Report of the Directors

Report of the Directors The Directors have pleasure in presenting their report together with the audited financial statements of the Association for the year ended 20 February 2005. Activities The principal activity of the Association continues to be the insurance and reinsurance of Members protection and indemnity risks (Class 1) and freight, demurrage and defence risks (Class 2). In addition, the Association provides cover for strikes risks of ships officers and/or crew (Class 3) and strikes risks in port areas (Class 4) although no business for these two Classes was underwritten during the year. During the year, the Association reinsured, through its whollyowned subsidiary International Shipowners Reinsurance Company SA, 90% of its risks for all Classes, and the reinsurance of The West of England Ship Owners Mutual Insurance Association (London) Limited, for past and current years. Also, The West of England Reinsurance (Hamilton) Limited, a 100% subsidiary of the Association, reinsured various specific areas of the Association s business on both a stop loss and excess loss basis. During the year The West of England Ship Owners Insurance Services Limited, which is wholly owned by the Association, ceased to provide insurance and claims handling services for this and the other associations in the West of England group. It continued to act as landlord to its tenant companies at its premises in London. A new subsidiary, West of England Insurance Services (Luxembourg) SA, was formed on 3 December 2004 which has provided insurance and claims handling services for this Association since 14 January 2005. Also during the year, the Association, along with the other members of the International Group of P&I Clubs, established a Bermuda segregated cell insurance company called Hydra Insurance Company Ltd, to insure and reinsure certain pool and quota share risks. The Association has contributed share capital to Hydra, and share capital and contributed surplus to Hydra West of England Cell which is wholly owned by the Association. Future Developments and Events since the Balance Sheet Date The Association will continue to maintain and develop its activities as above. No changes are envisaged to these. There have been no significant events after the balance sheet date. Financial Statements These financial statements conform to the Luxembourg law of 8 December 1994 in all respects except for the fact that investments are stated at market value and land and buildings at valuation. Luxembourg legislation requires that investments, including land and buildings, are stated at the lower of cost 34 The West of England Report of the Directors

or market value. The treatment adopted is consistent with the basis of accounting generally accepted by the other members of the International Group of P&I Associations. The financial statements are set out on pages 38 to 52 with the principal accounting policies summarised on pages 41 to 42. Financial statements conforming fully to the Luxembourg legislation are filed with the Luxembourg authorities: copies are available on request from our Principal Office. These statements show a deficit for the year of $7.1 million (2004 $18.5 million surplus) before transfer to Reserve Deposit Fund of $400,000 (2004 $400,000). In addition a revaluation loss of $4.0 million (2004 nil) was taken to Revaluation Reserve. Total reserves at 20 February 2005 were $134.3 million (2004 $145.4 million). Directors The present Directors of the Association, who are listed on page 32, held office throughout the year under review with the exception of Mr M M Harris who joined the Board with effect from 29 November 2004, Mr I H Heesom-Green joined with effect from 21 January 2005 and Mr Chen Hongsheng joined with effect from 11 February 2005. In addition, Mr J M de Mello Franco retired from the Board with effect from 22 September 2004, Mr Gao Weijie retired with effect from 20 October 2004, Mr H V Boyd retired with effect from 8 December 2004 and Mr R R Miles retired with effect from 21 April 2005. In accordance with the Constitution of the Association, all of the Directors will retire at the forthcoming Annual General Meeting but, being eligible, offer themselves for re-election. Directors and Officers Liability Insurance During the year, the Association maintained insurance cover for Directors and Officers against legal liabilities relating to the Association s activities. Auditors At the forthcoming Annual General Meeting on 21 September 2005, the Directors will propose a resolution for the appointment of PricewaterhouseCoopers S.à r.l. as Auditors for the period commencing 20 February 2005. By order of the Board P A Aspden Secretary 18 May 2005 35 The West of England Report of the Directors

Report of the Auditors at 20 February 2005 To the Members of The West of England Ship Owners Mutual Insurance Association (Luxembourg) We have audited the consolidated financial statements of The West of England Ship Owners Mutual Insurance Association (Luxembourg) for the year ended 20 February 2005 set out on pages 38 to 52 and have read the related Report of the Directors. These consolidated financial statements and the Report of the Directors are the responsibility of the Board of Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to check the consistency of the Report of the Directors with them. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accompanying consolidated financial statements give, on the basis of the Accounting Policies adopted by the Association as presented in Note 1, a true and fair view of the financial position of The West of England Ship Owners Mutual Insurance Association (Luxembourg) as of 20 February 2005 and of its operations for the year then ended. In order for these consolidated financial statements to be prepared on a basis consistent with accounting policies adopted by other members of the International Group of P&I Associations, investments are stated at market value and, as described in Notes 1 and 2 and for the reasons stated therein, land and buildings are stated at estimated market value. At 20 February 2005, and previously, land and buildings were revalued, the revaluation surplus taken to the Consolidated Income and Expenditure Account and then transferred to a revaluation reserve. Luxembourg law requires investments and land and buildings to be stated at the lower of cost and market value and buildings to be depreciated over their estimated useful lives. Statutory consolidated financial statements in conformity with Luxembourg law which differ from these consolidated financial statements only in these respects are filed with the Commissariat Aux Assurances and the Registre de Commerce in Luxembourg and our audit opinion thereon is unqualified. The Report of the Directors is in accordance with the consolidated financial statements. We have also examined the Consolidated Class 1 and Class 2 Policy Year Statements on pages 53 to 55 and the Statement of the Average Expense Ratio on page 54. In our opinion, using information consistent with the consolidated financial statements on pages 38 to 52, these Statements have been properly prepared by Management in accordance with the notes to them, the accounting policies on pages 41 and 42 and the assumptions made by Management in calculating the forecast additional calls and releases. PricewaterhouseCoopers S.à r.l. Réviseur d entreprises represented by Mervyn R Martins 18 May 2005 37 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Report of the Auditors

