, bid bonds, advance payment bonds, guarantees or standby letters of credit in respect of a performance obligation of SOSA to be provided to its customers in connection with SOSA's work on specific projects. The purpose of the bank guarantees generally is to enable SOSA's customers to recover cash paid to SOSA in advance of performing its obligations under the contract or to obtain cash compensation should SOSA be unable to fulfill its performance obligations under the contracts. The total amount of bank guarantees outstanding, as discussed below, as of November 30, 2003 was $324.9 million, of which $150.2 million expires within one year and $174.7 million expires within two to five years.

        The maximum potential amount of future SOSA guarantee payments represents the notional amounts that could be lost under the guarantees if there is non-performance under a contract by the guaranteed parties, without consideration of possible recoveries under recourse provisions from collateral held or pledged. Such guarantee amounts bear no relationship to the anticipated losses on these guarantees and greatly exceed anticipated losses.

        We have guaranteed the obligations of SOSA and/or its subsidiaries to the banks providing bank guarantees up to an aggregate of $104.3 million as of November 30, 2003 pursuant to the following agreements: (i) a $44 million guarantee facility (of which $23.5 million is the maximum amount available to SOSA and for which we could become contingently obligated pursuant to its guarantee); (ii) a $28 million reimbursement agreement in respect of a letter of credit; (iii) a $45 million guarantee facility; and (iv) a $29 million uncommitted guarantee facility, of which we have guaranteed up to approximately NOK 53 million (approximately $7.8 million as at November 30, 2003). The bank guarantees and/or letter of credit relate to various SOSA projects, including the Duke Hubline project; the Langeled project; the Dalia project; the Vigdis project; and various other projects. If the banks were required to make payments under the bank guarantees or letter of credit, we would be obligated to make such payments to the banks in connection with the bank guarantees or letter of credit as direct obligors unless SOSA makes such payment. The banks that provided SOSA with the bank guarantees or letter of credit required this support from us as a condition to providing the bank guarantee or letter of credit. Our guarantees of SOSA's obligations in connection with these bank guarantees and letter of credit, as the case may be, will continue until the underlying bank guarantees and letter of credit, as the case may be, are terminated. As of May 31, 2004, the aggregate amount of guarantees we and/or SNTG have provided to SOSA has been reduced to $99.8 million.

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        In connection with SOSA's New Bonding Facility, we have agreed to guarantee up to $96 million of SOSA's obligations under the New Bonding Facility. The maximum amount of this guarantee is reduced at any time by the amount of our guarantees outstanding from time to time in connection with the Bank Guarantees and letter of credit, as the case may be, described in clauses (i) through (iv) of the immediately preceding paragraph. The provision of this guarantee was a condition to the New Bonding Facility. Our guarantee of SOSA's obligations under the New Bonding Facility will continue until SOSA's obligations under the New Bonding Facility are terminated or satisfied or until SOSA has maintained a minimum tangible net worth of at least $300 million as reflected in its consolidated financial statements for two consecutive fiscal quarters.

Item 6. Directors and Senior Management and Employees

Directors and Senior Management

        We are a Luxembourg holding company with only four officers of SNSA. The following is a list of our directors and persons employed by our subsidiaries who perform the indicated executive and administrative functions for the combined business of our subsidiaries as of May 31, 2004:

Name

  Age*
  Position(s)
Jacob Stolt-Nielsen   72   Chairman of the Board (Stolt-Nielsen S.A.)
Niels G. Stolt-Nielsen   39   Director and Chief Executive Officer (Stolt-Nielsen S.A.)
Roelof Hendriks   49   Director (Nominee) (Stolt-Nielsen S.A.)
Erling C. Hjort   67   Director
James B. Hurlock   70   Director (Nominee)(Stolt-Nielsen S.A.) and Interim Chief Executive Officer (Stolt-Nielsen Transportation Group Ltd.)
Christer Olsson   58   Director (Stolt-Nielsen S.A.)
Jacob B. Stolt-Nielsen   41   Director and Executive Vice President (Stolt-Nielsen S.A.)
Christen Sveaas   47   Director (Stolt-Nielsen S.A.)
Christopher J. Wright   69   Director (Stolt-Nielsen S.A.)
Jan Chr. Engelhardtsen   52   Chief Financial Officer (Stolt-Nielsen S.A.)
John Wakely   56   Executive Vice President (Stolt-Nielsen S.A.)
James Stove Lorentzen   47   Chief Executive Officer (Stolt Sea Farm)

*
As of May 31, 2004.

