Annual Report2006 - Motor Oil Hellas€¦ · · 2011-12-19All information and data contained in the Annual Report are complete, true, ... the consolidated financial statements include

Annual Report

2006

CORINTH REFINERIES S.A.

Table of contents

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Table of contents

1 INFORMATION CONCERNING THIS ANNUAL REPORT AND THE COMPANY AUDITORS............................6

2 SHAREHOLDERS’ RIGHTS ............................................................................................................................8

2.1 General Information ....................................................................................................................................8

2.2 Dividend Taxation ......................................................................................................................................9

3 MARKET INFORMATION AND STRUCTURE ................................................................................................10

3.1 Structure of the Oil Refining Market in Greece ............................................................................................10

3.2 Regulatory Framework ..............................................................................................................................11

3.3 Recent Developments in the International Oil Market..................................................................................13

4 COMPANY PROFILE ......................................................................................................................................14

4.1 General Information ..................................................................................................................................14

4.2 Background ..............................................................................................................................................16

4.3 Company Activity - Fixed Assets..................................................................................................................17

4.4 Sales & Distribution Network – Customer Service ........................................................................................18

4.5 Share Capital – Shareholder Structure ........................................................................................................18

4.6 Company Administration & Management ..................................................................................................19

4.7 Organization Chart ..................................................................................................................................20

4.8 Personnel ..................................................................................................................................................21

4.9 2004 – 2006 Capital Expenditure ..............................................................................................................22

4.10 MOTOR OIL and Society..........................................................................................................................24

5 PERFORMANCE REVIEW ............................................................................................................................27

5.1 Company Activities ....................................................................................................................................27

5.2 Company Turnover and Earnings Review 2004 – 2006 ................................................................................30

5.3 Company Balance Sheet Statements Review 2004 – 2006 ............................................................................34

5.4 Company Key Financial Ratios ..................................................................................................................38

5.5 Company Cash Flow Statements ................................................................................................................39

5.6 Share Performance ....................................................................................................................................40

5.7 Consolidated Financial Statements ............................................................................................................41

6 AFFILIATED COMPANIES..............................................................................................................................48

6.1 Subsidiaries ..............................................................................................................................................48

6.2 Companies included in the Consolidated Financial Statements ..................................................................49

6.3 Related Companies ..................................................................................................................................50

6.4 Other Subsitiaries ......................................................................................................................................51

6.5 BoD Report on Inter-company Transactions according to Corporate Governance Law 3016/2002 ..............52

7 FUTURE PROSPECTS ....................................................................................................................................53

7.1 Goals & Strategy ........................................................................................................................................53

7.2 Prospects ..................................................................................................................................................54

8 DIVIDEND POLICY........................................................................................................................................56

9 APPENDIX ....................................................................................................................................................57

Invitation to the Annual General Meeting of May 30th, 2007 ............................................................................59

MOTOR OIL 2006 Published Figures and Information (Parent Company and Consolidated) ..............................60

MOTOR OIL 2006 Financial Statements (Parent Company and Consolidated) – Report of the Auditors ............62

Directors Report on MOTOR OIL 2006 (Parent Company and Consolidated) Financial Statements..................103

Information Bulletin compiled in accordance with the Law 3401/2005 ............................................................116

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1. Information concerning this annual report andthe company auditors

This Annual Report contains all the information and financial data needed for a proper assessment of the assets, theactivities, the financial position, the profitability and the prospects of the Company "MOTOR OIL (HELLAS) CORINTHREFINERIES S.A" (henceforth called the "Company" or "MOTOR OIL"), on the part of the investors and their investmentconsultants.

Investors interested in additional information may inquire during working days and hours with Messrs. Spyros Balezos(Investor Relations Officer), Philip Malergos (Financial Controller) and Ioannis Dimakis (Corporate AnnouncementsOff icer and Shareholders’ Off ice Head) at the Company Headquarters, 12A Irodou Attikou str., Maroussi 151 24,(tel.:++ 30 210 8094194).