Consolidated Balance Sheet at 20 February 2005 2005 2004 Note $ 000 $ 000 Assets Investments Land and buildings 2 40,354 42,992 Other financial investments 2 398,957 396,615 Reinsurers share of technical provisions 439,311 439,607 Claims outstanding 119,979 182,687 Debtors Member debtors 7,355 8,167 Reinsurance debtors 12,713 20,715 Additional calls not yet charged 26,530 23,450 Other debtors 3 52,099 40,293 Other assets 98,697 92,625 Tangible assets 4 325 392 Cash at bank and in hand 58,940 42,338 Prepayments and accrued income 59,265 42,730 Accrued interest 7 1,444 Other prepayments and accrued income 576 533 583 1,977 Total assets 717,835 759,626 38 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Consolidated Balance Sheet

2005 2004 Note $ 000 $ 000 Liabilities Capital and reserves Reserve Deposit Fund brought forward 16,450 16,050 Transfer from income and expenditure account 400 400 Reserve Deposit Fund carried forward 1, 13 16,850 16,450 Revaluation Reserve brought forward 11,521 9,722 Exchange movement 1,799 Revaluation loss 2 (4,014) Revaluation Reserve carried forward 2, 14 7,507 11,521 Class 1 Policy Year Reserve Account brought forward Transfer from income and expenditure account 20,785 Class 1 Policy Year Reserve Account carried forward 15 20,785 Income and expenditure account brought forward 117,417 99,273 (Deficit)/surplus for the financial year (7,066) 18,544 Transfer to Class 1 Policy Year Reserve Account 15 (20,785) Transfer to Reserve Deposit Fund (400) (400) Income and expenditure account carried forward 13 89,166 117,417 Technical provisions 134,308 145,388 Claims outstanding 527,288 562,621 Creditors Member creditors 17,085 22,170 Reinsurance creditors 7,236 2,496 Other creditors 5 31,918 26,951 56,239 51,617 Total liabilities 717,835 759,626 Chairman Director 18 May 2005 39 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Consolidated Balance Sheet

Consolidated Income and Expenditure Account for the year ended 20 February 2005 2005 2005 2004 2004 Note $ 000 $ 000 $ 000 $ 000 Technical account Earned premiums, net of reinsurance Gross premiums written 236,629 207,598 Outward reinsurance premiums (41,700) (39,307) Earned premiums, net of reinsurance 6 194,929 168,291 Allocated investment return transferred from the non-technical account 28,574 65,546 Claims incurred, net of reinsurance Claims paid Gross amount (257,312) (267,628) Reinsurers share 88,875 92,351 Net claims paid 7 (168,437) (175,277) Change in the provision for claims Gross amount 35,333 (77,276) Reinsurers share (62,708) 68,613 Change in the net provision for claims 8 (27,375) (8,663) Claims incurred, net of reinsurance (195,812) (183,940) Operating expenses 9 (33,581) (30,601) Balance on the technical account (5,890) 19,296 Non-technical account Balance on the technical account (5,890) 19,296 Investment income 11 57,632 86,402 Investment charges 11 (29,058) (20,856) Allocated investment return transferred to the technical account (28,574) (65,546) (Deficit)/surplus on ordinary activities before tax (5,890) 19,296 Tax on ordinary activities 12 (1,176) (752) (Deficit)/surplus on ordinary activities after tax (7,066) 18,544 40 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Consolidated Income and Expenditure Account