        Under the terms of our Articles of Incorporation, our directors may be elected for terms of up to six years, and serve until their successors are elected. It has been our practice to elect directors for one-year terms. Under the Articles of Incorporation, the Board may consist of not fewer than three nor more than nine directors at any one time. Our Board of Directors currently consists of seven members. In addition we have nominated two additional directors for election at our annual general meeting of shareholders (the "Annual General Meeting") scheduled for July 7, 2004.

        Jacob Stolt-Nielsen.    Mr. Jacob Stolt-Nielsen has served as our Chairman of the Board of Stolt-Nielsen S.A. since he founded Stolt-Nielsen in 1959. He also serves as Chairman of the Board of Directors of Stolt Offshore S.A. He held the position of Chief Executive Officer of Stolt-Nielsen S.A. from 1959 until 2000. He was trained as a shipbroker and worked in that capacity in London and New York prior to founding the Company. He holds a degree from Handelsgymnasium, Haugesund, Norway. He is a Norwegian citizen.

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        Niels G. Stolt-Nielsen.    Mr. Niels G. Stolt-Nielsen has served as a director of Stolt-Nielsen S.A. since 1996 and as Chief Executive Officer since 2000. He serves as a director of Stolt Offshore S.A and served as Interim Chief Executive Officer, Stolt Offshore S.A. from September 2002 until March 2003. He held the position of Chief Executive Officer, Stolt Sea Farm from 1996 until September 2001. In 1994 he opened and organized our representative office in Shanghai. He joined us in 1990 in Greenwich, CT, working first as a shipbroker and then as a round voyage manager. Mr. Stolt-Nielsen graduated from Hofstra University in 1990 with a BS degree in Business and Finance. Mr. Niels G. Stolt-Nielsen is a son of Mr. Jacob Stolt-Nielsen. He is a Norwegian citizen.

        Roelof Hendriks.    Mr. Hendriks has been nominated to serve as a director of Stolt-Nielsen S.A. subject to shareholder approval at our Annual General Meeting scheduled for July 7,2004. He has been Chief Financial Officer and a Member Board of Management of CSM N.V since 2000. Prior to that, he was a Vice Chairman Executive Board, Koninklijke Vopak N.V. He held various positions at Koninklijke Vopak N.V. and its predecessor, Van Ommeren, from 1980 until 2000. Mr. Hendriks received a law degree from Vrije Universiteit, Amsterdam. He is a Dutch citizen.

        Erling C. Hjort.    Mr. Hjort has served as a director of Stolt-Nielsen S.A. since 1995. He is a graduate of the Faculty of Law at the University of Oslo. In 1964 he joined the Norwegian law firm, Wikborg, Rein & Co. in Oslo, where he was admitted to the bar in the same year. In 1970 he was admitted to the bar of the Norwegian Supreme Court and in 1993 he became the Senior Partner in Wikborg, Rein & Co. He is a Norwegian citizen.

        James B. Hurlock.    Mr. Hurlock has been nominated to serve as a director of Stolt-Nielsen S.A., subject to approval at our Annual General Meeting on July 7, 2004. Mr. Hurlock served as Interim Chief Executive Officer of Stolt-Nielsen Transportation Group from July 2003 to June 14, 2004. He also serves as a director of Stolt Offshore S.A., Orient Express Hotel Ltd., New York Presbyterian Hospital and USA for UNHCR. Mr. Hurlock serves as Chairman of International Development Law Organization and of Parker School of Foreign and Comparative Law. Mr. Hurlock is a retired partner from the law firm of White & Case LLP and served as Chairman of its Management Committee from 1980 to 2000. He participated in the formation and served on the Board of Northern Offshore Ltd. Mr. Hurlock holds a BA degree from Princeton University, an MA Jurisprudence from Oxford University and a JD from Harvard Law School. He is a U.S. citizen.