This Annual Report was compiled and distributed in accordance with the Hellenic Capital Market Commission decision7/372/15.02.2006 as it is in force.

The following persons are responsible for the preparation of this Annual Report and the accuracy of the data containedherein:

■ Petros Tzannetakis, Deputy Managing Director – Chief Financial Officer, 12A Irodou Attikou str., Maroussi 151 24,(tel. ++ 30 210 8094162)

■ Spyros Balezos, Investor Relations Officer - Banking and Investments Manager, 12A Irodou Attikou str., Maroussi 15124, (tel. ++ 30 210 8094169).

The Company Board of Directors declares that all its Members have reviewed the content of this Annual Report and jointlywith its authors confirm that:

■ All information and data contained in the Annual Report are complete, true, correct and accurate.

■ There are no other data, neither have any events occurred, the concealment or omission of which might render thetotality or part of the data and information contained in this Annual Report misleading.

■ There are no legal disputes pending against the Company or the companies in which the Company has a controllinginterest that might have serious consequences on its financial position.

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MOTOR OIL FINANCIAL STATEMENTS (PARENT COMPANY AND CONSOLIDATED), CERTIFIED PUBLICACCOUNTANTS, TAX AUDIT.

The Company is audited by Certif ied Public Accountants. The regular audit of the yearly f inancial statements (ParentCompany and Consolidated) of the Company for 2004, 2005 and 2006 was carried out by the Auditing Firm DELOITTE,250-254 Kifissias Avenue, Chalandri, tel. ++ 30 210 6781100 (Certified Public Accountant in charge Mr. George CambanisReg. No. ICPA (GR) 10761). The Auditor’s Report for the 2006 yearly financial statements of the Company is with unqualifiedopinion with the exception of a matter of emphasis concerning note no. 30, relating to the current tax position of theCompany and of the Group relating to its fiscal years not yet audited by the Tax authorities, which has as follows: "TheCompany has not been subject to a tax audit for the years from 2005 up to 2006. "AVIN OIL S.A.", has not been subjectto a tax audit for the years from 2003 up to 2006, "OLYMPIC FUEL COMPANY S.A." has not been subject to a tax auditfor the years from 2001 up to 2006 while "HAFCO S.A." has not been audited by the tax authorities since its establishment."The outcome of the tax audits cannot be estimated at present and, consequently, no provision has been made in thefinancial statements in relation to this issue.

Apart from the parent Company "MOTOR OIL (HELLAS) S.A.", the consolidated financial statements include the whollyowned subsidiary "AVIN OIL S.A." with the "full consolidation" method, the "OLYMPIC FUEL COMPANY S.A." with the"net equity" method (direct and indirect participation 28%) and "HAFCO S.A." also with the "net equity method" (indirectparticipation 50%).

It is clarified that at the time of the preparation of the consolidated financial statements of the Company of the fiscal year2006 no audited f inancial statements were available for "OLYMPIC FUEL COMPANY S.A." and "HAFCO S.A.". Thecontribution of the earnings of these two companies in the consolidated earnings after tax and after minorities of "MOTOROIL S.A." for the fiscal year 2006 amounts to 0.10%.

All three companies included in the consolidated financial statements of MOTOR OIL are audited by Certif ied PublicAccountants (Chapter 6 of this Annual Report).

It is clarif ied that since MOTOR OIL prepared its f inancial statements in accordance with the International FinancialReporting Standards (IFRS) for the first time in 2005, the figures and information of the three fiscal years 2004, 2005and 2006 presented in Chapter 5 "Performance Review" are directly comparable. In addition, in the same Chapter theEarnings Per Share (EPS) figures (Parent Company and Consolidated) are presented based on the number of shares atyear end as well as on the weighted number of shares according to IAS no. 33 "EPS".

The published figures and information for the fiscal year 2006, the Financial Statements for the fiscal year 2006, the Reportof the Auditor as well as the Reports of the Board of Directors are presented in the Appendix of this Annual Report. Thefinancial figures and information along with the interim financial statements as of 31.3.2006, 30.6.2006 (audited) and30.9.2006, are available at the Company’s site at the electronic address www.moh.gr.

