finaval consolidated financial statements 2007

FINAVAL SPA Consolidated Financial Statements

as at December 31, 2007

Subject to the direction and co-ordination as per article 2497 of the Civil Code

of Finaval Holding SpA

FINAVAL SPA - CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2007

FINAVAL SPA Pag. 3

INDEX

Mission

Group profile

Group structure

Letter to the shareholders

Highlights

The Stock Exchange quotation process The macro-economic scenario Business sectors and markets The fleet, commercial activity, maintenance

Quality, security and environment Human resources

Operating performance. Balance sheet and financial performance Management of business risks

Transactions with companies of the Group

Other information

Glossary

Consolidated financial statements at December 31, 2007

Consolidation principles and scope - Accounting principles and policies

Notes to the consolidated financial statements

Attachment 1 - Transition to IFRS

Report of the board Statutory Auditors

Report of the Independent Auditors


FINAVAL SPA Pag. 4

FINAVAL SPA

The Board of Directors Giovanni Fagioli - Chairman

in office until the approval of Stefano Petrucciani

the accounts at December 31, 2009 Angelo Sani Francesco Zofrea

Paolo Francesco Lo Bue

Paul Thomas

Mark John Richardson

Christopher James Kernon

Jeffrey William Dellapina

The Board of Statutory Auditors Chairman of the Board

in office until the approval of Angelo Ghio the accounts at December 31, 2007 Standing members

Maria Altamura

Fabio Senese

Independent Auditors Deloitte & Touche S.p.a.

Share Capital Euro 32,293,000.00 - fully paid-in

Registered office Via M. Bufalini 8 - 00161 ROME Tel. +39 06 44067.1 - Fax +39 06 44067.777

Cod. Fisc. 02596490827 R.E.A. 629316

www.finaval.com

Company which exercises direction and co-ordination as per art. 2497 of the Civil Code Finaval Holding SpA


FINAVAL SPA Pag. 5

MISSION

The Finaval Group is focused on becoming a key player in European “energy” logistics.

With its affiliates, the Finaval Group boasts a long and consolidated tradition in the areas of petroleum and

petrochemical product Shipping, Engineering and Logistics, featuring strong partnerships with some of the

world’s largest companies operating in the field.

Finaval’s objective is to create value that is capable of satisfying the expectations of all those who are

involved with the Group.

This will be achieved by continuing to improve its cost base and the quality of the products and services its

provides to its customers, as well as focusing attention on the needs of its employees and the pursuit of

sustained growth, including a thorough evaluation of the environmental impact of its own activities and the

development of new and more efficient technologies.

In order to achieve these objectives, the Finaval Group draws on a wealth of managerial and technical

experience from its human resources and focuses on their continued improvement.


FINAVAL SPA Pag. 6

PROFILE OF THE FINAVAL SUB-GROUP IN THE SHIPPING SECTOR - FINAVAL SHIPPING SECTOR – FINAVAL

FINAVAL is one of the most important European companies in the energy product

shipping sector and it aims to become a key player in “energy” logistics.

The reliability of its ships, which are amongst the first in the world to use a double-hull, gives increased protection to both the ships cargo and to the environment. The

qualification of its crews, along with continuous maintenance and the use of the most modern technologies and operating standards (that are in compliance with the most recent regulations), have brought the Finaval Group to the attention of major multinational oil companies and earned it a well-deserved reputation of reliability, professionalism and safety. Attention to the diverse needs of its customers whilst offering a wide range of highly qualified services and its presence in the strategic areas of transportation are the factors that have led to the success that the Finaval Group enjoys today. The Finaval Group now enjoys a reputation for efficiency, professionalism and convenience that national and international markets demand.

COAL LOGISTICS SECTOR – VIANN LOG/MBS The company MBS - Mediterranean Bulk System N.V. - has been involved in the storage, logistics and transportation of the coal sector for many years. Its activities are carried out at the Croatian port of Rijeka – Bakar and the Slovenian port of Koper. MBS has signed contracts for the unloading and storage of coal for

electrical power plants on the Adriactic coast with both of these ports. By using port terminals with which it has collaborated for more than ten years and focusing on continued technical improvements, M.B.S./VIANN LOG offers transportation services to a variety of industrial users. They can provide ships with elevated draught, for the storage of products, with the possibility of mixing and blending and reloading and distribution with smaller ships.

ENGINEERING & SYSTEMS SECTOR – KTI MANAGEMENT/TECHNIP KTI TECHNIP KTI SpA is a process engineering company with more than thirty years of experience in the planning and realisation of systems for chemical, petrochemical and refinery industries with annual production activity of more than 400,000 service

hours. Its client list ranges from major oil companies to chemical, petrochemical, pharmaceutical and food industries to which TECHNIP KTI supplies a wide range of services from consultation on feasibility studies to the supply of turnkey systems and management and maintenance, operating as general contractor for the customer. The development and continued updating of its own technologies, a nucleus of process specialists and more than 500 projects have made TECHNIP KTI a global technology leader.

PROJECT FORWARDING SECTOR – FINAVAL OFFSHORE SRL

The establishment of Finaval Offshore, which took place in the final months of 2007, is in

line with the Group’s strategy of developing added value high-technology transportation

and logistics.

This initiative, although it features strong new entrepreneurial ideas, is based on the continued respect for the

traditions of the Finaval Holding Group, which had operated in this sector for more than a decade and up until

2001 developing its management skills and business relationships.


FINAVAL SPA Pag. 7

STRUCTURE OF THE FINAVAL SUB-GROUP AT 31/12/2007

The main events in 2007 included: the entry into the share capital of Finaval S.p.A. by Vitol B.v., one of the major global players in the trading

and shipping sector with a shareholding of 25%. In December 2007, an agreement was completed in

which Finaval S.p.A. approved a reserved paid-in share capital increase to the new shareholder for a

holding of 25%.

FINAVAL HOLDINGFINAVAL HOLDING

VIANN LOG LdA

MBS Nv

50%

Finaval SpA

75%

100%

KTI M. SpA

76,1%

Coal LogisticsShipping

TECHNIP KTI SpA

75%

Power

Finaval Offshore S.r.l.

Project Forwarding

29,24%

Sofipart S.r.l.

100%

Finaval Aviation S.r.l.

Air Cargo

100%

FINAVAL HOLDINGFINAVAL HOLDING

Finaval SpA

75%

EnergeticaLda

100%

Cabofin S.r.l.

Naftilos AM Ltd

50%

50%

25%

Novamar InternationalScarl in liquidazione

50%

Finaval Subholding details


FINAVAL SPA Pag. 8

Finaval S.p.A. subscribed to a 50% holding in Cabofin S.r.l., operating in short range transportation of

derivative petroleum products.

in November 2007, the Group entered the “Project Forwarding” sector with the incorporation of the

company “Finaval Offshore S.r.l.”, which began operations in 2008;

a series of corporate operations took place in the “Engineering and Systems” sector, which involved the

creation of a sub-holding, Sofipart S.r.l., of which Finaval Holding S.p.A. currently has a holding of 29.24% of

the Share Capital.

In 2008:

in January, the Group exited the “Air Cargo” sector with the sale of its total investment in the company

“Finaval Aviation S.r.l.”.

through its subsidiary Energetica Lda, it attained a 50% holding in the newly incorporated Maltese

company Angelica Shipping Ltd. This company purchased a 46,000 dwt Product tanker, with scheduled

delivery in April.

Winning photos of the 2007 Finaval photo contest, by category:

Best artistic shot (D’Angelo Rosolino) Best detail shot (Demonte Paolo)

Best action shot (Marengo Eddy)


FINAVAL SPA Pag. 9

CHAIRMAN OF THE BOARD OF DIRETORS’ LETTER

Dear Shareholders,

In commenting on 2007, I must highlight the fact that the fiscal year which has just ended was an important

one in our Group’s history, and featured some significant decisions that will certainly influence our future plans

and development.

The year was especially important for Finaval, which, in addition to dealing with its complex day-to-day

operations, faced some important financial challenges.

From a management standpoint, Finaval continued the journey of growth begun in recent years, focusing on

the progressive and balanced expansion of the fleet and concentrating on investments aimed at reducing

the average age of the ships owned by the Group. In this regard, two additional Aframax ships were ordered

from the Korean shipyard Samsung, with delivery scheduled for 2010. Finally, to guarantee both the renewal of

the fleet and a balanced presence in the Product and Crude Oil sectors, agreements were signed for the sale

of M/T Neverland Soul and two of the new Aframax constructions (Hulls 1658 and 1659) in 2008, in order to

proceed with the purchase of four newly constructed 50,000 DWT vessels. Moreover, throughout the year, we have continued to search for important synergies with competent and

qualified operators in our sector. The joint venture with the Greek group Ancora became operative with the

acquisition and excellent performances by M/T Naftilos AN and together with the purchase, during the first

months of 2008, of another 46,000 DWT Product tanker, we continued to consolidate the excellent business

relationship we have established with the Italian group Cabotaggi S.p.A. through the “Cabofin” joint venture,

ensuring our presence in the short-range oil transport sector, which we consider to be highly strategic. On the financial front, the second half of the year featured Finaval's stock market listing project. The objective

of this operation was the company’s continued development, in the belief that placement on the market

could enable the company's intrinsic value to be fulfilled. However, the negative market conditions which occurred prevalently during the final phase of the process led

us to withdraw the offer.

In relation to the strategic-financial plan, and even before preparing the stock market listing, Finaval had been

studying programmes aimed at finalising agreements and consolidating partnerships with important players

operating in the oil industry which are targeted, on the one hand, at improving Finaval’s financial and

economic position by strengthening its own ability to complete and increase investment plans, and on the

other, at developing our know-how and creating important industrial synergies - also through expansion of the

shareholder base. These objectives were achieved with the entry of a new minority shareholder, Vitol B.V., with which Finaval has

had an established business relationship for many years.

This expansion of the shareholder base, reserved for a key operator in the global oil industry like Vitol B.V., will

allow us to further improve our visibility in the markets in which we operate, creating a base with which we will

be able to attract additional investment.

Vitol will support Finaval by contributing, through its business experience, a strong and extensive presence in

the chartering market and offer financial backing, in order to increase fleet numbers in those sectors that both


FINAVAL SPA Pag. 10

companies consider to contain good profit margins, with the long-term objective of expanding Finaval’s

financial resources and capacity, thereby allowing it to become a key international player in the industry. A part of this objective is also the judicious policy of the acquisition and divestment of ships of different

tonnage, as mentioned previously.

The strategy adopted for 2008 guarantees our presence in the different sectors of petroleum transportation

with ships of varying tonnage and allows us to forecast a positive operative performance, even in the

presence of a significant weakening of the Dollar, which is expected to be countered by a consistent

contribution in terms of profitability from the extraordinary capital gains on the afore-mentioned sale/purchase

activities.

The growth will continue thanks to the quality and values that characterise the Finaval Group and its team:

based on the achievement of results, its capacity to innovate and complete on international markets, loyalty,

correctness and transparency. Finaval’s growth is based on the values that have guided the Group and will continue to guide it in the future.

In support of our business model, we confirm our commitment to help Finaval's growth and reach its future

objectives with a sense of responsibility and reliability, transparency and integrity: success is mainly measured

by the way in which it is achieved. At the heart of our strategy is the central role we assign to our human resources - the importance of enhancing

each person’s abilities and skills and guaranteeing them a correct and stimulating work environment.

We are aware that any organisation’s performance is the sum of the people who work for it each and every

day with commitment, determination and passion, in order to transform it into a Group that is worthy of pride.

With such an important year coming to a close, we now look to future challenges, with a confidence that

derives from our company’s strength, the professionalism and dedication of our partners, the pressures to

adapt that are the basis of our actions and undiminished values which set us apart.

The Chairman

Giovanni Fagioli


FINAVAL SPA Pag. 11

HIGHLIGHTS

In 2007, Finaval SpA recorded a consolidated net profit of Euro 1,679 thousand. Consolidated revenues

from services totalled Euro 62,889 thousand, a decrease of approximately Euro 16,494 thousand from the

previous year as a result of the reclassification of the gas tanker sector among “Discontinued operations”.

The Ebitda was Euro 12,646 thousand. Amortisation and depreciation amounted to Euro 10,503 thousand.

Financial management was a net charge of Euro -1.2 million, an improvement of approximately Euro 681

thousand on 2006. During 2007, the stock market listing process of company shares was initiated with the Italian Stock

Exchange. After the approvals obtained from both Consob and Borsa Italiana S.p.A. the process was

halted due to the extremely negative performances of the national and international financial markets.

The extraordinary costs incurred during the year, which were mainly related to the afore-mentioned stock

market listing transaction, amounted to Euro 2,731 thousand. In January, Naftilos A. Marine Ltd, a company of which our Group holds a 50% shareholding, purchased

the 36,000 dwt product tanker Naftilos A.N.

During the course of the year, two new 115,000 dwt Aframax constructions (Hull 1780 and Hull 1781), twin

ships of orders in previous years, were ordered from the Samsung shipyards. These ships are scheduled for

delivery during the second half of 2010. In April, along with the Italian Group Cabotaggi S.p.A., Finaval invested a 50% holding in a new company,

Cabofin S.r.l., which has been established for the management of Small Size Product ships for short-range

transport. This company began operating activities in September. In December, a complex sale/purchase transaction for several ships was completed.

Specifically, the sale took place, to be completed in 2008, of 3 Aframax vessels, the Neverland Soul and 2

new constructions ordered at the Samsung Shipyard in 2005 (Hull 1658 and Hull 1659), for a total amount of

USD 227.5 million, and the purchase of 4 Product vessels of 50,000 Dwt, with delivery in 2008, for a total

investment of Euro USD 232 million. These transactions will result in cash inflows of approx. USD 22.4 million in

2008. Agreements were reached with the Royal Bank of Scotland and Deutsche Schiffsbank for the financing of

two new constructions (Hull 1741 and Hull 1742) that were ordered from the Samsung Heavy Industries

shipyards in 2006. At year end, with a view to strengthening the balance sheet and financial position and the consolidation

of its partnerships, an important agreement was reached with Vitol B.V., world leader in the petroleum

sector. As a result of this agreement, Finaval S.p.A. approved and implemented a share capital increase

with a 25% holding reserved for Vitol B.V. and also added four senior managers from the Anglo-Dutch

company to its Board of Directors. In order for a better understanding and transparency of the principal economic and financial events of

the Group in the year, it was decided from the year 2007 to prepare the separate and consolidated

financial statements of the company Finaval SpA in accordance with IAS/IFRS (International Financial

Reporting Standards).


FINAVAL SPA Pag. 12

THE STOCK EXCHANGE QUOTATION PROCESS

The year 2007 for the Company was a year marked by important events, which we describe below. During the

year, in fact, Finaval underwent significant change through the decision, taken at the beginning of the year,

to commence the quotation process of the shares on the Italian Stock Market. The Company approved, within

its development plans, to undertake a public subscription offer of new shares through a share capital increase.

It was considered that the expansion of the shareholder base would allow for the provision of new resources

and, consequently, the strengthening of the financial position and balance sheet, as well as the capacity to

complete and increase the investment plans projected. On July 13, 2007, the Shareholders’ Meeting approved

the quotation of the ordinary shares of the company on the Italian Stock Exchange. At the end of the

application procedures authorisation was obtained for the quotation, first from Borsa Italiana S.p.A. and,

subsequently, on November 6, 2007, from Consob for the publication of the “Information Prospectus” relating

to the public subscription offer and to the admission of the shares on the Italian Stock Exchange. The public offer took place between November 12 and November 29 and related to 10,380,000 newly issued

shares. It should be underlined that the offer was made in a period when the stock markets were experiencing

the full intensity of the crisis deriving from the “subprime” market which began in August with contained effects

and which, after a false stall, saw more consistent reductions in share prices in November. This general event

was accompanied by a further factor concerning the shipping sector which, following the publication of the

third quarter results of companies already listed, there was a general lowering by the analysts of the principal

market multiples with repercussions on earnings projections. As a consequence of the above events the Company, although having obtained the necessary authorisations

and having covered its offer, decided to withdraw the Global Offer, due to the difficult national and

international financial market conditions, which resulted in a strong reduction in the placement price. This

decision was taken considering both the benefits deriving from the quotation of the company in terms of

image and prestige and the financial resources towards future business growth. It was considered that listing

the shares in such a difficult market would have meant the wish to pursue an objective in a rigid and short-

sighted manner without the correct dynamism that has always been the hallmark of Finaval S.p.A.


FINAVAL SPA Pag. 13

THE MACRO-ECONOMIC SCENARIO

The year 2007 saw the continuation in the recovery of the world economy, altbeit at a slower pace than in

2006.

Growth slowed in particular in the United States due to the effects from the American subprime crisis. Europe

however recorded robust growth driven by strong demand and progressive improvement in the labour

markets. As in 2006, the emerging countries in the Asiatic region - lead by China - recorded growth above the

average. From these general conditions the price of petrol, metals and food increased as well as in the energy

and raw material sectors and the emerging markets. During 2007, the financial markets were affected by the problems in the real estate market and in the US

subprime. At the end of June, the provision of credit without limit by the banks, the fall in the prices of

residential property, the excessive dependence on the US securitisation financial sector and the mortgage

sector resulted in a radical revaluation of risks and a temporary stall in the trading of securitised mortgages. A second key element in the international scenario was represented by the strong increase in energy, and

food raw material prices, due to a multitude of factors, amongst which was the high demand from the

emerging countries.

In relation to 2008, the prospects for the world economy continue to be unsettled. The world macroeconomic

scenario, in fact, is still dominated by the US real estate mortgage crisis which began last summer and has

major implications on the financial markets and world growth. Particularly in the US, the real estate market crisis and the relative turbulence in the financial markets have

increasingly affected the economic outlook. After the rises in real estate prices and favourable credit

conditions induced a strong expansion in private consumption in recent years, the domestic economies in the

US are expected to return to increased savings, which could mitigate growth in consumption for a number of

years. Therefore, an imminent and robust economic recovery seems improbable; in fact, the American

economy is expected to remain weak also in 2009. The strong expansionist monetary and fiscal policy should

however contribute to stem the downturn avoiding a deep recession. Overall, the American economy in 2008

and in 2009 is expected to achieve contained growth (1.3% for each of the next two years) compared to its

normal growth. In recent months also the Euro zone has reduced its economic forecast, although not as

marked as in the USA. While in 2007 the economic growth in the Euro zone reached 2.6%, in 2008 and 2009 the

forecast growth is only approx. 1.5%. There are also signs of a slowdown in Japan, which will end 2008 with growth of 1.5%, -20 b.p. compared to the

expectations in October. At present the crisis does not appear to have affected the emerging economies. The

IMF estimates GDP growth in China of 10% this year compared to 11.4% in 2007. The overall developing

economies are expected to grow by 6.9%, a reduction of 20 b.p. compared to the indications in October.

Growth in Africa is forecast at 7%, while Central and Easter Europe is forecast to grow at 4.6% and the former

states of the Soviet Union at 7%.

* * * * * * * * * * *


FINAVAL SPA Pag. 14

In 2007, the price of crude oil saw continuous rises reaching over USD 110 per barrel at the beginning of 2008.

On the offer side there remains the difficulty of the producer countries to adjust to a growing demand due to

insufficient infrastructural investments in the upstream. These decisions are based on a very high level of

irreversibility and as such are impacted largely by economic-political uncertainty. The volatility in prices due to

speculative and geopolitical reasons and the impact of environmental factors could induce a certain caution

in the expansion of the offer in spite of the continual rising petroleum price. In addition, there are difficulties in

sourcing human resources and technology, the skills and the know-how, appropriate for exploration activities

and extraction technically and geographically more complex than in the past.

The weakness of the dollar is also an element which inevitably impacts the world economy and which does

not favour a decrease in the price of petroleum. In fact, according to a recent study cited by the Financial Times, Venezuela will require a minimum price of

approximately USD 95 per barrel to maintain its international trade balance; this decreases to USD 70 for

Nigeria, USD 60 for Saudi Arabia and USD 50 for Kuwait and Qatar.

* * * * * * * * * * *

In relation to the exchange rates and monetary policy, 2007 saw a strong weakening in the Dollar/Euro rate,

from Euro 1.317 at December 31, 2006 to Euro 1.4721 at December 31, 2007. The recent turbulence in the

financial markets consequent of the “subprime” mortgage crisis has increased the expectations of weakness

in the US Dollar. The prospects of recession relating to the US economy, as illustrated above, does not lead to

expectations of a recovery in the Dollar which should remain at current levels(1,50/1,60)..

Euro Interest rates rose steadily during the year and the Dollar interest rates declined in the final quarter. For the

expectations relating to 2008, it is underlined that in addition to the real economic performance, strong

impact will also arise from the monetary policy by the United States and by Europe, as seen at the beginning

of 2008, with substantial cuts in US interest rates in order to stimulate consumption and investment.


FINAVAL SPA Pag. 15

REFERENCE MARKET

Aframax Sector

The performance of the ships included in this segment, which are managed by the Finaval Group, was

approximately USD 28,200 per day, achieved through a mixture of spot and time charter revenues.

The spot market average for 2007 was approximately USD 31,400 compared with USD 33,800 in 2006, the time

charter (one year) market average was USD 33,160, similar to the previous year. This performance can be

attributed to the normal market dynamics and an increase in the fleet tonnage, which for this particular

segment, has grown by approximately 6.8% in the last 12 months. This sector today accounts for a tonnage of

Euro 79.8 million. Growth estimates for the fleet at the end of the next year forecast the delivery of an additional 8.6 million dwt,

and scrapping is expected to be about 0.2 million dwt, with an overall increase of 10% in the tonnage on the

current amount.

