Annual Report and Financial Statements. 102 nd financial year

Transcription

1 annual report 2009

2 Year ended 31st december 2009 Annual Report and Financial Statements 102 nd financial year Premuda This report is based on Premuda's Annual Report For the year ended 31 December The Premuda Financial Statements were audited by Deloitte & Touche S.p.A. and are available in Italian. 000

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4 table of contents Board of Directors Group's Structure Group s Fleet Financial Highlights Premuda S.p.A.: Management Report Financial Statements Premuda Group: Management Report Financial Statements Notes

5 Navigare by Raimondo Sirotti painting realized for the 100 th Anniversary of the Company. 4

6 Board of directors Board of directors chairman deputy chairman managing director directors general managers Alcide Rosina Giacomo Costa Stefano Rosina Raffaele Agrusti Amerigo Borrini Antonio Dinia Antonio Gozzi Anna Rosina Alessandro Zapponini StefanoZara Stefano Rosina Marco Tassara Board of statutory auditors chairman auditors alternate auditors Alberto Garibotto Giorgio Carbone Giuseppe Alessio Vernì Edoardo Lagomarsino Luigi Barberi Auditor Deloitte & Touche S.p.A. The mandate of the Board of Directors and of the Board of Statutory Auditors will expire once the Financial Statements as at 31st December 2010 have been approved. 5

7 Baltic Sea: the wake of Ice Class aframax Four Atlantica, sailing in icy waters. 6

8 Group s Structure Operative Companies as at 31 st December 2009 Premuda Spa 100% 50% Premuda International Sah Four Jolly Spa Luxembourg Genoa m/t. Four Wind m/t. Four Smile m/t. Four Island m/t. Four Bay m/t. Framura m/v. Four Springs m/t. Four Moon m/v. Doric Spirit * 100% Four Vanguard Serviços e Navegaçao Lda. Madeira FPSO Four Rainbow 100% Australian FPSO Management Pty. Ltd. Perth Australia 100% Moon Shipping Serviços e Navegaçao Lda. Madeira m/t. Four Atlantica ** m/t. Four Antarctica ** 90% Premuda (Monaco) Sam Monaco 100% Four Handy Ltd. United Kingdom m/v. Four Aida m/v. Four Earth m/v. Four Shinano* m/v. Four Kitakami * m/v. Four Mogami * TBN bulk 35,000 dwt (2010) TBN bulk 35,000 dwt (2010) 50% Premuda Chartering Navegaçao Lda. Madeira m/v. Four Sky 114,700 dwt (2010) m/v. Four Tide 114,700 dwt (2011) m/v. Four Sea 114,700 dwt (2012) 100% Brig Shipping Lda. Madeira TBN bulk 35,000 dwt (2011) TBN bulk 35,000 dwt (2011) TBN bulk 35,000 dwt (2011) TBN bulk 35,000 dwt (2011) TBN bulk 35,000 dwt (2012) 100% Cordier Navegaçao Lda. Madeira TBN bulk 34,000 dwt (2010) TBN bulk 34,000 dwt (2010) Holding Company ShipManagement Company Shipowning Company * : long term timecharter in ** : long term bareboat out 7

9 M/t. Four Wind, 115,700 ds dwt aframax product tanker, delivered July

10 Group s Structure Operative Companies as at 31 st March 2010 Premuda Spa 100% 50% Premuda International Sah Four Jolly Spa Luxembourg Genoa m/t. Four Wind m/t. Four Sky m/t. Four Smile m/t. Four Island m/t. Four Bay m/t. Framura m/v. Four Springs m/t. Four Moon m/v. Doric Spirit * 100% Four Vanguard Serviços e Navegaçao Lda. Madeira FPSO Four Rainbow 100% Australian FPSO Management Pty. Ltd. Perth Australia 100% Moon Shipping Serviços e Navegaçao Lda. Madeira m/t. Four Atlantica ** m/t. Four Antarctica ** 90% Premuda (Monaco) Sam Monaco 100% Four Handy Ltd. United Kingdom m/v. Four Aida m/v. Four Earth m/v. Four Shinano* m/v. Four Kitakami * m/v. Four Mogami * m/v. Four Nabucco (2010) m/v. Four Otello (2010) 50% Premuda Chartering Navegaçao Lda. Madeira m/v. Four Tide 114,700 dwt (2012) m/v. Four Sea 114,700 dwt (2013) 100% Brig Shipping Lda. Madeira TBN bulk 35,000 dwt (2011) TBN bulk 35,000 dwt (2011) TBN bulk 35,000 dwt (2011) TBN bulk 35,000 dwt (2011) TBN bulk 35,000 dwt (2012) 100% Cordier Navegaçao Lda. Madeira TBN bulk 34,000 dwt (2011) TBN bulk 34,000 dwt (2012) Holding Company ShipManagement Company Shipowning Company * : long term timecharter in ** : long term bareboat out 9

11 Group s Fleet st at 31 December 2009 As at 31 st December 2009 the Group's Fleet consists of the following: name type hull design year built dwt tankers Four Smile Four Wind (50%) Four Antarctica * Four Atlantica * Four Island Four Bay Framura Four Moon suezmax tanker aframax product aframax Ice Class aframax Ice Class aframax tanker aframax tanker aframax tanker panamax tanker DH DH DH DH DH DH DH DH / , , , ,900 94,200 94,200 94,200 64,000 total owned tankers in service 851,800 FPSO 9 Four Rainbow FPSO DH 1992/ ,900 total owned FPSO in service 80,900 bulk carriers Four Springs Four Earth Four Aida minicape bulk panamax bulk handy bulk DH DB DB 1992/ ,000 77,100 34,400 total owned bulk carriers in service 220,500 total owned Fleet in service 1,153,200 new buildings Four Sky (50%) Four Tide (50%) Four Sea (50%) TBN TBN TBN TBN TBN TBN TBN TBN TBN aframax product aframax product aframax product handy bulk handy bulk handy bulk handy bulk handy bulk handy bulk handy bulk handy bulk handy bulk DH DH DH DH DH DB DB DB DB DB DB DB , , ,700 34,000 34,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 total new buildings on order 657,100 chartered in Doric Spirit ** Four Shinano ** Four Kitakami ** Four Mogami ** handymax bulk handymax bulk handymax bulk handymax bulk DB DB DB DB ,400 56,700 55,500 55,500 total chartered in tonnage 220,100 total fleet as at 31 st December ,030,400 * : renamed Stena Antarctica and Stena Atlantica (longterm bareboat out) ** : longterm timecharter in 10

12 Group s Fleet st at 31 March 2010 As at 31 st March 2010 the Group's Fleet consists of the following: name type hull design year built dwt tankers Four Smile Four Wind (50%) Four Sky (50%) Four Antarctica * Four Atlantica * Four Island Four Bay Framura Four Moon suezmax tanker aframax product aframax product aframax Ice Class aframax Ice Class aframax tanker aframax tanker aframax tanker panamax tanker DH DH DH DH DH DH DH DH DH / , , , , ,900 94,200 94,200 94,200 64,000 total owned tankers in service 967,500 FPSO 10 Four Rainbow FPSO DH 1992/ ,900 total owned FPSO in service 80,900 bulk carriers Four Springs Four Earth Four Aida minicape bulk panamax bulk handy bulk DH DB DB 1992/ ,000 77,100 34,400 total owned bulk carriers in service 220,500 total owned Fleet in service 1,268,900 new buildings Four Tide (50%) Four Sea (50%) TBN TBN TBN TBN TBN TBN TBN TBN TBN aframax product aframax product handy bulk handy bulk handy bulk handy bulk handy bulk handy bulk handy bulk handy bulk handy bulk DH DH DH DH DB DB DB DB DB DB DB , ,700 34,000 34,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 total new buildings on order 542,400 chartered in Doric Spirit ** Four Shinano ** Four Kitakami ** Four Mogami ** handymax bulk handymax bulk handymax bulk handymax bulk DB DB DB DB ,400 56,700 55,500 55,500 total chartered in tonnage 220,100 total fleet as at 31 st March ,031,400 * : renamed Stena Antarctica and Stena Atlantica (longterm bareboat out) ** : longterm timecharter in 11

13 San Francisco Bay: a relaxing break on the rudder of m/v. Four Aida. 12

14 Financial highlights Fixed assets Liabilities net of current assets Net equity (1) ( /000) 430, , ,985 ( /000) 379, , ,103 ( /000) 347, , ,438 ( /000) 324, , ,208 ( /000) 285, , ,292 EBITDA Financial items (2) Depreciation/impairment Cashflow (3) Net result (1) Dividends (4) Extraordinary dividends (5) ( /000) 34,286 7,718 46,550 26,742 (19,803) 2,817 ( /000) 40,217 9,572 24,138 27,874 3,750 2,817 ( /000) 69,745 7,909 23,809 59,040 33,118 8,451 8,450 ( /000) 58,448 5,457 24,136 52,129 24,108 8,451 ( /000) 64,865 6,129 29,299 56,807 25,376 8,451 Net result per share (1) Dividend per ordinary share Dividend per saving share ( ) (0.14) ( ) ( ) ( ) ( ) Debt/equity Cashflow/financial charges Average cost of debt Return on investment (ROI) Return on equity (ROE) (1) Cashflow/net equity 2.4% 8.1% 11.3% 15.2% 5.4% 10.9% 1.9% 14.1% 5.5% 19.5% 16.0% 28.5% 4.8% 17.1% 13.0% 27.3% 4.0% 22.6% 15.2% 32.2% (1): Group's interest (2): exchange differences not included (3): net profit + depreciation + impairment (4): on profit for the year paid during the following year (5): paid in December 2007 to celebrate the Company's Centennial 13

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16 Premuda S.p.A. Management Report 15

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18 Dear Shareholders, First of all we wish to remind you that your Company's Board of Directors for the years 2008, 2009 and 2010 include Raffaele Agrusti, Amerigo Borrini, Antonio Dinia, Giacomo Costa, Antonio Gozzi, Alcide Rosina, Anna Rosina, Stefano Rosina, Alessandro Zapponini and Stefano Zara. The Chairman of the Board is Alcide Rosina, whose powers include, amongst others, legal representation towards third parties as well as ordinary and extraordinary administration, excluding certain acts reserved by law to the Board as well as acts having financial relevance in excess of certain limits, such as: purchase and sale of ships; contracts for the employment of vessels exceeding 60 months; acquisition and sale of subsidiaries; granting of medium/longterm loans to subsidiaries; provision of guarantees. The Managing Director is Stefano Rosina, legal representative towards third parties, in charge of running and coordinating the commercial activity and fleet operations, as well as the activity and administration of Group Companies. The Deputy Chairman is Giacomo Costa, Independent Director. The Board has established two Committees, one for Internal Control and one for Remuneration. The purpose of the Committee for Internal Control is to address issues related to the company's activities with proposals and consultancy functions. Its members are Giacomo Costa, Antonio Dinia and Stefano Zara. The meetings of this Committee are attended by the Chairman of the Board of Statutory Auditors. The members of the Committee for Remuneration are the Chairman Alcide Rosina, Raffaele Agrusti and Antonio Gozzi. The role of this Committee is to advise the Board of Directors on matters relating to the remuneration of the Chairman and the Managing Director and to set the remuneration criteria for the Senior Management of the Company and the Group. The meetings of this Committee are also attended by the Chairman of the Board of Statutory Auditors. In 2009, the Board of Directors convened on six occasions. The meetings were all attended by the Board of Statutory Auditors. The attendees received, pursuant to a wellestablished procedure, updated information on: market performance, commercial coverage and technical management of the Fleet, dynamics of costs and profit/loss, performance and activity of subsidiaries, financial position, as well as all other operations and events concerning management. During the Financial Year there were no unusual transactions in relation to the ordinary business management to report and there were no significant nonrecurrent transactions with related parties or otherwise generating a conflict of interest. 17

19 In 2009, as in the year before, the only intergroup transactions that took place concerned the Group's operational structure and were all concluded with or between subsidiaries or affiliated companies. These transactions mainly consisted of management activities, timecharters and financial support to which ordinary fees or remunerations were applied, always consistent with normal practice and carried out at market value. All transactions, whether intragroup or with related parties, are summarised in the appendix to the Notes. Subsidiaries or affiliates The activities carried out by our subsidiaries and affiliates during the Financial Year are detailed hereunder. Nonetheless, we refer you to the Notes for further information on each company. 1.0 Four Jolly S.p.A., Genoa, setup in June 2009 as a 50/50 joint venture with the Messina Group, is the owner from July 2009 of the new 115,700 dwt aframax product tanker Four Wind and from March 2010 of the sister vessel Four Sky. The company registered a loss of 225, Premuda International S.A.H., Luxembourg, a whollyowned subsidiary, is the holding company for the Group's foreign assets. Its Financial Statements for 2009 show a loss of 7,681,165 (a loss of 4,545,248 in 2008). Premuda International S.A.H. owns the following companies: Four Handy Ltd., United Kingdom, a whollyowned subsidiary, is the owner of the two bulk carriers Four Earth and Four Aida (delivered 1 st October 2009), managed under the UK tonnage tax scheme. The company substituted Brig Shipping Lda. in the shipbuilding contracts for two 35,000 dwt handy bulk carriers (sister vessels of Four Aida) to be delivered by the Korean shipyard SPP in The company also controls (under long term time charters with purchase options) three supramax vessels (Four Shinano, Four Kitakami and Four Mogami). The company, which closed its first year of activity (2008) with a loss of $ 1,436,136, registered a profit of $ 1,432,149 in Moon Shipping Serviços and Navegaçao Lda., Madeira, whollyowned, is the owner of two aframax IceClass tankers, delivered in May and November 2006 and chartered to the Stena Group under longterm bareboat agreements. The company closed the Financial Year with a profit of 1,443,899 after depreciation for /mln 9.3 (loss of 3,741,009 after depreciation for /mln 9.3 in 2008). 18

20 2.3 Four Vanguard Serviços and Navegaçao Lda., Madeira, whollyowned, owner of the FPSO Four Rainbow (ex Four Vanguard), deployed in Australia since 2003 for crude oil extraction. The unit ceased the production in May 2009 and moved to Singapore where underwent significant repairs and class renewal activity. Please refer to the consolidated Annual Report for further details. The company booked a loss of 2,791,635 (a loss of 6,998,110 in 2008). 2.4 Brig Shipping Lda., Madeira, whollyowned, has on order five 35,000 dwt bulk carriers from the Korean shipyard SPP for delivery 2011/2012. This Company booked a loss of 2,025,017 (profit of 1,307,384 in 2008), mainly attributable to the costs of cancelling (for shipbuilder's reasons) the contracts of two 34,000 dwt bulk carriers ordered to a Vietnamese shipyard Cordier Navegaçao Lda., Madeira, 100% owned by Brig Shipping Lda. has on order two 34,000 dwt bulk carriers from a Vietnamese shipyard with updated expected delivery 2011/2012. This company booked a profit of 40,485 (a loss of 369,172 in 2008). 2.5 Australian FPSO Management Pty Ltd., Australia, whollyowned, in charge of the technical and operational management of the FPSO Four Rainbow. The company booked a profit of AU$ 292,497 (approximately 183,000) after a profit of AU$ 291,320 in Premuda (Monaco) SAM, Monaco, 90%owned, in charge of the commercial and operational management of all of the Group's foreignflagged units, booked a loss of 46,705 (a loss of 143,710 in 2008). 2.7 Premuda Chartering Navegaçao Lda., Madeira, 50%owned. At the year start the company had on order four 114,700 dwt product carriers from Samsung shipyard. The first vessel was delivered in July 2009 and immediately transferred to Four Jolly S.p.A., as well as the second vessel, delivered in March As of today, the company has still on order the last two vessels, expected delivery 2011/2012, with a cumulative investment of approximately US$ 156 Mln, of which US$ 78 Mln are related to third parties. This Company booked a profit of 472,649 versus a loss of 39,805 in The fully controlled Premuda (Atlantic) Inc., Delaware, was basically dormant and will be liquidated as soon as practicable. The fully controlled JEP Naveaçao Lda., Madeira, merged with Premuda Bulk Navegaçao Lda., Madeira, Panamax Navegaçao Lda., Madeira, and Suezmax Navegaçao Lda., Madeira, closing the year almost at breakeven. Please refer to the Consolidated Financial Statements for a more detailed analysis of the markets in which the Company and its subsidiaries operate. 19