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2. Shareholders’ rights

2.1. General

The last cash share capital increase of the Company was effected in the context of its listing on the Athens Stock Exchange(ASE) in 2001 with the issue of 5,275,380 new common registered shares through an Initial Public Offering at the priceof ª 10.30 per share. In addition, based on the December 19th, 2001 decision of the General Assembly of CompanyShareholders and ruling K2-17690/14.1.2002 of the Ministry of Development the nominal value of its shares increased toª 0.30 each. As a result, the Company’s Share Capital today amounts to ª 33,234,894 divided into 110,782,980 commonregistered shares.

Every Company share incorporates all the rights and obligations specified by Codified Law 2190/1920 and the CompanyCodified Memorandum and Articles of Association. Possession of a Company Share automatically denotes acceptance,on the part of its owner, of the Company Codified Memorandum and Articles of Association and of the lawful decisionsof the General Assembly.

Company shares do not incorporate any special privileges of any sort and the Company has not issued any ownershipstock or shares participating in earnings, neither any common or preferred founders’ shares.

Shareholder responsibility is limited to the nominal value of the shares they own. Each share entitles its owner to a righton the Company’s property and proportionate participation in Company’s earnings in accordance with the Law and theCompany Codified Memorandum and Articles of Association. The rights and obligations that accompany each share aretransferred to every universal or special shareholder successor.

Shareholders exercise their rights in relation to Company management only through the General Assemblies.

Shareholders have a right in every future share capital increase of the Company, proportionally to their shareholding priorto the increase, as prescribed by article 13, paragraph 5 of Codified Law 2190/1920.

Creditors of a shareholder and their successors may in no way cause the confiscation or placement of any restriction onthe use or disposal of any Company asset or of Company accounting Ledgers, neither may they demand its distributionor its liquidation, nor may they in any way interfere in its administration or management.

Every shareholder regardless of his/her actual place of residence, is considered having his legal address at the Company’sheadquarters and is subject to Greek Law with respect to his/her relations to the Company. Any difference or disputebetween the Company on the one hand and its shareholders or any third party on the other belongs to the exclusivejurisdiction of the regular courts, while the Company may be sued only before the courts of its domicile.

Every share is indivisible and entitles its owner to the right of one vote. Joint owners of common shares must appoint inwriting to the Company their representative who will represent them at the General Assembly of Company Shareholders.In case no common representative is appointed, the rights of joint owners of shares cannot be exercised at a GeneralAssembly.

Every shareholder has the right to participate in a General Assembly either in person or through a fully authorizedrepresentative. In order to be able to participate in an Extraordinary or Ordinary General Assembly, a shareholder mustblock his/her shares with the Securities Dematerialization System (SAT) or the Athens Exchanges S.A (previously CentralSecurities Depository - CSD) at least five (5) days prior to the date set for the General Assembly. Within the same deadlinethe Company must receive certification of this blocking placed on the shares as well as representation documentation inreturn for a receipt that is given to the shareholder or representative for his/her admission to the General Assembly. Thosewho fail to comply with these terms can only be admitted to the General Assembly by permission of the latter.

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Company Shareholders representing at least 5% of paid up Share Capital:

a. Have the right to submit petition to the First Instance Court of the Company’s domicile to conduct an audit of theCompany in accordance with articles 40, 40e of Codified Law 2190/1920, and

b. May ask the convention of General Assembly of Company Shareholders. The Board of Directors is obliged to convenethe Meeting no later than thirty (30) days from the day the relevant petition is submitted to the Chairman of the Boardof Directors. On their petition, the petitioning shareholders have to state an agenda with the issues on which theGeneral Assembly will have to decide.

Every shareholder may request, ten (10) days prior to the Ordinary General Assembly, copies of the yearly f inancialstatements as well as of the relevant reports of the Board of Directors and of the Auditors.