The order book at year-end shows a tonnage of 29.7 million, equal to 37% of the current fleet, with deliveries

scheduled to arrive until the first part of 2012.

The “second-hand” price for the Aframax vessels has continued to grow, from an average of USD 68.5 million

in 2006 to USD 70.0 million at the end of 2007.

Medium-to long-term prospects in this sector remain mostly positive, thanks to forecasts for continued growth,

in the order of 4-5 per cent annually of global energy demands. In the short-term, there is the possibility of

some tension between supply and demand for transportation, due to the entry of new waterway transport

and the delay in the programmed demolition of old vessels, which even today, are able to provide interesting

freight opportunities. However, this demolition will be mandatory for all ships that fail to meet certain requisites

by 2010.


FINAVAL SPA Pag. 16

Product MR Sector

In this sector, the Finaval fleet is mainly involved with time charter contracts with profit sharing, with only the

M/T Natiflos in the spot market. The spot market average for 2007 was approximately USD 26,000 compared with USD 27,300 during 2006; the

time charter (one year) market average was USD 20,300 compared with USD 21,000 in the previous year.

This pressure is mainly associated with the increased fleet tonnage, which for this specific segment, has grown

by approximately 7% in the past 12 months. This sector today accounts for a tonnage of Euro 58 million. Growth estimates for the fleet for the end of next year forecast the delivery of another 9 million dwt and the

expected scrapping of about 1 million dwt, with an overall increase of 12% of tonnage on the current amount.

There are some factors associated with this issue which, despite the economic slowdown, should sustain the

petroleum shipping market, such as:

• Increase and relocation of refinery capacities compared to the geographical area of consumption;

• Increased demand for the shipping of vegetable products;

• Reduction of the fleets’ shipping capacity due to arbitration policies, tightening of inspection

procedures and increase in unloading and maintenance delays.

In fact, the “second-hand” price for products has continued to grow, from an average of USD 46.3 million in

2006 to USD 50.7 million at the end of 2007.

Moreover, the prospects for the sector are well grounded, especially with regard to the structural increases

forecast for refinery activities, particularly in the Far East, India and South America.


FINAVAL SPA Pag. 17

THE FLEET MANAGED At December 31, 2007, the fleet of Finaval was as follows

SHIP HULL CLASSIFICATION DWT/Mc YEAR OWNERSHIP

Crude Neverland Double Hull N/A 105,411 2003 FinavalNeverland Soul Double Hull N/A 115,639 2004 Energetica (*)Jag Lata Double Hull N/A 105,716 2003 The GescoNeverland Gold Double Hull N/A 114,800 2008 FinavalNeverland Sky Double Hull N/A 114,800 2008 FinavalTBN3 Double Hull N/A 114,800 2009 FinavalTBN4 Double Hull N/A 114,800 2009 FinavalTBN5 Double Hull N/A 114,800 2010 FinavalTBN6 Double Hull N/A 114,800 2010 Finaval

Products Medium Range

Isola Verde Double Hull N/A 36,457 1994 FinavalIsola Rossa Double Hull IMO II-Coated 40,727 1997 FinavalIsola Gialla Double Hull IMO II-Coated 43,157 1999 FinavalIsola Magenta Double Hull N/A 36,457 1994 FinavalNaftilos AN Double Hull IMO III 37,379 2003 Naftilos AM (*)

Products Small size

Sichem Singapore Double Hull IMO II 13,141 2006 Eitzen GroupStellaria Double Hull IMO II - IMO III 14,070 1994 CaligaCurzola Double Hull IMO II - IMO III 14,070 1993 Caliga Lpg Gas Ice N/A Semi/Ref 3,366 m3 1991 StealthGas Artic N/A Semi/Ref 3,366 m3 1992 Stealth

(*) Finaval Group


FINAVAL SPA Pag. 18

COMMERCIAL ACTIVITIES The following table contains the details regarding the type of use for each ship.

SHIP USE CHARTERERS

Crude Neverland Tc RelianceNeverland Soul Spot J.V. Vitol -World wideJag Lata Tc - Spot Stena Bulk limited – World wide Products Medium Range Isola Verde Tc Mansel Oil limitedIsola Rossa Tc Mansel Oil limitedIsola Gialla Tc Mansel Oil limitedIsola Magenta Tc Mansel Oil limitedNaftilos AN Spot World wide Products Medium Range Sichem Singapore Spot Mediterranean AreaStellaria Spot Mediterranean AreaCurzola Spot Mediterranean Area Lpg Gas Ice Tc Alfa Trade and ServicesGas Artic Tc Alfa Trade and Services


FINAVAL SPA Pag. 19

MAINTENANCE OF THE FLEET

During 2007, long-term maintenance (class renewal and/or intermediate class and/or improvement

interventions) and extraordinary maintenance work was carried out on the following vessels:

M/V NEVERLAND SOUL (Hull repair following a collision with Pos Leader, Singapore, January 2007) M/V ISOLA ROSSA (Class Renewal, completed in dry-dock, Class confirmed until May 2010) M/V ISOLA VERDE (Intermediate Class, complete with dry-dock, Class confirmed until February 2009) LPG GAS ARCTIC (Class Renewal, completed in dry-dock, Class confirmed until October 2010) M/V ISOLA MAGENTA (Intermediate Class, completed in dry-dock, Class confirmed until September 2009)

M/V NEVERLAND SOUL

The ship remained anchored in Singapore from 6/02/07 until 16/02/07 for hull repairs resulting from the collision

with the ship Pos Leader, which occurred in the Singapore canal on January 26, 2007.

Once repairs were finished, verifications were made regarding the Class (RINA and DNV) which was confirmed

until November 2009.

During the stoppage, a modification was made to the chain locker (upgrading) to allow for improved

stowage during recovery.

M/V ISOLA ROSSA

The ship remained at the DAEWOO shipyard in Mangalia (Romania) from 17/04/07 until 19/05/07.

During the stoppage, the main engines, the substations and generators, as well as a variety of equipment in

the engine room, on deck and on the bridge were inspected.

Since it was a class renewal inspection, the ship was put into dry-dock to allow the keel to be cleaned and

completely repainted with the use of “TBT free” type anti-vegetative and self-smoothing paint.

Under the surveillance of the class inspectors (RINA and BV), all of the load tanks were inspected and the

correctness of the “GOOD” classification of the protective treatment was confirmed.

All of the ballast compartments were inspected, verifying the integrity of the structures with thickness surveys

carried out by ultrasound.

A partial restoration of the coating in some of the ballast tanks was necessary and upon completion of these

interventions all of the ballast compartments were classified as “GOOD”.

Since the twin ship ISOLA GIALLA had displayed problems with the rudder fin in the past, special attention was

paid to structural verifications of this installation with local reinforcement interventions in order to avoid future

problems. These interventions were carried out under class surveillance. All of the rudder system components

(including the rudder machine as well as the related power units) were taken apart and accurately checked

as well as the entire rudder blade support/centralising system (bearings, bushings, etc.). These interventions resulted in a prolonged ship stoppage, first in dry-dock and then in the quay, of at least 10

days. Finally, special attention was paid to the elimination of the observations and the adoption of

recommendations received from the Oil Companies who inspected the ship up until its stoppage for

maintenance and repair work.

Then, the S-VDR system (Simplified Voyage Data Recorder) was installed, which is required by new regulations

as of the first docking after 1/07/2006.


FINAVAL SPA Pag. 20

Finally, during the stoppage, some modifications and improvements were made in order to correct

deficiencies that were found during the year and can be summarised as follows:

retro-fitting of remote control ballast valves;

supply and installation of the new sea anti-fouling system; supply and installation of a fire alarm system in the sleeping quarters and pump room; renewal of the bunker boarding line with another of greater diameter;

transformation of tank 81 from Diesel Oil to Fuel Oil with Low Sulphur Content;

installation of “ullage” portholes for load tanks;

upgrade of the boiler with the installation of two new generation burners

The ships left the shipyard with all of its class and statutory certifications renewed until May of 2012.

With the improvement interventions, we can confirm an increase in the ship’s value and that it will continue to

be in line with the highest international regulatory standards and, finally, that it fully satisfies the strictest policies

set by the Oil Companies.

M/V ISOLA VERDE

The ship remained at the DAEWOO shipyard in Mangalia (Romania) from 04/05/2007 until 01/06/2007.

During the stoppage the main engine had a complete overhaul, as did the power units and a number of

machines in the engine room and equipment on deck and on the captain’s bridge were also checked.

Since it was an intermediate class inspection, the ship was put into dry-dock to allow the keel to be cleaned

and completely repainted with the use of “TBT free” type anti-vegetative and self-smoothing paint.

Under the surveillance of the class inspectors (RINA and ABS), all of the load tanks were inspected and the

efficacy of the protective treatment was classified as “GOOD”.

All of the ballast compartments were inspected, verifying the integrity of the structures with thickness surveys

carried out by ultrasound.

The treatment of the ballast compartments was classified as “Fair” and the restoration intervention, given the

good condition of the sacrificial anodes, was postponed until the class renewal stoppage scheduled for 2009.

The most recent analyses of the oil in the rudder system had shown a presence of metals and therefore as a

preventative measure the rudder machine and its relative power units were taken off ship and completely

disassembled at the service centre where inspections and the consequent mechanical work were carried out.

After the work was complete, evolution tests were carried out to verify the perfect working condition of the

rudder system.



Finally, during the stoppage, some modifications and improvements were made in order to correct

deficiencies that were found during the year and can be summarised as follows:

installation of “ullage” portholes for load tanks;

installation of a new “S” band radar;

upgrade of the bulkhead flow load pump axes cooling system;

sanding and painting of the covered bridge

The vessel left the shipyard with all of its class and statutory certificates approved until February of 2009.


FINAVAL SPA Pag. 21

LPG GAS ARCTIC

The ship stayed in the Ravenna shipyard from 23/05/07 until 14/07/07.

Since it was a special survey, thickness surveys were carried out and all of the ballast compartments were

carefully inspected, under the surveillance of the Class Inspectors (RINA and BV) to verify the complete

integrity of the hull.

The interventions that were carried out included the complete inspection of the main engine and the

substations and generators as well as a range of equipment on the deck (compressors/ load pumps) and on

the bridge.

The ship was placed in dry-dock in order to clean and completely repaint the keel with the use of “TBT free”

type anti-vegetative and self-smoothing paint.

The vessel left the shipyard with all of its class and survey certificates renewed until October of 2012.

M/V ISOLA MAGENTA

The ship was held in the San Giorgio Shipyard at the Port of Genoa from 12/09/07 until 1/10/07.

During the stoppage the main engine, the substations and generators as well as a range of engine room

machinery and some equipment on the deck and the bridge were inspected.

Since it was an intermediate class survey, the ship was placed in dry-dock for the cleaning and complete

repainting of the keel with the use of “TBT free” type anti-vegetative and self-smoothing paint.

Under the surveillance of the class inspectors (RINA and ABS), all of the load tanks were inspected and the

efficacy of the protective treatment was classified as “GOOD”.

All of the ballast compartments were inspected in order to verify the integrity of the structures with thickness

surveys carried out by ultrasound, the efficacy of the protective treatment was confirmed and all of the ballast

tanks were classified as “GOOD”.

For this vessel, the most recent analyses of the oil in the rudder system had also displayed the presence of

metals and therefore as a preventative measure the rudder machine and its related power units were taken

off board and completely disassembled at the service centre where inspections and the consequent

mechanical work were carried out.

After the work was complete, evolution tests were carried out to verify the perfect working condition of the

rudder system.



Finally, during the stoppage, additional modifications and improvements were carried out which can be

summarised as follows:

upgrade of the bulkhead flow load pump axes cooling system;

modifications to the mooring system in the manifolds zone; modifications to the mooring system at the

stern in compliance with the most recent regulations issued by the Panama Canal Authorities;

attaining of additional Plimsoll marks to carry 32,000 t and 29,999 t loads;

installation of a new “X” band radar

sanding and painting of the covered bridge The vessel left the shipyard with all of its class and statutory certificates validated through September of 2009.


FINAVAL SPA Pag. 22

QUALITY, SECURITY AND ENVIRONMENT At the beginning of 2008, during the “Management re-evaluation” the performances achieved with regard to

the integrated quality and environmental systems for the previous year were analysed and the objectives to

be reached during 2008 were defined.

OBJECTIVES ESTABLISHED IN PREVIOUS EXAMINATION AND ACTIONS TAKEN

Objective: implement the ship Portal to accommodate all procedures, manuals and memoranda. Actions

undertaken: twice yearly, the Quality Department will inspect and request the documentation updates

from the departments and create the “cd” to be provided on board the ships; Objective: formation of the company at the Ischitella centre as approved by the plan which is currently

under Management Review. Actions undertaken: every two months, training is provided for Officers

according to the subjects contained in Module 1. Training will also occur with the same time period for

those applying the Module II subjects. Objective: improve the fleet Officer’s level of English language knowledge. Actions undertaken: Two

courses have been provided by the English instructor at the IMA – IMAT centre. Objective: create a project for the execution of seminars to be held in India (course content, methods,

and instructors). Actions undertaken: this was organised and took place in India. From next year, the

course content for company training will be adopted by the Recruitment agency and the same methods

and content shall be used at the Ischitella centre. Objective: define periodic meetings to analyse non-compliances and determine the necessary corrective

actions in order to reduce the average number of occurrences. Actions undertaken: Every three months,

Finaval and Teknè managers meet to discuss and analyse the results of the inspection surveys conducted

on board the vessels. Objective: TMSA to consolidate level 3 and focus on reaching a higher level in those areas where critical

issues have been identified. Actions undertaken: consolidated all of the level 3 elements. OBJECTIVES 2008 Create the 2008 training programme with management approval. Create an integration process among the different nationalities on board the vessels (same training

programme, imparting of Finaval policies and objectives).

Implementation of an evaluation system for the acquisition of the course content carried out at the IMA-

IMAT centre in the present and over time.

Implementation of new indicators to verify the performance of the Operations Department. (TCE

Actual/TCE Estimate) and of Chartering. Develop a project to create an AMOS data analysis system for all of the departments that are involved in

the programme.

Implement an evaluation system of commanders and managers based on the recording and control of

performances.

Implementation of a computerised appraisal system with periodic evaluation and monitoring of averages

and the development of a methodology to render the evaluation system objective. Develop a project for a training course with the objectives of recruitment and possible career

advancement based on the new STCW provisions.


FINAVAL SPA Pag. 23

HUMAN RESOURCES Reporting on human resources in the 2006 accounts, 2007 was identified as the year that would allow the

entire business to prepare for the new constructions programmed from 2008 until 2010.

In this regard, we have operated on two different levels:

from an operational standpoint, the internal structure has refined its processes to create an organisation

that can coordinate activities between our technical partner Teknè and the naval unit command.

In fact, the principle focus on strengthening the relationships between the ship, its command and the

operational area (operations offices and crewing) and secondly between the afore-mentioned subjects

and our main supplier, Teknè, has been reaffirmed. This has made the maritime relationship with the Rome

office more “cohesive” and more involved with our partner Teknè’s overall management system, with full

respect for corporate autonomy and objectives. The involvement has been stepped up with trilateral

coordination and communication at all levels: meetings, teleconferences, simple communications

referring to a series of common and strategic organic projects, management, management policy and

voluntary systems of management (quality, TMSA, etc.); from an administrative standpoint, the company has proved its ability to be able to withstand extremely

intense pressures. In this context, it is worth recalling the commitment shown to welcome our new

shareholders to our Company and our financial and administrative commitment. With regard to staff, both the quantitative and qualitative rationalisation of Italian personnel can be

considered complete. In this regard, the consolidation of relationships with a very stable nucleus of maritime

crew that display mature overall management policies from previous years are to be noted. With regard to

foreign maritime personnel (we are referring specifically to Indian personnel) a good result has been shown

thanks to the support provided by our partners, which, once again, can also be attributed to good

performances during previous years. In light of the new constructions that are scheduled for delivery,

recruitment plans have been set out for both foreign and Italian personnel, with the objective of acquiring

staff of quality and professionalism. With regard to the office staff, a substantial confirmation of the team and

its main functions is to be noted. Finally, special mention should be made regarding maritime training: there has been a consolidation of the

relationship with IMA-IMAT, which has been identified as an ideal partner for the management of all aspects of

training. In this regard, besides the modernity of the structures, the centre is notable for its availability and for

having completely adopted the company philosophy, which is oriented not only towards form, but also

towards content. The centre has satisfied our needs up to this point, so much so that we are convinced that

we have created a complete training school. Our financial, human resources and programmed investments

are oriented in this direction. Moreover, this training commitment has guaranteed the involvement of external

agencies, through the development of commonly agreed programmes, carried out at their own centres.


FINAVAL SPA Pag. 24

OPERATIONAL PERFORMANCE

The table below reports Finaval S.p.A.’s key financial results, consolidated with the results from its subsidiary, Energetica Lda and the joint venture Naftilos A. Marine Ltd and Cabofin S.r.l., compared with the consolidated results from the previous year.

CONSOLIDATED INCOME STATEMENT 2007 % Changes % 2006 %

Revenues 62,889 141.7% -20.8% 79,383 136.1%

Voyage Costs -18,509 -41.7% -12.1% -21,063 -36.1%

TIME CHARTER EQUIVALENT EARNINGS 44,380 100.0% -23.9% 58,320 100.0%

Hire costs -8,658 -19.5% -15.9% -10,300 -17.7%

Operating costs -14,082 -31.7% -44.1% -25,200 -43.2%

CONTRIBUTION MARGIN 21,640 48.76% -5.2% 22,820 39.1%

Overhead costs -8,803 -19.8% 40.7% -6,257 -10.7%

Other costs and revenues -191 -0.4% -62.9% -515 -0.9%

Result on disposal of vessel 0 0.0% -100.00% -135 -0.2%

EBITDA 12,646 28.5% -20.5% 15,913 27.3%

Amortisation & depreciation -10,503 -23.7% 3.0% -10,196 -17.5%

EBIT 2,143 4.8% -62.5% 5,717 9.8%

Net Financial income (charges) -1,169 -2.6% -36.8% -1,850 -3.2%

PRE-TAX RESULT 974 2.2% -74.8% 3,867 6.6%

Income taxes for the year -329 -0.7% -234.3% 245 0.4%

PROFIT FROM CONTINUING OPERATIONS 645 1.4% -84.31% 4,112 7.1%

Net result from discontinued operations 1,034 2.3% -555.5% -227 -0.4%

NET PROFIT 1,679 3.8% -56.8% 3,885 6.7% The Contribution Margin, although it has decreased in absolute terms, is 49% of the Base Time Charter

revenues compared with the 39% reported in 2006, confirmation that the choices made with regard to the divestment from sectors that were considered to have limited profitability have produced an increase in operational earnings for the company.

With regard to EBITDA, the above improvement has been mainly reabsorbed by organisational costs, which have been significantly “burdened” with extraordinary costs mainly deriving from the company’s aborted stock market listing procedure, for a total of approximately Euro 2,731 thousand. This margin was achieved in spite of a weakened Euro/Dollar exchange rate; on a like-for-like exchange rate the EBITDA in 2007 would have been higher by approx. Euro 2.9 million;


FINAVAL SPA Pag. 25

With respect to forecasts made at the beginning of the year, the results from the Aframax and Product sectors were negatively impacted by the afore-mentioned depreciation of the Dollar, as well as a second half-year that saw the markets experience a slowdown compared to the first half of the year.

With regard to Financial Management, the result was impacted in this case positively by the movement in the Euro/Dollar exchange rate. Euro interest rates rose steadily during the year while Dollar interest rates declined in the final quarter of the year. However, Finaval has been relatively unaffected by these movements in that a significant share of its exposure has been covered with hedging transactions.


FINAVAL SPA Pag. 26

BALANCE SHEET AND FINANCIAL PERFORMANCE The following table contains the consolidated balance sheet data compared with the related consolidated

data from the previous year, followed by the Cash Flow Statement. Of particular note: shareholders’ equity increased:

− by Euro 2 million due to the profit in the year;

− by Euro 20 million due to the Share Capital increase.

and decreased by approximately Euro 1.5 million due to the consolidation of the company Naftilos A.M.

Ltd and the fair value of the financial assets held-for-sale.

net fixed assets reduced by Euro 41.2 million, mainly for the combined effect:

− of the reclassification under non-current assets held-for-sale of two of the six vessels under construction

and the M/T Neverland Soul.

− of the purchase of the M/T Naftilos AN (consolidated 50%);

− of the additional advances paid to the Korean shipyard Samsung for the ships under construction;

the net debt increased by Euro 8 million, from Euro 124.5 million to Euro 132.5 million, due to the combined

effect of cash flows from operations and the afore-mentioned investments, off-set by the share capital

increase;

the debt/equity ratio decreased from 1.7 to 1.41;

the net working capital decreased by Euro 6.2 million, from Euro -3.6 million to Euro -9.8 million.