Notes to the Financial Statements for the year ended 20 February 2005 1 Accounting policies General The West of England Ship Owners Mutual Insurance Association (Luxembourg) is established in the Grand Duchy of Luxembourg as a mutual insurance association. As a mutual association under Luxembourg law, the Association has no share capital or subscribed capital. In 1995, to comply with European Union and Luxembourg minimum insurance solvency margin requirements, a reserve fund, the Reserve Deposit Fund, was established, to which allocations are made periodically to meet the minimum solvency levels required. Presentation of financial statements These financial statements have been prepared in conformity with the law of 8 December 1994 on financial statements with respect to insurance and reinsurance undertakings except for the fact that investments (including land and buildings) are not stated at cost but at valuation, and with the significant accounting policies generally adopted by the members of the International Group of P&I Associations. A summary of the more important accounting policies is set out below. The West of England Ship Owners Mutual Insurance Association (London) Limited The financial statements have been drawn up to incorporate the terms of an agreement dated 18 October 1985 whereby the Association has reinsured the totality of the risks insured by The West of England Ship Owners Mutual Insurance Association (London) Limited up to 20 February 1986 for Class 2 and 20 February 1987 for Classes 3 and 4. In accordance with the agreement, the assets of The West of England Ship Owners Mutual Insurance Association (London) Limited have been held by that Association in trust for The West of England Ship Owners Mutual Insurance Association (Luxembourg) throughout the financial year. Basis of consolidation The consolidated financial statements have been prepared in US Dollars and incorporate the assets and liabilities of the Association and its subsidiaries at 20 February 2005 and the results of the year ended on that date. Classes and policy years Members are insured in accordance with the Rules of the Association. Separate records are maintained for all Classes of insurance. Mutual policy balance accounts are maintained, individual accounts being held for all open policy years for each Class. The accumulated balance for all policy years is available, if required, for any exceptional future charges. Calls and reinsurance premiums are credited or charged to the policy year to which cover relates except in the case of the reinsurance transactions with The West of England Ship Owners Mutual Insurance Association (London) Limited which are maintained separately. Claims are included in policy years by reference to the date of the incident and reinsurance recoveries are matched accordingly. General and management expenditure is allocated to Classes on the basis of calls and premium income and is charged to the policy year in which it is incurred; investment income is allocated to policy years as determined by the Directors. Premiums Gross premiums consist of calls, premiums and releases invoiced in respect of policies incepting prior to the balance sheet date together with movements in additional calls not yet charged which have been notified to Members. Reinsurance premiums are charged to the consolidated income and expenditure account on an accruals basis. Debtors Full provision is made for amounts owing which are more than one year in arrears and in respect of other balances considered to be doubtful. 41 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

Land and buildings Land and buildings are stated at estimated market value, based on periodic evaluations by independent valuers. The amortisation policy with regards to buildings is set out in Note 2. Investments Investments are stated at market value or at values provided by independent brokers or managers, except for interest rate swaps and over-thecounter options which are valued at their intrinsic value and dealer-supplied valuations, respectively. Investment income Income from investments is included, together with the related tax credit, in the non-technical account on an accruals basis. Account is taken of dividend income when the related investment is declared ex-dividend. Transfer of investment return A transfer of investment return, including unrealised exchange gains and losses, expenses and charges, is made from the non-technical account to the technical account to reflect the return made on those assets directly attributable to the insurance business. Claims incurred Claims incurred comprises claims and related costs, including claims handling expenses, approved by the Directors and advances made on account of claims during the year, including the Association s share of claims under pooling agreements, and changes in provisions for outstanding claims, including provisions for claims incurred but not reported and related expenses, together with any other adjustments to claims from previous years. Credit is taken for reinsurance recoveries due in respect of claims accounted for at the balance sheet date. Claims outstanding Statistical projections are calculated for claims outstanding at the balance sheet date based upon paid claims and estimates of notified outstanding claims. Provision is made for future claims handling expenses. Significant delays may occur before claims are settled and, accordingly, a substantial measure of experience and judgement is required in assessing the ultimate cost of outstanding and unnotified claims, which cannot be known with certainty at the balance sheet date. Expenses General and management expenditure is charged to the consolidated income and expenditure account on an accruals basis. Pension costs Defined benefit pension costs and the costs of providing other post-retirement benefits are charged to the income and expenditure account over the service lives of the eligible employees in accordance with the advice of qualified actuaries. Pension costs and obligations relating to defined benefits are recognised on a projected unit method. Tangible assets Expenditure on computer and office equipment and motor vehicles is written off over four to six years in equal annual instalments. Foreign currencies Revenue transactions are converted at the rate ruling at the date of the relevant transactions. Assets and liabilities in currencies other than US Dollars are converted to US Dollars at the rate prevailing at the balance sheet date. Exchange differences are analysed between realised and unrealised, and included in the investment return for the year. Unsettled forward exchange transactions are translated into US Dollars at the forward rate prevailing on the balance sheet date for the remaining term of the contracts. Unrealised profit or loss on hedging transactions is charged in the income and expenditure account and disclosed as an asset or a liability in the accounts. 42 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