21 Miscellaneous data and information In accordance with current regulations in several EU countries, Italy introduced, with the tonnage tax, a flatrate income tax for shipping companies whereby income generated by ships listed in the International Register is taxed on tonnage. The adoption of this new tax regime is on a voluntary basis, however, once implemented it must remain in force for a minimum period of ten years and must cover all owned units. Premuda S.p.A. formally entered it on 1 st January During the year the average exchange rate Euro/dollar was ( in 2008). At the end of 2009 the Euro/dollar exchange rate was ( at the end of 2008), with a 3.4% yearonyear depreciation of the US currency (but with a 5.3% appreciation on the averages). We remind you that our revenues are predominantly dollardenominated and the fleet value is markedtomarket in the same currency, whereas only some of our costs are normally sustained in dollars. Consequently, a weak dollar generally has a negative effect, both on Balance Sheet and on Profit & Loss. Conversely, the effect of accounting for Dollardenominated loans in Euros at the yearend exchange rate is also to be taken into account. Premuda's common stock was regularly listed on the Stock Exchange. It is to be noted that 4,660,066 shares were exchanged in 2009 (31,033,663 in 2008). The total traded value through the Stock Exchange was /Mln 4.50 (about /Mln in 2008). According to data provided by Borsa Italiana S.p.A., our stock's performance for the year was 2.87% as opposed to % for the MICROCAP index. Based on the data available, as at the end of 2009 the Company had 2,024 shareholders, (3,977 in 2008). At the end of 2009, Investimenti Marittimi S.p.A. (60% Navigazione Italiana S.p.A., 30% Assicurazioni Generali S.p.A. and 10% Duferco Italia Holding S.p.A.) held n. 111,033,237 Premuda ordinary shares (78.88% of the voting rights). As of today, such a participation is unchanged. We point out that Navigazione Italiana S.p.A. is (through Investimenti Marittimi S.p.A.) the sole body in control of Premuda without, however, exercising management and coordination activities, pursuant to art of the Italian Civil Code. The official Italian version of this Annual Report has been audited by Deloitte rd & Touche S.p.A., appointed by shareholders resolution dated 23 April 2007 for the period Deloitte & Touche S.p.A. also issued the limited review of the official Italian version of the Semi Annual Report The mandate of Deloitte & Touche S.p.A. is now expired and a new auditor is to be appointed by Shareholders' resolution, upon proposal of the Board of Statutory Auditors. 20

22 We wish to express all our gratitude to Deloitte & Touche S.p.A. for the precious activity of the past nine years, in the interest of Premuda and their shareholders. In accordance with the provisions of art of the Italian Civil Code, we hereby inform you that: apart apart from a project of a new hull stress monitoring system named MOSES, started in 2008 and continuing in following years, the Company did not carry out any research and development activity; the Company does not own treasury shares; the Company does not own shares or quotas of parent companies; none of the subsidiaries own Company shares; the Company has implemented a hedging strategy through derivative financial instruments to cover risks arising from the variations in exchange rates and interest rates. Further details are available in the Notes to the Financial Statements. Pursuant to the aforesaid art of the Italian Civil Code, we further inform you that: our activity is subject to several laws and rules (local and/or international) on environmental protection, the noncompliance of which could heavily affect the Company's capability to conduct its business. These include, amongst others, air pollution requirements, garbage and/or water disposal, old tonnage recycling, etc. The Company is further exposed to other risks typical for shipping: piracy, war, climate, casualties, etc. Such risks are covered, when feasible, by insurance and limited by a certified quality management system. For further information, please refer to the relevant chapter of the 2009 Annual Report (italian version). As to financial risks, please refer to the Notes; Premuda complies with the Labour Health and Safety Protection regulations and, in particular, has revised its specific risk assessment as per D. Lgs. 81/2008. The shares held and/or traded by Directors, Statutory Auditors and General Managers are mentioned in a specific prospectus drawn up in accordance with art. 79 of the Regulation implementing the Legislative Decree No. 58/98 (T.U.F.) attached to the audited Financial Statements (italian version). All information required by art. 123 bis of T.U.F. can be found in the relevant Report on Corporate Governance and Ownership Structure released concurrently with this Annual Report and available in the Investor Relations section of our website The Company complies with art. 36 a), b) and c) of Regolamenti Mercati Consob on Conditions for listing shares of companies controlling subsidiaries located and subject to Laws outside the European Union. 21

23 A plan for the remuneration of, and incentives to, the Top Management is in force, as recommended by the Remuneration Committee and resolved by the Board of Directors. The plan refers to the years and consists of three elements: a) an annual compensation, based on the financial result logged in each year, equal to 5% of the consolidated net profit generated by the Company exceeding 5% of the consolidated Net Equity at the beginning of the period. This amount is allocated: 50% to the Chairman, 25% to the Managing Director, 10% to the General Manager and the residual 15% is shared amongst other Managers. b) a compensation based on the growth of the Group's net equity in the 3year period, payable at the end of This compensation is equal to 5% of the differential between the Consolidated Net Equity at the end of the period and the Consolidated Net Equity at the beginning of the period, increased by 15%; the proportional allocation is as detailed in item a). c) a nominal stock option plan (socalled phantom stock ) with a compensation equal to the difference between the monthly average of the Premuda stock price on the option allocation date and its price in the week preceding the option declaration, as listed on the Milan Stock Exchange This plan was resolved by the Shareholders' Meeting of 17th April The options refer to a maximum cumulative amount of 2,700,000 shares per year and are to be exercised within 36 months starting from 1st January of the following year. The options refer to 1,350,000 shares for the Chairman, 810,000 for the Managing Director and 540,000 for the General Manager. The initial share value is for the options assigned in 2008 (average stock price in March 2008) and 0.90 for the option assigned in 2009 (average stock price in March 2009). The initial share value for the options to be assigned in 2010 will be the average stock price in March A residual portion of the stock incentive plan for the years is still in place, due to expire at the end of 2010 for the options granted in 2007 (at Euro). In consideration of the Group's results, no compensation for 2009 is expected to be paid to the Top Management pursuant to a) and b) above, however, a provision of about /mln 0.6 has been taken to cover the fair value at the end of 2009 of the residual stock option plans as described in item c). In conformity with the Legislative Decree 196/2003 (concerning the protection of Privacy) the Company has set up the relevant implementation plan chart. 22

24 We hereby inform you that, as already applied for the 2008 Annual Report, the 2009 annual Financial Statements of Premuda S.p.A. have been issued in accordance with the International Financial Reporting Standards (IFRS) as agreed by the International Accounting Standards Board (IASB). The financial position is summarized (in '000 Euros) in the following table; at the end of the financial year our net financial exposure was /Mln (end 2008: /Mln 45.46) with available cash of /Mln Financial Position Financial Position at at Cash Other liquid assets Total liquid assets Shortterm bank debt Shortterm portion of longterm debt Other shortterm debt Total shortterm debt Shortterm net debt Loan to controlled companies Longterm financial credit Longterm bank debt Longterm debt Total longterm net borrowing Total net borrowing 150 4,654 4,804 (9,516) (10,939) (97) (20,552) (15,748) 17,677 17,677 (87,368) (87,368) (69,691) (85,439) 175 5,820 5,995 (1,245) (26,689) (27,934) (21,939) 24,796 24,796 (48,320) (48,320) (23,524) (45,463) At the end of 2009 about two third of Premuda S.p.A.'s loans are Eurodenominated (the residual are Dollars). Borrowing amounts and terms appear to be adequate in relation to the size and quality of our Fleet and its ability to generate sufficient cashflow. We believe that, based on available cash and credit lines, commitments for new investments and expected cashflow, the company will have sufficient financial resources to cover its operating needs and fulfil its obligations at least for the next twelve months. The above considerations are sustained by the expectations of a significant share capital increase, as further detailed in the following pages. As to management conduct of the Company and business outlook, we have no particular issues to underline; nonetheless, we refer Shareholders to the Consolidated Annual Report Significant events after the balance sheet date and business outlook 23

25 Dear Shareholders, Premuda S.p.A. closed the 2009 financial year with a loss of /mln after depreciation charges of /Mln and impairment of 4 vessels of /Mln (net profit of /Mln 8.71 after depreciation charges of /Mln in 2008). The impairment is a nonmonetary negative element, subject to recovery should the reasons which made its implementation advisable cease to exist; anyhow, for next financial years, it will imply lower depreciation charges for about /Mln 2.4 yearly. The criteria used to determine such impairment are explained in the Notes and repeated in the consolidated Annual Report, for Group's purposes. The cashflow for 2009 was /Mln (2008: /Mln 20.71). Dear Shareholders, In order to improve the financial position and meanwhile restore and strengthen the Net Equity (cash inflow, against non monetary losses) and to provide all interested parties within the current shipping and whole economy crisis with a significant positive message, the Board of Premuda S.p.A. (duly empowered by art. 35 of company Bylaw) has today resolved the following Capital Increase: from 70,418, up to 93,890,966.50, thus for maximum 23,472, (partial amount acceptable as per art of Italian Civil Code), by issuing maximum 46,945,483 ordinary shares, 0.50 nominal value, share rights , offered to the actual shareholders at a rate of 1 new share for every 3 shares held, at a price of 0.75 (of which 0.25 as share premium) with a maximum cumulative amount of 35,209,112 (of which 11,736,371 share premium).the Capital Increase is to be finalized within six months from registration of the Board Resolution in the Company Registry. 24

26 Dear Shareholders, as far as result allocation is concerned, we recommend to cover the 2009 losses and to distribute dividends as follows: Net loss of the year 2009 Covered through reserves Covered through retained earnings Residual available retained earnings to ordinary shares to savings shares Retained earnings (20,754,105) 16,445,023 4,309,082 13,262,825 (2,815,230) (2,248) 10,445,347 The above recommendations correspond to an unchanged dividend of 0.02 per common share and 0.03 per savings share. We note that over the period in a completely different scenario the company distributed a total of 0.30 dividend per ordinary share, but we believe the proposed dividend is the maximum sustainable effort to remunerate our shareholders, taking into account the present economic scenario, the troubles affecting financial markets and the significant investment plan started by our Group. After distribution of the proposed dividend and full subscription of the Capital Increase, the shareholders' equity will be: Share capital Share premium Legal reserve Other reserves Retained earnings Total 93,890,967 11,736,371 14,083,650 10,445, ,156,335 equal to 0.69 per each of the 187,781,933 shares post Capital Increase. The Management Report on the Consolidated Financial Statements, as an integral and substantial part of this report, shall provide a proper overview of the Group led by Premuda S.p.A. This Management Report includes yearonyear data on the markets we operate in, fleet performance, costs and revenues as well as significant events occurred after the accountclosing date and a business outlook. As a final note we would like to thank all of our employees, ashore and at sea, for their valuable and professional cooperation, very important and very much appreciated in the present contingency. 31st March 2010 the Board of Directors 25

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28 Premuda S.p.A. Financial Statements 27

29 Premuda S.p.A. Balance Sheet (Euro) ASSETS at at Fixed Assets Tangibile fixed assets Vessels Vessels under construction Land and buildings Other fixed assets Participations Controlled companies Associated companies Other companies Other financial assets Loans Other investments Total Fixed Assets 116,556, ,349, , ,389 69,757,966 55,754,170 14,000,000 3,796 17,679,315 17,676,938 2, ,993, ,034, ,358,657 5,221, , ,798 55,757,966 55,754,170 3, ,796,363 2, ,591,769 Current Assets Inventories Consumables Voyages in progress Receivables Clients Prepayments Other receivables 2,361,591 1,675, ,676 10,959,176 5,157,253 1,601,861 4,200,062 2,063, ,440, Financial current assets Cash and cash equivalents Total Current Assets TOTAL ASSETS 4,804,021 18,124, ,118, ,657 5,755,977 21,498, ,090,028 28

30 LIABILITIES AND SHAREHOLDERS' EQUITY at at Shareholders Equity Share capital Legal reserve Other reserves Retained profit Profit for the year Total shareholders equity 70,418,225 14,083,650 16,445,023 17,571,907 (20,754,105) 97,764,700 70,418,225 14,083,650 16,445,023 9,412,913 8,707, ,067,128 LongTerm Liabilities Bank loans Provisions Provision for staff leaves Total LongTerm Liabilities 87,367, , ,962 88,627,722 48,319,983 1,262, ,629 50,418,861 Current Liabilities Bank loans Derivatives Controlled companies Suppliers Corporate tax Accruals Other debts Total Current Liabilities Total Liabilities TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 20,455,196 97, ,001 4,161, ,971 4,312,462 5,838,145 35,726, ,353, ,118,524 27,934,092 8,655,976 1,043,149 5,264,540 4,706,282 47,604,039 98,022, ,090,028 29

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32 Premuda S.p.A. Income Statement (Euro) year 2009 year 2008 Net revenue Voyage costs TimeCharter revenues Charter hire Running costs Fleet margin Profit on vessels sale Administrative expenses Depreciation Impairment of assets Operating profit/(loss) Financial items Profit/(loss) before tax Tax on profit Net profit/(loss) for the year 54,307,832 (6,050,749) 48,257,083 (17,948,811) (13,095,594) 17,212,678 9,501,974 (7,286,476) (13,838,230) (22,505,828) (16,915,882) (3,588,223) (20,504,105) (250,000) (20,754,105) 100,535,380 (8,943,141) 91,592,239 (41,672,057) (17,349,582) 32,570,600 (8,586,520) (12,028,302) 11,955,778 (2,793,461) 9,162,317 (455,000) 8,707,317 Net profit/(loss) per share (0.147) Statement of Comprehensive Income (Euro)* year 2009 year 2008 Net result Hedge accounting effect Comprehensive result (20,754,105) 2,267,409 (18,486,696) 8,707,317 (23,980) 8,683,337 (*): as requested by the amended version of IAS 1 applicable starting 1 st January

33 Premuda S.p.A. Cash Flow Statement (Euro) year 2009 year 2008 A) NET CASH POSITION AT YEAR BEGINNING (22,178,115) (13,199,891) B) CASH FLOW FROM OPERATING ACTIVITIES Profit for the year Unrealized exchange differences Interest charges Interest income Tax on income Depreciation Net change in other provisions (Profit)/loss on assets disposal Net change in Staff s leave provision Subtotal: Cash flow from operating activities before working capital changes Change in receivables Change in inventories Change in suppliers and other current liabilities Total cash flow from operating activities (20,754,105) 423,273 3,159,517 (1,431,726) 250,000 36,344,058 (812,249) (9,502,901) (26,667) 7,649,200 3,219,663 (298,148) (5,003,207) 5,567,508 8,707,317 (568,556) 4,865,896 (1,832,961) 455,000 12,028, ,249 (5,305) (102,606) 24,209,336 (4,638,410) 1,669,520 (3,807,308) 17,433,138 C) CASH FLOW FROM INVESTING ACTIVITIES Investments in assets: tangible financial Sale of tangible fixed assets Interest income cashed Total cash flow from investing activities (74,537,556) (14,000,000) 46,171,900 1,431,726 (40,933,930) (8,913,307) 7,068 1,832,961 (7,073,278) D) CASH FLOW FROM FINANCING ACTIVITIES Repayment of bank loan Net change in financial fixed assets Interest charges (cash) Dividends Other changes Total cash flow from financing activities (23,812,936) 7,119,775 (3,725,867) (2,817,478) 2,269,156 41,893,363 (20,698,054) 3,203,021 (4,869,870) (8,450,936) (22,245) (19,338,084) E) CASH FLOW OF THE PERIOD (B + C + D) 6,526,941 (8,978,224) F) NET CASH POSITION AT THE END OF THE PERIOD (A + E) (15,651,174) (22,178,115) 32

34 Statements of changes in Shareholders Equity (Euro) Share Capital Reserve for premium on issued share Legal Reserve Other Reserve Retained Profit Profit for the Year Total As at ,418,225 (1) 14,083,650 (2) 16,445,023 (3) 14,881,615 3,004, ,832, Profit Allocation to legal reserve to dividends to retained profit (8,450,936) 3,004,466 ( ) (8,450,936) Various 1,748 1,748 Hedge accounting effect (23,980) (23,980) 2008 Net Profit 8,707,317 8,707,317 As at ,418,225 (1) 14,083,650 (2) 16,445,023 (3) 9,412,913 8,707, ,067, Profit Allocation to legal reserve to dividends to retained profit (2,817,478) 8,707,317 (8,707,317) (2,817,478) Various 1,746 1,746 Hedge accounting effect 2,267,409 2,267, Net Result (20,754,105) (20,754,105) As at ,418,225 (1) (2) (3) 14,083,650 16,445,023 17,571,907 (20,754,105) 97,764,700 (1): available to cover future losses (2): of which 3,666,410 to be taxed when used other than to cover future losses (3): of which 2,827,699 not to be distributed 33

35

36 Management Report on the consolidated financial statements 35

37

38 Dear Shareholders, In 2009 tanker and bulker markets had similar patterns, in a generally uncertain and depressed economical climate. Factors influencing both markets were: increased tonnage supply: +7% for tankers and nearly +10% for bulkers; reduced tonnage demand: 3.2/4.1% for tankers and 3.0% for bulkers; significantly lower charter rates: a yoy decrease of 63/69% for tankers and 57/65% for bulkers (depending on vesseltype). In 1Q10 both markets markedly improved: +16/56% for tankers and +40/60% for bulkers (except capers, lagging behind). During this period charter rates have been reasonably viable, far from recent years' healthy levels, but significantly better than 2009 rates, which will go on record as the worstever. Market falls have been slowed by widespread port congestion, which kept a sizable share of global fleets (especially the larger bulkers) off the market. Another factor which sustained freight rates has been increased trading volume on certain routes which do not provide backhaul cargoes (e.g. iron ore from Brazil to China) and, therefore, forced ships to ballast back to loading areas. Along with port congestion, this contributed to reducing tonnage available for the cargo volumes due to be carried. Depressed charter rates and concern for the future, enhanced by shrinking financing sources, have caused a dramatic reduction of vessels' values. By way of example, a 5yearold panamax bulker, valued at US$ 90M in 2007 could achieve no more than US$ 26M at the end of 2008 and US$ 35M by end2009 (the trend was further up in 1Q10). The market pattern in 2009 required impairment tests for the Company's fleet, resulting into a cumulative charge of Euro 22.3M for 5 ships (see Notes to Financial Statements). The global economy, particularly in China, other parts of Asia and Brazil, still provides reasons for uncertainty: these countries, relatively unaffected by a serious credit crunch, have enjoyed good health, often recording significant industrial production growth (e.g. China with a steel production of 566M tons in 2009, up 14% yoy, with a corresponding increase, +10M tons/month, of iron ore imports in 2H09). Rather than tonnage demand, it is tonnage supply that is regarded as a major source of concern, due to a huge orderbook and a massive building capacity in Asia, supported by Governments eager to ensure social stability. 37