CONSOLIDATED BALANCE SHEET (in Euro Millions)

2007 2006 2007 2006 NON-CURRENT ASSETS 159.3 70% 200.5 101% SHAREHOLDERS’ EQUITY 94.1 42% 73.6 37%

Intangible assets 0.1 0% 0.1 0%

Property, plant & equipment 152.6 67% 197.5 100% NET FINANCIAL POSITION 132.5 58% 124.5 63% Financial assets 6.7 3% 2.9 1% Banks - medium/long-term 104.2 46% 111.4 56%

Banks – short term 50.9 22% 30.0 15%

NET WORKING CAPITAL -9.8 -4% -3.6 -2% Cash and cash equivalents -22.8 -10% -14.2 -7%

Derivative instruments 5.6 2% 2.3 1%

NON-CURRENT ASSETS Ministerial grant contributions -2.2 -1% -1.1 -1%

AVAILABLE FOR SALE 77.1 34% 1.2 1% Securities in portfolio -3.3 -1% -3.8 -2%

NET CAPITAL EMPLOYED 226.6 100% 198.1 100% 226.6 100% 198.1 100

%


FINAVAL SPA Pag. 27

CONSOLIDATED CASH FLOW STATEMENT

Dec 31,07 Dec 31,06 Cash flow generated from operating activities before working capital changes 14,351 16,286 Financial income/(charges) net of translation exchange gains(losses) and the IAS 32 and 39 effects (6,963) (2,040) Cash flow generated from working capital 4,959 (9,776)

Cash flow generated/(absorbed) from Operating Activities (A) 12,347 4,470

Cash flow generated/(absorbed) from Investing Activities (B) (45,290) (60,336) Cash flow generated/(absorbed) from Financing Activities (C) 32,582 32,979 Cash flow generated (absorbed) in the year (A+B+C) (361) (22,887)

Effect of the changes in foreign exchange rates (D) 8,916 3,304

Cash and cash equivalents at the beginning of the year (E) 14,232 33,815

Cash and cash equivalents at the end of the year (A+B+C+D+ E) 22,787 14,232


FINAVAL SPA Pag. 28

SIGNIFICANT EVENTS AFTER THE YEAR END

OPERATING PERFORMANCE

The principal events after the year-end were the following:

In January, the Aframax ship, Neverland Soul, was sold.

In February, together with the Shipping Group Ancora, the company Angelica Shipping Ltd was

incorporated with a 50% shareholding in order to proceed with the purchase of a 46,000 dwt Product

vessel, scheduled to be delivered in April.

With regard to the business outlook for 2008, the market is expected to maintain levels similar to those reported

during the previous year; therefore, the year’s performance is expected to be positive and in line with the

forecasts that have been made.


FINAVAL SPA Pag. 29

MANAGEMENT OF BUSINESS RISKS

While carrying out its activity, the Finaval Group has been exposed to business risks, mainly associated with

charter fees, damages to, or losses of, its own “assets”, financial risks related to the Euro/Dollar exchange rates

and movements in interest rates.

Therefore, as in previous years, in 2007 the group has pursued a management policy for these risks, through the

use of long-term commercial contracts, adequate insurance coverage for its own assets and derivative

products undertaken with primary Italian and foreign Credit Institutions.

COMMERCIAL RISKS

Historically, the shipping industry has been characterised by extreme volatility in revenues, usually caused by

factors outside the control of the individual companies. For this reason, several years ago Finaval had already

decided to neutralise a portion of any changes through long-term business agreements with the objective of

stabilising the performances of its own ships. Specifically, long-term contracts have been signed in the “crude

oil” and “product tankers” sector, which provide for a minimum guaranteed charter fee plus a profit-sharing

scheme with the commercial partner for the higher performance of the ship over the minimum level; It should also be mentioned that the market for derivative instruments on tanker ship freights has been carefully

studied and monitored for several months. It is our opinion, that this may become a useful instrument for the

hedging of business risks associated with the use of ships in “spot” markets.

RISK OF DAMAGE TO OR LOSS OF CORPORATE ASSETS

Finaval’s insurance system is well suited to cover the risks associated with its operations.

Specifically, the appropriate insurance against risks associated with environmental damages from accidental

pollution has been established.

Finaval’s policy in this regard is in line with the practices that are used by the major players in the industry.

In greater detail, the insurance structure includes, among others, the following standard maritime coverage

policies:

“Hull & Machinery”. All of the owned ships are insured for damages to the hull and the engine, including

against acts of war and any total losses. Each ship is insured for at least its book value and well beyond its

related mortgage debt. “Protection & Indemnity”. The entire fleet has insurance coverage against risks of pollution and spillage up to

USD 1,000 million and unlimited coverage for accidents that may occur involving the crew, the load and third

parties in general. The “P&I” insurance system is of a mutual type, therefore according to the criteria of any

form of mutual insurance, the members of the club share the benefit of a low overall claim rate, just as they

may be called upon for new payments, if requested.

INTEREST RATE RISKS

Finaval’s strategy is to cover up to 70% of its own medium to long-term debt, through transactions of different

types, the combination of which allows for a minimal impact on the financial management of interest rate

fluctuations.


FINAVAL SPA Pag. 30

EXCHANGE RISKS

Finaval SpA is subject to risks deriving from exchange rate fluctuations from ship loans in different currencies.

The accounting standards adopted and applied by the Group require loans to be converted into Dollars at

year-end, with consequent fluctuations in its financial exposure. For this reason, some hedging transactions

were implemented, for at least half of the risk value, which allow for a partial immunisation against the effect

from the fluctuations of the Dollar on the conversion of the debt.


FINAVAL SPA Pag. 31

TRANSACTIONS WITH GROUP COMPANIES

HOLDING AND GROUP COMPANIES

FINAVAL HOLDING SPA

Throughout the year, Finaval Holding SpA carried out its normal activities of financial holding and services for

Finaval SpA. The contract for elected residence and administrative service that Finaval SpA has with Finaval

Holding SpA also continued in 2007. At the end of the year Finaval SpA’s receivables amounted to

approximately Euro 248 thousand and payables to approximately Euro 241 thousand. These positions are of a

commercial nature.

FINAVAL AVIATION SRL

The contract for elected residence and administrative service that Finaval SpA has with Finaval Aviation Srl

also continued in 2007. At 31 December 2007, Finaval had a receivable for approximately Euro 12 thousand. At the beginning of 2008, Finaval Aviation S.r.l. was sold.

FINAVAL OFFSHORE SRL

In 2007, Finaval SpA signed an elected residence and administrative service contract for an annual amount of

Euro 10 thousand.


FINAVAL SPA Pag. 32

OTHER INFORMATION

RESEARCH AND DEVELOPMENT ACTIVITY

The company did not carry out pure research activities during 2007.

MANAGEMENT AND CONTROL ACTIVITY

Finaval SpA is under the direction and co-ordination of the parent company Finaval Holding SpA which

directly holds 75% of the share capital.

Throughout 2007, Finaval Holding SpA carried out investment holding and service activities for Finaval,

particularly in relation to financial services.

TREASURY SHARES OR QUOTAS IN HOLDING COMPANIES

The company did not carry out any sale/purchase transactions of shares or holdings in holding companies, nor

did it sell or purchase any of its own shares during the year.

LEGISLATIVE DECREE 231/2001

Legislative Decree 231/01 sets out the responsibility of the Company in relation to certain offences committed

in its interest or to the advantage of the persons that cover functions of representation, administration or

management of the company or one of its structures with independent finance and operations, as well as

persons that exercise, even de facto, its management and control (so-called top management), or persons

subject to the direction and supervision of one of the above-mentioned parties (so-called parties under other

management influence).

The decree, and more specifically articles 6 and 7, provide that the Company:

1) is not responsible for offences committed by top management subjects if it can be proven that:

a) the management body adopted, and efficiently implemented, before the offence was committed,

organisational and management models that are suitable to prevent offences of the nature of those that

occurred;

b) the supervision role on the functioning and observation of the models and of their up-dating was appointed

to a public entity organisation equipped with autonomous powers of initiation and control;

b) the persons committed the offence by fraudulently evading the organisational and management models;

c) there was not a lack of or insufficient surveillance by the body, pursuant to letter b);

2) is responsible for offences committed by parties under other management if the offence was made possible

through the failure to observe management or surveillance obligations, with the exclusion, in any case, of the

failure to observe management or surveillance obligations if the body, before the offence was committed,

adopted and efficiently implemented an organisational, management and control method that was suitable

to prevent crimes of the type that occurred.

Finaval SpA, with the resolution by the Board of Directors dated 5 October, 2005, established the adoption of

an organisational, management and control model pursuant to Legislative Decree No. 231 dated 8/6/2001.

This model was certified on March 1, 2006 by RINA.


FINAVAL SPA Pag. 33

In addition to the regulatory and organisational obligations, Finaval has adopted an ethics code, a

combination of the rights, duties and responsibilities of the company which are intended to promote, suggest

or prohibit certain behaviours.

PROTECTION OF PERSONAL DATA

Finaval SpA, in compliance with the provisions contained in Legislative Decree No. 196 dated June 30, 2003

“Code for the Protection of Personal Information”, has drafted and approved a Security Programming

Document.

The Document contains the provisions for security measures that will reduce the risks of destruction or loss, even

accidental, of personal information, unauthorised access or processing that is not allowed or compliant with

the objectives of the collection of the same information, with security combining the technical, computer,

organisational, logistical and security procedure provisions.”


FINAVAL SPA Pag. 34

GLOSSARY

Aframax

Tanker ship of between 80,000 dwt and 120,000 dwt.

B/B - Bare Boat Charter – charter rental contract

A charter in which the bare ship is Chartered without crew for a stated period of time; besides the voyage

costs (bunkers, port charges, canal tolls, etc.), the charterer also pays the running expenses (crew,

maintenance, repairs, lubricants, supplies and insurance), with the exception of reclassified works.

By its nature, the Bare Boat normally covers relatively long time periods.

Ballast

Voyage without load, required for positioning the ship in the next port for loading or docking.

Ballast tanks

Tanks or other spaces used exclusively for the collection of sea water, to ensure the required stability of the

ship during ballast voyages.

Barrel

Unit of measurement for crude oil and petroleum products; a barrel is equal to approximately 159 litres and

there are approximately 7.1 barrels for each tonne.

Bunkers - fuel

Fuel required for the functioning of the ship.

C/P - Charter Party – Rental Contract

Contract between the Ship Owner and the Charterer to establish the terms and conditions that regulate

transport. The contract may be for one or more voyages or for set periods of time. Charterer - Renter

The contracting party that pays for the transport of the load; normally it is the owner, supplier or receiver of the

load.

Classification Societies – Classification Registries Independent organisations that control and inspect the construction’s technical conditions and the

performance of the ships, with respect to the rules set forth by the same Registry or National Authorities.

COA - Contract of Affreightment – Transport Contract

A contract between the Ship Owner and the Charterer for the transport, during a given time period, of set

quantities of a load, in predetermined loading and unloading areas, with a certain number of voyages carried

out by ships that are not identified in the contract, but which fall under a predetermined category. COA and consecutive voyages

Transport contract that completely uses the vessel without continuity solutions for the period of the contract

itself.

Crude

Derivation of the English term Crude Oil; raw petroleum DH - Double Hull – double hull

Ship constructed with a double hull to reduce the risk of load overflow in the event of strandings or collisions;

the distance between the two hulls is generally 2 – 2.5 metres and the space is used for clean ballasts.


FINAVAL SPA Pag. 35

DB - Double Bottom

The ship has a double hull as far as the bottom; the distance between the two levels is between 2 and 3

metres and the relative volume is normally used to store clean ballast water.

DS - Double Side

The ship has a double hull that is limited to the sides; the distance between the two levels is between 2 and 3

metres and the relative volume is normally used to store clean ballast water.

Dry-dock

A vessel placed in dry-dock for the inspection, repair or painting of the portion of the hull that is submerged. In

normal conditions it is carried out every 2.5 to 3 years. DWT – dead-weight tonnage

A common measure of ship carrying capacity measured in tons, including the cargo, bunkers, stores and

crew.

Heavy-Lift

A ship that is suitable for the transport of extraordinary loads. Handymax


Handysize


Hull and machinery insurance (H&M)

Ships body and machinery insurance

Ice Class 1A

Ship classification relating to its ability to operate in water with ice formations of less than 80 cm of thickness.

IMO (International Marittime Organisation)

United Nations Agency that handles the drafting of safety and anti-pollution regulations for maritime traffic.

Knot

Unit of measurement of the speed at sea. A knot is equal to a nautical mile or 1,853 metres per hour. Marpol 73/78

Anti-pollution regulation drafted by the IMO.

M/C - M/T

Tanker, motor tanker.

M/N - M/V

Motorship, motor vessel.

Off-hire

Period of time during which the vessel does not generate freight, usually because it is undergoing repair or

maintenance activities. Operating Costs

Costs related to the operation of the ship including crew, insurance, provisions, certifications and lubricants.

Costs related to the voyage and commercial uses, including fuel, port fees and channel transit are excluded. OPA 90

U.S. Oil Pollution Act of 1990 – Anti-Pollution Regulations in the United States.

Order Book

The number and size of vessels on order.


FINAVAL SPA Pag. 36

Oremulsion

Emulsion of natural tar and water.

Panamax

Tanker ship or bulk carrier suitable to transit the Panama Canal, thus with a maximum length of 32.24 metres.

Vessels that are normally not superior to 80,000 dwt. P&I Insurance (Protect and Indemnity)

A form of mutual insurance coverage for risks related to environmental pollution from loss of load.

Pool

Cooperation agreement between Owners and common commercial operations among similar vessels, with

distribution of profits.

Product Carrier

Tanker ships suitable for the transport of refined petroleum products (including nafta, diesel fuel, petroleum)

and vegetable oils.

The tanks of these ships are treated with paint or special products.

RO/RO

Roll on Roll off abbreviations. Ferry ship that allows for the movement of land-based means of transport by

alternately loading and unloading them through the bow and stern hatches. SBT - Segregated Ballast Tanks

Tanks exclusively used for the loading of clean ballast water.

Scrapping

Demolition of a vessel and the re-use of iron parts.

Solas

IMO Regulations relating to the safeguard of life at sea.

Special Survey Surveillance cycle for the hull and the ship’s machinery and equipment to be completed every five years,

based on verifications and inspections with expiration dates that are set by the Classification Registries.

Spot Market

Use of a ship to move a single cargo based on the current charter market rate.

Suezmax

Tanker ship that is able to navigate the Suez Canal with a full load; normally between 120,000 and 200,000 dwt.

TBN - To be named

Indicates a ship under construction, or in any case, one that has not yet been named.

Technical operations

Technical management of the vessel in relation to class inspections, certifications, maintenance etc.


FINAVAL SPA Pag. 37

FINAVAL SPA CONSOLIDATED FINANCIAL STATEMENTS

AS AT DECEMBER 31, 2007


FINAVAL SPA Pag. 38

CONSOLIDATED BALANCE SHEET In Euro thousands

ASSETS Dec 31, 07 Dec 31, 06 NOTES NON-CURRENT ASSETS PROPERTY, PLANT & EQUIPMENT Fleet 129,813 173,913 AFleet under construction 20,775 21,400 B Other assets 2,007 2,149 C INTANGIBLE ASSETS 52 106 D FINANCIAL ASSETS Subsidies 2,241 1,145 EOther receivables and deposits 5,648 134 F Equity investments 4,211 6,437 G Deferred tax assets 66 129 H TOTAL NON-CURRENT ASSETS 164,813 205,413 CURRENT ASSETS Inventories of oils, lubricants and services in course 1,747 1,377 I Trade receivables 7,449 10,833 L Other receivables 1,788 3,035 M Cash and cash equivalents 22,787 14,231 N Derivative financial instruments 32 818 O Tax assets 724 255 P TOTAL CURRENT ASSETS 34,526 30,549 NON-CURRENT ASSETS HELD-FOR-SALE 77,092 1,240 Q TOTAL ASSETS 276,432 237,202


FINAVAL SPA Pag. 39

CONSOLIDATED BALANCE SHEET In Euro thousands

SHAREHOLDERS' EQUITY AND LIABILITIES Dec 31, 07 Dec 31, 06 NOTES

SHAREHOLDERS’ EQUITY Share Capital 32,293 24,220 I1 Share premium reserve 19,494 7,385 L1 Legal reserve 2,087 2,033 M1 Other reserves 35,910 33,549 N1 Cash Flow hedge Reserve -904 -707 O1Fair value reserve of financial assets available-for-sale 145 618 P1 Retained earnings 3,425 2,617 Q1 Net profit for the year 1,679 3,885 R1 TOTAL SHAREHOLDERS’ EQUITY 94,130 73,600 NON-CURRENT LIABILITIES Bank payables 104,227 111,364 A1Employees benefits 552 779 B1 Deferred tax liabilities 585 567 C1 Provision for future charges 862 202 D1 CURRENT LIABILITIES

Bank payables 50,904 30,036 E1 Derivative financial instruments 5,641 3,075 O Trade payables 8,654 10,179 F1 Other payables 10,523 7,255 G1 Tax liabilities 354 145 H1 TOTAL LIABILITIES 182,302 163,602 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 276,432 237,202


FINAVAL SPA Pag. 40

CONSOLIDATED INCOME STATEMENT In Euro thousands

Dec 31, 07 Dec 31, 06 NOTES

Net revenues 62,889 79,383 1 Port, bunker and commission expenses -18,509 -21,063 2 TIME CHARTER EQUIVALENT EARNINGS 44,380 58,320 3 Hire costs -8,658 -10,300 4 Operating costs -14,082 -25,200 5 FLEET CONTRIBUTION MARGIN 21,640 22,820 6 Overhead costs -8,803 -6,257 7 Other revenues/costs -189 -515 8 Result on disposal of vessel - -135 9 EBITDA 12,646 15,913 10 Amortisation & depreciation -10,503 -10,196 11 EBIT 2,143 5,717 12 Net Financial income (charges) -1,169 -1,850 13 PRE-TAX RESULT 974 3,867 Income taxes -191 -278 Deferred tax charges -138 523 NET PROFIT FROM CONTINUING OPERATIONS 645 4,112 14 Net result from discontinued operations 1,034 -227 15 NET PROFIT 1,679 3,885

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY In Euro thousands

Share capital

Share premium reserve

Legal reserve

Other reserves

Trans. and hedge reserve

IAS – IFRS Trans.

reserve Fair value reserve

Retained earnings

Result for the year

Group shareholder

s' equity Balance at December 31, 2005 24,220 7,385 1,579 21,962 0 0 30 1,250 13,498 69,924

Allocation of the 2005 result 454 11,703 1,341 -13,498 0

Change in cash flow hedges net of the tax effect -707 -707

Change in financial assets available-for-sale at fair value net of the tax effect 588 588

Total gains/(losses) recognised directly to equity in the year 0 0 0 0 -707 0 588 0 0 -119

Other movements -116 26 -90

Result 2006 3,885 3,885

Balance at December 31, 2006 24,220 7,385 2,033 33,549 -707 0 618 2,617 3,885 73,600

Allocation of the 2006 result 54 3,023 808 -3,885 0

Change in fair value deriving from hedging and of financial assets available-for-sale net of the tax effect -197 -473 -670

Increase in reserved share capital 8,073

12,110 20,183

Other movements -662 -662

Result for the year 1,679 1,679


FINAVAL SPA - CONSOLIDATED FINANCIAL STATMENTS AT DECEMBER 31, 2007

FINAVAL SPA Pag. 42

CONSOLIDATED CASH FLOW STATEMENT In Euro thousands

Operating activities Dec 31,07 Dec 31,06

Profit from operating activities 645 4,112 Adjustments for: - Adjustment to financial assets (15) (41) - Income taxes 329 (245) - Financial (income)/Charges 1,185 1,891 - Depreciation of non-current tangible assets 10,438 10,125 - Amortisation of intangible assets 66 71 - Employee leaving indemnity provision 311 403 - Provisions for risks and future charges 660 0 Purchase/sale of fixed assets 0 135 - Result of discontinued operations net of purchase/sale of fixed assets 718 (227) - Financial (income)/charges of discontinued operations 15 62

Cash flow generated from operating activities before working capital changes 14,351 16,286

Financial income/(charges) net of exchange gains(losses) and the IAS 32 and 39 effects (6,963) (2,040) (Increase) / Decrease in trade receivables 3,385 1,566

Increase/ (Decrease) in trade payables (1,526) (17,146)

(Increase) / Decrease in inventories (370) 2,000

(Increase) / Decrease of other current assets/liabilities 4,514 4,649 (Increase) / Decrease in tax receivables and payables (450) (484)

Increase (Decrease) in risks and employee leaving indemnity provision« (538) (650)

Increase / (Decrease) of deferred tax assets and liabilities (55) 289 Cash flow generated from working capital 4,959 (9,776)

Cash flow generated/(absorbed) from Operating Activities (A) 12,347 4,470

Investing activities (Investments) / Divestments in intangible assets (11) (133)

(Investments) / Divestments in property, plant and equipment 30,095 (59,321)

(Investments) / Divestments in financial assets (4,171) 357

(Investments) / Divestments in non-current assets held-for-sale (75,853) (1,239)

Divestment of discontinued operations 4,651 0

Cash flow generated/(absorbed) from Investing Activities (B) (45,290) (60,336)

Financing activities Change in bank payables 13,731 33,189

Changes of other payables 0 0

Issue / (Repayment) of bonds 0 0

Change in Shareholders' Equity 18,851 (210)

Cash flow generated/(absorbed) from Financing Activities (C) 32,582 32,979

Cash flow generated (absorbed) in the year (A+B+C) (361) (22,887) Effect of the changes in foreign exchange rates (D) 8,916 3,304

Cash and cash equivalents at the beginning of the year (E) 14,232 33,815 Cash and cash equivalents at the end of the year (A+B+C+D+E) 22,787 14,232


FINAVAL SPA Pag. 43

FINAVAL SPA

Consolidation scope and criteria Accounting principles and policies


FINAVAL SPA Pag. 44

Introduction

The consolidated financial statements include the financial statements of Finaval S.p.A., the Parent Company,

and of those companies in which Finaval S.p.A. holds at least 50% of the share capital either directly or

indirectly.