        Christer Olsson.    Mr. Olsson has served as a director of Stolt-Nielsen S.A. since 1993. He is President and CEO of Wallenius Lines AB and Chairman of Wallenius Wilhelmsen Lines A/S. He also serves as Chairman of UECC and the Swedish Club, and a director of B&N AB, Atlantic Container Line AB and the Swedish Shipowners Association. He received his BLL degree from Stockholm University. He is a Swedish citizen.

        Jacob B. Stolt-Nielsen.    Mr. Jacob B. Stolt-Nielsen has served as a director of Stolt-Nielsen S.A. since 1995. He is an Executive Vice President of Stolt-Nielsen S.A. In 2000, he founded and served as Chief Executive Officer of SeaSupplier Ltd until 2003. From 1992 until 2000 he held the position of President, Stolthaven Terminals, with responsibility for our global tank storage business. He joined the Company in 1987 and served in various positions in Oslo; Singapore; Greenwich, Connecticut; Houston, Texas; and London. Mr. Stolt-Nielsen graduated from Babson College in 1987 with a BS degree in Finance and Entrepreneurial studies. Mr. Jacob B. Stolt-Nielsen is the son of Mr. Jacob Stolt-Nielsen. He is a Norwegian citizen.

        Christen Sveaas.    Mr. Sveaas has served as a director of Stolt-Nielsen S.A. since May 2002. He is a private investor and chairs his own investment company, Kistefos AS, which has investments in shipping, offshore services, real estate and venture capital. He is a director of Orkla ASA and HemoCue AB, and is a senior advisor to the international investment firm EQT Scandinavia and EQT Northern Europe Limited. He is also a member of the Board of Representatives of Storebrand ASA,

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and Member of the Dean's Council, John F. Kennedy School of Government, Harvard University. He has a Lic.Oec. HSG-degree from the University of St. Gall, Switzerland. He is a Norwegian citizen.

        Christopher J. Wright.    Mr. Wright has served as a Director of Stolt-Nielsen S.A. since May 2002. He served as our President and Chief Operating Officer from 1986 to December 2001. He was employed by British Petroleum plc ("BP") from 1958 until the time he joined the Company. He held a variety of positions at BP working in Scandinavia, Asia, the U.S. and London. Mr. Wright holds a Masters degree in History from Cambridge University. He is a British citizen.

        Jan Chr. Engelhardtsen.    Mr. Engelhardtsen has served as Chief Financial Officer of Stolt-Nielsen S.A. since 1991. He served as Interim Chief Financial Officer, Stolt Offshore S.A. from September 2002 until March 2003. He served as President and General Manager of Stolt-Nielsen Singapore Pte. Ltd. from 1988 through 1991. He has been associated with Stolt-Nielsen since 1974. Mr. Engelhardtsen holds an M.B.A. from the Sloan School at the Massachusetts Institute of Technology, as well as undergraduate degrees in Business Administration and Finance. He is a Norwegian citizen.

        John Wakely.    Mr. Wakely has served as Executive Vice President of Stolt-Nielsen S.A. since January 2002 responsible for tax planning, internal audits and legal. He joined Stolt-Nielsen in 1988 and held various positions in the controllership, internal auditing and tax planning areas. He was employed by BP prior to his employment with Stolt-Nielsen. Mr. Wakely is a member of the Chartered Institute of Management Accountants. He is a British citizen.

        James Stove Lorentzen.    Mr. Stove Lorentzen has served as Chief Executive Officer, of SSF since September 2001. He has previously worked for SNSA in a number of marketing and management posts in the tanker and terminal divisions of SNTG. Most recently he has held senior management positions with Belships in both Oslo and Singapore. Mr. Stove Lorentzen has a business studies degree from HEC in Lausanne and an M.B.A. from IMI in Geneva. He is a Norwegian citizen.