39 On the other hand, the shipbuilding industry suffered too in 2009, faced with a dearth of newbuilding orders and pressure from several customers demanding order cancellations, discounts on price or, at least, postponement of their ships' delivery. Shipbuilders are obviously looking at possible solutions, such as cancelling orders, shelving expansion plans, switching from shipbuilding to repairing, diversifying production (e.g. infrastructure assembly) and scaling down utilization of subcontractors. Although this is obviously encouraging, the shipbuilding industry is still plagued by overcapacity and is widely thought to remain so, at least for the next few years, in view of a comparatively low demand for new tonnage. It is encouraging to note that cost of finance remains low, financiers have adopted a supportive approach towards their customers and bankers have cautiously resumed lending, although the gap between ships' contract value and market value has been left for owners to cure. The year 2009 is widely regarded as a trough in the market curve and a slow, still vulnerable, upward trend for the medium and long term may be on its way, in the wake of a growing global economy underpinned by developing countries, mainly in Asia. Tanker sector In 2009 the tanker fleet grew by 7.60% (29.40 mln dwt) over 2008, thus exceeding 435 million deadweight tons (in 2008 the tanker fleet grew by 5.60%). This strong growth confirms recent years' trend, from 296 mln dwt in year 2000 to more than 435 mln dwt in In 2009 tanker freight rates fell on average by 66% when compared with the previous year data. The first quarter 2010, on the contrary, saw recoveries between 16% and 56%, based on vessel's size. As far as the future is concerned, the shipyards' orderbook is the most important data to analyze. At the end of 2009 the tanker orderbook totalled mln dwt, or 29.50% of the current trading fleet. This is significantly lower than the mln dwt (or 39.80% of the then trading fleet) at the end of 2008: new vessels should be delivered in the 2010/2012 period, but it's a common feeling that part of the orderbook will not be built for different reasons, and that a more significant part won't match their contractual deliveries and will be delayed. This is almost certain as a concept, but it's difficult to weight the phenomenon, whose impact could be very significant, considering that in 2009 about 40% of the vessels with expected delivery during the year have been delayed to 2010 onward. 38

40 In 2009 ships' scrapping were more than doubled compared to the previous year's data: 8.40 M dwt (4.10 M dwt in 2008) at an average price of 340 $/ton(+20% over 2008). Taking into account current depressed freight rates, it is reasonable to assume that scrapping of old tonnage will significantly increase, also sustained by the phasing out rules, forcing to demolition (largely in 2010 and in any case within 2015) the residual single hull vessels (about 17% of the existing fleet). In 2009 the secondhand Sale & Purchase market was much lower than 2008 which, in turn, had recorded a significant reduction compared to Only 167 vessels have been sold, equivalent to M dwt worth US$ 4.20 Bln (in 2008: 302 ships for M dwt and US$ Bln). Further details on this sector are presented in the following tables. Table 1 shows demand for tanker tonnage and volumes of seaborne transportation of crude oil and refined products: in 2009, as a consequence of the slowing economy, the transported quantities were decreased between 3.2% and 4.1% (the deepest fall from 2000). (Table 1) Quantities transported by sea (millions of tons) year (est.) crude oil quantity change 1,656 1,684 1,667 1,770 1,850 1,885 1,933 1,984 1,964 1, % 1.0% 6.2% 4.5% 1.9% 2.5% 2.6% 1.0% 4.1% products quantity change % 0.5% 5.4% 8.5% 8.6% 6.5% 3.7% 2.4% 3.2% The tables below show the development of the tanker fleet in recent years, including new tonnage deliveries, scrapping and newbuilding orderbook. (Table 2) Tanker fleet Order book at end o f year (Mln dwt) as of end Total % of Fleet VLCC Suezmax Aframax Panamax Small Total + 200, /200,000 80/120,000 60/80,000 10/60,

41 (Table 3) Newbuilding deliveries/scrapping (Mln dwt) ) VLCC + 200,000 Suezmax 120/200,000 Aframax 80/120,000 Panamax 60/80,000 Small 10/60,000 Total difference between deliveries and scrapping (Table 4) Age profile of the tanker fleet as at March 1 st 2010 (Mln dwt) 09 yrs 1014 yrs 1519 yrs > 20 yrs total VLCC Suezmax Aframax Panamax Small Total + 200, /200,000 80/120,000 60/80,000 10/60, ,945 40,066 58,798 21,925 65, ,770 29,025 9,674 13,562 1,126 11,764 65,151 21,604 7,856 11,189 2,021 6,644 49,314 6,358 3,635 5,185 2,875 15,024 33, ,932 61,231 88,734 27,947 98, ,312 66% 15% 11% 8% 100% The world fleet's age is obviously a significant element for the assessment of its future development and tonnage supply growth. During the last few years, the average age has progressively decreased and it is evident that the renewal process will proceed according to the volume of new deliveries and to the entity of tonnage due for compulsory demolition in upcoming years and/or sent to voluntary demolition because of the decreasing market. Table 5 shows average freight rates (US$/day, timecharter equivalent) for spot voyages, related to different tonnage classes. (Table 5) Average freight rates for spot voyages year (1 st Qrt) $/g 15,718 12,486 9,872 18,467 24,950 13,940 22,032 27,707 29,954 24,174 24,516 23,325 7,700 10,000 clean chg 21% 21% 87% 35% 44% 58% 26% 8% 19% 1% 5% 67% 30% $/g 21,109 16,425 13,059 33,150 30,759 18,954 34,212 49,592 41,650 39,356 35,810 49,922 15,483 18,000 aframax chg 22% 21% 154% 7% 38% 81% 45% 16% 6% 9% 39% 69% 16% suezmax chg $/g 23,753 21,277 15,189 39,390 30,420 18,647 41,648 74,975 53,579 53,097 44,142 76,626 28,211 35,000 10% 29% 159% 23% 39% 123% 80% 29% 1% 17% 74% 63% 24% $/g 34,691 31,968 19,775 50,353 36,017 22,029 52,433 96,055 60,319 63,073 55,000 91,390 32,000 50,000 VLCC chg 8% 38% 155% 28% 39% 138% 83% 37% 5% 13% 66% 65% 56% clean: 20/35,000 dwt vessels used to transport clean petroleum products aframax: 80/110,000 dwt vessels. Suezmax: 110/160,000 dwt vessels. VLCC:modern construction 250/320,000 dwt vessels. 40

42 The above data show the averages for the year, significantly lower than in 2008 but extremely volatile: rates for suezmaxes went from 37,800 US$/day in the first quarter to 25,421 US$/day in the second quarter, to 14,524 US$/day in the third quarter and to 35,059 US$/day in the last quarter. In the first part of 2010 the rates surged for every category of vessels, with a declining trend at the end of the first quarter. After a yearly increase of 6.60% in both 2007 and 2008, in 2009 the bulker fleet grew at a rate of 9.90%, reaching the record level of 460 Mln ts dwt. Bulker sector Freight rates recorded an average 60% yearly decrease for all categories of vessel. The first quarter 2010 shows a further, light, reduction for capesizes and significant recoveries (between 40% and 60%) for all other types of vessel. Similarly to the tanker sector, the future is mainly affected by the orderbook level: at the end of 2009, the bulk carrier orderbook was Mln ts dwt or 62.30% of the current trading fleet (293.7 Mln ts dwt or 69.80% of the active fleet in 2008) for a total number of 3,267 vessels to be delivered (a reduction of 119 units compared to the end of 2008). It's reasonable to predict that based on the same reasons of the tanker sector a certain number of vessel will not be built by shipyards or will be significantly postponed, but it's very difficult to evaluate the real impact of this phenomenon in Scrapping activity strongly recovered from 5.50 Mln ts dwt of 2008 to Mln ts dwt of Scrap prices, obviously, surged from US$ 270 per displacement ton in 2008 to US$ 330 in Further increase in scrapping activity is expected in In 2009, secondhand sales transactions recorded a strong increase in volumes (+ 65%) as opposed to significant reduction in prices. Sales involved 594 units equivalent to Mln ts dwt and US$ 9.10 Bln in value (2008: 351 units for 20 Mln dwt ts and US$ Bln). Of these 594 vessels, 51 were capesize, 134 panamax, 160 handymax and 249 handy. Further details on dry bulk sectors are reported in the following tables. Table 1 shows the volumes of seaborne transportation of dry bulk commodities. After 8 years of continuous growth, 2009 marks a 3.0% reduction, clearly linked to the economic crisis. 41

43 (Table 1) Quantities transported by sea (millions of tons) year minerals coal grain other total changes (est.) ,009 1,061 1,103 1, ,043 2,096 2,170 2,302 2,493 2,627 2,801 2,959 3,065 2, % 3.5% 6.1% 8.3% 5.4% 6.6% 5.6% 3.6% 3.0% The tables below show the development of the bulker fleet in recent years, including newbuilding deliveries, scrapping and shipyards' orderbook. (Table 2) 2005 Trading fleet as at end of year (Mln dwt) Order book as of end 2009 Total % of fleet Capesize Panamax Handymax Handy Total 100/160,000 60/100,000 40/60,000 10/40, (Table 3) Newbuilding deliveries/scrapping (Mln dwt) Capesize 100/160,000 Panamax 60/100,000 Handymax 40/60,000 Handy 10/40,000 Total difference between deliveries and scrapping (Table 4) Age profile of the bulker fleet as at March 1st 2010 (Mln ts dwt) 09 yrs 1014 yrs 1519 yrs > 20 yrs total VLBC Capesize Panamax Handymax Handy + 160, /160,000 60/100,000 40/60,000 10/40,000 88,588 2,229 62,741 52,846 21, ,346 20,840 6,120 22,552 16,745 10,299 76,556 14,454 15,650 11,779 6,567 3,915 52,365 16,479 10,435 25,717 17,607 41, , ,361 34, ,789 93,765 77, ,809 49% 16% 11% 24% 100% 42

44 The world fleet's age profile is obviously a key element to estimate the fleet's future pattern and, therefore, tonnage supply growth. It is, however, noteworthy that, over the last few years, the fleet's average age has gradually decreased: it is, therefore, apparent that the renewal process will continue, as a result of scrapping activity and massive newbuilding deliveries. Table 5 shows the progress of bulk freight rates for spot voyages (US$/day time charter equivalent), for different tonnage classes (Clarkson index). (Table 5) Average freight rates for spot voyages year (1 st Qrt) $/g 24,724 15,524 11,654 37,563 70,395 51,613 43, ,757 97,699 39,064 35,000 capesize chg 37% 25% 222% 87% 27% 16% 159% 13% 60% 10% panamax $/g 10,700 8,709 7,284 19,091 33,950 22,931 21,427 49,349 43,323 15,090 24,000 chg 19% 16% 162% 78% 32% 7% 130% 12% 65% 59% handymax $/g 8,970 8,206 8,761 16,706 31,987 24,020 22,583 47,582 41,113 17,500 25,000 chg 9% 7% 91% 91% 25% 6% 111% 14% 57% 43% Freight rates for 2009 were, as an average, 60% lower than those (incredibly high) recorded in The data are correct, but they don't evidence the movement throughout the year and, in particular, don't show the recovery of the market in the last six months. To better clarify the situation, it's worth notice that panamax rates were worth about 7,600 US$/day in the first quarter, 15,400 US$/day in the second quarter, 16,559 US$/day in the third quarter and 20,700 US$/day in the last three months of the year. In the first quarter 2010 the rates remained, as an average, almost steady, showing some increases for handy and handymax. The existing and scheduled FPSO can be broadly divided in two groups: the first group is mainly characterized by high technology and a high level of investment, operating in deepwaters highpotential oilfields. The complexity of the equipment is also due to the growing exploitation of wells yielding ever increasing gas volumes together with crude oil. This involves working with gas processing facilities to enable transportation by gas carrier vessels; the second group of FPSO, technologically less complex, requires a lower level of capital investment and involves shallow to medium depth petroleum wells yielding a smaller percentage of gas in relation to the crude oil extracted. VLCC are the best suited vessels for conversion into FPSO for Brazilian and West African oilfields, whereas aframaxes are the most in demand for Far Eastern and Australian markets. FPSO sector 43

45 Because of the falling in oil price, the increase of raw materials and the impact of world crisis, the offshore market recorded a significant slowdown in 2008 (but not the full stop which affected other shipping segments) followed by a progressive recovery in 2009, related to the oil price growth. Perspective for 2010 and following years are positive, based on the strong restart of research activity for new fields. There are currently 154 FPSO in service and 39 new buildings under construction: almost all of them are committed to oil fields ready for exploitation (146 units and 43 new buildings at the end 2008). The Fleet The following changes occurred to the Group's fleet during 2009: in April: the second 55,500 dwt supramax bulk carrier named Four Kitakami, time chartered in for long term (with purchase option in our favour), was regularly delivered; in May: the suezmax tanker Four Smile, built 2001, was purchased (through an option in our favour) at the price of US$ 50M. After a short employment on the spot market (to get the due Oil Major Approval), in July the vessel was delivered to the charterer for a long term employment; the panamax bulk carrier Four Etoiles, built 1983, was sold for scrap generating a profit of about /Mln 0.4; in June: the panamax tanker Four Schooner, built 2000, was purchased (through an option in our favour) at the price of US$ 32M. As expected, at the end of the month the vessel was sold, but we had to accept a discounted price and a partial payment deferral (secured by a bank guarantee). Anyhow, the transaction generated a profit of about /Mln 2.3; the third 55,500 dwt supramax bulk carrier named Four Mogami, time chartered in for long term (with purchase option in our favour), was regularly delivered; in July: the new 115,000 dwt aframax product tanker Four Wind was successfully delivered by Samsung shipyard and the associated company Four Jolly S.p.A. (our interest 50%) owns and operates the vessel under the Italian flag through the Taurus Pool ; the panamax bulk carrier Four Coal, built 2000, was sold generating a profit of about /Mln 6.9; in October: the new 34,400 dwt handy bulk carrier Four Aida was successfully delivered by SPP shipyard to the controlled company Four Handy Ltd. As already advised, in 2009 we've reached an agreement with Vinashin shipyard for cancelling two out of four new buildings ordered. The advances already made for the cancelled units have been transferred to the residual ones, whose delivery dates are now expected respectively within the first quarter 2011 and within the first quarter

46 All other cost meanwhile capitalized on the cancelled vessel ( /Mln 1.1) have been charged to profit and loss in Our expectations on the finalization of the residual two vessels are sustained by the effected delivery to another shipowner (at the end of February, with more than 2.5 years delay!) of the first unit of this Diamond series, but we have to keep a tight control on shipyard's obligation, focused on the extension (amount and time validity) of the refund guarantees. At the end of the first half of the year the conversion works (from tanker to bulk carrier) of the 1992 built aframax Four Springs were completed. In the first week of July the vessel completed the seatrials and was delivered to the charterer for the scheduled long term employment (8 years). Conversion works, realized at a Cosco shipyard in China, also included: 1) complete refurbishment of the cargo area; 2) installation of hatch covers; 3) insertion of a brand new hull block; thus increasing the l.o.a. to 256 m. and the deadweight to 109,000 dwt. Also because of some change in the scope of work as requested by the Class Registry, the total cost (about /Mln 19) exceed our expectations. This investment is, anyhow, profitable due to the terms of the contract of employment. The vessel obtained a conventional age reduction of 11 years from the Registry, with positive effects on future cost of insurance coverages. Regarding the changes to Premuda's fleet occurred after yearend, we point out that in the first decade of March the associated company Four Jolly S.p.A. (our interest 50%) took delivery of the second new 115,000 dwt aframax product tanker, named Four Sky. As per the sister vessel Four Wind, the commercial employment is granted by the Taurus Pool. We also notice that in March, after more than eight months of stoppage, the FPSO Four Rainbow (ex Four Vanguard) finally restarted the production at the Woollybutt field. Total cost of repairs/class renewal (performed at Keppel's shipyard in Singapore with an investment in excess of /Mln 30) were financed through existing credit lines. Group Fleet details as at 31st December 2009 and 31st March 2010 are shown on pages 10 and 11 of this report. Current commitments for fleet investments amount to approximately US$ 331M (of which about US$ 68M are attributable to thirdparties), spread over the years 2010/