The reporting date of the consolidated financial statements coincides with the year-end of the Parent

Company and its subsidiaries. The companies are included in the consolidation on the basis of the financial

statements prepared by the Directors for approval at the Shareholders’ AGM. Where necessary, the financial statements of the companies included in the consolidation were appropriately

adjusted to take into account the accounting principles adopted by the Parent Company.

The consolidated financial statements consist of: the balance sheet, income statement, statement of changes

in shareholders’ equity and the cash flow statement together with the explanatory notes prepared in

accordance with the minimum disclosure requirements of IAS 1 and applicable regulations, where applicable,

required by the national legislature and by CONSOB. The Euro is the presentation currency for the Parent Company and for the other companies included in the

consolidation scope.

All the amounts in the financial statement accounts are shown in thousands of Euro. Any differences deriving

from the rounding of the values in Euro are allocated to an equity reserve. On the first-time application of the IFRS, for the preparation of the consolidated financial statements at

December 31, 2007, it was necessary, for comparative purposes, to restate the consolidated financial

statements at December 31, 2006 in accordance with IFRS. These latter, however, do not present comparative

data relating to the previous year, as requested by IAS 1. The consolidated financial statements restated in accordance with IFRS, were obtained by making

reclassifications and adjustments in accordance with the IFRS accounting principles, at January 1, 2006, in

application of IFRS 1. For the purposes of the application of this international accounting standard, at the

transition date to IFRS, the Company prepared an opening balance sheet. This balance sheet is to be

considered as a starting point for the accounting of subsequent operations in accordance with IFRS. Attachment 1 (Transition to IFRS) reports the effects deriving from the transition from Italian GAAP to IFRS, also

reporting the:

- reconciliation of the consolidated balance sheet accounts at January 1, 2006 and at December 31,

2006;

- reconciliation of the consolidated income statement accounts for the year ended December 31, 2006;

- reconciliation of consolidated shareholders’ equity at January 1, 2006 and December 31, 2006;

- reconciliation of the consolidated income statement for the year ended December 31, 2006;


FINAVAL SPA Pag. 45

Consolidation scope, changes and exclusions at December 31, 2007

The consolidated financial statements include the financial statements of the Parent Company and of its

directly or indirectly held subsidiaries and companies subject to joint control (so-called Joint Ventures) with

third party groups.

The following table contains a list of the companies consolidated by the line-by-line method and by the

proportional method:

In Euro thousands

Company Consolidation

method

% held Registered

offices

Share Capital

Finaval S.p.A. Line-by-line

method

Holding company Rome Euro 32,293

Energetica Lda Line-by-line

method

100% Madeira Euro 5

Naftilos A. Marine Ltd Proportional

method 50% Malta USD 0.7

Cabofin S.r.l. Proportional

method 50% Cagliari Euro 50

Consolidation criteria and principles at December 31, 2007

Subsidiary companies

The subsidiary companies are those companies in which the Group has the power to determine, directly or

indirectly, the administrative and management choices, the financial and operating policies and obtain the

relative benefits. Control is generally presumed when the Group holds, directly or indirectly, more than

half of the voting rights exercisable at the ordinary shareholders’ meeting. The assets and liabilities, as well as the income and costs of the consolidated companies are consolidated

using the line-by-line method at 100%, eliminating the book value of the investments against the related net

equities of the companies. Receivables and payables, revenues and costs and all transactions involving significant amounts with

companies included in the consolidation scope are eliminated. Shareholders’ equity and the minority interest result for the year are shown separately in the consolidated

financial statements.

The results of subsidiaries acquired or sold during the year are included in the consolidated income statement

from the date of acquisition until the date of sale.

Gains and losses arising on inter-company sales of tangible fixed assets are eliminated, where considered

material.

Joint Venture

Joint Ventures are companies in which the Group exercises joint control, based on a contractual agreement,

and exists only when the strategic financial and operating decisions of the business require the unanimous

approval of all of the parties that share control. The investments in Joint Ventures are consolidated under the


FINAVAL SPA Pag. 46

proportional method from the date on which the joint control occurs and until the date the joint control

terminates.

Investments in associated companies

The associated companies are companies in which the Group is able to exercise significant influence in the

definition of the financial and operating policies, although not having control or joint control. The investments in associated companies are recorded in the consolidated financial statements using the

equity method.

The application of the equity method is described below:

- the book value of the investments is aligned to the net equity of the company adjusted, where necessary,

to reflect the application of the accounting principles of the Parent Company and include, where

applicable, the recording of any goodwill identified at the moment of the acquisition;

- the Group profits and losses are recorded in the consolidated income statement at the date when the

significant influence begins and until the date when it terminates. Where losses in the investee result in a

negative net equity, the book value of the investment is written down and any excess pertaining to the

Group is recorded in a specific provision only when the Group is committed to comply with legal or implicit

obligations of the investee or in any case to cover the losses. The equity changes of the investee

companies not derived from the income statement are recorded directly as adjustments to equity;

- the gains not realised generated on operations between the Parent Company and subsidiaries or

associated companies are eliminated for the part pertaining to the Group, where it is not considered

insignificant. The losses not realised are eliminated except when they represent a permanent impairment in

value.

In relation to the general criteria of including joint ventures in consolidated statements, it should be noted that

the Joint Venture “Novamar international Scarl in liquidation” was measured under the equity method.

In relation to this, it is noted that the proportional consolidation method was not used, as the inclusion of this

investment in the consolidation scope would not aid a true and correct presentation.

Business Combinations

Business combinations are recognised utilising the purchase accounting method as per IFRS 3.

The cost of business combinations is calculated at the acquisition date in consideration of the fair value of the

assets given and/or of the liabilities incurred and of capital instruments issued in order to obtain control. In

addition, the fair value of the assets and liabilities acquired are compared with the cost as previously defined.

Any positive difference between the purchase cost and the fair value of the identifiable assets and liabilities

and contingent liabilities is allocated to goodwill.

Any negative difference, following a re-examination of the valuation of the assets and liabilities acquired, is

recognised in the income statement.


FINAVAL SPA Pag. 47

Accounting principles and policies

The measurement of accounts was made in view of the continuity of business activities, as well as taking into

account the economic function of each of the assets and liabilities concerned.

The financial statements were prepared on the basis of the historical cost principle, except for some financial

instruments which are recognised at fair value. In the preparation of the consolidated financial statements at December 31, 2007, December 31, 2006 and

December 31, 2005, the Group availed of some options permitted by international accounting standards. In

particular:

- Financial Statements presentation and other statements: the assets and liabilities are presented under the

“current/non-current” criteria, while the income statement adopted the presentation by nature of

expenses. - Cash flow statement: was prepared with the indirect method. - Employee benefits: as per IAS 19, the Group has decided to record all accumulative actuarial gains and

losses existing at January 1, 2005 and not to adopt the so-called “corridor method” for the actuarial gains

and losses which were generated and will be generated subsequent to this date, in consideration that the

actuarial variations do not produce significant impacts on the income statement such as to justify recourse

to the “corridor” method. - Intangible and tangible assets: as per IAS 16 (Property, plant and equipment) and IAS 38 (Intangible

assets), the tangible and intangible fixed assets are measured under the cost method, also subsequent to

initial recognition. - Operations in foreign currencies: foreign currency transactions are recorded at the exchange rate at the

transaction date. Assets and liabilities denominated in foreign currencies are converted at the exchange

rate at the end of the reporting period. The exchange differences generated from the settlement of

monetary accounts or from their conversion at different rates to those in which they were initially recorded

in the year or in previous years are recognised in the income statement.

The most significant accounting principles used in preparing the consolidated financial statements are as

follows:

- The fleet is measured at purchase cost, net of accumulated depreciation and any loss in value.

The cost includes the contractual price and all the other directly attributable charges to the asset and

those incurred before the asset is in condition for use.

The charges incurred for the maintenance and repairs of an ordinary nature are directly charged to the

income statement in the year in which they are incurred. The capitalisation of the costs relating to the

expansion, modernisation or improvement of owned tangible assets or of those held in leasing, is made only

when they satisfy the requirements to be separately classified as an asset or part of an asset in accordance

with the component approach.

The replacement costs of components relating to complex assets are allocated as assets and

depreciated over their residual useful life while the residual value of the component subject to

replacement is recorded in the income statement. In particular, the ships are subject to periodic

stoppages (generally between 30 and 60 months) during which repair and maintenance costs are


FINAVAL SPA Pag. 48

incurred which are separately capitalised and depreciated over the period between each stoppage (so-

called “dry dock”). Public grants received against investments in the fleet are recorded as a direct reduction of the ships to

which they refer.

The depreciation of the fleet is determined on the basis of the cost of each ship, reducing the estimated

net value from its demolition. Depreciation is calculated from the entry into service of the asset, based on

an economic/technical life of 30 years for tanker ships and 25 years for other ships. For the assets entered

into service during the year, depreciation is calculated based on the number of months in service.

- The account fleet under construction under property, plant and equipment includes the payments

effectively made, the advances paid and the initial costs incurred relating to the new fleet under

construction.

- Factories, buildings, fittings, office machinery and transport vehicles are recognised at purchase cost, net

of accumulated depreciation and any loss in value. The cost includes all charges directly incurred in

bringing the assets to utilisation. The charges incurred for maintenance and repairs are directly charged to the income statement in the

year in which they are incurred. The costs for improvements, modernisation and transformation of an

incremental nature of tangible fixed assets are allocated as an asset. The depreciation rates used are as follows:

Category Criteria Rate %

Buildings Straight-line 3%

Plant and machinery Straight-line 10%

Commercial and industrial equipment Straight- line 15%

EDP Straight- line 20%

Furniture and fittings Straight- line 12%

Motor Vehicles Straight- line 25%

In the year in which the assets are purchased, the depreciation is reduced by half, as a reasonable

approximation of the period held in the year.

- An intangible asset is an identifiable non-monetary asset without physical substance, identifiable, subject

to control and capable of generating future economic benefits. These assets are recorded at purchase

and/or production cost, including the costs of bringing the asset to its current use, net of accumulated

amortisation, and any loss in value.

- Loss in value of tangible and intangible assets. At each balance sheet date, the tangible and intangible

fixed assets with definite life are analysed to identify the existence of any indicators, either internally or

externally to the Group, of impairment. Where these indications exist, the recoverable amount of the asset

is estimated to determine the amount of the loss in value, recording the relative write-down in the income

statement. When it is not possible to estimate the recoverable value of an asset individually, the Group

estimates the recoverable value of the cash-generating unit to which the asset belongs. The recoverable


FINAVAL SPA Pag. 49

value of an asset is the higher between the current value less costs to sell and its value in use. To determine

the value in use of an asset, the expected future cash flows are discounted on a pre-tax basis that reflects

the market assessment of the time value of money and the risks specific to the asset. A loss in value is

recorded if the recoverable value is lower than the book value. When the loss on an asset subsequently

reduces, the book value of the asset or of the cash-generating unit of cash flows is increased, up to the

new estimate of the recoverable value but may not exceed the value that the asset would have had, had

the write-down for the loss in value not being made. The restatement of a loss in value is recognised

immediately in the income statement.

- The financial assets consisting of shares and quotas not available-for-sale or for trading, in accordance

with IAS 39, are included in the category “financial assets available-for-sale” and are measured at fair

value with any changes recorded in equity.

- Trade and financial receivables are recorded at fair value and subsequently at amortised cost, on the

basis of the effective interest rate method. When there is an indication of a reduction in value, the asset is

reduced to the value of the discounted future cash flows obtainable. The amount of the loss, recorded in the income statement, is equal to the difference between the book

value of the asset and the current value of the expected future cash flows using the effective interest rate.

When, in subsequent periods, the reasons for the write-down no longer exist, the value of the assets is

restated up to the value deriving from the application of the amortised cost where no write-down had

been applied.

The receivables are adjusted, where it is deemed necessary, through a provision for doubtful debt so as to

reflect their realisable value.

- The Bare Boat rental contracts are normally considered as operating leases and the instalments, prepaid

or accrued, are recorded in the income statement on the accruals basis.

Where they are considered finance leases, as per IAS 17, the lessee will record the asset under property,

plant and equipment with a corresponding financial payable to the lessor and the lessor will eliminate the

asset from its financial statements and record a financial receivable in relation to the lease contract. The Bare Boat rental payments, finally, are recorded as a reduction of the payable or receivable for the

capital portion, while the interest portion will be recorded in the income statement based on the effective

interest rate method.

- Oil and fuel inventories are stated at the lower of the purchase cost, determined by the weighted average

cost method, and the net realisable value.

The net realisable value is calculated as the estimated sales price less the costs to sell. The account “work in progress”, classified under inventories, includes the quota of shipments made at the

end of the year for which an estimate is made of the revenues on a pro-rata basis.

- Non-current assets held-for-sale includes assets of which the book value will be principally recovered

through sale rather than use. For this to be the case, the asset must be available for immediate sale in its

current condition and the sale must be highly probable. The non-current assets held-for-sale are measured,

as per IFRS 5, at the lower between their book value and the fair value, less costs to sell.


FINAVAL SPA Pag. 50

- Cash and cash equivalents includes cash, deposits on demand with banks and other short-term

investments, highly liquid, or easily convertible into cash, and not subject to the risk of a change in value.

These assets are recorded at fair value and relative changes are recognised in the income statement.

- - The employee leaving indemnity provision covers the entire liability matured to employees in compliance

with legislation in force and collective employment agreements.

In relation to this, it is noted that the Finaval Group in the current year recorded the accounting effects

deriving from the changes made to the employee leaving indemnity as per Law 296 of December 27,

2006 ("2007 Finance Law") and subsequent Decrees and Regulations issued at the beginning of 2007. In

particular, the Group recalculated the provision matured at December 31, 2006 and the consequent

“curtailment” (in accordance with paragraph 109 of IAS 19) and whose economic effect, however, is not

significant.

- Financial and trade payables are recorded on initial recognition at fair value and subsequently at

amortised cost, on the basis of the effective interest rate. When there is a change in the expected cash

flows and it is possible to estimate them reliably, the value of the payables are recalculated to reflect this

change, based on the new current value of the expected cash flows and on the internal yield initially

determined.

- The share capital is the amount of the subscribed and paid-in capital by the shareholders of the Parent

Company. The costs directly related to the issue of new shares are classified as a reduction of the

shareholders' equity, net of any deferred fiscal effect.

- The share premium reserve relates to the payments made for the subscription of share capital for an

amount above the nominal value of the shares. This reserve may not be distributed in the presence of

losses carried forward not covered.

- The legal reserve includes the annual allocation of part of the result for the year realised by the Parent

Company (5% each year up to reaching 20% of the share capital) and may only be utilised to cover losses.

- The other reserves include specific profit and capital reserves.

- Retained earnings refer to the part not distributed or recorded under other reserves (in the case of profit)

or recapitalised (in the case of losses) of the results from previous years. The account also includes the

transfers from other equity reserves when they are released from any restrictions.

- The Group obtains subsidies as per article 11 of Law 234/89, which are considered operational subsidies.

These are recorded in the income statement on an accruals basis. In addition, the Group avails of assistance for the shipping industry as per Law 361/82 and updated by Law

848/84, 234/89 (article 1 and 9 and) and Law 132/94 (article 10). These subsidies are recognised at the

moment of the concession decree by the relevant government authorities and are recorded as a direct


FINAVAL SPA Pag. 51

reduction of the value of the ships to which they refer and recorded in the income statement as a

reduction of the respective depreciation. The subsidies relating to ships already completely depreciated or no longer owned are recorded in the

income statement under income. The public subsidies are recorded under assets if there exists,

independently of the presence of a formal concession by the relevant government authorities, reasonable

certainty that the company obtaining the subsidy will comply with the conditions required for the

concession and that the subsidies will be received.

- Revenues derived from chartering out the company's own vessels or from transport services are

accounted at the moment of the completion of the service.

The income from the sale of assets is recorded when the risks and rewards related to the ownership of the

asset are transferred to the buyer.

The so-called “shipments at year-end” are those shipments still in course at the balance sheet date, for

which the Group makes an estimate of the expected costs and revenues that will be recorded in relation

to the part of the completed shipment at the balance sheet date. This estimate is made with reference to

the duration and expected destination of the shipment, the consumption of fuel statistically expected and

estimated port expenses. The charter contracts normally contain specific clauses which regulate the loading and unloading

operations between one journey and another, establishing the maximum duration permitted. Where these

time limits, contractually determined, are exceeded, the shipping company reserves the right to charge

damage for the stoppage period exceeding that contractually agreed. These revenues are called

“demurrage”.

- Costs sustained by the Group in carrying out operations are recorded in the income statement when

relating to goods and services purchased or consumed in the year or when there is no future utility.

- The ordinary maintenance expenses of the ship, incurred for the efficient maintenance of the fleet, are

recorded in the income statement in the year incurred.

- Dividends are recorded on an accruals basis at the moment in which the right arises. The dividends

payable are recorded as liabilities when they are approved by the ordinary shareholders’ meeting which

approves the annual accounts.

- Current income taxes are calculated based on the tax regulations in force at the reporting date. The

Parent Company, from January 1, 2006, with optional choice but binding for a period of 10 years for all the

ships managed by the Group, adhered to the “Tonnage Tax” regime. According to this fiscal regime, the

assessable income for IRES income tax purposes, deriving from the utilisation of ships in international traffic

registered in the Register as per Law No. 30 of February 27, 1998 (Constitution of the International Register)

is calculated on a forfeit basis on the net tonnage of the fleet, in accordance with articles 155 and 161 of

the Consolidated Finance Act. In the calculation of the forfeit income, gains realised on the sale of ships

are also included, with some specific limitations relating to ships already held at the date of subscription to

the new regime. For the activities undertaken by the group through the utilisation of the ships recorded in

the register as per Law No. 30/1998, which do not undertake international traffic, the “Tonnage Tax”


FINAVAL SPA Pag. 52

regime is not applied; however, the reduced rates are contained in Law No. 30/1998, which provides for

the total exemption of the IRAP regional tax and the reduction by 80% of the assessable IRES income taxes.

The deferred taxes are calculated on the temporary differences between the assessable income of an

asset or liability and the relative book value. The deferred tax assets, including those relating to previous

tax losses, are recognised only for those amounts for which it is probable there will be future assessable

income to recover the amounts.

- Loans are initially recognised at nominal value, net of charges and commissions incurred.

- The Group utilises derivative financial instruments principally for the management of financial risks relating

to interest rates and exchange rates. In accordance with IAS 39, derivatives financial instruments may be

accounted for under hedge accounting only when: the hedging instrument is formally designated and documented at the start of hedging;

the hedge is expected to be highly effective;

the effectiveness can be reliably measured;

the hedge is highly effective during the various accounting periods for which it is designated.

Initially, all the derivative financial instruments are measured and recognised at fair value. Subsequently,

when the financial instruments have the characteristics to be recorded under hedge accounting and the

efficacy is verified, the following accounting treatment is applied:

1. Fair value hedge – If a derivative financial instrument is designated as a hedge to the exposure of the

changes in the current value of an asset or liability in the financial statements attributable to a specific

risk which can have effects on the income statement, the profit or loss after the initial change of the fair

value of the hedge instrument is recognised in the income statement. The profit or loss on the item

hedged, related to the risk realised, changes the book value of that item and is recognised in the

income statement.

2. Cash flow hedge – If a derivative financial instrument is designated as a hedge to the exposure of the

changes in the cash flows of an asset or liability recorded in the financial statements or of an operation

considered highly probable and which may have effects on the income statement, the effective

portion of the profits or of the losses of the financial instrument are recognised in a separate equity

reserve. The cumulative gains or losses are reversed from the net equity and recorded in the income

statement in the same period in which the hedged operation is recorded. The profits or losses

associated to a hedge or to that part of the hedge which has become ineffective are immediately

recorded in the income statement. If a hedge instrument or a relation of a hedge is closed, but the

operation hedged has not yet been realised, the cumulative profits and losses, up to that moment

recorded in equity, are recognised in the income statement when the relative operation is realised. If

the operation hedged is no longer considered probable, the profits or losses not yet realised and

recorded in equity are recognised immediately in the income statement.

The derivative financial instruments that, although effective in the reduction of the financial risks, based on

the provisions contained in the “risk management policy” of the Group, which may not apply hedge


FINAVAL SPA Pag. 53

accounting as per IAS 39, are recorded at fair value and the respective changes are recorded directly in

the income statement.

- Segment information - the Finaval Group operates in the shipping of crude petroleum and petroleum

products. In particular, the group operates through two Business Units, which based on the type of product

transported, are classified as Crude Oil and Product. In 2006, the Group commenced the disposal process

of the tanker fleet owned, retaining however the operational activities in the sector through the

management of the five vessels still owned and not sold at December 31, 2006, as well as the two bare

boat vessels rented (Bare Boat). At December 31, 2007, the Group operations in the Gas sector were

limited to the management of two rented bare boat vessels. It is also reported that the Finaval Group

undertook the transport of chemical products for a number of years. In 2005, however, all the chemical

vessels held by the Group were sold; the sales contract stipulated the continuation by Finaval of the

commercial contracts related to the vessels at the time of the sales, which were concluded during 2006. From a geographical viewpoint, the Finaval Group operates in a single sector as the world market is not

broken down. This is confirmed by the fact that there are no specific vessels for certain geographic areas.