2 Investments Land and buildings Land and buildings comprise the Association s freehold premises at Tower Bridge Court, London, which are partly occupied by the Association and a property in Hong Kong which is fully occupied by the Association. The London property was revalued at 20 February 2005 by Dron & Wright at 19,620,000 ($37.1 million) and the Hong Kong property at 20 February 2005 by Jones Lang LaSalle Ltd at HK$25.0 million ($3.2 million). The resulting reduction in the surplus on revaluation of the London property over its original cost has been taken to the Revaluation Reserve. The surplus on revaluation of the Hong Kong property has been taken to income as the valuation amount is below original cost. The Directors do not consider this remaining diminution in value to be permanent in nature. The Directors periodically reassess the useful lives and residual values of the buildings. It is the Association s practice to maintain its buildings in a continual state of sound repair and, accordingly, the Directors consider that, given the useful economic lives of these assets, their expected residual values and their estimated current value, depreciation thereon is not appropriate. If the properties were to be presented in conformity with Luxembourg law then the cost, depreciation and net book values would be as follows: 2005 2004 $ 000 $ 000 Cost 30,004 30,004 Currency fluctuation adjustments 4,102 2,500 Accumulated depreciation (3,268) (3,008) Net book value 30,838 29,496 In determining the accumulated depreciation above, which is based on an expected economic life of fifty years, no account has been taken of the Directors reassessment of the useful life and residual values of the buildings, nor of any reassessment of the relative values of land and buildings arising from the revaluation carried out at 20 February 2005. Other financial investments 2005 2005 2004 2004 $ 000 $ 000 $ 000 $ 000 Market Market Value Cost Value Cost Shares and other variable yield securities and units in unit trusts 191,775 157,843 195,187 162,937 Debt securities and other fixed interest securities 206,552 198,095 191,146 192,132 Deposits with credit institutions 630 630 10,282 10,282 398,957 356,568 396,615 365,351 Debt securities include investments in collective investment schemes, the underlying investments of which are fixed interest securities. 43 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

Certain of the Association s investment managers have authority to invest, to a limited extent, for hedging purposes in financial instruments. At 20 February 2005, the position was as follows: Forward foreign exchange transactions creating net long positions in seventeen currencies including Canadian dollars, euros, Hong Kong dollars, Hungarian forint, pounds sterling, Singaporean dollars, South Korean won, New Turkish lira and South African rand for a total value of $45.3 million and net short positions in Swiss francs, Danish krone, Japanese yen, New Zealand dollars, Polish zloty and Swedish krona for a total value of $8.1 million. Interest rate futures contracts for a total commitment equivalent to $270.0 million including US Dollar contracts for a total commitment of $164.9 million and other contracts in pounds sterling, euros and Japanese yen. Interest rate swap contracts for a total commitment equivalent to $73.7 million including US Dollar contracts for a commitment of $40.2 million, pounds sterling contracts for a commitment of $9.8 million, euro contracts for a commitment of $9.1 million, Japanese yen contracts for a commitment of $7.4 million, Canadian dollar contracts for a commitment of $3.9 million and Hong Kong dollar contracts for a commitment of $3.3 million. Interest rate options and swaptions - US Dollar contracts for a total commitment of $28.7 million. The Association itself and through its subsidiaries, International Shipowners Reinsurance Company SA and The West of England Reinsurance (Hamilton) Limited, has pledged certain investments as security for bank guarantees and other facilities with one bank. At 20 February 2005, the secured facilities, including an agreed margin where appropriate, amounted to $55.0 million and guarantees issued against those facilities totalled $33.4 million. Total bank guarantees and letters of credit issued on behalf of the Association at 20 February 2005, including both the above and issuances against facilities unsecured by pledged investments, were: $ million On behalf of Members 59.1 The International Group of P&I Clubs Designated Reserves procedures 15.9 Letters of credit and other guarantees 6.7 For guarantees issued on behalf of Members for claims, appropriate balance sheet provision has been made within claims outstanding. 2005 2004 3 Other debtors $ 000 $ 000 Tax debtors 244 198 The West of England Mutual War Risks Association Limited 9 24 The West of England Ship Owners Mutual Insurance Association (London) Limited 10 16 Claims recoverable from Members and third parties 474 Mortgages 950 967 Forward currency contract gains 2,476 Investment debtors 50,380 35,560 Dividends receivable 140 148 Other debtors 366 430 52,099 40,293 The mortgages are in respect of loans to Directors of West of England Insurance Services (Luxembourg) SA, a subsidiary, for house improvement or purchase. They are secured on the respective properties and other assets, have an interest rate of 5% and are repayable over various periods up to the end of each Director s service. 44 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

Computer Motor Office Equipment Vehicles Equipment Total 4 Tangible assets $ 000 $ 000 $ 000 $ 000 Cost At 20 February 2004 5,726 976 2,722 9,424 Additions 166 166 Disposals (5,726) (170) (2,722) (8,618) At 20 February 2005 972 972 Depreciation At 20 February 2004 5,726 584 2,722 9,032 Provided during the year 212 212 Disposals (5,726) (149) (2,722) (8,597) At 20 February 2005 647 647 Net Book Value At 20 February 2005 325 325 Net Book Value At 20 February 2004 392 392 2005 2004 5 Other creditors $ 000 $ 000 UK Corporation Tax 1,479 1,428 Luxembourg municipal and state taxes 229 223 The West of England Mutual War Risks Association Limited 29 Accrued expenses 2,297 1,782 Forward currency contract losses 5 Investment creditors 24,955 20,625 Other creditors and provisions 2,924 2,893 31,918 26,951 UK Corporation Tax includes $1,014,000 (2004 $1,014,000) of deferred tax arising on unrealised gains on equity investments and other deferred tax liabilities. All other creditors are payable within one year. 45 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