47 A summary of such commitments: 2 aframax (114,700 dwt) product tanker newbuildings at South Korea's Samsung, due for delivery respectively May 2011 and May Outstanding installments due to the shipyard amount to approximately US$ 135.5M, of which 50% is attributable to the Group; 2 handysize (34,000 dwt) craned bulkers, on order with Vietnamese shipyards Vinashin with updated delivery respectively in first quarter 2011 and first quarter Outstanding installments due to the shipyard amount to approximately US$ 22.5M; 7 handysize (35,000 dwt) craned bulkers, on order with South Korean shipyards SPP due for delivery in 2010 (2 vessels), 2011 (4 vessels) and 2012 (1 vessel). Outstanding installments due to the shipyard amount to approximately US$ 173M. Loan finance for the ships due for delivery in 2010 has already been broadly secured, for the later newbuildings negotiations have begun to secure longterm mortgagebacked finance. Management Information The management of the Premuda fleet, both tankers and bulk carriers, has been carried out smoothly and eventless. The use of available vesseltime is summarised in the following table, and includes time spent for routine survey and drydock on one vessel. The data refer to shipping activity only (offshore is excluded) and time spent for conversion work on the Four Springs is excluded too. Compared with 2008, time available for commercial operations increased due to the lower number of vessels undergoing scheduled drydock. Time lost waiting for employment is increased due to tonnage demand volatility throughout the year. % of vessel/time: year commercial operations waiting for employment technical offhires (*) % 95.2% 95.0% 90.7% 93.1% 96.4% 1.1% 0.3% 0.6% 2.3% 0.2% 1.4% 5.6% 3.8% 4.4% 7.0% 6.7% 2.2% (*): includes vessel positioning to drydock 46

48 The next table reports the daily income booked by our vessels on a timecharter equivalent basis over the last five years, subdivided into the most homogenous categories. It should be noted that, in timecharter contracts, voyage operating costs associated with the utilization of the vessel such port costs, canal transit rights, fuel, etc., are borne by the charterer. Tankers Time Charter Equivalent (US Dollars/Day) year aframax panamax suezmax ,142 26,180 24,934 28,537 20,091 18,205 18,500 21,628 21,422 21,442 27,173 34,110 34,398 36,284 27,862 Bulk Carriers Time Charter Equivalent (US Dollars/Day) year minicape panamax handymax handy ,569 22,232 16,733 19,818 19,307 17,497 17,854 11,872 The following table shows the running costs paid for our vessels, subdivided into the most possible homogenous categories. Running costs include insurance, crew, maintenance and repairs, spares and stores, lubricants, classification, security and safety costs etc.; general expenses and voyage costs associated with the commercial utilization of the vessels (such as port costs, canal transit rights, fuel, etc) are not included. Running Costs (US Dollars/Day) tankers bulk carriers year suezmax aframax panamax panamax handy ,131 8,523 8,683 10,353 11,724 9,169 6,831 6,744 8,359 7,660 8,168 5,207 6,646 7,129 7,804 6,589 4,047 47

49 Vessels' Opex in 2009 were lower than in the previous year (except for panamax tankers) despite a widespread steady increase of insurance and labour cost (regardless of crew nationality). Costcutting measures, even more meaningful during low market cycles, will always be respectful of the necessity to ensure high standards and safety, essential for a first class operation. Financial Position The consolidated financial position, duly detailed in the Notes, is summarized (in '000 Euros) in the following table; at the end of 2009 the net financial exposure was /Mln ( /Mln at the end of 2008) with a cash availability of /Mln Financial Position Cash Other liquid assets Total liquid assets Shortterm bank debt Shortterm portion of longterm debt Other shortterm debt Total shortterm debt Shortterm net debt at ,692 16,019 (9,560) (20,270) (957) (30,787) (14,768) at ,856 13,036 (1,300) (35,526) (929) (37,755) (24,719) Longterm financial investments Loan granted to associated companies Total longterm financial assets Longterm bank debt Longterm debt Longterm net debt Total net borrowing 20,042 9,250 29,292 (241,283) (241,283) (211,991) (226,759) 20,042 11,846 31,888 (167,291) (167,291) (135,403) (160,122) At the end of 2009 about 50% of long term loans were Dollardenominated, offering a significant hedge to assets and income expressed in the same currency. Taking into account the extent of new investments, the amount and structuring of borrowings appear to be affordable, considering cash and credit lines available, the size and quality of our Fleet, its ability to generate sufficient cash flow and the contribution granted by the Share Capital Increase resolved by the holding company Premuda S.p.A. 48

50 Based on the above, we believe that at least for the next 12 months the Group will have sufficient financial resources to cover its operating needs and to fulfil its obligations. We note that the mediumto long term financial investments concern an investment of Euro 20M in 5year term, capitalguaranteed financial products issued by Commerzbank, pledged for a Euro 30Mcredit line, issued by Commerzbank itself, with a tenor equal to the duration of the investment, thereby making the funds immediately available. In any case we have the right to exit this investment (with a simultaneous cancellation of the credit line). Our Group is highly regulated, at national and international level, on environmental safety issues, as a prerequisite to be allowed to trade. These rules also concern air emissions, garbage disposal, water recycling and scrapping of obsolete ships. The Group is also exposed to other risks, typical of the shipping industry, such as piracy, war hostilities, bad weather, groundings and collisions, etc. Such risks are covered, as far as possible, by insurance, and limited by submitting technical management to certification by specialized auditors. We refer you to Environment and Safety chapter, which is integral part of the Italian version of this Annual Report. The Group is also exposed to financial risks, as reported in detail in the Notes to Financial Statements. As at 31st December 2009, Premuda S.p.A. and its associated companies employed 287 people, of whom 213 were seafarers. Yearonyear, shore staff increased by 4 and seafarers decreased by 11. Other data and information The Group's Consolidated Financial Statements (as well as Premuda S.p.A.'s Financial Statements) as at 31st December 2009 have been audited by Deloitte & Touche S.p.A., who also carried out a limited review of our Semiannual Report. All information required by art. 123 bis of T.U.F. can be found in the Report on Corporate Governance and Shareholding Structure, released together with this Annual Report as well as in the Investor Relation section of our website Apart from what previously reported on the delivery of Four Sky to the associate company Four Jolly S.p.A. and on the restart of production of Four Rainbow (ex Four Vanguard), no significant events or circumstances have occurred subsequent to the accountclosing date. As far as new investments are concerned, we point out that based on the market condition described at the beginning of this report we have started negotiating with the shipbuilders in order to modify the contractual terms. Significant events after the year closing date and business outlook 49

51 Regarding the management of our owned fleet, both tankers and bulkers, no significant events or circumstances have occurred subsequent to the accountclosing date. Scheduled drydock and special surveys for 2 units are planned in 2010, with technical offhire for the entire Fleet amounting to 2.0% of vesseltime (2.2% in 2009). As to running costs, we are aiming at keeping them at approximately the same level as last years, in line with the international pattern for our quality standard. Operating costs will certainly be negatively affected by the increase in crew wages, whilst the high fuel price only marginally concern our fleet, as fuel for vessels employed on timecharter is paid for by the charterer. Financial charges should benefit (at least in the short term) of low interest rates, and are partly fixed at adequate levels. On the opposite side it's logical to foresee a general increase in the applicable spreads required by the banks for new transactions. With respect to commercial risk, it must be noted that approximately 74% of time/vessel available is currently covered at adequate levels. Nearly all of income is expressed in US$, therefore, its conversion into Eurodenominated balance sheet data may be negatively influenced by a weak dollar, only partly offset by costs sustained in the same currency (part of crew costs, insurance, spares and stores, lubricant oils and maintenance) and by interest charges on US$denominated loans. Broadly speaking, excluding additional impairment on vessels and barring unforeseen circumstances, it is reasonable to expect a positive 2010, notwithstanding all uncertainties related to the present troubled contingency. 50

52 Dear Shareholders, We draw your attention to the fact that our 2009 Consolidated Financial Statements have been issued in accordance with the IFRS International Accounting Standards of the International Accounting Standard Board (as already done in 2008). The consolidated results for the 2009 financial year (net of minority interest, irrelevant) show a loss of /Mln after depreciation and amortisation charges of /Mln 24.20, provisions and other costs of /Mln 5.00 and impairment of five vessels of /Mln (in 2008 net profit was /Mln 3.80 after depreciation and amortisation charges of /Mln 24.10). Without such impairments and provisions, and all other conditions unchanged, the 2009 result would have been a profit of /Mln The impairment is a nonmonetary negative element, subject to recovery should the reasons which made its implementation advisable cease to exist; anyhow, for next financial years, it will imply lower depreciation charges for about /Mln 2.70 yearly. The criteria used to determine such impairment are explained in the Notes. The cashflow for 2009 was /Mln (2008: /Mln 27.90). Net equity at the end of 2009 amounts to /Mln , compared to /Mln at the end of

53

54 Dear Shareholders, In order to improve the financial position and meanwhile restore and strengthen the Net Equity (cash inflow, against non monetary losses) and to provide all interested parties within the current shipping and whole economy crisis with a significant positive message, the Board of Directors of the holding company Premuda S.p.A. proposed a) to cover the 2009 losses through reserves and retained profit; b) to distribute an unchanged dividend and resolved the following Capital Increase: from 70,418, up to 93,890,966.50, thus for maximum 23,472, (partial amount acceptable as per art 2439 of Italian Civil Code), by issuing maximum 46,945,483 ordinary shares, 0.50 nominal value, share rights , offered to the actual shareholders at a rate of 1 new share for every 3 shares held, at a price of 0.75 (of which 0.25 as share premium) with a maximum cumulative amount of 35,209,112 (of which 11,736,371 share premium).the Capital Increase is to be finalized within six months from registration of the Board Resolution in the Company Registry. After taking into account the payment by the Parent Company of the proposed dividends and assuming the full subscription of the Capital Increase, the Consolidated Shareholders' Equity will be structured as follows: Share capital Share premium Legal reserve Other reserves Retained earnings Total Group Shareholders' Equity Minority interests Total Consolidated Shareholders' Equity ( /000) 93,891 11,736 14,084 88, , ,428 Equal to 1.11 Euro per each of the 187,781,933 shares post Capital Increase. Dear Shareholders, The 2009 result shows a loss, mainly generated by impairment of old vessels. Our expectations for 2010, subject to the current uncertain times, are back to profit, as reported in company budgets and supported by the market trend in the first quarter. As a final note, we would like to thank all of our Group's employees, ashore and at sea, for their valuable and precious cooperation in the present contingency: they deserve our unconditional gratitude and firm confidence in the future. 31 st March 2010 The Board of Directors 53

55

56 Consolidated Financial Statements 55

57 Premuda Group Consolidated Balance Sheet (thousands of Euro) ASSETS at at Fixed Assets Tangible fixed assets Vessels Vessels under construction Real estate Other fixed assets Participations Associated companies Other companies Other financial assets Loans Other investments Total Fixed Assets 385, , , ,631 15,583 15, ,399 29, , , ,522 82, ,467 2,212 2, ,966 31, ,467 Current Assets Inventories Consumables Voyages in progress Receivables Clients Prepayments Other receivables Financial current assets Cash and cash equivalent Total Current Assets TOTAL ASSETS 3,656 2, ,036 25,892 2,431 10,713 16,020 58, ,924 2,734 2, ,896 23,334 3,330 14, ,797 56, ,133 56

58 LIABILITIES AND SHAREHOLDERS' EQUITY at at Shareholders Equity Share capital Reserves for premium on issued shares Legal reserve Other reserves Retained profit Profit/(loss) for the year Group shareholders equity Minority Interest: Capital and reserves Profit/(loss) for the year Total shareholders equity 70,418 14,084 16,445 94,841 (19,803) 175, (5) 176,036 70,418 14,084 16,445 93,406 3, , ,159 LongTerm Liabilities Bank loans Provisions Provisions for staff leaves Total LongTerm Liabilities 241,283 4, , ,291 1, ,650 Current Liabilities Bank loans Derivatives Suppliers Corporate tax Accruals Other debts Total Current Liabilities Total Liabilities TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 29, ,229 1,075 6,395 4,530 66, , ,924 36, ,946 1,193 6,680 4,750 68, , ,133 57

59

60 Premuda Group Consolidated Income Statement (thousands of Euro) year 2009 year 2008 Net revenue Voyage costs Time Charter revenues Charter hire Running costs Fleet margin Profit on vessel sales Administrative expenses Other income/(costs) Depreciation Impairment of assets Operating profit Financial items Profit/(loss) from associated companies Profit/(loss) before tax Tax on profit Net profit/(loss) Minority interest Group's net profit/(loss) 101,909 (6,325) 95,584 (25,110) (24,363) 46,111 8,363 (15,183) (5,005) (24,240) (22,310) (12,264) (6,756) (258) (19,278) (530) (19,808) (5) (19,803) 150,609 (9,492) 141,117 (44,478) (37,902) 58,737 (18,702) 182 (24,138) 16,079 (11,752) (20) 4,307 (571) 3,736 (14) 3,750 Group s net profit/(loss) per share (Euro) (0.140) Statement of Comprehensive Income (thousands of Euro) * year 2009 year 2008 Group s net result Effects of changes in foreign exchange rates Hedge accounting effect Comprehensive result (19,803) (3,095) 3,654 (19,244) 3,750 (219) (4,220) (689) (*): as requested by the amended version of IAS 1 applicable starting 1 st January

61 Premuda Group Cash Flow Statement (thousands of Euro) year 2009 year 2008 A) NET CASH POSITION AT YEAR START (24,029) 15,385 B) CASH FLOW FROM OPERATING ACTIVITIES Profit for the year Unrealized exchange differences Interest charges Interest income Tax on profit Depreciation Net change in other provisions (Profit)/loss on assets disposal (Profit)/impairment of associated companies Net change in Staff s leave provision Subtotal: Cash flow from operating activities before working capital changes Change in receivables Change in inventories Change in suppliers and other current liabilities Tax on profit (cash) Total cash flow from operating activities (19,803) 768 7,007 (1,453) ,550 3,257 (8,363) 258 (27) 28,724 2,099 (922) 3,956 33,857 3,750 (569) 10,522 (2,014) , (5) (102) 37,199 (18,184) 1,488 (1,472) (293) 18,738 C) CASHFLOW FROM INVESTING ACTIVITIES Investments in assets: tangible financial Sale of financial fixed assets Other changes Interest income cashed Total cashflow from investing activities (124,308) (13,629) 46,183 1,453 (90,301) (47,963) (2,155) ,014 (47,940) D) CASHFLOW FROM FINANCING ACTIVITIES New loans Repayments of bank loan Net change in financial fixed assets Interest charges (cash) Dividends Other changes Total cashflow from financing activities 112,682 (38,690) 2,564 (7,573) (2,817) ,663 43,526 (24,905) (6,082) (9,653) (8,451) (4,647) (10,212) E) CASHFLOW OF THE PERIOD (B + C + D) 10,219 (39,414) F) NET CASH POSITION AT THE END OF THE PERIOD (A + E) (13,810) (24,029) 60

62 Statements of Changes in the Consolidated Shareholders Equity (thousands of Euro) Share Capital Share Premium Account Legal Reserve Other Reserves Retained Profit Profit for the Year Group Interest Subtotal Minority Interest Total Balance as at ,418 14,084 16,445 73,373 33, , ,508 Allocation of the 2007 result for the Parent Company legal reserve dividends retained profit (8,451) 3,004 (3,004) (8,451) (8,451) Allocation of the 2007 result for subsidiaries 30,114 (30,114) Exchange differences (219) (219) (219) Others (195) (195) (195) Hedge accounting effect (4,220) (4,220) (4,220) Consolidated result for the year ,750 3,750 (14) 3,736 Balance as at ,418 14,084 16,445 93,406 3, , ,159 Allocation of the 2008 result for the Parent Company legal reserve dividends retained profit (2,817) 8,707 (8,707) (2,817) (2,817) Allocation of the 2008 result for subsidiaries (4,957) 4,957 Exchange differences (3,095) (3,095) (3,095) Others (57) (57) (57) Hedge accounting effect 3,654 3,654 3,654 Consolidated result for the year 2009 (19,803) (19,803) (5) (19,808) Balance as at ,418 14,084 16,445 94,841 (19,803) 175, ,036 61