Discretional valuations and significant accounting estimates relating to the Group

In the preparation of the consolidated financial statements in accordance with IFRS, the Group’s management

must make accounting estimates and assumptions which have an effect on the values of the assets and

liabilities and disclosures contained in the accounts. The actual results may differ from the estimates. The

estimates and assumptions are revised periodically and the effects of any change are promptly reflected in

the financial statements.


FINAVAL SPA Pag. 54

FINAVAL SPA

Notes to the consolidated financial statements for the year ended

December 31, 2007


FINAVAL SPA Pag. 55

It should be noted that in the analysis of the information shown in the tables and schedules below, differences

may arise in the figures compared to the aggregate financial statements due to roundings made at different

levels.

NOTES TO THE BALANCE SHEET

Non-current assets

Property, plant & equipment

Fleet (Note A)

The account, which at December 31, 2007 amounted to Euro 129,813 thousand, includes the carrying value of

the vessels owned by the Group, recorded net of the relative depreciation provision, and includes the

capitalised cost relating to the dry dock periods, depreciated between dry dock periods. This cost component

is also shown for the vessels not owned but leased under bare boat contracts, while no costs are recorded for

the vessels leased out under bare boat contracts in that, in this case, the maintenance costs are incurred by

the lessee. The details of the movements are as follows:

In Euro thousands Net balance

1.1.07 Purchases Sales Depreciati

on Reclassification

s Net balance

31.12.07 Fleet (historical cost) 249,243 20,359 (5,261) (54,142) 210,199 Fleet (acc. deprec.) (59,099) 2,154 (11,556) 3,293 (65,208) Total fleet 190,144 20,359 (3,107) (11,556) (50,849) 144,991 Ship purchase grants (16,231) 1,053 (15,178)

Total net fleet 173,913 20,359 (3,107) (10,503) (50,849) 129,813

Note (1): the column “Reclassifications” includes the reclassified values of the ship "Neverland Soul” under assets held-for-sale

The net decrease of Euro 44,100 thousand compared to the value recorded at December 31, 2006, equal to

Euro 173,913 thousand, is principally due to the combined effect of the following operations:

- reclassification of the net value of vessels held-for-sale of approx. Euro 50,849 thousand;

- depreciation in the year of Euro 10,503 thousand;

- new investments, including the dry dock costs capitalised, of approx. Euro 20,359 thousand;

- net disposals of approx. Euro 3,107 thousand.

Fleet under construction (Note B) The account, amounting to Euro 20,775 thousand at December 31, 2007, is composed of advances paid to

the Samsung Heavy Industries shipyard and the initial costs incurred (principally construction studies and

analysis, preparation of the “site-office”, borrowing costs and commissions) for the construction of four new

petroleum vessels which will be delivered in 2009 and 2010. At December 31, 2006, the balance of the account was Euro 21.4 million. The values at December 31, 2006

refer to four vessels to be delivered in 2008 and 2009. In 2007, a further two vessels were ordered with delivery


FINAVAL SPA Pag. 56

in 2010 and agreements were signed for the sale in 2008 of the first two vessels, which were, in accordance

with IFRS 5, reclassified under assets held-for-sale. The details of the movements are as follows:

In Euro thousands Fleet under construction Balance at December 31, 2006 21,400 Increases 25,619 Reclassified to other accounts (26,244)

Balance at December 31, 2007 20,775

Other assets (C)

The account includes the value of the other tangible fixed assets capitalised, comprising buildings, plant and

machinery, equipment, EDP, furniture, fittings and automobiles, recorded net of the relative depreciation

provision.

In Euro thousands Other assets 31/12/2006 31/12/2007 Change Land and buildings 1,334 1,292 (42) Plant and machinery 34 30 (4)

Other equipment 7 4 (3)

Other assets 774 681 (93)

Total 2,149 2,007 (142)

The movement in the year is illustrated in the table below:

In Euro thousands

beginning balance changes in the year ending balance

Historical cost

Accum. Deprec.

Balance 2006

Purchases Sales

Other move. historical

cost

Other move. accum. deprec.

Depreciation

Historical cost

Accum. Deprec.

Balance 2007

Land and buildings 1,395 61 1,334 - - - - 42 1,395 103 1,292

Plant & Machinery 39 5 34 - -

- - 4 39 9 30

Other equip. 31 24 7 - -

- - 3 31 27 4

Other assets 1,523 748 774 88 -

(1) 3 179 1,610 929 681

Total 2,988 838 2,149 88 -

(1) 3 228 3,075 1,068 2,007

It is recalled, as further described in attachment 1 relating to the description of the transition to IFRS, that in the

measurement of the tangible fixed assets subsequent to the initial recognition, the historical cost criteria was

maintained (as an alternative to fair value).


FINAVAL SPA Pag. 57

Intangible assets (Note D)

The movements in the intangible assets account during 2007 are shown in the table below.

In Euro thousands

Intangible assets

Balance at December 31, 2006

106

Increases

12

Amortisation

(66)

Balance at December 31, 2007

52

At December 31, 2007, intangible assets amounted to Euro 52 thousand, a decrease of Euro 54 thousand on

the previous year. The account “Other intangible assets” comprises costs relating to software purchased.

Financial assets

The financial assets recorded in the accounts are comprised of “Ministerial grant contributions”, “Other

receivables and deposits”, “Equity investments” and “Deferred tax assets”.

Subsidies (Note E)

The subsidies consist of the present value quota of the subsidies to be received relating to subsidies provided

by the relevant government authorities for the purchase, construction and demolition of new vessels. The

composition of the receivables for the years 2006 and 2007 are summarised in the table below: In Euro thousands

Subsidies 31/12/2006 31/12/2007 Cge.

Receivables for subsidies within 12 months 766

2,240

1,474

Receivables for subsidies over 12 months 379

1

(378)

Total 1,145 2,241

1,096

The increase in the account, amounting to approx. Euro 1,096 thousand, is due to the combined effect of the

receipt of the instalments overdue in the year (a decrease of Euro 771 thousand) and new receivables relating

to the demolition of the vessels in the tanker sector due within one year (increase of Euro 1,847 thousand).

Other receivables and deposits (Note F)

For the years ended December 31, 2007 and 2006, the details of the account are shown in the table below:

In Euro thousands

Other receivables and deposits 31/12/2006 31/12/2007 Cge.

Guarantee deposits 117

354 237 Restricted current accounts 5,265 5,265 Other receivables 17 30 13

Total 134 5,649 5,515


FINAVAL SPA Pag. 58

The amount shown in the account “Restricted current accounts” refers to the payment on account relating to

the sale of the M/T Neverland Gold which was paid by the buyer through a restricted current account (so-

called “Joint Account”) to be released on the sale of the ship.

Equity investments (Note G)

The account includes the value of the investments in subsidiaries, associated companies and Joint Ventures,

excluded from the consolidation area and the value of the equity securities, valued at fair value, of the Banco

Popolare dell’Emilia Romagna.

The breakdown of the investments held at December 31, 2007 are shown below:

In Euro thousands

Value at Increases Decreases Other Value Equity investments % held

31/12/2006 Purchases Sales movement

s 31/12/2007

Naftilos A. Marine Ltd 50% 1,678 - -

(1,678) - Novamar Int. Scarl 50% 951 - - (8)- 943 Soc. Marittima Siciliana Srl 50% 13 - - (13)- -

Sub-total 2,642 - - (1,699) 943

Securities in portfolio 3,795 (527) 3,268

Total equity investments 6,437 (2,226) 4,211

As already described, the securities recorded in the financial statements, whose value at December 31, 2007

was Euro 3,268 thousand (Euro 3,795 thousand at December 31, 2006), refers to shares of Banco Popolare

dell’Emilia Romagna, considered as financial assets available-for-sale and, in application of IAS 39, measured

at fair value and recorded in an appropriate equity reserve. The market value of these shares at December 31, 2006 was above the cost incurred by approx. Euro 921

thousand and, approx. by Euro 394 thousand at December 31, 2007. Deferred tax assets (Note H)

The principal elements comprising the deferred tax assets are shown below:

In Euro thousands

Temporary differences Amount Average

rate Rate

IRES income taxes - Sales representatives expenses 254 5.50% 14 - Foreign currency translation costs 664 5.50% 37 IRAP regional taxes - Sales representatives expenses 333 13 - Shipping costs in the year 55 2

Total deferred tax assets at 31.12.2007 66


FINAVAL SPA Pag. 59

Current assets

Inventories of oil, lubricants and services in course (Note 1)

The inventories include the fuel and lubricants on board the ships at the year-end, recorded at the lower

between purchase cost, determined according to the weighted average cost method and market value, as

well as services in course of execution (shipments at year-end) calculated on a pro-rata basis of the service

provided, for the quota not yet invoiced before the year-end.

The table below shows the balances of the account:

In Euro thousands

Inventories 31/12/2006 31/12/2007 Cge.

Raw material, ancillary and consumables 1,256

1,747 491

Services in course of execution 121 -

(121)

Total

1,377

1,747 370

The value of inventories from 2006 to 2007 increased by Euro 370 thousand, substantially due to the higher

number of embarkations managed compared to the end of 2006.

Trade receivables (Note L)

The account includes amounts due within one year of trade receivables, and receivables from subsidiaries,

holding companies and group companies of a commercial nature.

In Euro thousands

Trade receivables 31/12/2006 31/12/2007 Change Trade receivables 9,220 7,430 (1,790) Receivables from subsidiary and associated companies 5 - (5) Receivables from group companies 1,310 12 (1,298) Receivables from holding companies 298 7 (291)

Total 10,833 7,449 (3,384)

In particular, the trade receivables include the balances at the end of the year of receivables for charters,

demurrage and other. They derive from normal transport and rental operations and are adjusted to their

realisable values through a doubtful debt provision of Euro 133 thousand which has not changed from the

previous year. The decrease of Euro 1,790 thousand compared to the previous year is principally due to the receipt of existing

receivables.

The receivables from companies subject to common control, excluded from the consolidation scope, amount

to Euro 1,310 thousand at December 31, 2006 and Euro 12 thousand at December 31, 2007, refers to the

company Finaval Aviation Srl. During the year, the financial receivable from the group company Finaval

Aviation Srl was settled.

The receivables from holding companies, amounting to Euro 298 thousand at December 31, 2006 and approx.

Euro 7 thousand at December 31, 2007, represents the receivable of Finaval S.p.A. from Finaval Holding S.p.A.

for various receivables.

During the year, the financial receivable from the group company Finaval Aviation Srl was settled.


FINAVAL SPA Pag. 60

Other receivables (Note M)

The breakdown of the account at December 31, 2007 and 2006 is shown in the table below:

In Euro thousands

Other receivables 31/12/2006 31/12/2007 Cge. Other receivables 2,193 850 (1,343) Accrued income 125 64 (61) Prepayments 717 874 157

Total 3,035 1,788 (1,247)

Other receivables principally relate to receivables from insurance institutions for damages incurred on vessels.

Cash and cash equivalents (Note N)

The account is composed of bank and postal current accounts of the Group at the individual credit institutions

of the Group and cash held by the company. The book value of these assets coincides with the fair value. The increase at December 31, 2007 of Euro 8,556 thousand is principally due to the share capital payment

made by a new shareholder close to the year-end.

Derivative financial instruments (Note O) The details of the derivative financial instrument assets and liabilities at December 31, 2007 are shown in the

table below:

In Euro thousands

ASSETS FOR DERIVATIVE INSTRUMENTS Notional Fair value DERIVATIVES ONINTEREST RATES Fix Floater Swap Euro 1,666 -

IRS Euro 4,167

10 Zero Cost Collar Floor rising Euro 3,500 1 K-in collar step up Euro 5,022 5 IRS step-up USD 6,087 3 IRS Euro 5,000 13

TOTAL ASSETS FOR DERIVATIVE FINANCIAL INSTRUMENTS 32


FINAVAL SPA Pag. 61

At December 31, 2006, the total assets for derivative instruments amounted to Euro 818 thousand.

In Euro thousands

LIABILITIES FOR DERIVATIVE FINANCIAL INSTRUMENTS Notional Fair value DERIVATIVES ON INTEREST RATES IRS with floor EUR 600 3 Collar with k-in floor USD 9,465 27 IRS step-up with floor USD 31,000 335 IRS EUR 3,500 40 IRS USD 48,600 889 FOREIGN EXCHANGE DERIVATIVES Strip with floor option k-out and k-in 1.261 – 1,60 USD 18,090 820 Strip with floor option k-out and k-in 1,250 – 1,60 USD 9,000 446 Strip with floor option k-out and k-in 1.310 – 1.50 USD 6,474 312 Strip with floor option k-out and k-in 1.330 – 1.50 USD 12,949 447 Strip with floor option k-out and k-in 1.247 – 1.48 USD 15,100 987 Strip with floor option k-out and k-in 1.320 – 1.60 USD 9,300 280 Strip with floor option k-out and k-in 1.260 – 1.50 USD 7,313 419 Knoch in Forward USD 5,520 636

TOTAL LIABILITIES FOR DERIVATIVE FINANCIAL INSTRUMENTS 5,641 At December 31, 2006, the total liabilities for derivative instruments amounted to Euro 3,075 thousand.

Tax receivables (Note P)

The tax receivables of approx. Euro 724 thousand at December 31, 2007 and approx. Euro 255 thousand at

December 31, 2006 principally refer to income tax payments on account.

Non-current assets held- for-sale (Note Q)

The account at December 31, 2007 amounts to Euro 77,092 thousand.

The account includes the net book value of the M/T Neverland Soul as well as the advances paid to the

Korean shipyard Samsung for the vessels “Neverland Gold” (Hull 1658) and “Neverland Sky” (Hull 1659) and the

relative costs capitalised. These amounts are reclassified under “Non-current assets held-for-sale” for which, as

at December 31, 2007, preliminary sales agreements were already signed (Memorandum of Agreement). The account at December 31, 2006 amounted to Euro 1,240 thousand and included the net book value of the

gas tankers still in the fleet at December 31, 2006, but whose sale was approved by the Board of Directors and

for which, at that date, a preliminary sales agreement was already signed (Memorandum of Agreement) with

the client. Specifically this relates to the vessels operating in the LPG segment, “Fiemme” and “Azzurra Prima”. The valuation of these assets was made at the lower of the inscription value and the fair value less costs to sell.

Non-current liabilities

Bank payables (Note A1)

The account includes the payables to credit institutions for the portion of the loans due within one year; the

bank payables due within one year are recorded under “current liabilities”.

The balances at December 31, 2007 and 2006 are shown in the table below:


FINAVAL SPA Pag. 62

In Euro thousands

Medium/long-term bank payables Balance at December 31, 2006 111,364 Balance at December 31, 2007 104,227

In relation to the previous year:

a new mortgage was taken out with Bremer Landesbank to finance the purchase of M/T Naftilos;

the first two “draw downs” were made on the Fortis Bank loan relating to the construction of the

Neverland Gold vessel;

the first draw down of the “DSB” loan was made relating to the construction of the Neverland Sky

vessel;

two loans were drawn down from the Banca Antonveneta for a total amount of Euro 15 million to be

repaid in 2010. The composition of the Finaval Group bank loans at December 31, 2007 is shown in the table below:

In Euro thousands

Lender Duration Curr. Interest rate Balance at 31/12/2007

Short-term

portion

Medium/Long term portion

Fortis Bank in pool 01/10/2015 USD Libor USD 3 months +0,75-

0.95% (LTV) 48,625 8.857 39.768

Unicredit in pool 01/06/2021 USD Libor USD 3 months

+0.80% 33,014 2.445 30.569

Bremer Landersbank 01/01/2019 USD "Tranche B" Libor 3 months +1,1% "Tranche A” Libor 3

months +0.90% 10,911 1.082 9.829

Interbanca 01/02/2011 EUR Euribor 6 months +1.15% 10,500 3.000 7.500 Banco di Roma 01/02/2011 EUR Euribor 6 months +0.90% 10,132 2.919 7.213 Antonveneta 01/10/2008 EUR Euribor 3 months +1% 1,734 1.734 0 Antonveneta 01/10/2010 EUR Euribor 6 months+1% 4,167 1.667 2.500 Antonveneta 01/12/2010 EUR Euribor 6 months+1% 10,000 3.333 6.667 Unicredit 01/06/2015 EUR Euribor 6 months+1% 934 112 822 DSB USD 1,363 1.363 IFRS adjustments -760 -121 -639

Medium/long term bank loans 130.620 26.391 104,227

In compliance with some loans existing at December 31, 2007, the Group must respect some covenants

relating in particular to the ratio between the assets financed and the value of the loans. At December 31,

2007, the financial covenants were complied with.

The principal loans as at December 31, 2007 are shown below.

Fortis Bank –in Pool

In 2004, the Group completed a restructuring of the existing payable on the vessels in the Product sector, with

the assistance of Fortis Bank SA of Rotterdam, as Lead Bank in a syndicate of Credit Institutions. Through this

operation the pre-existing payable was fully repaid and a new mortgage loan was obtained for an original

amount of USD 56,500 thousand. In 2005, on the acquisition of the Neverland vessel by Finaval, the loan was

increased by a further amount of USD 42,200 thousand and some contractual clauses were renegotiated with

particular regard to the extension of the expiry terms.


FINAVAL SPA Pag. 63

Currently, the contract has a decreasing capital portion, with quarterly repayments, at a Libor variable rate on

USD at 3 months increased by a variable spread between 0.75% and 0.95% based on the ratio between the

total market value of the vessels and the residual payable, and an expiry date of October 2015, including the

so-called “balloon” (final repayment) of USD 11,800 thousand. The loan is secured by a mortgage on the ships

to which the loan refers.

Unicredit Banca d'Impresa – in Pool

This is a loan granted by a syndicate of banks with Unicredit Banca d’Impresa as lead bank, granted to

Energetica LTDA on June 26, 2006, of an original amount of USD 54 million and with secured guarantees on the

vessel financed (Neverland Soul). The loan is repayable through equal quarterly capital instalments, at a Libor variable interest rates on USD at 3

months increased by a spread of 0.85%.

In January 2008, on the sale of the M/T Neverland Soul, the above-mentioned loan was fully repaid.

Bremer Landesbank Kreditanstalt Oldenburg - Girozentrale

This relates to a loan granted to Naftilos A. Marine Ltd on January 12, 2007, of an original amount of USD 35,200

thousand (USD 30 million for the A Tranche and USD 5.2 million for the B Tranche). The loan, with final repayment

in January 2019, requires quarterly capital repayments and a Libor variable interest rate on USD at 3 months

increased by a spread of 0.95% on the A Tranche and a spread of 1.10% on the B Tranche.

Interbanca

This relates to an interest bearing loan of an original amount of Euro 15 million granted to the Parent Company

on March 14, 2006, which provides for half yearly repayments up to February 2011, at an Euribor interest rate at

6 months increased by a spread of 1.15%.

Banca di Roma

This relates to an interest-bearing mortgage of an original amount of Euro 15 million granted to the Parent

Company on February 16, 2006 with guarantees given by the parent company of Finaval. The loan provides for

half yearly repayments until February 2011 at a rate of Euribor at 6 months increased by a spread of 0.90%.

Banca Antonveneta

This relates to interest bearing loans of a total amount of Euro 20 million granted to the Parent Company

between 2005 and 2007, which provides for half yearly repayments, at a Euribor interest rate at 6 months

increased by a spread of 1%.

As previously described (in accordance with the conditions of some loans as at December 31, 2007), the

Group must comply with some “covenants” principally referring to the loan to value ratio of the vessels and

guaranteed minimum levels of net equity.

All of the “covenants" in the loan contracts had been complied with at December 31, 2007.


FINAVAL SPA Pag. 64

Personnel provisions (Note B1)

This provision relates to the employee leaving indemnity calculated in accordance with IAS 19 on an actuarial

basis.

In accordance with international accounting standards, the employee leaving indemnity is considered a post

employment defined-benefit plan, or rather as defined services, which is recorded utilising the unit credit

projection method. The changes in the year regarding the present value of retirement benefit obligations were as follows:

In Euro thousands

EMPLOYEE LEAVING INDEMNITY

Opening balance i n the present value of the defined benefit obligation at December 31, 2006 779 Effect of employee indemnity reform (curtailment) (54) Current service cost 193 Financial charges on obligations undertaken 31 Benefits paid in 2007 (332) Present value of the defined benefit obligation at December 31, 2007 616 Net actuarial profit/(loss) recognised in the year (64)

Closing balance i n the present value of the defined benefit obligation at December 31, 2007 552

As already described in the paragraph “accounting and consolidation principles”, the Group has decided not

to utilise the corridor method for the gains and losses generated subsequent to January 1, 2005 and to record

all the cumulative actuarial gains and losses existing at that date.

Average number of employees

The average number of employees for the years 2007 and 2006, broken down by category and including

seagoing personnel is as follows:

Average number of employees 31/12/2006 31/12/2007 Change Executives 3 3 - Ashore personnel 29 28 (1) Seagoing personnel 294 234 (60)

Total average personnel 326 265 (61) Note 1: The data indicated includes 22 Crew referring to the Company Naftilos A.M. Ltd, consolidated proportionally.