        On June 14, 2004, Mr. Otto Fritzner, formerly Managing Director for SNTG Shipowning; was named Chief Executive Officer of SNTG replacing Mr. Hurlock. The following individuals served on the Board of Directors or performed executive and administrative functions during 2003 but have since resigned from their positions:

        Mr. Cooperman terminated his employment with us on July 31, 2003 and continues to serve as a consultant to us. Mr. Lee is still an employee.

        Under a Shareholders' Agreement between NYK and Fiducia Ltd., (which owns 43.0% of our common stock) during the term of such agreement and for so long as NYK shall own at least 5,500,000 Common Shares, (or the equivalent thereof after any stock split or recapitalization), Fiducia shall support NYK's nomination of one person to our Board of Directors. In March 2004, the NYK nominated director, Hiroshi Ishikawa, resigned. To date, NYK has not proposed a new nominee.

Compensation

        As described above, SNSA has only four officers, but certain persons employed by our subsidiaries perform executive and administrative functions for the combined business of our subsidiaries. The aggregate annual compensation paid to the seven members of senior management, excluding non-executive directors, performing such executive functions for us for the fiscal year ended November 30, 2003 (including employee performance incentive awards and certain benefits) was

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$4,088,176. In addition, $865,707 was contributed on behalf of such directors and members of executive management to defined contribution pension plans maintained by us and our subsidiaries. Some of the directors and members of executive management also received stock option awards in December 2003 for 120,500 Common Shares with an exercise price of $7.37 and expiring in December 2012. During 2003, our executive directors received no compensation for their services as such, but received reimbursement of their out-of-pocket expenses. The non-executive directors, with the exception of NYK's nominated director, received an aggregate fee of $227,882 plus expenses for serving on the Board and Committees.

Employee Performance Incentive Plan

        We have employee performance incentive plans which are based in part on the net profits earned by each of our individual businesses (after specified adjustments) and in part on performance in meeting individual performance objectives. SNTG's and SSF's Plans are administered by a Compensation Committee appointed by our Board of Directors. The SOSA Plan is administered by a Compensation Committee appointed by SOSA's Board of Directors. For the fiscal year ended November 30, 2003, the SNTG, SOSA and SSF programs paid $3.8 million, $1.4 million and $0.2 million, respectively, of which $199,160 was paid to those officers performing executive and administrative functions.

Share Ownership

        Each of our directors and executive officers, on an individual basis, and all directors and executive officers as a group beneficially own less than one percent of the Common Shares outstanding as of May 31, 2004. After including Common Shares receivable upon exercise of employee stock options exercisable within 60 days after May 31, 2004 that are deemed to be beneficially owned at said date, each of our directors and executive officers would directly own less than one percent of Common Shares on an individual basis. All directors and executive officers as a group (12 persons) would directly own 1.3% of our Common Shares outstanding.

        Reference is made to Item 7. "Major Shareholders and Related Party Transactions" for a discussion of Common Shares owned by Fiducia Ltd., which is owned by trusts of which members of the Stolt-Nielsen family are beneficiaries. Total shares owned by Fiducia Ltd. and Jacob Stolt-Nielsen, Jacob B. Stolt-Nielsen, and Niels G. Stolt-Nielsen represent 43.4% of the Common Shares outstanding as of May 31, 2004.

        Our 1987 Stock Option Plan (the "1987 Plan") covers 2,660,000 Common Shares and our 1997 Stock Option Plan (the "1997 Plan") covers 5,180,000 Common Shares. No further grants will be issued under the 1987 Plan. Options granted under the 1987 Plan, and those which have been or may be granted under the 1997 Plan are exercisable for periods of up to ten years. The options granted under the 1987 Plan and the 1997 Plan are or will be at an exercise price not less than the fair market value per share at the time the option was or is granted. The 1987 Plan and the 1997 Plan are administered by a Compensation Committee appointed by our Board of Directors. The Compensation Committee awards options based on the grantee's position in Stolt-Nielsen, degree of responsibility, seniority, contribution to Stolt-Nielsen and such other factors as it deems relevant under the circumstances.