2005 6 Earned premiums net of reinsurance $ 000 Gross premiums by policy year Reinsurance of WoE WoE Class 1 Class 2 Class 3 Class 4 (London) Hamilton Total Policy year 2004/2005 200,668 7,191 207,859 Policy year 2003/2004 23,933 589 24,522 Policy year 2002/2003 22 1,208 1,230 Other 470 (532) (62) Total gross premiums 225,093 8,456 233,549 Movement in additional calls not yet charged 2,940 140 3,080 228,033 8,596 236,629 Reinsurance premiums (46,976) (1,492) 6,768 (41,700) Earned premiums, net of reinsurance 181,057 7,104 6,768 194,929 2004 $ 000 Reinsurance of WoE WoE Class 1 Class 2 Class 3 Class 4 (London) Hamilton Total Gross premiums by policy year Policy year 2003/2004 174,535 6,896 6 7 4 181,448 Policy year 2002/2003 19,474 51 19,525 Policy year 2001/2002 599 948 1,547 Other 244 114 358 Total gross premiums 194,852 8,009 6 7 4 202,878 Movement in additional calls not yet charged 4,770 (50) 4,720 199,622 7,959 6 7 4 207,598 Reinsurance premiums (44,866) (1,355) (60) (75) 7,049 (39,307) Earned premiums, net of reinsurance 154,756 6,604 (54) (68) 4 7,049 168,291 Direct insurance premiums are all classified as marine, aviation and transport. All direct insurance contracts were concluded in a member state of the European Union other than the member state of the Association s head office. 46 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

2005 7 Net claims paid $ 000 Reinsurance of WoE WoE Class 1 Class 2 (London) Hamilton Total Gross claims paid Members claims (231,611) (7,313) (48) (238,972) International Group of P&I Clubs (18,340) (18,340) (249,951) (7,313) (48) (257,312) Recoveries on claims paid Recoveries from other members of the International Group of P&I Clubs 26,703 26,703 Recoveries from Group Excess Loss reinsurance 41,818 41,818 Other reinsurances and WoE Hamilton 24,509 1,991 (6,146) 20,354 93,030 1,991 (6,146) 88,875 Net claims paid (156,921) (5,322) (48) (6,146) (168,437) 2004 $ 000 Reinsurance of WoE WoE Class 1 Class 2 (London) Hamilton Total Gross claims paid Members claims (246,981) (7,790) (111) (254,882) International Group of P&I Clubs (12,746) (12,746) (259,727) (7,790) (111) (267,628) Recoveries on claims paid Recoveries from other members of the International Group of P&I Clubs 68,169 68,169 Recoveries from Group Excess Loss reinsurance 19,154 19,154 Other reinsurances and WoE Hamilton 4,835 531 (338) 5,028 92,158 531 (338) 92,351 Net claims paid (167,569) (7,259) (111) (338) (175,277) 47 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

2005 8 Change in the net provision for claims $ 000 Reinsurance of WoE WoE Class 1 Class 2 (London) Hamilton Total Claims outstanding (509,905) (17,383) (527,288) Reinsurers share of claims outstanding Recoveries from other members of the International Group of P&I Clubs 57,082 57,082 Recoveries from Group Excess Loss reinsurance 31,427 31,427 Other reinsurances and WoE Hamilton 66,373 2,096 (36,999) 31,470 154,882 2,096 (36,999) 119,979 Net claims outstanding carried forward (355,023) (15,287) (36,999) (407,309) Net claims outstanding brought forward (319,276) (12,778) (47,880) (379, 934) Change in the net provision for claims (35,747) (2,509) 10,881 (27,375) 2004 $ 000 Reinsurance of WoE WoE Class 1 Class 2 (London) Hamilton Total Claims outstanding (547, 357) (15,264) (562,621) Reinsurers share of claims outstanding Recoveries from other members of the International Group of P&I Clubs 81,002 81,002 Recoveries from Group Excess Loss reinsurance 55,171 55,171 Other reinsurances and WoE Hamilton 91,908 2,486 (47,880) 46,514 228,081 2,486 (47,880) 182,687 Net claims outstanding carried forward (319,276) (12,778) (47,880) (379,934) Net claims outstanding brought forward (328,465) (12,237) (30,569) (371,271) Change in the net provision for claims 9,189 (541) (17,311) (8,663) Claims outstanding include $65,954,000 (2004 $58,922,000) in respect of other clubs claims through the International Group Pool, including appropriate provision for claims incurred but not reported. Recoveries shown include amounts statistically projected as recoverable against claims incurred but not reported. 2005 2004 9 Operating expenses $ 000 $ 000 Directors fees 349 362 Auditors remuneration 435 355 Other expenses 11,951 10,871 Depreciation 212 214 Administrative expenses 12,947 11,802 Acquisition costs 20,634 18,799 33,581 30,601 Included within acquisition costs is $12,420,000 (2004 $10,766,000) in respect of commission. 48 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