Deferred tax liability (Note C1)

The composition of the deferred tax liability at December 31, 2007 is shown below.

In Euro thousands

Temporary differences Amount Average rate Rate IRES income taxes - Exchange gains 1,262 5.50% 69 - Deferred gains on disposals 1,963 5.50% 108 - Securities valued at fair value 904 27.50% 249 - Damage income and grants not received 2,186 5.50% 120 - Other net temporary differences 436 5.50% 24 IRAP regional taxes - shipments at year end 398 15

Deferred tax liability at 31.12.2007 585


FINAVAL SPA Pag. 65

Provision for charges and expenses (Note D1)

The table below shows the composition of the provision for charges and expenses:

In Euro thousands

Risks and future charges 31/12/2006 31/12/2007 Change Risks on investments – Novamar Int. Holland 118 118 - Future personnel costs - 660 660 Interest calculated on terminated Mare Glaciale and Capo Horn loan 84 84 -

Total 202 862 660 Current liabilities

Bank payables (Note E1)

The account includes bank overdrafts, the current portion of loans and short-term loans.

The breakdown of the account is shown in the following table: In Euro thousands

Short-term bank payables 31/12/2006 31/12/2007 ChangeAdvances 534 53 (477) Mortgages 21,094 26,391 5,293 Bank loans 8,408 24,460 16,052

Total 30,036 50,904 20,868

Trade payables (Note F1)

The composition of the account, with indication of the geographic breakdown, is shown in the table below:

In Euro thousands

Trade payables 31/12/2006 31/12/2007 Change Trade payables 9,429 7,853 (1,576) Payables to subsidiary and associated companies 750 801 51

Total 10,179 8,654 (1,525)

Other payables (Note G1)

The account principally relates to payments on account from clients due within one year, payables to pension

and social security institutions, as well as other payables and accruals and deferred income due within one

year.

The breakdown of the account is shown below:

In Euro thousands

Other payables 31/12/2006 31/12/2007 Change Advances due within one year 2,711 1,576 (1,135) Payables to pension and social security institutions 146 179 33 Other payables due within one year 2,541 7,122 4,581 Accrued liabilities 1,027 909 (118) Deferred income 830 738 (92)

Total 7,255 10,523 3,269

The reduction in the account Deferred Income is principally due to the lower amount of revenues relating to

the subsequent year recorded in the so-called “shipping at year-end”.


FINAVAL SPA Pag. 66

The account other payables at December 31, 2007 principally refers to payables relating to a payment on

account equal to 10% of the sales price of the M/T Neverland Gold (Euro 5,266 thousand) and to payables to

the Danish shipyard Aarthus Bankrupt (Euro 1 million).

Tax payables (Note H1)

The account, amounted to Euro 354 thousand at December 31, 2007 and Euro 145 thousand at December 31,

2006 and principally includes the corporation tax payables.

Shareholders' Equity

Share capital (Note I1)

The share capital fully paid-in amounts to Euro 32,293 thousand, consisting of 32,293,000 ordinary shares of a

par value of Euro 1.00 each. The increase compared to 2006 derives from a paid-in share capital increase

reserved to Vitol B.V. approved on December 19, 2007. The payment by the new shareholder was Euro 20,183

thousand and was recorded as a Share Capital increase of Euro 8,073 thousand and a share premium reserve

increase of Euro 12,110 thousand. Following this operation, Vitol B.V. holds 25% of the share capital while

Finaval Holding holds the remaining 75%. Share premium reserve (Note L1)

The reserve amounts to Euro 19,495 thousand and includes:

Euro 7,385 thousand as the difference between the nominal value of the convertible bonds and the share

capital increase in 2004 following the conversion of these bonds;

Euro 12,110 thousand relating to the share capital increase detailed in note I1.

Legal reserve (Note M1)

The legal reserve amounts to Euro 2,087 thousand at December 31, 2007 (Euro 2,033 thousand at December 31,

2006) and includes the profits allocated by the Parent Company Finaval S.p.A. up to 5% of the annual profit. This

reserve increased compared to the previous year by Euro 54 thousand following the allocation of the net profit

for 2006.

Other reserves (Note N1)

The other reserves, amounting to Euro 35,910 thousand at December 31, 2007 and Euro 33,549 thousand at

December 31, 2006, principally consist of retained earnings. The increase in 2007 of Euro 2,361 thousand is

principally due to the allocation to the Extraordinary Reserve of almost all of the result for the year of the

Parent Company Finaval S.p.A.. A reduction was recorded for the direct allocation of costs relating to the

above-mentioned share capital increase for an amount of Euro 250 thousand. Cash Flow Hedge Reserve (Note O1)

This negative reserve of Euro 904 thousand at December 31, 2007 represents the negative fair value at the end

of year of the derivative financial instruments of the Group to hedge against interest rate risks in accordance

with the procedures outlined in the paragraph “management of the financial risks” in the present notes, which

may be treated as hedge accounting. The details of the derivative positions at December 31, 2007 are shown

in the table in Note O.


FINAVAL SPA Pag. 67

Fair value reserve of financial assets held-for-sale (Note P1)

This reserve - positive at December 31, 2006 for Euro 618 thousand and for Euro 145 thousand at December 31,

2007 - refers to the fair value adjustment, represented by the market price at the balance sheet date, of the

shares of Banco Popolare dell’Emilia Romagna held in portfolio by the Parent Company, net of the tax effect.

The change in the fair value of these assets was recorded under equity as treated as financial assets which are

not held for the intention of resale or trading, and therefore are classified under “financial assets held-for-sale”. Retained earnings (Note Q1)

This account, accounting to Euro 3,425 thousand at December 31, 2007 and Euro 2,617 thousand at

December 31, 2006, also includes the positive effect on the net equity generated from the transition to IFRS.

Net profit for the year (Note R1)

The account refers to the net result of the Finaval Group. The table below shows the statement of changes in

shareholders’ equity in the year.

STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY In Euro thousands

Share capital

Share premium reserve

Legal reserve

Other reserves

Trans. and hedge reserve

IAS – IFRS Trans.

reserve Fair value reserve

Retained earnings

Result for the year

Group shareholder

s' equity Balance at December 31, 2005 24,220 7,385 1,579 21,962 0 0 30 1,250 13,498 69,924

Allocation of the 2005 result 454 11,703 1,341 -13,498 0

Change in cash flow hedges net of the tax effect -707 -707

Change in financial assets available-for-sale at fair value net of the tax effect 588 588

Total gains/(losses) recognised directly to equity in the year 0 0 0 0 -707 0 588 0 0 -119

Other movements -116 26 -90

Result 2006 3,885 3,885


Allocation of the 2006 result 54 3,023 808 -3,885 0

Change in fair value deriving from hedging and of financial assets available-for-sale net of the tax effect -197 -473 -670

Increase in reserved share capital 8,073

12,110 20,183

Other movements -662 -662

Result for the year 1,679 1,679


NOTES TO THE INCOME STATEMENT

Comments are provided below on the composition and changes in the main income statement accounts in

the period 2006 - 2007.

In accordance with IFRS 5, the individual income statement accounts are shown net of the components

relating to discontinued operations, Chemical in 2006 and LPG in 2007, whose results, net of the tax effect,

are reported in the account “Profit (loss) from Discontinued Operations”. In relation to this, it should be noted

that the comparison between the revenue and costs for the periods and the values relating to the LPG

statement are shown on a single line of the income statement at December 31, 2007 and are reported line-

by-line in the previous year. The application of the accounting principle IFRS 5 resulted in a significant

reduction in the income statement accounts “Net Revenues” and to the cost for “Bunkerage”, “Charter

Expenses”, “Seagoing Personnel”, “Maintenance” and “Other Vessel Costs”. It should be noted that in the analysis of the information shown in the tables and schedules below,

differences may arise in the figures compared to the aggregate financial statements due to roundings made

at different levels.

It should also be noted that in the following analysis, the percentage of the “Net Revenues ” and of the

different income statement accounts is compared to the Time Charter Base revenues equal to 100. The Time

Charter Base comparison, in relation to the Group operating segments, is considered more significant as this

is not impacted by differences in the allocation of the shipping costs in the “Spot” and “Time Charter” type

contracts.

Net revenues (Note 1)

The Finaval Group operates through three Business Units, which, based on the types of product shipped and

the types of market served, are classified as Crude Oil, Product Medium Range and Product Small size. In

particular, this last sector, which in 2007 saw the start-up of its activities through the incorporation of the

“Cabofin” Joint Venture, relates to short range shipping of derivative petroleum products in the

Mediterranean area. In 2006, the Group commenced the disposal process of the gas tanker fleet owned which was completed in

the first half of 2007, continuing as an operator in this sector through Bare Boat charters. It is also reported that

the Finaval Group undertook the transport of chemical products for a number of years. In 2005, however, all

the chemical vessels held by the Group were sold; the sales contract stipulated the continuation by Finaval

of the commercial contracts related to the vessels at the time of the sales, which were concluded during

2006. As previously described, in accordance with IFRS 5 the operating result of the Chemical segment in 2006 and

the LPG segment, for the year ended December 31, 2007, is reported, net of the tax effect, in a single line

“Net profit/loss from Discontinued Operations” at the end of the income statement. Summarised income

statements of the Chemical and the Discontinued LPG sectors are shown at the end of the Notes.

FINAVAL SPA Pag. 70

Net revenues by area of activity are shown in the table below:

In Euro thousands Net revenues 31/12/2006 % 31/12/2007 % Crude Oil 35,861 61.5% 37,231 59.20% Product Medium Range 19,531 33.5% 23,355 37.14% Product Small size - - 2,303 3.66% LPG 23,991 41.1% - - Total 79,383 136.1% 62,889 141.71%

For a better understanding of revenues, the Spot contracts invoiced include the cost of transport, while the

Time Charter contracts are invoiced net of these costs, which are borne by the charterer.

Net revenues decreased from Euro 79,383 thousand at December 31, 2006 to Euro 62,889 thousand at

December 31, 2007, a reduction of Euro 16,494 thousand in the period (-20.8%). This decrease is principally

due to the exclusion of the income from the Discontinued LPG sector and to the different classification of the

residual amounts referring to the same sector, registered in 2007 together with other income and cost items in

the single income statement account “Net profit (loss) from discontinued operations”. In the other Business Units, apart from the start-up of the Product Small Size activities, an increase was

registered in both the Business Units already in operation and attributable in the “Crude Oil” sector to the

greater number of Spot charters while in the “Product Medium Range” to the entry into the fleet of the M/T

Naftilos AN.

No subdivision by geographic areas was made as the vessels operate in a single global market and the

individual vessels are not limited to commitments in specific areas.

Port, bunker and commission expenses - voyages costs (Note 2)

The table below shows the breakdown of the account for the years 2007 and 2006: In Euro thousands Port, bunker and commission expenses

31/12/2006 % 31/12/2007 % Bunker 8,091 13.9% 8,560 19.29% Commissions 903 1.5% 1,046 2.36% Port expenses 6,152 10.6% 7,830 17.64% Joint venture management 5,581 9.6% 1,877 4.23% Changes in inventory 335 0.6% (804) (1.81%) Total 21,063 36.2% 18,509 41.71%

The transport costs decreased from Euro 21,063 thousand in 2006 to Euro 18,509 thousand in 2007, a reduction

of Euro 2,554 thousand (-12.1%). The decrease in the account “joint venture management” is due to better

contractual terms for Finaval in relation to the joint venture with Vitol SA. This recalculation is applied to the

variation in certain parameter benchmark values relating to the charter market.

Time Charter Equivalent Earnings (Note 3)

The table below shows the Time Charter equivalent earnings by area of activity:

FINAVAL SPA Pag. 71

In Euro thousands Time Charter equivalent ernings 31/12/2006 % 31/12/2007 % Crude Oil 22,948 39.3% 21,324 48.05% Product Medium Range 19,267 33.0% 21,423 48.27% Product Small size - - 1,633 3.68% LPG 16,105 27.6% - - Total 58,320 100.0% 44,380 100.00%

The Time Charter base equivalent earnings from Euro 58,320 thousand in 2006 to Euro 44,380 thousand in

2007, a decrease of Euro 13,940 thousand (-23.9%). This decrease is principally due to the exclusion of the income from the Discontinued LPG sector and to the

different classification of the residual amounts referring to the same sector, registered in 2007 together with

other income and cost items in the single income statement account “Net profit (loss) from discontinued

operations”.

With reference to the Crude Oil operations, the decrease derives from different elements principally due to

the weakness of the USD compared to the Euro.

The net revenues relating to the Product Medium Range activities increased due to the expansion of the

fleet following the acquisition of the vessel Naftilos AN.

Hire costs (Time Charter In – Bare Boat In) (Note 4)

The table below shows the breakdown of the account for the years 2007 and 2006:

In Euro thousands Hire costs 31/12/2006 % 31/12/2007 % Time Charter hire costs 6,786 11.6% 8,658 19.5% Bare boat hire costs 3,514 6.0% 0 0.0%

Total 10,300 17.6% 8,658 19.5%

The charter expenses decreased from Euro 10,300 thousand in 2006 to Euro 8,658 thousand in 2007, a

reduction of Euro 1,644 thousand (-15.9%). This decrease is due to the combined effects of: a reclassification of the bare boat chartering expenses as relating to two gas tankers to be sold;

an increase in Time Charter expenses due to the commencement of the “Cabofin” activity in the

“Product small size” sector through the spot usage of charters.

Operating costs (Note 5)

The table below shows the breakdown of the account for the years 2007 and 2006:

In Euro thousands Operating costs 31/12/2006 % 31/12/2007 % Seagoing personnel 10,788 18.50% 5,990 13.50% Maintenance 6,175 10.59% 2,815 6.34% Other shipping costs 3,763 6.45% 3,081 6.94% Insurance 2,414 4.14% 1,704 3.84% Other costs and expenses 2,559 4.39% 791 1.78% Damage income (499) (0.86%) (299) (0.67%) Total 25,200 43.21% 14,082 31.73%

FINAVAL SPA Pag. 72

The operating costs decreased from Euro 25,200 thousand in 2006 to Euro 14,082 thousand in 2007, a

decrease of Euro 11,118 thousand (44.1%). The decrease is principally due to the significant reduction in

maritime personnel and maintenance, items significantly impacted by the effects deriving from the

discontinuation of the gas tanker sector, characterised by older vessels and although with lower profitability,

requires a large use of personnel and maintenance. The salaries of seagoing personnel are shown net of contributions as per Law 30 of 1998, as a form of tax

credit on the employee withholding taxes made by the companies of the Group.

Fleet contribution margin (Note 6)

The fleet contribution margin, a figure which expresses the capacity of the fleet management to cover

general costs, decreased from Euro 22,820 thousand in 2006 (with a percentage of 39.1% on the total Time

Charter equivalent earnings) to Euro 21,640 thousand in 2007 (with a percentage of 48.8% on the total Time

Charter equivalent earnings) and recorded a total decrease of Euro 1,180 thousand, an improvement

compared to the Time Charter equivalent earnings of approx. 9 percentage points.

The Group achieved this result through optimising the mix of services and favouring, as previously described,

the use of own vessels (with higher added value) to chartered vessels.

Overhead costs (Note 7)

The table below shows the breakdown of the account for the years ended December 31, 2007 and 2006: In Euro thousands Overhead costs 31/12/2006 % 31/12/2007 % Employees 2,750 4.7% 3,512 7.9% General expenses 3,057 5.2% 4,877 11.0% Rent and equipment 450 0.8% 414 0.9% Total 6,257 10.7% 8,803 19.8%

Overhead costs increased from Euro 6,257 thousand in 2006 to Euro 8,803 thousand in 2007, an increase of

Euro 2,546 thousand (40.7%). This increase is principally related to the costs incurred for the listing of the

company and as it was interrupted during the final phase of the process, almost all of the related costs were

sustained.

Other revenues/costs (Note 8)

The table below shows the breakdown of the account for the years ended December 31, 2007 and 2006: In Euro thousands Other revenues/costs 31/12/2006 % 31/12/2007 % Other revenues 1,462 2.5% 642 1.4% Other costs (1,977) (3.4%) (831) (1.8%) Total (515) (0.9%) (189) (0.4%)

The accounts other revenues and other costs in 2006 principally include prior year income of Euro 1,175

thousand, prior year charges of Euro 1,558 thousand and charges relating to the consortium management of

the Novamar International of Euro 414 thousand.

FINAVAL SPA Pag. 73

The accounts other revenues and other costs in 2007 principally include prior year income of Euro 566

thousand and prior year charges of Euro 714 thousand.

Result on disposal of vessel (Note 9)

The table below shows the breakdown of the account for the years 2007 and 2006: In Euro thousands

Result on disposal of vessel 31/12/2006 % 31/12/2007 % Gains from sale of ships - 0.0% - - Losses from sale of ships (135) -0.2% - - Other income and charges - 0.0% - -

Total (135) -0.2% - -

The losses from the sale of vessels in 2006 related to the sale of the LPG Adrastea.

EBITDA (Note 10)

The Ebitda decreased from Euro 15,913 thousand in 2006 to Euro 12,646 thousand in 2007, a decrease of Euro

3,267 thousand (-20.5%). This reduction is principally related to the increase in overhead costs and to the

contraction in the contribution margin as already described.

The table below shows the breakdown of the EBITDA by sector of activity for the two years:

In Euro thousands

EBITDA (a) 31/12/2006 % 31/12/2007 % Crude Oil 10,513 45.7% 6,362 29.83%

Product Medium Range 7,854 40.9% 6,246 29.30%

Product Small size 37 2.27%

Lpg (2,454) -15.2% - -

Total 15,913 27.3% 12,646 28.49%

Notes:

(a) The EBITDA is defined by the directors of the parent company, as the “operating margin”, as resulting from the

consolidated income statement approved by the Board of Directors, before depreciation and amortisation as

accounted in the consolidated income statement. The EBITDA is not defined as an accounting measure as per IFRS and therefore should not be considered as an

alternative measure for the evaluation of the performance of the Group’s operating results. As the composition of the

EBITDA is not regulated by the applicable accounting standards, the criteria used in the calculation of the Ebitda by

the Group may not be uniform with the criteria adopted by other operators/groups and, therefore, may not be

comparable.

FINAVAL SPA Pag. 74

Amortisation and depreciation (Note 11)

The table below shows the breakdown of the account for the years ended December 31, 2007 and 2006: In Euro thousands

Amortisation & depreciation 31/12/2006 % 31/12/2007 % Depreciation of fleet 10,954 18.8% 11,270 25.39% Subsidies art. 10 Law 132/94 (715) -1.2% (713) (1.61%) Subsidies Law 234 14/6/89 (350) -0.6% (348) (0.78%) Depreciation of other tangible assets 235 0.4% 228 0.51% Amortisation of intangible assets 72 0,1% 66 0,1%

Total 10,196 17.5% 10,503 23.67%

The net increase in the fleet depreciation is principally due to the combined effect of:

lower depreciation in the Discontinued LPG sector in the first half of 2007;

higher depreciation in 2007 on the Crude Oil sector Neverland Soul, which entered into fleet at the end

of June 2006;

higher depreciation in 2007 on the Product sector Naftilos AN, which entered into the fleet in January

2007.

The subsidies on plants received relating to the fleet are classified as a direct reduction of the relative

depreciation costs.

EBIT (Note 12)

The operating margin decreased from Euro 5,717 thousand in 2006 to Euro 2,143 thousand in 2007 (-62.5%)

due to the already commented upon gross operating margin as well as higher depreciation recorded in

2007 on the new vessels in the fleet.

The table below shows the breakdown of the EBIT by sector of activity for the two years: In Euro thousands

EBIT 31/12/2006 % 31/12/2007 % Crude Oil 7,258 31.6% 1,826 8.56% Product Medium Range 2,556 13.3% 280 1.31% Product Small size - - 37 2.27% Lpg (4,097) -25.4% -

Total 5,717 9.8% 2,143 4.83%

Net financial income (charges) (Note 13)

The table below shows the breakdown of the account for the years 2007 and 2006: In Euro thousands

Financial Management 31/12/2006 % 31/12/2007 % Financial income 2,570 4.4% 1,181 2.66% Interest on mortgages, loans and banks (7.397) -12,7% (8,453) -19.05% Fair value of derivative instruments (372) -0,6% (2.828) -6,36% Exchange Differences 3,308 5.7% 8,916 20.09% Adjustments to financial asset values 41 0,1% 15 0,03%

Total (1,850) -3.2% (1,169) -2.63%

FINAVAL SPA Pag. 75

The positive effect of the exchange differences recorded in 2007 is principally due to the conversion at the

year-end of the financial debt expressed in USD, compared to a depreciation of the US currency against the

Euro during the year.

The increase of Euro 1 million in the interest recorded in 2007 compared to the previous year is principally due

to the charges connected to the new loan granted to the Group for the acquisition of the M/T Naftilos.

Net profit from continuing operations (Note 14)

The table below shows the Group income taxes, current and deferred, for the years 2007 and 2006: In Euro thousands 31/12/2006 31/12/2007

Profit before taxes 3,867 974 Income taxes (278) (191) Deferred tax charges 523 (138) Net profit from continuing operations 4.112 645

Profit/(loss) from discontinued operations (Note 15)

The table below shows the results from Discontinued Operations for the two years. In Euro thousands

31/12/2006 % 31/12/2007 % Profit /(loss) from discontinued operations (227) -0.4% 1,034 2.3%

In accordance with IFRS 5, the total gains and losses in the management of the vessels in the Chemical

sector, sold during 2005, but whose operations continued in the initial months of 2006, are reported on a

single line item in the income statement.