        In March 2001, we completed a share reclassification whereby our outstanding non-voting Class B Shares were reclassified as Common Shares on a one-for-one basis. All Class B Shares issued in connection with the exercise of options will immediately convert to Common Shares upon issuance.

        As of May 31, 2004, options for 4,124,836 Common Shares were outstanding under the 1987 and 1997 Plans. Of this total, options for 861,100 Common Shares were outstanding in accordance with their stated terms to some of our directors and executive officers. Each of our directors or executive officers hold options exercisable for shares representing less than 1% of our outstanding Common

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Shares. The options are exercisable at the respective prices set out below and expire on the dates indicated:

Exercise Price

  Number of Common Shares
  Expiration Date
$ 0.0   183,225   December 2004-December 2005
  19.75   142,000   December 2004
  25.38   3,000   June 2005
  28.63   220,850   December 2005
  16.88   4,250   September 2006
  17.13   144,638   December 2006
  17.50   143,326   December 2006
  22.50   2,500   August 2007
  22.13   2,500   August 2007
  20.13   344,950   December 2007
  9.88   262,050   December 2008
  11.94   2,100   April 2009
  14.63   404,475   December 2009
  20.50   2,600   October 2010
  17.73   5,000   December 2010
  14.75   498,100   December 2010
  13.10   563,350   December 2011
  5.90   606,622   December 2012
  7.33   589,300   December 2013
     
   
      4,124,836    
     
   

Board Practices

        The standing committees of the Board of Directors consist of an Audit Committee and a Compensation Committee.

Audit Committee

        The Audit Committee, formed in 1988, meets regularly to review our audit practices and procedures, the scope and adequacy of our internal controls and related matters, and our financial statements. The Audit Committee annually determines the appointment of auditors the scope of audit and other assignments to be performed by the auditors and the fees relating thereto. The Audit Committee also meets periodically with representatives of our auditors to review the recommendations arising from the audit of our financial statements and the internal control processes involved. The current members of the Audit Committee are Mr. Hjort (Chairman), Mr. Olsson and Mr. Sveaas.

Compensation Committee

        The Compensation Committee, formed in 1988, reviews and approves salaries for our executive officers, salary parameters for all other staff, employee performance incentive awards (if any, pursuant to our Employee Performance Incentive Plan) and stock option awards under our stock option plans. The current members of the Compensation Committee are Mr. Jacob Stolt-Nielsen (Chairman,) Mr. Niels G. Stolt-Nielsen, Mr. Olsson and Mr. Wright.

        Our Compensation Committee is not currently comprised solely of independent directors as defined under the rules and regulations of the Sarbanes-Oxley Act of 2002 and the rules of the SEC. By January 2005, it is our intention that the Compensation Committee be comprised solely of independent directors.

66



Service Contracts

        No director has a service contract that provides for benefits upon termination.

Employees

        The average number of persons employed during the three years ended November 30, 2003 are as follows:

 
  Average number of employees
Years ended November 30,

 
  2003
  2002
  2001
SNTG(a)   4,545   4,693   4,572
SOSA(b)   6,843   6,666   6,553
SSF   2,527   2,370   1,736
All Other(c)   49   72   72
   
 
 
Total   13,964   13,801   12,933
   
 
 

(a)
Corporate service employees are included within SNTG and related costs are allocated to the other business units based on services provided.

(b)
As of the year ended November 30, 2003, the total number of employees was approximately 6,843, comprised of 4,892 permanent employees and 1,951 temporary employees.

(c)
All other includes the employees of OLL and SSL.

        As of May 31, 2004 the total number of employees was approximately 7,100. The decline in 2004 is due to the deconsolidation of SOSA, which took place in the first quarter of 2004.

        The increase in SSF's employees from 2001 to 2002 is due to the acquisition of Bluefin Pty Ltd. The increase between 2002 and 2003 was due to the opening of a new site in Spain, Vilano, offset by some employee reductions in the Americas region and the sale of Aga in Norway.