10 Staff costs During the year, the employment contracts of all staff of The West of England Ship Owners Insurance Services Ltd, a subsidiary, were transferred to West of England Insurance Services (Luxembourg) SA, a subsidiary formed during the year. Staff costs are in respect of the employees and Directors of those companies for the period, together with the costs of the five (2004 four) staff directly employed by the Association and International Shipowners Reinsurance SA. The total costs for all staff are: 2005 2004 $ 000 $ 000 Wages and salaries 14,688 12,644 Other staff related costs 1,271 952 Social security costs 1,461 1,164 Other pension costs 3,465 2,735 Special contribution to pension fund 3,547 3,976 24,432 21,471 The average weekly number of employees during the year, by department, was 2005 2004 Number Number Claims 83 89 Underwriting 24 24 Administration 44 40 151 153 Until 30 June 2004 the majority of the management company s staff was included in a defined benefit pension scheme which provided benefits based upon final pensionable salary. At 30 June 2004, the terms of the scheme were altered. Pension benefits for service after that date are based upon annual salaries and inflation. The assets of the scheme, which at 30 June 2004 had a market value of 37.6 million ( 36.4 million), are held in a separate fund, administered by trustees, and are invested independently of the Club s assets. Funding requirements are assessed in accordance with advice from an independent professionally qualified actuary. The most recent valuation of the scheme was undertaken as at 30 June 2004 when, on a projected unit basis, the deficit estimated for past service was 11.8 million ( 12.4 million). The projected investment returns used were 7.25% (7%) prior to retirement and 5.25% (5%) post retirement. The figure shown above for other pension costs includes the contributions paid to the scheme in accordance with the actuary s calculations which spread the funding of the deficit, for service up to 30 June 2004, over the approximate remaining service period of the staff concerned (15 years). The figure shown as special contribution to pension fund represents voluntary contributions made by the employer in excess of the actuary s certified contribution rate and has the effect of reducing the period over which the deficit is funded to less than fifteen years. Those staff employed by subsidiary companies who are not included in the defined benefit scheme and staff employed by the Association are included in defined contribution arrangements. The annual cost for the year amounted to $0.2 million (2004 $0.2 million) and is included in the figure for other pension costs. The Association has no further payment obligations once the contributions have been paid. Contributions are recognised as an expense when they are due. 49 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

2005 2004 11 Investment income $ 000 $ 000 Income from land and buildings 2,090 1,833 Investment income 9,762 10,136 Gains on realisation of investments 24,064 23,913 Unrealised gains on investments 12,831 34,384 Realised exchange gains 8,885 6,132 Unrealised forward currency gains 2,946 Unrealised exchange gains 7,058 Total investment income 57,632 86,402 Investment management expenses 3,107 3,358 Losses on realisation of investments 7,952 11,880 Unrealised losses on investments 13,734 4,226 Unrealised forward currency losses 2,484 Realised exchange losses 769 1,392 Unrealised exchange losses 1,012 Total investment charges 29,058 20,856 Total investment return 28,574 65,546 The investment return has been attributed as follows: Class 1 19,646 48,204 Class 2 587 1,864 Class 3 1 Class 4 2 The West of England Reinsurance (Hamilton) Limited 7,941 15,475 28,174 65,546 Reserve Deposit Fund 400 28,574 65,546 2005 2004 12 Taxation $ 000 $ 000 Luxembourg municipal and state taxes 402 (275) UK Corporation Tax 774 1,027 Total investment income 1,176 752 Luxembourg taxes are computed on the operations of the Association and its subsidiary, International Shipowners Reinsurance Company SA. In addition, the Association and its subsidiaries are subject to UK Corporation Tax jointly with The West of England Ship Owners Mutual Insurance Association (London) Limited ( London ). Any tax paid by the Association on behalf of London is reimbursed by that entity. UK Corporation Tax contains a transfer to deferred tax of nil (2004 $514,000). 50 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

2005 13 Summarised Income & Expenditure Account by Class $ 000 Reinsurance of WoE WoE Class 1 Class 2 Class 3 Class 4 (London) Hamilton Total Earned premiums, net of reinsurance (Note 6) 181,057 7,104 6,768 194,929 Total investment return (Note 11) 19,646 587 7,941 28,174 200,703 7,691 14,709 223,103 Claims incurred, net of reinsurance (192,668) (7,831) (48) 4,735 (195,812) Net operating expenses and taxation (33,201) (1,494) (5) (10) (47) (34,757) (225,869) (9,325) (5) (10) (48) 4,688 (230,569) Surplus/(deficit) for the financial year (25,166) (1,634) (5) (10) (48) 19,397 (7,466) Surplus/(deficit) at beginning of year 19,693 22,368 110 10 (1,597) 76,833 117,417 (5,473) 20,734 105 (1,645) 96,230 109,951 Net transfer to Class 1 Policy Year Reserve Account (Note 15) (20,785) (20,785) Surplus/(deficit) at end of year (26,258) 20,734 105 (1,645) 96,230 89,166 Deficit for the financial year as above (7,466) Investment income allocated to Reserve Deposit Fund (Note 11) 400 Deficit for the financial year (7,066) 2004 $ 000 Reinsurance of WoE WoE Class 1 Class 2 Class 3 Class 4 (London) Hamilton Total Earned premiums, net of reinsurance (Note 6) 154,756 6,604 (54) (68) 4 7,049 168,291 Total investment return (Note 11) 48,204 1,864 1 2 15,475 65,546 202,960 8,468 (53) (66) 4 22,524 233,837 Claims incurred, net of reinsurance (158,380) (7,800) (111) (17,649) (183,940) Net operating expenses and taxation (29,844) (1,432) (10) (15) (52) (31,353) (188,224) (9,232) (10) (15) (111) (17,701) (215,293) Surplus/(deficit) for the financial year 14,736 (764) (63) (81) (107) 4,823 18,544 Surplus/(deficit) at beginning of year 5,057 23,232 273 191 (1,490) 72,010 99,273 19,793 22,468 210 110 (1,597) 76,833 117,817 Transfer to Reserve Deposit Fund (100) (100) (100) (100) (400) Surplus/(deficit) at end of year 19,693 22,368 110 10 (1,597) 76,833 117,417 Surpluses and deficits at the beginning and end of years are stated after transfers to the Reserve Deposit Fund. For the year ended 20 February 2005, the Directors allocated $400,000 to the Reserve Deposit Fund from investment income (Note 11); for the year ended 20 February 2004 $100,000 was allocated to the Fund from the cumulative surplus of each of Classes 1 to 4. 51 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