In relation to this, the result in the LPG sector in 2007 is principally due to the sale of the fleet which generated

a net gain of Euro 316 thousand and income deriving from ministerial grants of Euro 1,847 thousand for the

demolition of the two vessels.

FINAVAL SPA Pag. 76

The income statements, including the tax effects, for 2006 of the Chemical sector and 2007 of the LPG sector

are shown below.

Chemical Sector In Euro thousands

31/12/2006 % Net revenues 7,787 125.9% Port, bunker and commission expenses (1,601) -25.9%

TIME CHARTER EQUIVALENT EARNINGS 6.186 100,0% Hire charges (6,368) -102.9% Operating costs 9 0.1%

FLEET CONTRIBUTION MARGIN (172) -2,9% Overhead costs - 0.0% Other revenues/costs 13 0.2% Result on disposal of vessel - 0.0%

EBITDA (159) -2,6% Amortisation & depreciation - 0.0%

EBIT (159) -2,6% Net financial income (charges) (62) -1.0%

PRE-TAX RESULT (222) -3,6% Income taxes (5) -0.1% Deferred tax charges - 0.0%

Chemical division net profit (loss) (227) -3.7%

FINAVAL SPA Pag. 77

LPG Sector In Euro thousands

31/12/2007 % Net revenues 7,851 126.0% Port, bunker and commission expenses (1,619) (26.0%)

TIME CHARTER EQUIVALENT EARNINGS 6.232 100,0% Hire charges (3,207) (51.5%) Operating costs (3,539) (56.8%)

FLEET CONTRIBUTION MARGIN (514) (8,2%) Overhead costs (92) (1.5%) Other revenues/costs 1,859 29.8% Result on dosposal of vessel 316 5.1%

EBITDA 1,569 (30,2%) Amortisation & depreciation (519) (8.3%)

EBIT 1,050 16,8% Net financial income (charges) (15) -0.3%

PRE-TAX RESULT 1,034 16,6% Income taxes - - Deferred tax charges - -

LPG division net profit/(loss) 1,034 16,6%

FINAVAL SPA Pag. 78

MANAGEMENT OF FINANCIAL RISKS

The Group adopted a policy for the management of financial risks, based on the business operations and the

strategic guidelines.

With regard to the financial risk, the Group defined a specific risk management policy in order to identify,

evaluate and mitigate the financial risks, also incorporating, where considered appropriate, the utilisation of

derivative financial products.

The Group risk management policy is based on the following criteria:

- the Group manages risks in order to preserve the expected value of the company’s assets;

- the risk management policies operate in order to fully utilise the so-called “natural hedge conditions”,

minimising in this manner the net exposure to financial risks without incurring additional charges on

hedging contracts;

- the derivative hedging contracts are subscribed exclusively against effective exposures to financial risks

which are specifically identified;

- all the risk management operations of the Group are based on the principle of prudence; - the risk management policy has the purpose of identifying in a timely manner operational events and

market developments which can potentially have an impact on the income statement;

- all the management activities of the financial risks are undertaken within the limits approved by

company Management;

- the personnel responsible for the implementation of the risk management policy have the necessary

professional qualifications and are authorised to operate exclusively within the limits defined by the risk

management policy (and by any further specific powers).

In relation to the details of the derivative financial instruments, reference should be made to note O of

present notes.

Through its activities, the Group is exposed to various risks of a financial nature:

- liquidity risk;

- credit risk;

- foreign currency risks (Euro/USD);

- interest rate risk.

Liquidity risk

The Group is exposed, in the carrying out of the ordinary commercial transactions, to the liquidity risk arising

from the misalignment of cash flows in and out.

In order to ensure its capacity to meet all financial obligations at any moment which are required to seize

possible business opportunities not planned or unforeseen cash disbursements, the Group holds a surplus

credit line.

The excess liquidity is invested temporarily on money markets in readily liquid operations.

The Group has a liquidity plan which is utilised to measure and manage the liquidity risk which permits a

careful planning of the normal liquidity needs.

The contractual maturities of the financial assets and liabilities are shown in the following table:

FINAVAL SPA Pag. 79

In Euro thousands

Financial assets Amounts due within 1 year

Amounts due between 1 and 5 year

Amounts due over 5 year

Total at 31/12/2007

Subsidies 2,240 1 2,241

Other receivables and deposits 5,264 384 5,648

Deferred tax assets 66 66

Trade receivables 7,449 7,449

Other receivables 1,788 1,788

Cash and cash equivalents 22,787 22,787

Derivative financial instruments 32 32

Tax assets 724 724

Total financial assets 40,350 385 - 40,735

Financial liabilities

Bank payables 50,904 60,932 43,295 155,131

Derivative financial instruments 5,641 5,641

Trade payables 8,654 8,654

Other payables 10,523 10,523

Tax liabilities 354 354

Total financial assets 76,076 60,932 43,295 180,303

Credit risk

Also in order to mitigate the risk relating to the recoverability of trade receivables, the Group operates

exclusively with commercial partners with recognised standing and high levels of solvency, at both national

and international level.

For this reason, historically specific difficulties of credit collection have not been encountered.

Foreign currency risks (Euro/USD)

The shipping sector trade is normally carried out on a global market, where a large part of the ordinary

commercial transactions and almost all of the negotiations for the purchase/sale of vessels and the

agreement of the relative financial contracts are in foreign currencies (USD). Consequently, the economic

and financial results of the Group are in part impacted by fluctuations between the Euro and the USD. In this economic environment, the Finaval Group, following a careful analysis of its exposure to the Euro/USD

exchange rate fluctuations and of the opportunities offered on the financial markets, defined its hedging

strategy which provides that:

- subscription of specific hedging contracts of the exchange risk relating to the medium/long term

financial debt denominated in USD. In particular purchase options on US Dollars were acquired with a

protection exchange rate for the duration of the loan which, up to the cap, allows an economic benefit

related to any depreciation in the US currency. Where the US Dollar/Euro should reach the knock-in cap

the company would however be covered by a strike exchange rate fixed by the option compared to

the relative financial risk (so-called “option strip with knock in cap”);

FINAVAL SPA Pag. 80

- with reference to the ordinary commercial transactions there is a so-called “natural hedge” in that the

risk connected to the fluctuations in the value of the invoicing denominated in USD de facto mitigates

the corresponding changes recorded in the commercial payables for the part denominated in USD. In relation to the impact in the changes in the exchange rate of the Euro/USD on the operational activity, this

change is reflected almost completely on the EBITDA, taking account that the revenues and a significant

portion of the costs are normally in USD and only the overhead costs, part of the crew costs and part of the

maintenance costs are in Euro. The impact at EBITDA level is normally recovered at Net Profit level, in that the

“Financial Management” result off-sets more or less proportionally the changes which impact the EBITDA

level. In relation to the sensitivity of the company to the exchange risk on the financial instruments, the table below

shows the effects on the income statement and net equity (assuming that other variables, in particular

interest rates, remain constant).

The tables were prepared including the financial asset and liability balances at the year-end denominated in

USD, including the assets and liabilities whose exchange risk was hedged through derivative financial

instruments, and the financial instruments at year end.

There are no significant transactions in foreign currencies other than the US Dollar.

Following the adherence by the Parent Company to the flat rate “tonnage tax”, the changes indicated

below do not have significant tax effects.

Book value +10 notional -10 notional

In Euro thousands IS Effect NE Effect IS Effect NE Effect Trade receivables 2,554 (162) 186 Trade payables (3,984) 253 (290) Other receivables and deposits 5,265 (335) 384 Other receivables 1,208 (77) 88 Other payables (9,310) 592 (679) Cash and cash equivalents 21,288 (1,354) 1,551 Bank payables (93,153) 5,925 (6,789) Foreign exchange derivatives (4,348) (3,812) 2,711

Total exposure (80,480) 1,030 0 (2,838) 0

Interest rate risk

The shipping sector is typically characterised by a high level of capital and therefore large utilisation of

medium/long term bank debt. The Group financial management is impacted by changes in interest rates,

both in the European and US markets. In this context, the choice of hedging, and the duration, is therefore made in view of the relative

expectations of the interest rate curve.

FINAVAL SPA Pag. 81

The minimum hedge on the interest risk is fixed at Group level at a quota above 70% of the total

medium/long term financial debt for the period.

The benchmark parameters on the bank debt are prevalently the Euribor and the USD Libor for the period.

The sensitivity of the group to the exchange risk is shown in the table below, based on the other market risks

remaining unchanged (in particular USD/Euro exchange).

Following the adherence by the Parent Company to the flat rate “tonnage tax”, the changes indicated

below do not have significant tax effects.

+100 basis point -100 basis point

In Euro thousands Book value IS Effect NE Effect IS Effect NE Effect

Cash and cash equivalents 22,787 185 (185) Loans and mortgages (155,131) (1,483) 1,483 Cash flow hedges (905) 470 465 (470) (465) Other interest rate derivatives (356) 1,759 (1,759) Total exposure (133,605) 931 465 (931) (465)

The income statement effect of the sensitivity analysis illustrated above was calculated on the basis of the

average book values of the period, as considered more representative compared to the book values at the

end of the period.

FINAVAL SPA Pag. 82

INFORMATION ON DIRECTION AND CO-ORDINATION ACTIVITY

The company is under the direction and co-ordination of the parent company Finaval Holding SpA which

directly holds 75% of the share capital.

In accordance with article 2497 bis of the Civil Code, information is provided as an attachment on the

parent company as at December 31, 2006. For a better and complete understanding of the balance sheet

and financial position of Finaval Holding S.p.A. at December 31, 2006 and the result for the year, reference

should be made to the financial statements, together with the Auditors’ reports, available at the registered

office of the Company.

FINAVAL HOLDING SPA

BALANCE SHEET

ASSETS 31/12/06 31/12/05 LIABILITIES 31/12/06 31/12/05

B. FIXED ASSETS A. SHAREHOLDERS’ EQUITY II PROPERTY, PLANT 1 EQUIPMENT Other assets 207 181 I. Share capital 30,000 25,427 Total property, plant & equipment 207 181 IIi. Revaluation reserve 1,105 1,105 III FINANCIAL ASSETS IV. Legal reserve 792 227 Investments in subsidiary companies 43,550 43,450 VII. Other reserves 17,863 6,789 Investments in associated companies 1,050 1,050

Other securities 595 VIII. Retained earnings/(Acc. losses) -4,206 -4,206

Total financial fixed assets 45,195 44,500 IX. Net profit for the year 517 11,309

TOTAL FIXED ASSETS 45,401 44,681 TOTAL SHAREHOLDERS’ EQUITY 46,071 40,651

C. CURRENT ASSETS B. PROVISION FOR RISKS AND CHARGES

II. RECEIVABLES Tax provisions 0 0 Subsidiary companies 1,600 20 Provisions for risks 0 0

Tax receivables 175 36 TOTAL PROVISIONS 0 0

Deferred tax asset 70 70 Other receivables - 335 D. PAYABLES Total receivables 1,845 461 Social security institutions 1,392 3,737 Other lenders 0 0 IV CASH AND CASH EQUIVALENTS Trade payables 401 393 Bank and postal deposits 1,081 160 Payable to subsidiaries 298 70 Tax liabilities 88 216 Total cash and cash equivalents 1,081 160 Other payables 86 97

TOTAL CURRENT ASSETS 2,926 621 TOTAL PAYABLES 2,266 4,513

D. PREPAID AND ACCRUED INCOME 9 12 E. ACCRUALS AND DEFERRED INCOME - 150

TOTAL ASSETS 48,336 45,314 TOTAL LIABILIITES 48,336 45,314

FINAVAL SPA Pag. 83

FINAVAL SPA

Attachment 1 - Transition to IFRS

FINAVAL SPA Pag. 84

TRANSITON TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IAS/IFRS)

First-time adoption of IFRS

As indicated in the Notes, the Company prepared the financial statements as at December 31, 2007 in

accordance with International Financial Reporting Standards (IFRS). In the first-time adoption of IFRS, it was necessary, for comparative purposes, to restate the financial

statements of the company for the year ended December 31, 2006 in accordance with IFRS, making

reclassifications and adjustments to these accounts prepared in accordance with Italian GAAP in line with

the IFRS accounting principles, from January 1, 2006 in application of IFRS 1.

For the purposes of the application of this international accounting standard, at the transition date to IFRS,

the Company prepared an opening balance sheet at January 1, 2006. This statement, which is considered as

a starting point for the accounting of subsequent operations in accordance with IFRS, was prepared making

the necessary adjustments to the financial statements at December 31, 2005 prepared in accordance with

Italian GAAP, as illustrated below: • all the assets and liabilities recorded in accordance with IFRS, including those not in accordance with

Italian GAAP, were recorded and measured in accordance with IFRS;

• all the assets and liabilities which are required to be recognised by Italian GAAP, but not permitted by

IFRS, were eliminated;

• some accounts in the financial statements were reclassified in accordance with IFRS. The company applied the IFRS approved by the European Commission in retrospective manner to all of the

periods prior to January 1, 2006, except some exemptions adopted in accordance with IFRS 1.

The transition to IFRS approved by the European Commission resulted in the maintaining of the estimates

previously made in accordance with Italian GAAP, except in those cases where the adoption of IFRS

required the formulation of estimates in accordance with different methodology. These estimates are based

on the best knowledge of Management at the moment of the transition.

The effect of the adjustment to the new standards on the opening balances of assets and liabilities was

recognised under shareholders’ equity net of the fiscal effect, and under deferred tax assets or deferred tax

liabilities.

The reconciliation schedules attached, as prepared only for the purposes of the transition project for the

preparation of the first full IFRS financial statements in accordance with the IFRS approved by the European

Commission, do not include comparative data and the necessary explanatory notes that would be required

to represent in a true and fair manner the balance sheet, financial position and result of Finaval S.p.A. at

December 31, 2006 in conformity with IFRS approved by the European Commission.

The reconciliations and relative explanatory notes required by IFRS 1 - First time adoption of IFRS - of the net

equity and of the result for the year in accordance with the previous principles (Italian GAAP) and the new

principles are illustrated below. In particular the paragraphs below provide the following information:

• A description of the accounting principles and policies in accordance with IFRS adopted by the

Company for the preparation of the Separate Financial Statements at December 31, 2007 and which

were considered for the purposes of the preparation of the reconciliations shown below;

• The description of the criteria utilised for the transition from Italian GAAP to IFRS;

FINAVAL SPA Pag. 85

• The reconciliation between the net equity as per Italian GAAP and IFRS approved by the European

Commission at January 1, 2006 (transition date) and at December 31, 2006 (comparative date of

financial statements at December 31, 2007), with separate information on the effects on the single

balance sheet accounts;

• The reconciliation between the net result as per Italian GAAP and IFRS approved by the European

Commission for the year ended December 31, 2006 (comparative date of financial statements at

December 31, 2007), with separate information on the effects on the single income statement accounts.

It should be noted that in the analysis of the information shown in the tables and schedules below,

differences may arise in the figures compared to the aggregate financial statements due to rounding made

at different levels.

Options and exemptions adopted by the Company

The principal options and exemptions which the Company availed of, in accordance with IFRS 1, are listed

below:

• Financial Statements presentation and other statements: for the Balance Sheet the “current/non-

current” (generally applied to industrial and commercial companies) criteria was adopted while for the

Income Statement the cost reclassified by nature was used. The cash flow statement was prepared

applying the indirect method. • Business Combinations: the operations prior to the transition date were recalculated retrospectively only

with reference to the business combinations completed in 2005; for these operations the application of

the provisions contained in IFRS 3 resulted in the recalculation of the current asset and liabilities referring

to the moment of the acquisition by the Group. The operations prior to January 1, 2005 were not subject

to retrospective calculation.

• Employee benefits: the Company has decided to record all accumulated actuarial gains and losses

existing at January 1, 2006, and not to adopt the so-called “corridor method” for the actuarial gains and

losses which were generated and will be generated subsequent to this date, in consideration that the

actuarial variations do not produce significant impacts on the income statement such as to justify

recourse to the “corridor” method.

• Intangible and tangible assets: the historical cost criteria was retained (as an alternative to fair value) as

the measurement criteria for property, plant and equipment and intangible assets after initial

recognition. • Inventories (of fuel): according to IAS 2, the cost of inventories must be calculated using the FIFO method

or the weighted average cost formula. The Company decided to utilise the weighted average cost

method for each movement (cost of the fuel where the ships are refuelled).

• Public grants: capital grants are recorded in the balance sheet as an adjustment to the book value of

the asset to which it was obtained.

FINAVAL SPA Pag. 86

Reconciliation of the Balance Sheet at January 1, 2006

EFFECTS ON THE TRANSITION TO IFRS ON THE BALANCE SHEET AS AT JANUARY 1, 2006 ITA - GAAP ADJUSTMENTS RECLASS. IAS-IFRS 1/1/2006 IAS-IFRS 1/1/2006

NOTES

ASSETS

NON-CURRENT ASSETS PROPERTY, PLANT & EQUIPMENT Fleet 143,909 3,676 (17,296) 130,289 A-A1 Fleet under construction 16,147 0 0 16,147

Other assets 1,965 0 0 1,965

INTANGIBLE ASSETS 124 (78) 0 46 B

FINANCIAL ASSETS

Subsidies 3,535 (88) 0 3,447 C Other receivables and deposits 148 0 0 148 Equity investments 3,685 45 0 3,730 D Deferred tax assets 131 0 0 131

TOTAL NON-CURRENT ASSETS 169,644 3,555 (17,296) 155,903

CURRENT ASSETS

Inventories 5,366 0 (1,988) 3,378 E Trade receivables 12,400 0 0 12,400

Other receivables 6,967 0 (860) 6,107 F

Cash and cash equivalents 33,815 0 0 33,815 Derivative financial instruments 0 925 1,655 2,580 H1-H2-H3 Tax assets 595 0 0 595

TOTAL NON-CURRENT ASSETS 59,143 925 (1,192) 58,875

TOTAL ASSETS 228,787 4,480 (18,488) 214,778

FINAVAL SPA Pag. 87

EFFECTS ON THE TRANSITION TO IFRS ON THE BALANCE SHEET AS AT JANUARY 1, 2006 ITA - GAAP ADJUSTMENTS RECLASS. IAS-IFRS 1/1/2006 IAS-IFRS 1/1/2006

NOTES

LIABILITIES

SHAREHOLDERS’ EQUITY Share capital 24,220 0 0 24,220 Share premium reserve 7,385 0 0 7,385

Legal reserve 1,579 0 0 1,579

Extraordinary reserve 0 0 0 0

Other reserves 21,962 0 0 21,962

Cash Flow Hedge Reserve 0 0 0 0

ADV fair value reserve 0 30 0 30 D IAS/IFRS transition reserve 0 2,616 0 2,616

Retained earnings (25) 0 0 (25)

Net profit/(loss) for the year 12,157 0 0 12,157

TOTAL SHAREHOLDERS’ EQUITY 67,278 2,646 0 69,924

NON-CURRENT LIABILITIES

Bank payables 76,814 0 2,754 79,568 F-H3 Personnel provisions 656 15 0 671 G

Deferred tax liabilities 777 26 0 803 I

Provision for risks and charges 1,430 0 (871) 559 H2

Other payables 16,229 0 (16,229) 0 A1

CURRENT LIABILITIES

Bank payables 28,854 0 (211) 28,643 F

Derivative financial instruments 0 1,792 (876) 916 H1-H2-H3

Trade payables 27,326 0 0 27,326

Other payables 8,733 0 (3,055) 5,678 A1-E

Tax liabilities 690 0 0 690

TOTAL LIABILITIES 161,509 1,833 (18,488) 144,854

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 228,787 4,479 (18,488) 214,778

FINAVAL SPA Pag. 88

Reconciliation of the net equity at January 1, 2006

Reconciliation of Shareholders' Equity 1-1-2006 Note Shareholders' Equity as per Italian GAAP 67,278 “Dry dock” costs 3,676 A Intangible assets (78) B Subsidies (88) C Financial assets available for sale – BPER shares 45 D Provision for employees – actuarial recalculation (15) G Derivative financial instruments - hedge on exchange rate (1,282) H1 Derivative financial instruments - hedge on interest rate 414 H2 Deferred tax liabilities (26) I Shareholders' Equity as per IAS/IFRS 69,924


NOTES TO THE FINANCIAL STATEMENTS AT JANUARY 1, 2006

The principal adjustments made on the opening Balance Sheet in application of IFRS at January 1, 2006 are

illustrated below.

In relation to the tax effects of the adjustments, in virtue of the tax regime adopted by the Company, which

opted for the “Tonnage Tax” flat rate regime from January 1, 2006, they were calculated exclusively with

reference to the transactions where the above-mentioned regime is not applicable and where the effects

are not immaterial.

A) – A1) Fleet and Other receivables

A) “Dry dock” costs

The adjustment relates to the component approach to the ships. For each ship there is a compulsory “dry

dock” period in which repairs, maintenance and replacement of some components is undertaken, which

cannot be made when the ship is in operation. The adjustment was made extrapolating from the original

purchase cost of the ship the relative value of the components requiring periodic substitution in the dry dock

phase. This component is not depreciated on the basis of the entire life of the ship, but based on the period

between one dry dock and the subsequent dry dock (normally between 30 and 60 months, according to the

type of work and maintenance).