Unions

        Ten SNTG-owned ships are manned by Filipino officers and crew, twelve by Latvian officers and crew and nine by Russian officers and crew. Various SNTG-owned ships are also manned by Polish officers. SNTG maintains its own crewing office and training center in Manila to provide Filipino officers and crew members for its fleet, all of whom belong to the Associated Marine Officers' and Seamen's Union of the Philippines. SNTG owns 49% of its crewing agent in Latvia to provide Latvian officers and crew members who belong to the Latvian Seafarers' Union of Merchant Fleet Riga, and those from Russia belong to the Seafarers' Union of Russia. All such unions are affiliated with the International Transport Workers Federation in London. The collective bargaining agreements remain in full force and effect as of May 31, 2004. Hourly employees at certain of SNTG's terminals are also covered by union contracts. A significant number of SOSA's employees are represented by labor unions. As part of the normal course of business, a number of union agreements come up for annual renegotiation in 2004. SOSA believes that it maintains a good relationship with its employees and their unions. In addition, many workers, including most of our divers, are hired on a contract basis and are available on short notice.

67


Item 19. Exhibits

1.1   Amended and Restated Articles of Incorporation, dated as of August 6, 2003.*

2.1

 

Deposit Agreement among Stolt-Nielsen S.A., Citibank, N.A., as Depositary and the holders and beneficial owners of American Depositary Receipts. Incorporated by reference to Exhibit A Stolt-Nielsen's Registration Statement on Form F-6 (Registration File No. 333-90728) filed with the Securities and Exchange Commission on June 13, 2002.

2.2

 

Form of American Depositary Receipt (included in Exhibit 2.1).

2.3

 

Stolt-Nielsen S.A. hereby agrees to furnish copies of instruments defining the rights of holders of long-term debt of Stolt-Nielsen S.A. and its consolidated subsidiaries to the Securities and Exchange Commission upon request.

4.1

 

Stolt Tankers Joint Service Agreement, as restated effective November 12, 1997 (the "Joint Service Agreement"), among Stolt Tankers Inc., Stolt Parcel Tankers, Inc., NYK Stolt Tankers, S.A., Rederi AB Sunship, Barton Partner Limited, Bibby Pool Partner Limited and Unicorn Lines (Pty) Ltd. Incorporated by reference to Exhibit 4.1 of Stolt-Nielsen's Annual Report on Form 20-F/A for the fiscal year ended November 30, 2002, filed with the Securities and Exchange Commission on June 4, 2003.

4.2

 

Addendum to the Joint Service Agreement, dated March 2, 2000, between Stolt Tankers Inc. and Stolt Parcel Tankers Inc., Barton Partner Limited, Bibby Pool Partner Limited, Unicorn Tankers (International) Limited, Rederi AB Sunship and NYK Stolt Tankers S.A. Incorporated by reference to Exhibit 4.2 of Stolt-Nielsen's Annual Report on Form 20-F/A for the fiscal year ended November 30, 2002, filed with the Securities and Exchange Commission on June 4, 2003.

4.3

 

Novation Agreement, dated November 22, 2002, among Stolt Tankers Inc., Stolt-Nielsen Transportation Group Ltd., Barton Partner Limited, Bibby Pool Partner Limited, Unicorn Tankers (International) Limited, NYK Stolt Tankers S.A. and Stolt-Nielsen Transportation Group B.V. Incorporated by reference to Exhibit 4.3 of Stolt-Nielsen's Annual Report on Form 20-F/A for the fiscal year ended November 30, 2002, filed with the Securities and Exchange Commission on June 4, 2003.

4.4

 

Addendum to the Joint Service Agreement, dated December 10, 2002, between Stolt-Nielsen Transportation Group B.V. and Stolt-Nielsen Transportation Group B.V., Barton Partner Limited, Bibby Pool Partner Limited, Unicorn Tankers (International) Limited and NYK Stolt Tankers S.A. Incorporated by reference to Exhibit 4.4 of Stolt-Nielsen's Annual Report on Form 20-F/A for the fiscal year ended November 30, 2002, filed with the Securities and Exchange Commission on June 4, 2003.