63

64 Notes to Consolidated Financial Statements 63

65

66 Statement of compliance with IFRS and accounting principles Statement of compliance These Consolidated Financial Statements of the Premuda Group have been issued in compliance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB). They are reported in '000 Euro and compared with the previous year's financial results. The Yearend Consolidated Financial Statements include Balance Sheet, Income Statement, Cash Flow Statement, Statement of Changes in Shareholders' Equity and Notes. These Consolidated Financial Statements have been issued in compliance with the accounting principles currently ruling, consistent with those applied in the past. The Consolidated Financial Statements are expressed in Euro, functional currency consistent with the Group's financial structure. These Consolidated Financial Statements are based on the historical cost principle, duly modified in order to recognize certain financial instruments, and on a going concern basis. The Group assumes, despite the present heavy financial and economic environment, and also considering the risks later on described, that there aren't significant uncertainties (as defined in IAS 1) on the Group's ability to continue as a going concern. All information required by the amended version of IAS 1 (change in net equity produced by transactions other than those with shareholders) are reported under the Income Statement. Consolidation Area The Consolidated Companies operate in the shipping industry for liquid and dry bulk transportation, employing owned and chartered vessels, with the exception of the holding company Premuda International S.A.H. and of Premuda (Monaco) S.A.M. (responsible for the operational and business management of the foreign flagged vessels), Australian FPSO Management PTY LTD (in charge of the technical and operational management of the FPSO Four Rainbow) and Premuda (Atlantic) Inc. (which is now dormant and in the past was responsible for the Group fleet employment related to the US market). Consolidation Area Subsidiary companies are those, directly or indirectly, controlled by the Parent Company or where the latter issues financial and operating policies so as to benefit from its activity (actual control). 65

67 The companies consolidated on a linebyline basis as at are: st December Premuda S.p.A. Parent Company Registered office: Trieste Share capital: Euro 70,418,225 Companies directly controlled: Premuda International S.A.H. Registered office: Luxembourg Share capital: Euro 52,000,000 Ownership: 99,90% Companies indirectly controlled (through Premuda International S.A.H.): Premuda (Monaco) S.A.M. Registered office: Monte Carlo Share capital: Euro 305,000 Ownership: 90% Brig Shipping Lda. Registered office: Madeira Share capital: Euro 50,005,000 Ownership: 100% Cordier Navegaçao Lda. Registered office: Madeira Share capital: Euro 5,000 Ownership: 100% (through Brig Shipping Lda.) Four VanguardServiços e Navegaçao Lda. Registered office: Madeira Share capital: Euro 27,243,505 Ownership: 100% Moon ShippingServiços e Navegaçao Lda. Registered office: Madeira Share capital: Euro 16,597,027 Ownership: 100% Premuda (Atlantic) Inc. Registered office: Delaware Share capital: US$ 1,000 Ownership: 100% Dormant 66

68 JEP Navegaçao Lda. Registered office: Madeira Share capital: Euro 20,000 Ownership: 100% Australian FPSO Management Pty Ltd. Registered office: Australia Share capital: Australian Dollar 100 Ownership: 100% Four Handy Ltd. Registered office: United Kingdom Share capital: US$ 10,000,000 Ownership: 100% Investments in associates: Premuda Chartering Navegaçao Lda. Registered office: Madeira Share capital: Euro 5,000 Ownership: 50% Four Jolly S.p.A. Registered office: Genoa Share capital: Euro 10,000,000 Ownership: 50% We point out that the acquisition in 2008 of the entire share capital of Cordier (owner of the shipbuilding contracts of two new 34,000 dwt handy bulk carriers, and not operating yet) produced the allocation on the two newbuildings (sole assets of the company) of the difference ( /000 5,375 equal to $/000 7,480 per vessel) between the purchase price and the net equity of the company. Please refer to the tables attached for further information on the Group's structure. We point out, as differences over 2008, the acquisition (upon setup of the company) of 50% of Four Jolly S.p.A. and the merging of the sleeping companies Premuda Bulk Navegaçao Lda., Panamax Navegaçao Lda. and Suezmax Navegaçao Lda. into Jep Navegaçao Lda. 67

69 Consolidation principles Consolidation principles The main consolidation principles basically unchanged include the following: The book value of the controlled companies has been written off for the relevant Shareholders' Equity against the entry of assets and liabilities on a linebyline basis, and showing in the retained earnings the difference arising therefrom. Minority interests have been booked separately. Investments in associates have been recognized as explained in the following paragraph on valuation criteria. Credit and debit entries as well as costs and revenues among consolidated Companies were written off. In particular, profits and losses generated by transactions among Group Companies not yet realized towards third parties were also written off. The Euro conversion of financial statements expressed in foreign currency was carried out at the current exchange rate. For both Balance Sheet and Profit & Loss Account items the endofperiod exchange rate has been used, since their valuation adopting the average exchange rate for the period had not caused significant changes. Exchange rate differences arising from the conversion of original shareholders' equities at the current exchange rates, compared to those used in the previous financial statements, were directly entered in the consolidated Shareholders' Equity under the item reserves from translation difference. We point out that starting from year 2009 the United States Dollar is considered to be the functional currency for the controlled companies Brig Shipping Lda. and Cordier Navegaçao Lda. and, as a consequence, the relevant reporting packages included in the consolidated balance sheet have been prepared based on such a currency. The effect on the consolidated accounts of previous year were not significant and, as a consequence, no adjustment for comparison purposes was necessary. Also the reporting package of the newly formed associated company Four Jolly S.p.A. is prepared based on the same functional currency. For further information, we refer you to the reconciliation account between Shareholders' Equity and net profit for the year of the Parent Company and those of the consolidated financial statements attached hereto. Accounts presentation Accounts presentation Profit and Loss is exposed by function, that is considered more reliable and representative than the exposure based on the nature of expenses. As far as the Balance Sheet is concerned, the Group opted for a distinction between current/non current assets and liabilities. 68

70 Valuation criteria The valuation criteria used for the Consolidated Financial Statements are as follows: Valuation criteria Te Fleet is booked at the purchase cost; extraordinary charges, increasing the productivity of the vessels, are capitalised on same. As to vessels directly ordered to shipbuilding yards, their cost value consists of the contract price, agreed extra costs, costs for directly purchased startup equipments, cost of personnel employed during fitting out, and interest charges on advance instalments paid to the Shipbuilding Yards before delivery of the vessel. Fleet depreciation is based on the cost of each unit less estimated scrap value, divided by the years of residual life, based (in the past) on the assumption of a trading life of twentyfive years for tankers and of twenty years for bulk carriers. For the new bulk carriers (the Four Aida already delivered and the others under construction) having considered the statistics on the age of scrapped vessels, we decided to assume an useful life of twentyfive years. The effects of such a change (surely not relevant in 2009 and in the short term) will progressively increase in connection with the deliveries of the new vessels. The cost component of vessels undergoing repairs during routine drydock is amortised over the time until the subsequent drydock (usually 30 months). Real estate are stated at purchase cost and amortized on a straightline basis over 33 years. Fixtures, furniture, machinery, office equipment and motor vehicles are stated at purchase cost. Amortization is calculated on a straightline basis according to the estimated useful life shown below: fixtures and furnishings 8 years machinery and office equipment 5 years motor vehicles 4 years Assets carrying an artistic, but nonsignificant, value are stated at purchase cost. Associated companies are those subject to a great influence by the Group (but not controlled). Investments in associates (even if jointly controlled) are initially entered in at cost and, subsequently, at Net Equity. The value is increased/decreased to reflect all changes after acquisition. Other investments are stated at cost, reduced in case of losses and where no profits are expected in the near future in amounts that would make it possible to cover such losses; the original value is reinstated in subsequent years only if the reasons for the adjustment to the value of such investments cease to exist. 69

71 Longterm investments include receivables entered at their recoverable value. Tax advances are recorded as assets to the extent that they are reasonably expected to be recovered. Fixed assets are subject to periodical valuation so as to find out indicators showing a loss of value. If such indicators exist, the recoverable value is determined, equalling the higher between the selling price and the value in use. The latter is determined by discounting the expected cash flows at an interest rate reflecting market evaluations of cost of money and the specific risk of shipping activity. Where the recoverable value was below the entry value, the arising impairment was booked in the Profit & Loss Account. The book value is immediately restored (with effect on Profit & Loss) should the reason for impairment cease to exist. Bareboat and timecharter contracts are usually regarded as operating leases. If their contractual terms define them as financial leases, pursuant to IAS 17, vessels are entered as lease assets. Charter rates referred to operating leases are charged to Profit & Loss throughout the duration of the contract. Accruals and prepayments are determined on an accrual basis. Owned shares are recorded in the impaired Shareholders' Equity. Inventories are valued using the FIFO method (first in, first out) taking market value into account. Costs for voyages not yet completed at the closing date are booked as voyages in progress, net of the whole loss (if negative) and including the prorata profit (if positive). Each voyage begins (conventionally) once cargo offloading operations under the preceding voyage is completed; includes the ballast leg to the next loading port and is deemed to be completed at the end of the subsequent cargo offloading. Receivables are booked at their recoverable value. The provision for staff severance indemnity (TFR) is regarded as a liability arising from defined benefit plan for employees and is booked taking into consideration (amongst other factors) the estimated working life and the wages earned by the employees during a certain working period. The TFR liability is determined by an independent consultant, using actuarial techniques and applying the Projected Unit Credit Method. Actuarial gains and losses are charged to Profit and Loss. According to changes in the relevant Italian rules, TFR accrued from is considered a Defined Contribution Plan and entered like any other social contribution. Due to this change, the actual evaluation from excludes any expected future salary increase. The difference arising is considered a curtailment according to paragraph 109 of IAS 19 and charged to Profit and Loss in

72 Other provisions are allocated to cover losses and debts, probably existing, but whose amounts and/or date of occurrence were not ascertainable at the balance sheet date. Payables are booked at their par value. Income from services is booked once the services are rendered. Income from services in progress is calculated according to the progress report. Income from timecharter is calculated on the accrual basis of the charter period. Income from asset disposal is booked once risks and benefits linked to the asset are transferred to the buyer. Maintenance costs comprise all of the expenses incurred during the year for the ongoing maintenance of the relevant fleet class. Costs relating to periodical maintenance of vessels are capitalised and depreciated during the period until the next drydock. Other costs are determined on an accrual basis. Dividends are entered when they become payable. Taxes are entered in compliance with the tax laws in force in the country where the Group operates (in Italy and U.K. under the socalled tonnage tax ); tax effects on time differences arising between taxable income and profit and loss results are booked under the entries deferred taxes and prepaid taxes, as per IAS 12 provisions. Tax effects related to items directly entered in net equity (without affecting Profit & Loss) are directly entered in net equity too. Exchange rate differences arising from collection of credits and payment of debts denominated in foreign currency are charged to Profit & Loss. Receivables and Payables originally shown in a foreign currency are converted to Euro at the endofperiod exchange rates. Exchange rate differences arising out of the above conversion are charged to Profit & Loss, whereby net profits resulting from such differences, when positive, are not available for distribution. Exchange differences on monetary items qualified as hedging instruments of future cash flow are directly recognised in net equity, provided the hedge proves to be effective. The Group qualified certain long term loans as a natural hedge of the exchange risk on cash flow in US$ coming from long term charter contracts of certain vessels. Loans are valued at cost, net of acquisition costs, which are charged to Profit & Loss using the amortised cost method. Group assets and liabilities are exposed to financial risk related to exchange rate and interest rate fluctuations. The Group's policy tries to minimize such risks by way of hedging with financial instruments, usually resulting from forward purchase/sale of foreign currencies and swap transactions from floating to fixed loan rates. Derivatives are originally entered at cost, and afterwards adjusted to the fair value. Changes in the fair value of hedging 71

73 derivatives that prove to be effective pursuant to IAS 39 are directly booked to the Shareholders' Equity. Their potential ineffective portion, as well as changes in the fair value of other derivatives is charged to Profit & Loss. Risks connected with future fluctuations of the fair value of commitments related to charteringin thirdparty vessels may be covered by Forward Freight Agreement (FFA). For such coverage, if effective, the fair value hedge is applied, booking in the Balance Sheet the fair value valuation of both the hedging instrument and the hedged item, charging to Profit & Loss the relevant effects. Financial items comprise: interest charged on financial debts (booked applying the effective interest method), interest income, exchange differences, profit and losses on derivatives (if not registered as hedging instruments). The cashflow statement is produced applying the indirect method. Cash and cashequivalent reported in the Statement of Cashflow comprise the relevant values at the reference date. The issuance of the Financial Statements and their related Notes in accordance with the International Accounting Standards requires Management to provide estimates and assumptions which may have a certain impact on certain balance sheet items (tangible and intangible assets, provisions for risks, impairments, useful life of assets, employees' benefit, income tax, insurance claims, derivatives instruments etc). As a consequence, actual results may differ from initial estimates. Valuations are reviewed on a periodical basis and their direct effects are immediately charged to Profit & Loss. On this basis it's worth notice that, due to the contingent financial and economic crisis, our assumptions on future development are characterized by a significant uncertainty and we can't exclude future results which may differ from estimates and which may require to rectify some balance sheet items, particularly the fleet value and the recoverable amount of commercial credits and insurance recoveries. All asset entered in the Balance Sheet have never been revaluated. The stock options plans are recognized pursuant to IFRS2 provisions. The current plan involves exclusively a cash compensation (and not the physical transfer of shares) and it is therefore accounted in the Balance Sheet as a liability based on the fair value of the relevant shares, and in the Income Statement as personnel cost within the administrative expenses. Amounts shown in these Notes are in '000 Euro. 72

74 Risk management Credit risk: The Group is exposed to the credit risk affecting the shipping industry: an activity towards a limited number of clients, usually major companies or shipping operators. This risk is, however, significantly reduced by our standard payment rules (in advance for time charter hire and within completion of discharge for spot voyages) and by the large availability of information on clients' credit standing. Receivables are monitored at all times and, when necessary, impaired, based on historical experience and on newly available information on clients' standing. At the accountclosing date (excluding the credit towards ENI Australia, described below), about 3.80% of receivables had been due for over one year. Of these, the majority consisted of demurrage and other charges, usually requiring a longer period for agreement and settlement. We evidence that the balance sheet data include insurance claims yet to be liquidated, amounting to a total of /Mln 8.60 at the end of Such amounts are mainly related to past casualties affecting the Four Rainbow (ex Four Vanguard) which were recorded in the balance sheet 2008 as the result of management assessments, based on costs sustained and claims submitted to insurers. In 2009 the estimates referred to one claim were reduced by /Mln 0.60 (to reflect a subsequent agreement with the insurers) and as a consequence of unexpected problems argued by the insurers to accept/settle a second claim a provision of /Mln 2.50 was accrued, equivalent to about 50% of the recovery, as previously assessed. The provision considers all the uncertainties in estimating the result of a legal proceeding that the company could be forced to activate in order to protect our rights and obtain the due refund. The result of such an action (under evaluation by recently appointed legal advisors) could differ from company estimates. We also evidence that the amounts due by Clients comprise about /Mln towards ENI Australia connected with the long production stoppages occurred in the first half of We had regularly invoiced such hires because we considered this to be caused by the charterers and the analysis effected by independent experts (appointed by us) duly supported our position. Long negotiations for an amicable solution were up to now useless and we are almost forced to ask for an arbitration in order to solve the matter. To cover the direct and indirect costs that could arise from such a legal action, as well as the loss from a possible partial recovery of our credit, we've made a provision of /Mln 1.10 (about 10% of the disputed amount), charged to profit and loss in Please refer to the Notes for a more detailed analysis. Risk management Liquidity risk: Cashflow, financial requirements and liquidity are strictly monitored and assessed in order to efficiently manage the Group's financial resources, under the control and coordination of the Mother Company. Short and longterm cash requirements are regularly assessed in order to ensure timely and adequate acquisition of financial resources, as well as proper employment of cash excess. Please refer to the Notes for any information regarding the repayment schedule of longterm loans. 73

75 Exchange risk: Certain assets and liabilities are exposed to risks arising from exchange rate fluctuations (mainly related to the Euro/dollar rate). It is a Group's policy to partially cover this risk by derivative hedging instruments as well as by natural hedging. Additional protection is offered by controlled companies whose accounts are (at least for consolidation purposes) denominated in dollar. Please refer to the Notes for information on all derivative transactions entered by the Group. At the end of 2009 the main US$denominated assets and liabilities are summarized as follows: Assets Cash and cash equivalent Commercial credit Financial credit Other credit Total Liabilities Bank debts Suppliers Financial debts Other debts Total US$/000 16,893 8,907 9,437 35, ,179 6, , ,283 US$denominated loans converted into Euro by cross currency swap are not included in the above data. Please refer to the Notes for indepth analysis of the more significant US$ denominated balance sheet items. According to the sensitivity index, had 2009 average and yearend Euro/ US$ exchange rates been the same as in 2008, Net Result and Net Equity would have been reduced by Euro/Mln 1.10 and Euro/Mln 3.90 respectively, all other factors unchanged. Interest rate risk: The majority of long term bank loans are based on floating interest, therefore, the Group is exposed to interest rate fluctuation risk. It is a Group policy to reduce such a risk through financial derivatives, fixing the interest rates for certain periods. Please refer to the Notes for information on the financial derivatives transactions entered by the Group. According to the sensitivity index, had average 2009 interest rate be 100bp higher/lower, both Net Profit and Net Equity would have changed by Euro/Mln 2.60, all other factors unchanged and after taking into account all derivative transactions. Freight rates volatility risk: The Group operates in a very volatile freight market. Risks related to market rates fluctuations may be reduced by longterm timecharters or by derivative contracts (Forward Freight Agreements, FFA's). Please refer to the Notes for all information on the derivatives transactions entered by the Group. According to the sensitivity index, a 10% variation of 2009 average freight rates would have affected both Net Profit and Net Equity by Euro/Mln 0.90, all other factors unchanged. This variation refers only to the time/vessel portion still uncovered at the beginning of the year (thus, subject to market volatility). As far as the year 2010 is concerned, the freight rates volatility risk affects 4.5 year/vessel only, considering that all other vessels (owned and charteredin) are already covered by contracts. 74