For each dry dock stoppage the relative costs are capitalised on the value of the ship.

Adjustment Debit Credit Fleet - Component capitalised net of the depreciation provision 3,676 IAS/IFRS transition reserve 3,676 Total 3,676 3,676

FINAVAL SPA Pag. 89

A1) Subsidies reserve

As described in the section Accounting Principles, the Company adopted the option in IAS 20 which allows

the recording of subsidies received as a direct reduction of the book value of the asset for which it was

obtained. The reclassification was Euro 17,296 thousand. Adjustment Debit Credit Other payables - non-current 16,229 Other payables - current 1,067 Fleet 17,296 Total 17,296 17,296

B). Intangible assets

The adjustment relates to leasehold improvements, capitalised in accordance with Italian GAAP, which may

not however be recorded under intangible assets in application of IFRS, as, although the company avails of

the future related benefit, they do not satisfy the identification requirement established by IAS 38 for the

recording of intangible assets. Based on IAS 38 the definition of an intangible asset requires an intangible

asset to be identifiable to distinguish it clearly from goodwill. Adjustment Debit Credit IAS/IFRS transition reserve 78 Intangible assets 78 Total 78 78

C) Subsidies (IAS 39)

The adjustment relates to the discounting of the value of the receivable for public subsidies which will be

received in equal half yearly installments without interest, by September 2009. In accordance with IAS 39, as

relating to a long-term financial asset, the value is calculated on the basis of the relative fair value at the

date it arose. Therefore, these receivables were adjusted to take account of effects deriving from the

discounting of their value at January 1, 2006. The interest rate used was the IRS rate of the period. The implicit

interest income component was consequently separated from the value of the relative receivable and will

be recorded periodically as a financial component.

Adjustment Debit Credit IAS/IFRS transition reserve 88 Subsidies 88 Total 88 88

D) Investments - Available-for-sale financial assets (IAS 39)

Refers to the adjustment to the fair value - represented by the market price at December 31, 2005 - of the

shares of Banca Popolare dell’Emilia Romagna held in portfolio by the Company. The above adjustment

was recorded under equity as treated as financial assets which are not held for the intention of resale or

trading, and therefore are classified under “financial assets available- for-sale”; the positive impact of this

valuation is shown in the table below:

FINAVAL SPA Pag. 90

Adjustment Debit Credit Equity investments 45 Fair value reserve - assets available-for-sale 15 Fair value reserve - assets available-for-sale 45 Deferred tax liability 15 Total 60 60

E) Inventories for services in course of execution (IAS 11).

The reclassification relates to the services in course of execution, valued on a pro-rata basis, net of the

amounts already invoiced, in accordance with IAS 11.

Adjustment Debit Credit Other payables - current 1,988 Inventories and services in course of execution 1,988 Total 1,988 1,988

F) Commissions on loans (IAS 39)

In accordance with IAS 39 the commissions on loans, incurred on the granting of the loan and subsequently

paid each year, are reclassified as a decrease in the value of the loan received.

Adjustment Debit Credit Bank payables – non-current portion 649 Bank payables – current portion 211 Other Receivables - current 860 Total 860 860

G) Employee benefits (IAS 19)

The adjustment relates to the valuation of the existing liabilities against the employee benefits to be paid on

termination of employment and relates to the employee leaving indemnity.

In accordance with IAS 19, this liability was calculated utilising the actuarial valuation methods. In

compliance with the above-mentioned accounting standards, an actuarial valuation was made of the

Employee Leaving Indemnity payable at the balance sheet.

This payable, therefore, was adjusted to take account of the results of the above-mentioned actuarial

valuations.

Adjustment Debit Credit IAS/IFRS transition reserve 15 Personnel provisions 15 Total 15 15

FINAVAL SPA Pag. 91

H) Derivative financial instruments (IAS 39)

H1) Derivative financial instruments - hedges on exchange rates

The adjustment relates to the accounting of the hedging operations of the exchange risk which, in

accordance with IAS 39, does not qualify for hedge accounting application. It refers to the fair value of the

derivative financial instruments on US Dollar loans, to hedge against the change in the exchange rate.

It should be noted however, that the above-mentioned derivative financial instruments, although not qualifying

for hedge accounting operations, are in any case appropriate for the purposes of the financial risks hedged, on

the basis of the provisions contained in the “risk management policy” of the Company.

Adjustment Debit Credit IAS/IFRS transition reserve 1,281 Derivative financial instruments - Assets 465 Derivative Financial instruments - Liabilities 1,746 Total 1,746 1,746

H2) Derivative financial instruments - hedge on interest rates

The adjustment relates to the accounting of the hedging operations of the interest rate risk which, in

accordance with IAS 39, does not qualify for hedge accounting application. This relates to the fair value of

the derivative financial instruments on loans, to hedge the risk of change in the interest rate. It should be noted however, that the above-mentioned derivative financial instruments, although not

qualifying for hedge accounting operations, are in any case appropriate for the purposes of the financial

risks hedged, on the basis of the provisions contained in the “risk management policy” of the Company.

Adjustment Debit Credit Provision for risks and charges 871 Derivative financial instruments - Assets 460 Derivative Financial instruments - Liabilities 916 IAS/IFRS transition reserve 415 Total 1,331 1,331

H3) Derivative financial instruments

Reclassified under derivative financial instruments are the effects of the exchange risk hedge recorded in

application of Italian GAAP as a direct decrease of the bank debt.

Adjustment Debit Credit Derivative Financial instruments - Liabilities 1,748 Derivative financial instruments - Assets 1,656 Bank payables – non-current portion 3,404 Total 3,404 3,404

FINAVAL SPA Pag. 92

A1) E) Other payables

The quota of the capital grants due beyond one year are reclassified from non-current other payables for an

amount of Euro 16,229 thousand (as indicated in note A1). In addition, the quota of the capital grants due

beyond one year are reclassified from current other payables for an amount of Euro 1,067 thousand (as

indicated in note A1), as well as the advances received from services in course of execution, for an amount

of Euro 1,988 thousand (as indicated in note E).

I) Deferred tax liabilities

The negative effect of the deferred tax liabilities relating to the transition adjustments to IFRS at January 1,

2006 amount to Euro 26 thousand.

FINAVAL SPA Pag. 93

Reconciliation of the Balance sheet and Income Statement at December 31, 2006

EFFECTS ON THE TRANSITION TO IFRS ON THE BALANCE SHEET AS AT DECEMBER 31, 2006 F.T.A. 1/1/06 RESTATMENT 2006

ITA - GAAP ADJUSTMENTS ADJUSTMENTS RECLASS. IAS-IFRS

31/12/2006 IAS-IFRS IAS-IFRS 31/12/2006

NOTES

ASSETS NON-CURRENT ASSETS PROPERTY, PLANT & EQUIPMENT Fleet 186,606 3,676 1,102 (17,471) 173,913 A-A1-A2-A3 Fleet under construction 21,400 0 0 0 21,400

Other assets 2,149 0 0 0 2,149

INTANGIBLE ASSETS 164 (78) 20 0 106 B

FINANCIAL ASSETS

Subsidies 1,177 (88) 56 0 1,145 C Other receivables & deposits 134 0 0 0 134 Equity investments 5,516 45 876 0 6,437 D Deferred tax assets 129 0 0 0 129

TOTAL NON-CURRENT ASSETS 217,275 3,554 2,055 -17,471 205,413

CURRENT ASSETS

Inventories 2,827 0 0 (1,450) 1,377 E Trade receivables 10,833 0 0 0 10,833

Other receivables 3,909 0 0 (874) 3,035 F

Cash and cash equivalents 14,231 0 0 0 14,231 Derivative financial instruments 0 925 (107) 0 818 G2 Tax receivables 255 0 0 0 255

TOTAL NON-CURRENT ASSETS 32,055 925 (107) (2,324) 30,549

NON-CURRENT ASSETS HELD-FOR-SALE 0 0 0 1,240 1,240 A3

TOTAL ASSETS 249,330 4,479 1,948 (18,555) 237,202

FINAVAL SPA Pag. 94

EFFECTS ON THE TRANSITION TO IFRS ON THE BALANCE SHEET AS AT DECEMBER 31, 2006 F.T.A. 1/1/06 RESTATMENT 2006

ITA - GAAP ADJUSTMENTS ADJUSTMENTS RECLASS. IAS-IFRS

31/12/2006 IAS-IFRS IAS-IFRS 31/12/2006

NOTES

LIABILITIES

SHAREHOLDERS’ EQUITY Share capital 24,220 0 0 0 24,220

Share premium reserve 7,385 0 0 0 7,385

Legal reserve 2,033 0 0 0 2,033

Extraordinary reserve 0 0 0 0 0

Other reserves 33,549 0 0 0 33,549

Cash Flow Hedge Reserve 0 0 (707) 0 (707) G2

ADV fair value reserve 0 29 587 0 618 D IAS/IFRS transition reserve 0 2,617 0 (2,617) 0

Retained earnings 0 0 0 2,617 2,617

Net profit/(loss) for the year 3,077 0 808 0 3,885

TOTAL SHAREHOLDERS’ EQUITY 70,264 2,647 689 0 73,600

NON-CURRENT LIABILITIES Bank payables 111,960 0 0 (596) 111,364 F-G3

Personnel provisions 772 14 (7) 0 779 H

Deferred tax liabilities 245 26 296 0 567 I

Provision for risks and charges 652 0 0 (450) 202 G1-G2

Other payables 15,166 0 0 (15,166) 0 A2

CURRENT LIABILITIES

Bank payables 30,175 0 0 (139) 30,036 F

Derivative financial instruments 0 1,793 971 311 3,075 G1-G2-G3

Trade payables 10,179 0 0 0 10,179

Other payables 9,770 0 0 (2,515) 7,255 A2-E

Tax liabilities 145 0 0 0 145

TOTAL LIABILITIES 179,064 1,833 1,260 (18,555) 163,602

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 249,328 4,479 1,948 (18,555) 237,202

FINAVAL SPA Pag. 95

EFFECTS ON THE TRANSITION TO IFRS ON THE INCOME STATEMENT AS AT DECEMBER 31, 2006 RESTATMENT 2006 IAS-IFRS CHEMICAL IAS-IFRS

ITA - GAAP ADJ. RECLASS. TOTAL. DIVISION FINAL 31/12/2006 IAS-IFRS 31/12/2006 31/12/2006

NOTES

INCOME STATEMENT

Net revenues 87,171 0 0 87,171 7,787 79,384

Port, bunker and commission expenses 22,664 0 0 22,664 1,601 21,063

TIME CHARTER EQUIVALENT EARNINGS 64,507 0 0 64,507 6,186 58,321

Hire charges 16,668 0 0 16,668 6,367 10,301

Operating costs 27,160 (1,970) 0 25,190 (9) 25,199 A-H

FLEET CONTRIBUTION MARGIN 20,679 1,970 0 22,649 (172) 22,821

Overhead costs 6,268 (10) 0 6,258 0 6,258 H

Other costs and revenues (503) 0 0 (503) 12 (515)

Result on disposal of vessel (201) 66 0 (135) 0 (135) A1

EBITDA 13,707 2,046 0 15, 753 -160 15,913

Amortisation & depreciation 9,305 891 0 10,196 0 10,196 A-A1-B

EBIT 4,402 1,155 0 5,557 -160 5,717

Net financial income (charges) (1,570) (342) 0 (1,912) (62) (1,850) G1-G2-

C-H

PRE-TAX RESULT 2,832 813 0 3,645 (222) 3,867

Income taxes 283 0 0 283 5 278

Deferred tax charges (528) 5 0 (523) 0 (523) I NET PROFIT FROM CONTINUING OPERATIONS 3,077 808 0 3,885 (227) 4,112

PROFIT/(LOSS) FROM DISCONTINUED OPERATIONS (227)

NET PROFIT 3,077 808 0 3,885 (227) 3,885

FINAVAL SPA Pag. 96

Reconciliation of Net Equity and Result for the year ended December 31, 2006

Reconciliation of Shareholders' Equity 31-12-2006 Note Shareholders' Equity as per Italian GAAP 70,264 “Dry dock” costs 4,779 A-A1 Intangible assets (58) B Subsidies (32) C Financial assets available for sale – BPER shares 921 D Derivative financial instruments - hedge on exchange rate (2,057) G1 Derivative financial instruments - hedge on interest rate 111 G2 Provision for employees – actuarial recalculation (7) H Deferred tax liabilities (321) I Shareholders' Equity as per IAS/IFRS 73,600

Reconciliation of the Income Statement 31-12-2006 Note Net result as per Italian GAAP 3,077 “Dry dock” costs 1,102 A-A1 Intangible assets 20 B Subsidies 56 C Derivative financial instruments - hedge on exchange rate (775) G1 Derivative financial instruments - hedge on interest rates 403 G2 Provision for employees – actuarial recalculation 7 H Deferred tax liabilities (5) I Net result as per IAS/IFRS 3,885


NOTES TO THE BALANCE SHEET AT DECEMBER 31, 2006

The nature of the principal adjustments and reclassifications at December 31, 2006 made on the Balance

Sheet and on the Income statement in application of IFRS are shown below.

In relation to the tax effects of the adjustments, in virtue of the tax regime adopted by the Company, which

opted for the “Tonnage Tax” flat rate regime from January 1, 2006, they were calculated exclusively with

reference to the transactions where the above-mentioned regime is not applicable and where the effects

are not immaterial.

A) – A1)- A2)-A3) Fleet and Other receivables

The value of the fleet is adjusted and reclassified to take into account the following effects:

A) “Dry dock” costs (IAS 16)

Adjustment Debit Credit Fleet - Component capitalised net of the depreciation provision 4,760 Depreciation - Fleet 787 IAS/IFRS transition reserve 3,600 Operating costs - maintenance 1,947 Total 5,547 5,547

FINAVAL SPA Pag. 97

A1) Lower losses from sale of ships

The adjustment below is due to the different net book value of the gas tanker fleet in application of IFRS

compared to Italian GAAP and to the consequent recording of a lower loss in the sale of 2007:

Adjustment Debit Credit Fleet 18 Depreciation - Fleet 124 IAS/IFRS transition reserve 76 Purchase/sale result of fixed assets 66 Total 142 142

A2) Capital grants reserve (IAS 20)

The reclassification of December 31, 2006 amounted to Euro 16,231 thousand, as shown in the table below:

Adjustment Debit Credit Other payables - non-current 15,166 Other payables - current 1,065 Fleet 16,231 Total 16,231 16,231

A3) Non-current assets held for sale

The net book value is recorded of the gas tankers still in the fleet at December 31, 2006, but whose sale was

already approved by the Board of Directors and for which, at that date, a preliminary sales agreement was

already signed (Memorandum of Agreement) with the buyer. Specifically this relates to the vessels operating

in the LPG segment, “Fiemme” and “Azzurra Prima”. Adjustment Debit Credit Non-current assets held for sale 1,240 Fleet 1,240 Total 1,240 1,240

B) Intangible assets (IAS 38)

Adjustment Debit Credit IAS/IFRS transition reserve 78 Intangible assets 58 Amortisation - intangible assets 20 Total 78 78

C) Subsidies (IAS 39)

Adjustment Debit Credit IAS/IFRS transition reserve 88 Financial Management Income 56 Subsidies – non-current 19 Subsidies – current 13 Total 88 88

FINAVAL SPA Pag. 98

D) Investments - Available-for-sale financial assets (IAS 39)

Refers to the adjustment to the fair value - represented by the market price at December 31, 2006 - of the

shares of Banca Popolare dell’Emilia Romagna held in portfolio by the Company. The above adjustment

was recorded under equity as treated as financial assets which are not held for the intention of resale or

trading, and therefore are classified under “financial assets available- for-sale”; the positive impact, net of

the tax effect, of this valuation is shown in the table below: Adjustment Debit Credit Equity investments 921 Fair value reserve - assets available-for-sale 304 Fair value reserve - assets available-for-sale 921 Deferred tax liabilities 304 Total 1,225 1,225

E) Inventories for services in course of execution (IAS 11).

Adjustment Debit Credit Other payables - current 1,450 Inventories and services in course of execution 1,450 Total 1,450 1,450

F) Other receivables - commissions on loans (IAS 39) Adjustment Debit Credit Bank payables – non-current portion 735 Bank payables – current portion 139 Other Receivables - current 874 Total 874 874

G) Financial derivative instruments and cash flow hedge reserve

The receivables and payables included under current assets and liabilities for derivative financial instruments

include the fair value on exchange and interest rate trading and hedging derivatives in accordance with

the indications in the table below.

G1) Derivative financial instruments - hedges on exchange rates



the derivative financial instruments on loans, to hedge the risk of change in the exchange rate.

It should be noted however, that the above-mentioned derivative financial instruments, although not


risks hedged, on the basis of the provisions contained in the “risk management policy” of the Company. At

December 31, 2006, there was only one operation no longer qualified as a hedge on the exchange risk.

FINAVAL SPA Pag. 99

Adjustment Debit Credit IAS/IFRS transition reserve 1,282 Financial Management Charges 775 Derivative financial instruments - liabilities 2,057 Total 2,057 2,057

Adjustment Debit Credit Provision for risks 348 Derivative financial instruments - liabilities 348 Total 348 348

G2) Derivative financial instruments - hedge on interest rates



the derivative financial instruments on loans, to hedge the risk of change in the interest rate. It should be noted however, that the above-mentioned derivative financial instruments, although not


risks hedged, on the basis of the provisions contained in the “risk management policy” of the Company.

At December 31, 2006, there was only one operation no longer qualified as a hedge on the interest risk,

following the advanced repayment of the underlying loan.

Adjustment Debit Credit Derivative financial instruments - Assets 818 IAS/IFRS transition reserve 415 Financial Management Income 403 Total 818 818

Adjustment Debit Credit Provision for risks 102 Derivative financial instruments - liabilities 102 Total 102 102

Adjustment Debit Credit Cash Flow Hedge Reserve 707 Derivative financial instruments - liabilities 707 Total 707 707

G3) Derivative financial instruments

The effects of the hedging on the exchange risks recorded in accordance with Italian GAAP as a direct

change in the bank loan was reclassified under derivative instruments.

Adjustment Debit Credit Derivative financial instruments - liabilities 139 Bank payables – non-current portion 139 Total 139 139

FINAVAL SPA Pag. 100

H) Employee benefits (IAS 19)

The net effect on the income statement of 2006 of the adjustment of the Employee Leaving Indemnity in

accordance with IAS 19 was approx. Euro 7 thousand. Adjustment Debit Credit IAS/IFRS transition reserve 14 Financial Management Charges 26 Personnel provisions 7 Operating costs – Crew Salaries 23 Overhead costs – Ashore salaries 10 Total 40 40

A1) E) Other payables

The quota of the capital grant beyond one year was reclassified to other payables for an amount of Euro

15,166 thousand (as indicated in note A2). In addition, the quota of the capital grants beyond one year, for

an amount of Euro 1,065 thousand (as indicated in note A2), and the advances received on services in

course of execution, for an amount of Euro 1,450 thousand (as indicated in note E) were reclassified from

other current payables.


The negative effect on the deferred tax liability, calculated on the adjustments made to the restated

Balance Sheet in 2006 in accordance with IFRS, was approx. Euro 321 thousand.


NOTES TO THE INCOME STATEMENT AT DECEMBER 31, 2006.

We illustrate the nature of the principal adjustments at December 31, 2006 made on the income statement

in accordance with IFRS.

A) – H) Operating Costs

The adjustment, amounting to Euro 1,970 thousand, principally refers to the reversal of the costs for

maintenance in accordance with IAS 16 in relation to component analysis. For further information reference

should be made to the note in the “Balance Sheet”.

A) – B) Depreciation, amortisation and provisions

In accordance with IFRS, amortisation and depreciation on tangible and intangible assets increased by a

total of Euro 891 thousand, against the combined effect of the following adjustments:

• Recording of higher depreciation on the Fleet, of Euro 911 thousand, in order to reflect the different

depreciation period of the so-called “dry dock” component;

• Reversal of amortisation on intangible assets, recorded for Euro 20 thousand in application of Italian

GAAP, and which for IFRS refer to previous costs recorded in the income statement (see note B of the

comments on the “Balance Sheet”).

FINAVAL SPA Pag. 101

G1) – G2) – C) – H ) Net Financial income (charges)

The results of the financial management of the period were adjusted principally in relation to:

• Recording in the income statement of the positive fair value of the derivatives on the interest rate (Euro

403 thousand) and the negative effect on the exchange rate derivatives (Euro 775 thousand).

Reference should also be made to notes G2 and G1 of the Balance Sheet;

• Recording in the income statement of the fair value of the subsidies receivables, with a positive effect of

Euro 56 thousand (reference should also be made to note C of the Balance Sheet);

• Effect on the year of the recalculation relating to the financial charges of the personnel provision of Euro

26 thousand (reference should also be made to note H of the Balance Sheet).


The negative effect of the deferred tax liability calculated on the adjustments made for the purposes of the

restatement of the 2006 income statement in accordance with IFRS was approx. Euro 5 thousand.

L) Profit/(loss) from discontinued operations

In accordance with IFRS 5, the total gains and losses in the management of the vessels in the Chemical

sector are reported on a single line item in the income statement.

finaval consolidated financial statements 2007

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