4.5

 

Loan Agreement, dated as of November 20, 2002, between Stolt-Nielsen S.A., as borrower, and Danish Ship Finance, as lender.*
     

68



4.6

 

$275 Million Secured Multi-Currency Revolving Loan Facility Agreement, dated July 19, 2001 and amended and restated on November 25, 2002 among Stolt-Nielsen Transportation Group Ltd., as borrower, Salomon Brothers International Limited, DnB NOR Bank ASA (formerly known as Den norske Bank ASA), HSBC Investment Bank plc, Deutsche Bank AG in Hamburg, and Nordea Bank Norge ASA, New York Branch (formerly known as Christiania Bank OG Kreditkasse, ASA, New York Branch), as joint arrangers, the banks listed in Schedule 1 thereto and others from time to time party thereto, as banks, HSBC Investment Bank plc, as facility agent, HSBC Bank PLC, as security trustee, Salomon Brothers International Limited and DnB NOR Bank ASA (formerly Den norske Bank ASA), as syndication agents and joint book managers, and Nordea Bank Norge ASA, New York Branch, as documentation agent, as amended from time to time.*

4.7

 

$130 Million Revolving Credit Facility Agreement, dated March 30, 2004, among Stolt-Nielsen Transportation Group Ltd., as borrower, Stolt-Nielsen S.A., the banks and financial institutions listed on Schedule 1 thereto, as banks, Schiffshypothekenbank Zu Lubeck AG, as facility agent and security trustee, the banks and financial institutions listed on Schedule 2 Part A, as joint lead arrangers, the banks and financial institutions listed on Schedule 2 Part B, as joint arrangers, and Deutsche Schiffsbank AG, as Co-Arranger.*

8.1

 

Significant subsidiaries as of the end of the year covered by this Report. See "Item 4. Information on the Company—Significant Subsidiaries."*

11

 

Code of Ethics.*

12.1

 

Certification of the principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 1, 2004.

12.2

 

Certification of the principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 1, 2004.

13.1

 

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated June 16, 2004.*

13.2

 

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002, dated June 16, 2004.*

14.1

 

Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.*

14.2

 

Consent of Elvinger, Hoss & Prussen.*

*
Filed with SNSA's Annual Report on Form 20-F on June 16, 2004.

69



SIGNATURES

        The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Amendment No. 1 to the annual report on Form 20-F on its behalf.

    STOLT-NIELSEN S.A.

 

 

By:

/s/  
NIELS G. STOLT-NIELSEN      
Name: Niels G. Stolt-Nielsen
Title: Chief Executive Officer

 

 

By:

/s/  
JAN CHR. ENGELHARDTSEN      
Name: Jan Chr. Engelhardtsen
Title: Chief Financial Officer

Date: July 1, 2004

 

 

 

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STOLT-NIELSEN S.A. (Exact name of Registrant as specified in its charter)
LUXEMBOURG (Jurisdiction of incorporation or organization)
c/o STOLT-NIELSEN LIMITED Aldwych House 71-91 Aldwych London WC2B 4HN, England (Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act: None
Securities registered or to be registered pursuant to Section 12(g) of the Act: Common Shares, no par value
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
EXPLANATORY NOTE
SIGNATURES


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Exhibit 12.1


CERTIFICATIONS

I, Niels G. Stolt-Nielsen, certify that:

1.
I have reviewed this annual report on Form 20-F of Stolt-Nielsen S.A.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report.

By:   /s/ NIELS G. STOLT-NIELSEN
Name: Niels G. Stolt-Nielsen
Title: Chief Executive Officer, Stolt-Nielsen S.A.

Date: July 1, 2004



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CERTIFICATIONS


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Exhibit 12.2


CERTIFICATIONS

I, Jan Chr. Engelhardtsen, certify that:

1.
I have reviewed this annual report on Form 20-F of Stolt-Nielsen S.A.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report.

By:   /s/ JAN CHR. ENGELHARDTSEN
Name: Jan Chr. Engelhardtsen
Title: Chief Financial Officer, Stolt-Nielsen S.A.

Date: July 1, 2004



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CERTIFICATIONS