76 Please also note our fleet charter cover over the next three years (as a share of trading vessels, both owned and charteredin vessels under J/V considered at 50% only): year 2011: 26%; year 2012: 17%; year 2013: 12%. Risks related to the present crisis: All above refers to normal market conditions. The present contingent situation of deep economic and financial crisis enhances the risk (very difficult to evaluate in advance) of default and/or not performance of contractual obligations by counterparts like shipowners, charterers etc. The above is confirmed by the default/non performance situations reported in the last 18 months for big and experienced players, usually considered as fully reliable. At the moment all banks have significantly reduced also for shipping the provision of financial support, with particular reference to new investments in progress. If this situation is not rectified, in the next future it could be very difficult to organize the traditional long term mortgage loans to cover the investments. Regarding our Group's position, we notice that all vessels delivered in 2009 (also to related companies) were regularly financed by Italian banks through traditional long term mortgage loans, and also the coverage of the units to be delivered in 2010 have already been duly organized. The deep fall in freight rates today particularly deep for tankers produced a reduction in the vessels' value, mainly affecting the aged and unemployed units. This happened for five of our vessels which book values were duly impaired in 2009, as later on detailed. New accounting principles and interpretations The following accounting principles, amendments ad interpretations (also revised after the annual improvement process effected by IASB in 2008) have been applied (without any significant impact for our Group) starting 1st January 2009: IAS 1 Revised Presentation of Financial Statements. IFRS 8 Operative Segments to replace IAS 14 Segment Reporting. IAS 23 Revised Borrowing Costs. amendment to IFRS 2 Sharebased Payments: Vesting Conditions and Cancellations. improvement to IAS 16 Property, Plant and Equipment. improvement to IAS 19 Employee Benefits. improvement to IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. improvement to IAS 28 Investments in Associates. improvement to IAS 38 Intangible Assets. amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements Financial Instruments. improvement to IAS 29 Financial Reporting in Hyperinflationary Economies. improvement to IAS 36 Impairment of Assets. improvement to IAS 39 Financial Instruments: Recognition and Measurement. improvement to IAS 40 Investment Property. IFRIC 13 Customer Loyalty Programmes. IFRIC 15 Agreements for the Construction of Real Estate. IFRIC 16 Hedges of a Net Investment in a Foreign Operation. IFRIC 9 Reassessment of Embedded Derivatives; and IAS 39 Financial Instruments: Recognition and Measurement. 75

77 Here below you can find, in chronologic order of issuance, the accounting principles, amendments and interpretations not yet compulsory and not adopted in advance by our Group: on 10 th January 2008 the IASB issued a revised version of IFRS 3 Business Combinations, and amended IAS 27 Consolidated and Separate Financial Statements, applicable after 1 st January 2010; on 22 nd May 2008 the IASB issued certain improvements to: IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations, st ruling 1 January 2010 prospectively; IAS 16 Property, Plant and Equipment, ruling 1st January 2010; on 31 st July 2008 the IASB issued an amendment to IAS 39 Financial Instruments: Recognition and Measurement, applicable after 1 st January 2010; th on 5 March 2009 the IASB issued an amendment to IAS 39 Financial Instruments: Recognition and Measurement, applicable after 1 st January 2010; on 16 th April 2009 the IASB issued certain improvements (not yet approved by the relevant U.E. authority) to the following principles: IFRS 2 Sharebased payments, ruling 1 st January 2010 and applicable in advance; IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations, ruling 1 st January 2010 prospectively; IFRS 8 Operative Segments, ruling 1 st January 2010; IAS 1 Presentation of Financial Statements, ruling 1 st January 2010 and applicable in advance; IAS 7 Statement of Cash Flow, ruling 1 st January 2010; IAS 17 Leases, ruling 1 st January 2010; IAS 36 Impairment of Assets; ruling 1 st January 2010 prospectively; IAS 38 Intangible Assets, ruling 1 st January 2010 prospectively; to be applied in advance in case IFRS 3 revised is applied in advance; IAS 39 Financial Instruments: Recognition and Measurement, ruling 1 st January 2010 prospectively; anticipated implementation allowed. in June 2009 the IASB issued an amendment to IFRS 2 Sharebased payments: group cashsettled sharebased payment transactions; ruling 1 st January 2010 and not yet approved by the relevant U.E. authority; th on 8 October 2009 the IASB issued an amendment to IAS 32 Financial Instruments: Disclosure and Presentation: Classification of Rights Issues; st ruling 1 January 2010 retrospectively and not yet approved by the relevant U.E. authority; on 4 th November 2009 the IASB issued a revised version of IAS 24 Related Party Disclosures; ruling 1 st January 2011 and not yet approved by the relevant U.E. authority; on 12 th November 2009 the IASB issued the principle IFRS 9 Financial Instruments; ruling 1 st January 2013 and not yet approved by the relevant U.E. authority; th on 26 November 2009 the IFRIC issued the interpretation IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments applicable for st accounting periods starting 1 July 2010 and not yet approved by the relevant U.E. authority. Management believes that the effects that could arise from the adoption of the above principles and interpretations won't be significant. 76

78 We finally recall that during the period following interpretations (not relevant for our Group) were issued: IFRIC 9 Reassessment of Embedded Derivatives, ruling 1 st January 2010 prospectively; IFRIC 12 Service Concession Arrangements, ruling 1 st January 2010; IFRIC 14 Prepayments of a Minimum Funding Requirement, ruling 1 st January 2011 and not yet approved by the relevant U.E. authority; IFRIC 17 Distributions of Noncash Assets to Owners, ruling 1 st January 2010 prospectively; IFRIC 18 Transfers of Assets from Customers, ruling 1 st January 2010 prospectively. Balance sheet Balance sheet ASSETS Fixed Assets Tangible fixed assets Vessels This item records the book value of owned vessels deducting the relevant accumulated depreciation, as detailed in the following page. The cost component regarding routine dry docking is stated separately, amortized during the intervening period, until next off hire. This item is also recorded for vessels (other than our own vessels) charteredin under bare boat; it is not recorded, however, for our own units charteredout on bare boat, considering that under this type of contract drydocking is charterer's responsibility. The increases reported refer to the purchase of m/vv. Four Smile and Four Schooner and the completing of conversion works on Four Springs, which started last year. Regarding this last item we notice that about /Mln1.6 of cost sustained during the conversion phase (manning, bunker, lubricants, consumables etc.) were directly capitalized on the vessel. The decreases relate to the sales of m/vv. Four Etoiles, Four Coal and Four Schooner, yearly depreciation and impairment of five vessels. As far as this last item is concerned, due to the declining market condition, the fleet was submitted to impairment test in order to assess the recoverable value and the following adjustments were recorded ( /000): m/v. Framura m/v. Four Island m/v. Four Bay m/v. Four Moon m/v. Four Earth Total 3,892 6,762 5,999 3,862 1,795 22,310 77

79 Antarctica Atlantica Four Four Vanguard Four Schooner Overall total 240,580 (80,237) 160,343 6,165 (1,600) 4, ,908 59, (20,516) (22,922) (1,223) 1,223 (10,737) (2,829) 277,637 (90,974) 186,663 (20,516) 5,392 (3,206) 2, ,333 Framura 42,237 (25,377) 16,860 1,873 1,873 18,733 (1,569) (775) 42,237 (26,946) 15,291 1,098 12,496 (3,893) (3,893) 1,873 (775) Four Island 34,968 (13,328) 21,640 1,223 (978) ,885 (6,762) (1,223) 1,223 (1,600) (245) 34,968 (14,928) 20,040 (6,762) 13,278 Four Bay 45,147 (24,692) 20,455 1,633 1,633 22,088 (5,999) (1,592) (1.031) 45,147 (26,284) 18,863 (5,999) 1,633 (1,031) ,466 Four Smile 37, (1,196) (204) 37,057 (1,196) 35, (204) ,107 Four Earth 12,214 (3,296) 8,918 2,730 (296) 2,434 11,352 (1,795) (1,374) (856) (303) (83) 11,911 (4,670) 7,241 (1,795) 2,647 (1,152) 1,495 6,941 Four Etoiles 14,154 (12,548) 1,606 1,736 (1,212) 524 2,130 (1,606) (1,736) 1,736 (524) (12.548) 46,476 (4,219) 42,257 42,257 (1,628) 46,476 (5,847) 40,629 40,629 46,574 (3,482) 43,092 43,092 (1,634) 46,574 (5,116) 41,458 41,458 Four Aida (228) (228) ,331 60,501 (26,642) 33,859 6,469 (2,425) 4,044 37,903 42,991 (1,795) (19,609) 5,747 (2,465) 2,465 (3,610) (1,865) (303) (83) 83,580 (24,505) 59,075 (1,795) 3,921 (1,825) 2,096 59, ,728 (60,662) 53,066 5,063 (417) 4,646 57,712 (4,384) (396) 113,728 (65,046) 48,682 5,063 (813) 4,250 52,932 Four Moon 25,178 (9,139) 16,039 1,436 (622) ,853 (3,862) (1,518) (574) 25,178 (10,657) 14,521 (3,862) 1,436 (1,196) ,899 Four 22,922 (22,922) Four Coal 18,003 (5,377) 12, (364) ,991 (18,003) 5,747 (729) 729 (370) (365) Four Springs 16,130 (5,421) 10,709 1,274 (553) ,430 19,432 (1,638) (120) 35,562 (7,059) 28,503 1,274 (673) , ,809 (167,541) 247,268 17,697 (4,442) 13, , , (22,311) (42,531) 5,747 (3,688) 3,688 (18,731) (5,090) (303) (83) 474,945 (180,525) 294,420 (22,311) 14,376 (5,844) 8, ,641 Vessel cost Accumulated depreciation Balance at Dry dock component Accumulated depreciation Balance at Net Increases: Vessel Dry dock component Impairment Vessel sale/end of depreciation: vessel cost accumulated depreciation dry dock component accumulated depreciation Depreciation: vessel dry dock component Exchange differences: vessel dry dock component Vessel cost Accumulated depreciation Balance at Impairment at Dry dock component Accumulated depreciation Balance at Net Vessels Tankers subtotal Bulkers subtotal

80 Such impairments affected the oldest vessels, and particularly those operating in the tanker segment, deeply declining in No impairment was deemed necessary for other vessels (newbuildings on order included). Management has considered each single vessel to be the Cash Generating Unit (CGU) to submit (according to IAS 36) to impairment test. In case of sister vessels (vessels which could reasonably be swapped in their commercial commitments) all calculation are effected for the entire group and the results are then attributed to the single units. We point out that if we had considered the entire fleet as a single CGU, no impairment would be necessary, the above amounts being covered by the surplus of other vessels on their book value. The above adjustments aligned the book value of the relevant vessels to their recoverable value, being the higher between the market value ant the value in use, determined by discounting the future cash flows. Vessels' market value has been hardly depressed by several factors, all related to the global economic crisis, as: a) reduction in seaborne trade; b) low freight rates; c) cash shortage for shipowners, forced to sell vessels accepting reduced prices; d) expectations and commercial attitude of potential buyers (cash rich), focused to maximize the benefit of their strong position. In such a scenario, the recoverable value of vessels is today equal to their value in use and this has been determined for each single unit, through a common mathematic model, applying the following criteria: a) the model considers the entire residual useful life of each vessel (min 3.5 years of m/v. Four Earth; max 25 years of m/v. Four Aida); b) income are based on actual contractual commitments. For uncovered positions, management estimates (basically referred to a 5year period, and maintained unchanged onwards) are applied. Such estimates, which are coherent with company plans, were produced through a prudent evaluation of: i) vessels' age, ii) current market rates (both for spot and time/charter employments) iii) last ten years average rates (spot and time/charter). It's worth notice that the heavy fluctuations that characterize shipping activity make any estimate very uncertain, particularly in a short term scenario. A third party fairness opinion on management estimates has been obtained. c) scrap value at the end of useful life is considered, based on yearend prices; d) vessel running costs are based on historical and budget values; averages offhires and drydock planning duly considered; e) average inflation of 1.8% (next 5 years average OECD estimate) considered; f) discount factor 6.8% flows in Dollars converted into Euro at (yearend exchange rate). 79

81 The value in use of the fleet as above determined is related to a period exceeding 5 years for percentages ranging from a minimum of 0% for the Four Earth to a maximum of 69% for the Four Aida (mainly depending on vessel's residual life). The impairment as booked is subject to the following sensitivity: 1) Effect of +0,50% in the discount factor (from 6.8% to 7.3%): m/v. Framura m/v. Four Island m/v. Four Bay m/v. Four Moon m/v. Four Earth Total ,388 In such a case, an impairment of about / on the Four Springs would also be required. 2) Effect of 500 US$/day on estimated income for uncovered periods: m/v. Framura m/v. Four Island m/v. Four Bay m/v. Four Moon m/v. Four Earth Total ,331 3) Effect of + 5 basis point (from to ) in the /$ exchange rate: m/v. Framura m/v. Four Island m/v. Four Bay m/v. Four Moon m/v. Four Earth Total ,665 In such a case, an impairment of about / on the Four Springs would also be required. 4) Effect of 50 US$/ton in scrap price: m/v. Framura m/v. Four Island m/v. Four Bay m/v. Four Moon m/v. Four Earth Total ,735 80

82 The above amounts are to be considered as additional impairments. Change of parameters of equal amount and opposite direction should produce an equivalent reduction in the booked impairment. We point out that the Committee for Internal Control, while checking the right application of Accounting Principles, expressed its agreement to the impairment procedure applied. Management will continue strictly monitoring in the future the fleet recoverable value. Vessels under construction This item records advance installments paid to shipyards and other charges sustained for the new vessels under construction, as detailed below. The increases on HRPR 02 and HRPR 04 mainly come from the transfer to these units of the advances previously paid for the cancelled HRPR 05 and HRPR 06. Such a cancellation produced a loss of about /Mln 1.2 related to all other costs capitalized in the past on the cancelled vessels, charged to profit and loss in Other increases for newbuildings relate to the finalization of H4002 (now Four Aida), one instalment for H4007 and for H4008 and the exchange differences on the book values of all vessels, now denominated in dollar. Other changes relate to the completion of conversion works of Four Springs (which started its activity as bulk carrier early July) and the massive repair and class renewal works on the FPSO Four Rainbow (ex Four Vanguard) which restarted production in the first quarter Breakdown ( /000): as at increases decreases as at handy bulk nr. HRPR02 handy bulk nr. HRPR04 handy bulk nr. HRPR05 handy bulk nr. HRPR06 handy bulk SPP H 4002 handy bulk SPP H 4007 handy bulk SPP H 4008 handy bulk SPP H 4013 handy bulk SPP H 4014 handy bulk SPP H 4017 handy bulk SPP H 4039 handy bulk SPP H 4047 Four Springs conversion Four Rainbow repairs Total 13,331 11,168 5,490 5,490 7,361 4,930 4,930 4,857 4,857 4,857 5,008 5,008 5,221 82,508 4,783 4, ,198 2,029 2, ,211 30,190 74,698 (5,609) (5,573) (23,559) (271) (271) (271) (19,432) (54,986) 18,114 16,054 6,959 6,947 4,586 4,586 4,586 5,099 5,099 30, ,220 81

83 Real estate This item records the cost, less accumulated depreciation, of owned buildings, i.e. the 12th floor and an apartment on the 11 th floor of the building where our Genoa premises are based, as well as archive areas and car parkings. Depreciation is calculated on the basis of a trading life of 33 years. ( /000) Residual value as at Depreciation Residual value as at (54) 738 The office is encumbered by a mortgage registered as security for a mediumterm credit line amounting to /Mln 7.50, of which /Mln 7.00 were drawn as at 31st December Other fixed assets Detailed as follows ( /000): fixtures and furnishings ( *) office equipment other assets (**) motor vehicles total Cost Accumulated depreciation Balance as at ,540 (746) 794 1,445 (1,003) (229) 231 3,445 (1,978) Increases Depreciation for the year 2009 Decreases Other changes Relevant depreciation Balance as at (98) (11) (17) (144) (7) (14) (110) (2) (366) (13) (24) 2 1,631 Summary: Cost Accumulated depreciation Balance as at ,533 (844) 689 1,456 (1,147) (14) (337) 185 3,973 (2,342) 1,631 (*): Improvements on leased office, depreciated over the contract (12 years), are included (**): vessel's cranes depreciated over their estimated useful life (20 years) Participations Associated companies These are represented by our stake in Four Jolly S.p.A. and Premuda Chartering Navegaçao Lda., both jointly controlled with other shareholders. Four Jolly S.p.A. was formed in 2009 and its accounts are issued in accordance with national accounting principles. The participation is recognized in this consolidated annual report based on a reporting package specifically produced for IAS purposes, having the Dollar as functional currency. Summarized Balance Sheet and Profit and Loss of the two companies are enclosed. 82