14 Revaluation Reserve The balance on the Revaluation Reserve is attributed to Classes as follows: 2005 2004 $ 000 $ 000 Class 1 7,228 11,165 Class 2 235 312 Other 44 44 7,507 11,521 15 Class 1 Policy Year Reserve Account At the Annual General Meeting on 22 September 2004, the Board of Directors approved the transfer of $40.0 million from Class 1 closed years to a Policy Year Reserve Account. The following transfers were made to/(from) this Reserve by the Board of Directors at their meeting of 18 May 2005: 2005 $ 000 Balance established by transfer from income and expenditure account 40,000 Allocation to Reserve representing Class 1 net investment income, tax and valuation adjustments 12,785 Release from Reserve to close policy year 2002/03 (32,000) Balance on Reserve at end of year 20,785 52 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Notes to the Financial Statements

Class 1 Consolidated Policy Year Statement and Statement of Reserves at 20 February 2005 Policy Year Reserve 2002/03 Account $ 000 (Note 1) 2003/04 2004/05 (Note 1) Total Calls and premiums 157,998 198,468 200,669 557,135 Future additional calls (Notes 2 and 4) 24,780 24,780 Gross premiums 157,998 198,468 225,449 581,915 Reinsurance premiums (27,051) (38,969) (40,876) (106,896) Acquisition costs (16,734) (18,714) (18,866) (54,314) Net premiums 114,213 140,785 165,707 420,705 Investment income (Note 1) 37,000 12,000 20,785 69,785 Net income 151,213 152,785 165,707 20,785 490,490 Net claims paid (99,155) (100,569) (36,676) (236,400) Net claims outstanding (44,021) (71,084) (141,533) (256,638) Net claims incurred (143,176) (171,653) (178,209) (493,038) Administration expenses (7,395) (10,906) (12,001) (30,302) Net expenditure (150,571) (182,559) (190,210) (523,340) Forecast balance on open years 642 (29,774) (24,503) 20,785 (32,850) Forecast balance on closed years 34,611 Reserve Deposit Fund 16,850 The West of England Reinsurance (Hamilton) Ltd 96,230 Other Classes (Note 5) 19,467 Free reserves at 20 February 2005 134,308 Notes 1 At the Annual General Meeting on 22 September 2004, the Board of Directors approved the transfer of $40.0 million from Class 1 closed years to a Policy Year Reserve Account. The 2002/03 policy year was closed by the Board of Directors at their meeting on 18 May 2005 after allocation of $32.0 million from the Policy Year Reserve Account. At the same time, the investment income earned during the financial year was allocated to that account, together with the brought forward balance of unallocated investment income at 20 February 2004. Investment income includes all amounts earned up to 20 February 2005 - no allowance is made for future investment income. 2 Future additional calls represents 20% for the 2004/05 policy year (due 20 August 2005). Additional calls are chargeable on the advance call excluding the charge to Members for The International Group Excess of Loss Reinsurance premium. In addition, release calls have been set at 15% for both the 2003/04 and 2004/05 policy years. The estimated yields of these releases, if charged, would be $18.4 million and $21.6 million respectively. No account of these releases has been taken in the Policy Year Statement. 3 Net claims outstanding includes anticipated recoveries from The West of England Reinsurance (Hamilton). These amount to $0.4 million in respect of the 2002/03 policy year and $3.9 million in respect of the 2003/04 policy year. Notes continued overleaf 53 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Class 1 Consolidated Policy Year Statement and Statement of Reserves