84 Others companies These consist in minor stakes, with marginal amounts and unchanged yearonyear. Other financial assets They consist of the interestbearing loans ( /000 9,250) to the associated company Premuda Chartering Navegaçao Lda. and other marginal amounts pledged as guarantee c/o Telecom Italia, Enel, etc. This item also includes a nominal Euro 20/Mln investment in financial products issued by Commerzbank (with guaranteed principal refund after 5 years) kept as security for a Credit Line of Euro 30 million granted by Commerzbank itself for the same period, fully described later on. CURRENT ASSETS Inventories Spares, stores and consumables This item refers to fuel, lubricants and paints on board the vessels and spare parts available on 31st December 2009 in the amount of /000 2,970, all accounted for under the FIFO method and taking into account market value ( /000 2,495 as at ). Voyages in progress This item accounts for ongoing voyages at the end of the period, in the amount of / ( / as of ). Trade receivables Clients This item accounts for the net yearend balances of definitely realizable trade receivables, concerning freight, demurrages and others. This amount also includes approximately /000 19,073 due by Eni Australia, of which about /000 11,005 (partly AU$denominated) concerns hire due for past period of suspended production by the FPSO Four Rainbow (ex Four Vanguard), which we have billed on the assumption (substantiated by independent technical expertise instructed by us) that such suspended production was attributable to the Charterer's fault. Negotiations for an amicable settlement of this dispute were useless and we are going to opening a formal litigation aimed at recovering the unpaid amounts. Currently available evidence shows that the Group can lawfully defend its position and, therefore, a partial loss appears today just as a possibility and the quantum of which cannot be determined. Anyhow, in 2009 a provision of /Mln 1.1 (about 10% of disputed amounts) was booked. 83

85 Accrued income and prepayments Accrued income refers, prorata to the financial year, to income not yet booked as at (mainly interest and other income). Prepayments refer prorata to costs already incurred during the financial year, but related to the following year (mainly insurance, rent fees, membership fees and other charges not connected with shipping activities). Other receivables This item refers to yearend balances for shortterm credits: amounts due by insurance companies for damage indemnities, advances to agents, loans to personnel, miscellaneous advances, etc. Credits with insurance underwriters on account of claim indemnities are usually booked on the basis of reasonable expectations of claims settlements, taking into account previous claims, counterparty solvency as known to us, brokers' judgement etc, net of applicable deductibles. As a consequence, the sums that will be actually settled might differ from such estimates. As far as two 2008 claims are concerned (accounted for /000 8,707 as a whole), we point out that in the first part of 2010 one settlement was agreed for a lower amount of / and unexpected problems were argued by the insurers to accept/settle the second. Company believes to be fully entitled to obtain the claimed amount, if necessary through a legal proceeding. Due to the above, a total provision of /Mln 3.1 was accrued in 2009, corresponding to the reduced settlement already agreed plus 50% of the possibly disputed amount. Current financial assets In 2008 they represented the positive fair value evaluation of the financial derivatives implemented to protect the Group from risks generated by fluctuations of exchange and interest rates, as summarized in the table attached. The fair value evaluation for 2009 is negative and represented as liability. Cash and cash equivalents This item represents the yearend balances relating to cash at hand and liquidity with banks. A more detailed analysis of the variation occurred during the year can be found in the Cash Flow Statement. 84

86 LIABILITIES AND SHAREHOLDERS' EQUITY Shareholders Equity Group's objectives for equity management are: a) to generate value for shareholders; b) to protect the Group's continuity and c) to support the Group's development. The Group intends to maintain adequate leverage, allowing a satisfactory return to shareholders as well as easy access to bank finance. Debt/equity ratio and its pattern are constantly monitored, taking into account the available cash flow. Share capital Share Capital, fully subscribed and paidup as at , is unchanged and consists of 140,761,507 common shares and 74,943 savings shares, all of a par value of 0.50 Euro, and for a total value of /000 70,418. Legal reserve It amounts to /000 14,084 (unchanged yearonyear) and presently accounts for one fifth of the Share Capital. Other reserves They cumulatively amount to /000 16,445, also unchanged yearonyear. Retained profit Amounting to /000 94,841, with an increase of /000 1,435 over 2008, they include the overall effect on Net Equity produced by applying the international accounting principles. Profit /(Loss) for the year This item represents the Group's loss for the financial year, equal to /000 19,803, as opposed to a 2008 profit of /000 3,750. We point out that the 2009 loss include non monetary items (impairments and provisions) for more than /Mln Minority interests This is the interest of thirdparty minority shareholders and amounts to / A more detailed analysis of the changes of the consolidated Shareholders' Equity can be found in the relevant statement. 85

87 Long Term Liabilities Bank loans Amounts due to banks are detailed as follows (in '000 Euro): Expiring medium/longterm: Within one year More than one up to five years More than five years Total BNL m/v. Framura Zero Coupon Bond 1, ,135 2, Efibanca: m/vv. Four Island and Four Bay 4,843 10,896 15,739 Unicredit Corporate Banking 17,746 17,746 Banca Popolare di Milano (pool) 11,000 11,000 Commerzbank: m/v. Four Moon m/v. Four Springs 1,391 1,667 3,130 3,333 4,521 5,000 Banca Popolare di Novara m/v. Four Smile 1,055 15,825 17,338 34,218 MPS Capital services 6,964 6,964 Banca IMI Commerzbank: FPSO Four Rainbow 5,000 20,000 12,500 37,500 Fortis Bank: m/v. Four Antarctica m/v. Four Atlantica 1,841 1,842 7,366 7,366 13,349 14,269 22,556 23,477 Unicredit Corporate Banking: hull nr. HR02 e HR04 m/v. Four Aida 649 5,200 2,853 11,613 5,200 15,115 Banca Carige 23,399 6,000 29,399 Commerzbank 30,000 30,000 medium/longterm Subtotal 20, ,213 75, ,553 Overdraft and other 9,560 9,560 Total 29, ,213 75, ,113 It must be noted that values expiring within one year are entered in the financial statements under Current liabilities as Shortterm bank debts. Please also note that debts accounted for under the amortized cost method cause a lower value of / in the amounts effectively due to banks as per amortization plans. 86

88 Details: Banca Nazionale del Lavoro A loan drawn in 2001 and secured by a mortgage on m/v. Framura, for an original amount of US$ 15 Mln and currently Eurodenominated, to be repaid in 40 equal principal instalments, of which the first was repaid on and the last will be due on Interest charges are based on the relevant EURIBOR plus margin. The average rate applied for the year 2009 was 2.58%; for next instalment due on the rate will be 1.61%. Banca Nazionale del Lavoro A 10year loan in the amount of 12,017,952 Euros, drawn on and refundable with a single payment on termination date ( ). The loan is secured by a pledge on 10year Zero Coupon Bond issued by BNL with a corresponding nominal value, and is entered in the Financial Statements net of the present value of the bonds as at yearend. Interest charges are calculated on the 6month EURIBOR plus margin and are payable twice a year. The average rate applied for the year 2009 was 2.91%; for next instalment due in March 2010 the rate will be 1.78%. EFIBANCA (in pool with Banca Carige, Centrobanca and Mediocredito Lombardo) A loan granted in 2000 in the original amount of US$ 48 Mln and currently Eurodenominated, secured by a mortgage registered on the two units Four Island and Four Bay. The loan interest is calculated on EURIBOR for the period plus margin (2009 average rate was 2.66%; 1.70% for the instalment due in January 2010) and is repayable in fortyeight quarterly instalments with increasing principal, of which the first was repaid on and the last will be due on Unicredit Corporate Banking S.p.A. A loan of a maximum amount of Euro/Mln 30, signed on to be repaid for Euro/Mln 7.50 within and the residual within The loan was drawn for an amount of Euro/Mln 10 on , whereas the remaining Euro/Mln 20 falls under a revolving credit line until termination, in use for Euro/Mln 8 at the end of Interest is calculated on 3month EURIBOR. On the fixed amount, the average rate applied in 2009 was 2.84%, for the instalment due in March 2010 the rate will be 1.97%. On the revolving credit line, the rate applied in 2009 was between 1.59% and 2.10%. The loan requires our complying with certain financial covenants (with respect to ratio between the shareholders' equity and residual debt, to ratio between net financial debt and EBITDA and to ratio between net equity and total indebtedness) all of which are currently easily satisfied. The value of the latter ratio and the value of EBITDA can also have an impact on the applied margin. The control of the company by the present shareholders is to be maintained too. 87

89 Commerzbank A loan granted on , secured by a mortgage on m/v. Four Moon for an original amount of US$15 Mln, to be repaid in forty deferred quarterly instalments with constant principal amount quotas, of which the first instalment was repaid on and the last will be due on The loan has been converted into Euro through a special cross currency swap transaction and, therefore, generates interests calculated on the EURIBOR for the period. Starting from October 2008 the floating interest rate has been converted into a fixed one until termination (3.14% spread included). Taking into account the above hedging transaction, the average rate applied in 2009 as well as the rate for the instalment due in January 2010 is 3.14%. Commerzbank (jointly with Banca Mediocredito) A loan granted on , secured by a mortgage on m/v. Four Springs for an original amount of US$ 18 Mln, to be repaid in thirtysix deferred quarterly instalments with constant principal amount quotas, of which the first instalment was repaid on and the last will be due on The loan has been converted into Euro through a special cross currency swap transaction and, therefore, generates an interest calculated on the EURIBOR for the period. Taking into account the above hedging transaction, the average rate applied in 2009 was 4.38%; for the instalment due in March 2010, the rate will be 2.08%. MPS Capital Services A credit line for Euro/Mln 7.50 (or US$equivalent) signed on , available until , to be drawn in one or more tranches, secured by mortgage on the company's office premises. Interest charges are based on the relevant EURIBOR. A commitment fee is due on the available and unused portion. The amount drawn and outstanding at the end of 2009 was Euro/Mln 7.00, the average interest applied was 2.62%. Banca Popolare di Novara (pool with Banco Popolare S.C.) a credit line for US$ 60 Mln, signed on 30th June 2008, to be reduced till the expiring date (last repayment 30 th June 2018). The line was drawn in May 2009 for the reduced amount of US$ Mln to finance the acquisition of m/v. Four Smile. Interests are charged based on the relevant LIBOR. The average rate applied in 2009 was 1.54%; for interest to be paid in March 2010 the rate will be 1.29%. The loan is considered as an Hedge for the expected cash flow (in dollars) generated by the vessels Four Smile and (partially) Four Springs. As a consequence, the exchange difference on the countervalue of the loan at the yearend exchange rate are directly booked in Net Equity. At the end of 2009 this difference amounts to /Mln 2,322. Banca Popolare di Milano (pooled with eight other banks) A credit line for Euro/Mln 20 signed on , available until , to be drawn in one or more tranches. Interest charges are based on the relevant EURIBOR. The credit line substitutes a similar facility of Euro/Mln 26 lead by Banca Nazionale del Lavoro, and is unsecured. At the end of 2009 the amounts drawn totalled Euro/Mln 11.The average interest rate for 2009 was 1.46% (2.45% for the BNL credit line). 88

90 Fortis Bank (jointly with NIBC) Two 10year loans amounting to US$ 42 Mln each, respectively drawn on and concurrently with the deliveries of two new IceClass aframax tankers, repayable in monthly instalments plus a US$ 16 Mln balloon due together with the last instalments in May/November The two loans, secured by mortgage arrangements on the vessels Four Antarctica and Four Atlantica and by the assignment of the two respective bareboat contracts, generate interests calculated on LIBOR for the period. The interest rate have been covered through specific Interest Rate Swap transactions from January 2008 till January 2011 for the loan related to Four Atlantica and from May 2009 till May 2011 for the loan related to Four Antarctica. The above considered, the average interest rate for year 2009 were 4.64% and 2.72% respectively, whilst the rates for next instalments due in January 2010 will be 4.03% and 2.51%. These loans require our complying with certain financial covenants (with respect to a minimum shareholders' equity, ratio between the shareholders' equity and residual debt, and a minimum amount of available liquidity), all of which are currently satisfied. Should such covenants not be fully complied with, the applicable margin will increase and the loantovalue ratio will be restricted. We point out that these US$denominated loans are a partial hedge of the exchange rate risk related to the inflow generated in the same currency by the bare boat contracts for the two vessels ( hedge accounting ). As a consequence, the changes in their countervalue at the end of the year due to Euro/US$ exchange rate fluctuations are directly booked as Shareholder's Equity. This amount for the year 2009 is /000 1,252; the cumulative amount as of the end of 2009 is equal to /000 6,180. Banca IMI (ex Intesa San Paolo) Commerzbank A 10year loan amounting to Euro/Mln 50, drawn on , repayable in 40 quarterly equal instalments, the first of which was duly reimbursed on and the last will be due on The loan, secured by mortgage arrangements on the FPSO Four Rainbow (ex Four Vanguard) and by the assignment of the employment contract, generates interests calculated on the EURIBOR for the period (2.38% the average 2009, 1.42% for the next instalment due in February 2010), with applicable margin depending on the loan to value ratio (that, in any case, is to be lower than 0.8). This loan requires our complying with certain financial covenants (with respect to a minimum shareholders' equity, a minimum amount of available liquidity, a minimum EBITDA to financial charge ratio, a maximum debt to material assets ratio, all of them on consolidated basis). Should such covenants not be fully complied with, the applicable margin will increase and the loantovalue ratio will be restricted to Commerzbank A credit line of Euro/Mln 30 signed on , available until , secured by pledge on financial products issued by Commerzbank itself, amounting to Euro/Mln 20, to be drawn in one or more tranches. Interest charges are based on the relevant EURIBOR. A commitment fee is due on the available and unused portion. The average rate applied in 2009 was 1.99%; for the amounts outstanding at the end of 2009 the average rate is 1.50%. 89

91 Banca Carige A credit line for the amount of Euro/Mln 30 signed at the end of 2008 (to substitute a similar line of an original amount of US$ 28 Mln) to be reduced by Euro/mld 6 per year starting 31st December 2011 (expiring 31st December 2015). The credit line may also be drawn in Dollars and interest charges are based on the relevant LIBOR/EURIBOR (average rate 2009: 2.22% and 2.39% respectively). The line is secured by a guarantee of Premuda S.p.A. and a pledge on 1,800,000 shares of Premuda International S.A.H. A commitment fee is due on the available and unused portion. This loan requires our complying with certain financial covenants (with respect to the ratio between operating result and financial charges, ratio between net debt and net equity and a minimum shareholders' equity, all of them on consolidated basis). Should such covenants not be fully complied with, the applicable margin will increase; if all covenants are not met, the bank may require an anticipated repayment. Unicredit Four loans of max US$ 22 Mln each (or Eurequivalent) to finance four new handy bulk carriers. Due to the cancellation of two Vietnamese contracts (to whom the loans were originally dedicated) two loans were transferred to Four Handy Ltd. to cover two Korean vessels. The first loan was drawn in October concurrently with the delivery of m/v. Four Aida whilst for the second vessel (to be named Four Nabucco) some instalment will be drawn during the construction pahese and the residual on delivery, scheduled at the end of June The loans related to the two residual Vietnamese vessels have already been partially drawn, for a total amount of US$/Mln 7.5 at the end of Each loan is to be repaid in 60 quarterly instalments from the delivery of the relevant vessel. The loans are secured by a Premuda S.p.A. guarantee and by mortgage on the relevant vessel (assignment of refund guarantee during the predelivery phase). Interest charges are based on the relevant LIBOR/EURIBOR (average rate 2009: 2.21% 1.40% for instalment due March 2010). A commitment fee is due on the available and unused portion. Banca Popolare di Sondrio A credit line for Euro/Mln 5 available until March 2010, to be drawn in Euro and/or US$, in one or more tranches. Interest charges are based on the relevant EURIBOR/LIBOR. The credit line is unsecured. At the end of 2009 the line was entirely drawn, with an applicable interest rate of 1.68% (2.65% the average rate 2009). Amounts drawn under the last credit line are represented in the above table as Overdraft and other. 90

92 We point out that at 31st December 2009 the following loans were cancelled: Unicredit Banca d'impresa (in pool with Banca Generali and Banca Popolare di Vicenza) A 5year loan of a maximum amount of Euro/Mln 40, agreed on and to be repaid within The loan was drawn for an amount of Euro/Mln 30 on (concurrent with the repayment of a previous bond loan of equal amount), reduced to Euro/Mln 10 at the end of 2008 end entirely repaid at the end of Interests were calculated on 3month EURIBOR. The average rate applied in 2009 was 2.92%. Commerzbank A loan granted on for an original amount of US$15 Mln, to be repaid in forty deferred quarterly instalments with constant principal amount quotas. The loan, secured by a mortgage on the m/v. Four Coal, was converted into Euro through a special cross currency swap transaction and, starting from January 2009, the floating interest rate has been fixed at 3.38% until termination. The loan (and the related derivatives transactions) were reimbursed upon the sale of the vessel. It should be noted that there is an ongoing interest rate risk related to the above mentioned transactions, covered by financial derivative transactions for a total amount of Euro/Mln 75.80, as per the attached table. Provisions for risks and charges The item registered, equivalent to /000 4,779 on , as opposed to a corresponding value of /000 1,522 on , represents the overall allocations for litigations, third party claims and other liabilities. Particularly, this item includes all provision accrued by Four Vanguard Serviços e Navegaçao Lda. to cover the cost that may arise from the incoming litigation with ENI, the possible loss on insurance recoveries and a potential fiscal litigation regarding the tax depreciation of the FPSO. The fiscal audit covering periods up to 31 st December 2007 has not been concluded yet. Anyway, our fiscal advisor has confirmed the validity of our scheme. The potential liability is, at the moment, not ascertainable and the risk of being condemned is considered low. Provisions for staff severance indemnity This item refers to sums accrued for employees severance indemnities, determined on an actual basis, as previously stated under the Valuation Criteria. 91