4 The following disclosure is in conformity with the agreed accounting standards of the International Group of Protection and Indemnity Associations: 2002/03 2003/04 2004/05 a Disclosure relating to calls $ 000 $ 000 $ 000 Additional calls and releases already charged 21,351 26,204 4,187 Estimated product of a further 10% additional call 9,665 12,289 14,400 The additional call products shown take account of calls and releases charged at 20 February 2005 and therefore do not represent 10% of the original advance call for each year. The additional call is based on the advance call excluding the charge to Members for The International Group Excess of Loss Reinsurance premium. Closed Years 2002/03 2003/04 2004/05 b Disclosure relating to claims and reinsurance recoveries $ 000 $ 000 $ 000 $ 000 Claims paid - own business (107,261) (197,088) (29,538) Claims paid - other Clubs Pool claims (10,722) (3,964) (7,138) Gross claims paid (117,983) (201,052) (36,676) Recoveries from the Pool 17,980 62,352 Recoveries from the Group Excess Loss reinsurance 29,248 Recoveries from other reinsurances 848 8,883 Reinsurance recoveries on claims paid 18,828 100,483 Outstanding claims - own business (136,274) (50,363) (133,135) (124,171) Outstanding claims - other Clubs Pool claims (29,788) (9,777) (8,535) (17,862) Gross outstanding claims (166,062) (60,140) (141,670) (142,033) Recoveries from the Pool 21,250 7,024 28,808 Recoveries from the Group Excess Loss reinsurance 956 5,818 24,653 Recoveries from other reinsurances 45,471 3,277 17,125 500 Reinsurance recoveries on outstanding claims 67,677 16,119 70,586 500 The figure for outstanding claims includes appropriate provision for claims incurred but not reported and future claims handling expenses. Recoveries include amounts statistically projected as recoverable against claims incurred but not reported. Recoveries from the Pool include the International Group s retained share of the Excess Loss programme. 5 Other Classes consists of the following: $ 000 Class 2 20,969 Class 3 122 Class 4 21 Reinsurance of WoE (London) (1,645) 19,467 Average Expense Ratio In accordance with Schedule 3 of the International Group Agreement 1999, all members of the International Group of P&I Associations are required to prepare and disclose an average expense ratio which expresses expenses as a percentage of total income, calculated as a five year moving average. The figure for the period ended 20 February 2005 is 12.99%. 54 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Class 1 Consolidated Policy Year Statement / Average Expense Ratio

Class 2 Consolidated Policy Year Statement at 20 February 2005 Unallocated 2000/01 Investment $ 000 (Note 1) 2001/02 2002/03 2003/04 2004/05 Income Total Calls & premiums 7,678 8,020 8,319 7,203 7,191 38,411 Future additional calls (Note 2) 860 890 1,750 Gross premiums 7,678 8,020 8,319 8,063 8,081 40,161 Reinsurance premiums (1,661) (1,259) (1,478) (1,463) (1,361) (7,222) Acquisition costs (495) (526) (586) (558) (538) (2,703) Net premiums 5,522 6,235 6,255 6,042 6,182 30,236 Investment income (Note 1) 450 8,368 8,818 Net income 5,972 6,235 6,255 6,042 6,182 8,368 39,054 Net claims paid (4,447) (4,594) (3,578) (2,246) (441) (15,306) Net claims outstanding (949) (1,263) (2,254) (3,583) (5,691) (13,740) Net claims incurred (5,396) (5,857) (5,832) (5,829) (6,132) (29,046) Administration expenses (539) (488) (534) (820) (884) (3,265) Net expenditure (5,935) (6,345) (6,366) (6,649) (7,016) (32,311) Forecast balance on open years 37 (110) (111) (607) (834) 8,368 6,743 Forecast balance on closed years 14,226 Forecast balance on all years at 20 February 2005 20,969 Notes 1 Investment income includes all amounts earned up to 20 February 2005 - no allowance is made for future investment income. The 2000/01 policy year was closed by the Board of Directors at their meeting on 18 May 2005. On that date the Board of Directors allocated $450,000 of investment income to that year. 2 Future additional calls represents 20% for the 2003/04 and 2004/05 policy years, due 20 August 2005 and 2006 respectively. In addition, releases have been set at 15% for all open years. No account of these releases has been taken in the Policy Year Statement. 55 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Class 2 Consolidated Policy Year Statement

Notice of Meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Members of The West of England Ship Owners Mutual Insurance Association (Luxembourg) will be held in Hotel Le Royal, 12 Boulevard Royal, L-2449 Luxembourg on 21 September 2005 at 10:00 hours for the following purposes: 1 To approve the Report of the Directors and the Financial Statements for the year ended 20 February 2005 and to grant discharge to the Directors and Auditors for the period under review. 2 To elect Directors. 3 To reappoint PricewaterhouseCoopers S.à r.l. as Auditors of the Association and to fix their remuneration. 4 To transact any other ordinary business of the Association. By order of the Board P A Aspden Secretary 33 Boulevard Prince Henri L-1724 Luxembourg 18 May 2005 Note A Member entitled to attend and vote is entitled to appoint a proxy to attend and, on a poll, to vote instead of him. A proxy need not be a Member of the Association. The instrument appointing a proxy shall be left with the Secretary not later than 48 hours before the holding of the Meeting. 56 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Incorporated in Luxembourg RCS B 8963