93 Current Liabilities Shortterm bank debts This item refers to overdraft facilities, shortterm credit lines and the shortterm quota of medium/longterm loans, as stated in the description of the bank loan detail table previously shown. Derivatives This item refers to the fair value evaluation of the financial derivatives implemented to protect the Group from risks generated by fluctuations of exchange and interest rates, as summarized in the table attached which also reports all information requested by the recently amended version of IFRS 7. Suppliers This item indicates current sums due to various suppliers. The amount is higher than in past years mainly because of a significant part of the works performed on the FPSO Four Rainbow still to be settled in accordance with the agreed payment terms. The above considered, the amount of this exposure reflects the business volume. Balances for the end of the period are stated. Tax liabilities This item amounts to /000 1,044 ( /000 1,193 as at ) and refers to liabilities towards Tax Authorities at the end of the year related to corporate tax on income, personal income tax on employees' wages and salaries (IRPEF), withholding tax for professionals, all due within the following period. Accrued liabilities and deferred income Accrued liabilities relate to costs accrued in 2009, the majority of which is represented by interest charges on loans, by the fourteenthmonth pay for personnel and its related social charges, and by insurance coverage costs. Deferred incomes nearly totally consist of charter hires which have been invoiced in advance. Other payables Cumulatively these amount to /000 4,530 ( /000 4,750 as at end 2008) and mainly consist in miscellaneous payables due to charterers, wages due to workforce, social security, others debts. Commitments and risks As at 31st December 2009, the Group's purchase commitments totalled / ,978, relating to the outstanding instalments due to the Vinashin Vietnamese shipyard and the SPP Korean shipyard for the nine handy bulk carriers ordered. We also point out the purchase commitments of the associated company Premuda Chartering Navegaçao Lda. for / ,074 (our share /000 61,037) relating to the outstanding instalments due to the Samsung Korean shipbuilding yard for three new 92

94 aframax product tanker units. The first vessel was regularly delivered in March 2010 (and immediately transferred to Four Jolly S.p.A.), whilst for the two residual vessels (whose commitments amount to /000 94,058 of which our share is /000 47,029) negotiation are in progress aimed to obtain a postponed delivery. All vessel with expected delivery 2010 have already been financed; negotiations are in progress with several banks in order to cover through long term loans a portion of the shipbuilding cost of vessels to be delivered in the following years. The Group holds purchase options for the three charteredin new bulk carriers Four Shinano, Four Mogami and Four Kitakami, starting from the end of the fifth contractual year (from the end of third contractual year for Four Kitakami). Option prices, deescalating throughout the charter periods, are JYNdenominated. The Group granted purchase options on the vessels Framura and Four Islands to the present charterers. Such options may be exercised in June 2011 at the price of US$ 30 Mln and US$ 35 Mln respectively. The Group granted to the charterers of the vessels Four Atlantica and Four Antarctica options to extend from 8.5 to 10 the respective bareboat contracts; if such extension is exercised, purchase options at the end of year 10 at the price of US$ 36 Mln per vessel shall also become effective. Herebelow the minimum commitments (Euro/000) resulting from longterm charters: Committed amounts within 1 year More than 1 up to 5 years More than 5 years Total Time charterout (income) Bare boatout (income) Time charterin (costs) 75,010 11,103 11,838 75,478 45,119 36,992 16,831 2,141 15, ,319 58,363 64,361 Income statement Before explaining in detail the Income statement items, it must be noted that comparisons with the corresponding period of the year before are not quite homogeneous due to changes occurred in the Fleet composition and vessels' employment (spot or time charter). Income Statement Net revenues Net revenues account for income received from charters, demurrages and ancillary services of vessels used, net of brokerage fees. 93

95 They are detailed as follows ( /000): year 2009 year 2008 variat. % Gross charters of which bare boat of which time charter Demurrages Other income Fees Net revenues 102,847 11,434 82, (1,728) 101, ,849 10,687 73,757 1,539 (4,779) 150,609 (51,002) 747 8,411 (1,173) 424 3,051 (48,700) Voyage costs Voyage costs are charges directly incurred for individual voyages, i.e., amongst others, fuel costs, port disbursements, canal transit tolls, extraordinary insurance (related to contingent risk factor). It must be noted that, under a time charter, these costs are borne by the charterer. Breakdown ( /000): year 2009 year 2008 variat. % Fuel Port costs Others Total 4,280 1, ,325 7,403 2, ,492 (3,123) (186) 142 (3,167) Charter hires This item refers to hire fees paid by Premuda to third parties on account of vessel charters. Running costs This item refers to charges incurred for operating the fleet, such as crew, maintenance, certifications, insurance, lubricants and other costs. It must be noted that, under bareboat charters, these costs are borne by the charterer. Breakdown ( /000): year 2009 year 2008 variat. % Crew Maintenance Insurance Lubricants Other Total 14,915 3,693 3,600 1, ,364 16,955 11,454 4,701 1,207 3,585 37,902 (2,040) (7,761) (1,101) 74 (2,710) (13,538) Profit on vessel s disposal The amount refers to the profit booked through the disposal of the vessels Four Etoiles ( / ), Four Schooner ( /000 2,282) and Four Coal ( /000 6,862) net of cost for cancelling two vietnamese contracts ( /000 1,139). 94

96 Administrative expenses These are costs incurred by the Group's shore facilities, including administrative personnel remuneration and social security costs, as well as overheads, company officers' remuneration and expenses, other operating charges and other costs not directly attributable to the vessels. year 2009 year 2008 variat. % Remuneration Social security costs Employee severance indemnity Other charges Subtotal: Head office personnel 6,240 1, ,905 6,498 1, ,735 (258) (290) (137) (145) (830) Overheads Sundry company expenses Other charges/(income) Total 4,276 2,591 (584) 15,188 5,036 3, ,702 (760) (715) (1,209) (3,514) Other income/costs These are residual amounts of marginal value. Depreciation Depreciation rates applied and criteria used to determine the depreciation concerning the year can be found under the corresponding Balance Sheet items as well as in the valuation criteria section. Financial items These are detailed as follows ( /000): Interest income: Banks Securities Affiliates Other income Income subtotal year ,472 year , ,023 variat. (1,001) (551) % Interest charges: Shortterm to banks Loans Fees and expenses Other charges Charge subtotal (410) (6,597) (660) (1,521) (9,188) (316) (10,206) (310) (763) (11,595) (94) 3,609 (350) (758) 2, Exchange differences Total 960 (6,756) (2,180) (11,752) 3,140 4,

97 Financial revenues and charges are both reduced in comparison with previous year due to the rebate in interest rates, partially balanced by an increased exposure and by higher spread applicable on new loans. The exchange differences stay positive also because of the effect of the conversion of receivables and debits (denominated in other currencies) at the endofyear exchange rate. Profit/loss from associated companies These indicate the impact of the net equity valuation of the affiliate companies Four Jolly S.p.A. and Premuda Chartering Navegaçao Lda. Tax on profit This item accounts for taxes relating to the period, detailed as follows ( /000): year 2009 year 2008 variat. % Current Total (41) (41) Because of the introduction of a new taxation method under the socalled tonnage tax regime for the Parent Company, the amount of prepaid/deferred taxes to be entered in the financial statements is very low. Net result This is the consolidated profit (loss) for the period, gross and net of minority interests. Segment information Segment information Premuda Group mainly operates with owned or chartered vessels in 3 business sectors: Oil and derivative products (tanker sector); Transport of bulk dry loads (bulk sector); Oil offshore (FPSO) sector. The following table contains the Profit & Loss Statement for the year 2009, divided by business sector. 96

98 tanker bulk FPSO individed total Net revenues Voyage costs TimeCharter revenues 45,106 (5,153) 39,953 32,959 (1,074) 31,885 23,420 (98) 23, ,909 (6,325) 95,584 Charter hire Running costs Fleet margin Profit on vessel sales Administrative expenses Depreciation Impairment of assets Operating result (5,192) (10,673) 24,088 2,282 (13,566) (20,515) (7,711) (19,917) (4,345) 7,623 6,081 (5,609) (1,795) 6,300 (9,346) 13,976 (4,533) (4,780) 4, (15,655) (285) (15,516) (25,109) (24,364) 46,111 8,363 (20,188) (24,240) (22,310) (12,264) Financial items Profit/(loss) from associated companies Result before tax (6,756) (258) (19,278) Tax on profit Net result (530) (19,808) Minority interest Group s net result (5) (19,803) The subdivision of the Fleet and of the Net Financial Indebtedness by business sector is also reported ( /000). tanker bulk FPSO undivided totale Fleet Net financial Indebtedness 168,333 (103,161) 59,376 (25,315) 52,932 (37,500) (60,783) 280,641 (226,759) No geographical subdivision has been detailed, taking into consideration that our vessels operate in global markets and the operation of individual units is not limited to certain areas, with the exception of the FPSO Four Vanguard, which is permanently deployed in Australia under a longterm contract. Consolidated Cash Flow Statement The CashFlow Statement has been drawn up following the indirect method. Consolidated Cash Flow Statement The operating activity generated a liquidity of /Mln 33.90, of which /Mln 6.10 coming from the decrease in working capital. The investment activity absorbed cash resources of /Mln due to the progress of new buildings plan, the vessels acquired, all of them net of vessel's disposals. The financial activity produced cash resources in the amount of /Mln 66.70, mainly due to the newlycontracted loans, net of the repayment dynamic of all medium/longterm loans and the distribution of dividends. 97

99 Financial position Financial Position The financial position, already detailed and illustrated in its components, is summarized (in '000 Euros) in the following table; at the end of 2009 the net financial exposure was /Mln ( /Mln at the end of 2008) with a cash availability of /Mln Financial Position Cash Other liquid assets Total liquid assets Shortterm bank debt Shortterm portion of longterm debt Other shortterm debt Total shortterm debt Shortterm net debt at ,692 16,019 (9,560) (20,270) (957) (30,787) (14,768) at ,856 13,036 (1,300) (35,526) (929) (37,755) (24,719) Longterm financial investments Loan granted to associated companies Total longterm financial assets Longterm bank debt Longterm debt Longterm net debt Total net borrowing 20,042 9,250 29,292 (241,283) (241,283) (211,991) (226,759) 20,042 11,846 31,888 (167,291) (167,291) (135,403) (160,122) RelatedParties Transactions RelatedParties Transactions The Directors, the General Managers and the Department Managers declare when certain transactions are effected with Premuda S.p.A. or with Grouprelated companies, even via third parties, or by individuals connected to such companies, in accordance with IAS 24. On th basis of available information no unusual transactions with related parties, as thus defined by Consob, have been effected. Dealings with related parties, in significant amounts, are listed in an appendix, including supplementary sheets as per the Consob resolution no of 27 thjuly

100 Annex 1: Reconciliation between Net Equity and Net Profit for Premuda S.p.A. and Net Equity and Net Profit on consolidated basis (Euro/000) Amounts as at 31st December 2009 as per Premuda S.p.A. Balance Sheet Net Equity 97,765 Net Profit (20,754) Adjustments for consolidation purposes: Equity and Profit of controlled and associated companies exceeding the book value of the related participations Effect generated by the cancellation of intercompany transactions (net of tax) 81,413 (3,193) (1,437) 2,388 Group's interest 175,985 (19,803) Minority interests 51 (5) Total consolidated 176,036 (19,808) 99

101 Annex 2: Transactions with related parties (Euro/000) Commercial activity with related parties Receivables Liabilities Cost Income Assicurazioni Generali S.p.A. (shareholders of the controlling company Investimenti Marittimi S.p.A.) 521 1,998 1,858 Financial activity with associated parties Premuda Chartering Navegaçao Lda Four Jolly S.p.A. 9, Commercial activity with associated parties Premuda Chartering Navegaçao Lda Four Jolly S.p.A Above amounts derive from the following transactions, all of which concern normal business activity, arranged at ordinary market terms and conditions, i.e. conditions that would apply between unrelated parties: insurance cover issued by Assicurazioni Generali S.p.A.; providing administrative services, granting loans and issuing guarantees to the associated company Premuda Chartering Navegaçao Lda. and Four Jolly S.p.A. The summarized financial statements highlighting transactions with related parties are reported in the following pages. 100

102 Summary Consolidated Balance Sheet as at 31st December 2009 with separate evidence of transactions involving related parties (Euro/000) ASSETS Fixed Assets Tangible fixed assets of which: Fleet of which: Fleet under construction Participations Other fixed assets Total fixed assets at , , ,220 15,583 29, ,212 of which with related parties 15,579 9,250 24,829 Current Assets Inventories, credits and other current assets Cash and cash equivalents Total current assets TOTAL ASSETS 42,692 16,020 58, , ,524 LIABILITIES AND SHAREHOLDERS EQUITY at of which with related parties Shareholders equity Share capital Reserved and retained profit Profit of the year Group Shareholders equity Minority interests 70, ,370 (19,803) 17, Longterm liabilities Bank loan Provisions and other longterm liabilities Total longterm liabilities 241,283 5, ,872 Current liabilities Shortterm bank debt Other current liabilities Total current liabilities Total liabilities 29,830 36,186 66, ,888 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 488,

103 Summary Consolidated Income Statement as at 31st December 2009 with separate evidence of transactions involving related parties (Euro/000) year 2009 of which with related parties Net revenues Voyage costs Timecharter revenues Charter hire and running costs Fleet margin Profit on vessel sales Administrative expenses and other income/(costs) Depreciation Impairment of assets Operating result Financial items Profit/(loss) from associated companies Result before tax Tax on profit Minority interest Group's net result 101,909 (6,325) 95,584 (49,473) 46,111 8,363 (20,188) (24,239) (22,311) (12,264) (6,756) (258) (19,278) (530) (5) (19,803) 233 (375) (142) (90)

104 Annex 3: Derivative instruments (Euro/000) Type Notional amount at Fair Value Expiring date 1) Interest Rate Swap 2) Interest Rate Swap 3) Interest Rate Swap 4) Cap 5) Cap 23,477 22,709 4,536 10,412 15,000 (619) (241) (36) (41) (21) ,134 (958) All above derivative transactions have been arranged for hedging purposes and booked at their fair value at the end of the year. The changes in their fair value are, however, charged to Profit & Loss when the hedge proves to be inefficient or in case of noncompliance with certain formal requirements, precondition to apply the hedge accounting system according to IAS 39. The table does not include two crosscurrency swap transactions covering as many longterm loans, because these are recognized at their historical exchange rates. In any case, a separate representation of such transactions would not have any effect on either profit & loss or net equity. All above derivative transactions are classified (according to IFRS 7) of level 2; their fair value are determined following generally accepted rules (discounted cash flow) based on publically available data (LIBOR rate for transactions 124 and EURIBOR rate for transactions 35 and related swap rates) and applying calculation instruments very common in the financial market. 103

105 Annex 4: Related Companies Financial Data (Euro/000) Premuda Chartering Navegaçao Lda. Balance Sheet Fixed Assets Vessel under construction Other fixed assets Total Fixed Assets Current Assets Total assets at at , , ,845 24, , ,612 Shareholders Equity Current Liabilities Shareholders loan Other current liabilities Total Current Liabilities Total Equity and Liabilities , ,275 33, , ,515 24,612 Profit and loss account year 2009 year 2008 Voyage costs Profit on vessel sales General expenses and other cost/income Financial items Net result (59) 845 (72) (241) 473 (38) (2) (40) Our participation as of : 50% 104

106 Annex 4: Related Companies Financial Data (Euro/000) Four Jolly S.p.A. Balance Sheet Fixed Assets Vessel Vessel under construction Other fixed assets Total Fixed Assets Current Assets Total assets Net Equity Long Term Liabilities Debts to Shareholders Other current liabilities Total Current Liabilities Total Equity and Liabilities at ,377 14, ,310 1,872 70,182 27,775 40, ,298 2,357 70,182 Profit and loss account Net revenue Voyage costs Time charter revenues Charter hire and running costs Fleet margin Administrative expenses and other costs Depreciation Operating profit Financial items Profit before tax Tax on profit Net result year ,714 (39) 1,675 (854) 821 (52) (963) (194) (31) (225) (225) Our participation as of : 50% 105

107 Premuda Annual Report 2009 design & layout: Aldo Scorzoni photos: pages 4, 6, 8, Premuda s archive For the photo at page 12 thanks to San Juan Navigation LLC