Shareholders entitled to dividend are the ones who appear on the Shareholders’ Registry, which is kept by the Company,on the date the yearly financial statements are approved by the Ordinary General Assembly or on whichever date specifiedby the Ordinary General Assembly.

The first day of payment of the dividend is within two (2) months following the date of the Ordinary General Assemblythat approved the yearly financial statements. The place and method of payment is acknowledged to the shareholdersthrough announcements on the daily press.

Dividends not collected five years since they became payable are written off in favor of the State.

All procedural matters regarding share blocking, so that shareholders may participate in General Assemblies, and dividendpayment are provided for by the Regulation of Operation and Clearance of the Securities Dematerialization System of theAthens Exchanges S.A. (previously Central Securities Depository) as this Regulation is in force.

2.2 Dividend taxation

Under Greek Corporate Law (Law 3296/2004 article 6 paragraph 4), as it is in force, the income tax rate for companieslisted on the Athens Stock Exchange (ASE), with the exemption of banks, is 29% for the fiscal year 1.1.2006 – 31.12.2006and is applied on taxable earnings prior to any appropriation. In this way, dividends are paid out from already taxedcorporate earnings and, therefore, the shareholder has no further tax obligation on the dividend amount he collects.

The date on which the General Assembly approves the yearly Financial Statements is regarded as the one that dividendincome is generated.

It must be noted that, under Greek Corporate Law, in case a subsidiary proceeds with a dividend distribution from itsearnings, the portion of the dividend attributable to the parent company can only be distributed by the latter to itsshareholders during the next fiscal year (unless the parent company decides to distribute an interim dividend during thecurrent fiscal year) and, consequently, this portion of dividend is recorded as income on next fiscal year’ s earnings of theparent company.

That part of parent company earnings accounted for as dividend income received by its subsidiaries can only be distributedto parent company shareholders in the next fiscal year following its collection.

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3. Market information and structure

3.1 Structure of the Oil Refining Market in Greece

3.1.1. General

Production of crude oil in Greece is extremely limited. The Prinos reserves at Kavala meet less than 1% of domestic demandand consequently nearly all of the country’s needs in crude oil is met by imports. Once processed in domestic refiningunits, crude oil is exported or sold in the domestic market.

The structure of the domestic oil market is shown in the following chart:

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OIL REFINING COMPANIES

CRUDE

OIL

PRODUCT

IMPORTS

REFINING FUEL TRADING END CONSUMER

– MOTOR OIL– HELLENIC PETROLEUM

– BIG END CUSTOMERS– ARMED FORCES

– Aviation Fuels– Bunkering Fuels

FUEL TRADING COMPANIES

EXPORTS

INTERNATIONAL SALES

– Gas Stations– Other Retail Sales

– Industrial Sales

DOMESTIC MARKET

Gas Stations

EKO - ELDABP

SHELLAVIN

OTHERS

3.2. Regulatory Framework

3.2.1 General

Fuel production and distribution in Greece takes place within a peculiar regulatory framework. Until the mid-eighties therewas heavy state intervention. The Greek government set the pricing policy and ruled that petroleum product commercialenterprises could only get their supplies from the two state-owned refineries. Gradually the market was liberalized completelyand at present its operation is regulated by the Law 3054/2002 as it has been amended and completed by Law 3335/2005.According to the regulatory framework a legal entity may obtain more than one license of oil refining, fuel trading, retailsales activities / gas station operation etc. and perform these kinds of activities on condition that the licensee fulfills therequirements, as these are set by the law, for each separate activity.

3.2.2. Oil Refining

The relevant regulatory framework allows oil refining companies to import freely and process crude oil and petroleumproducts from any country on condition that they pay taxes in harmonisation to European Union directives relating toimports from non European Union Member States.

3.2.3. Fuel Trading

For the Ministry of Development to grant an operating license to a Company, engaged in fuel trading, the latter must fulfillthe following requirements: a) the Company share capital must exceed a preset limit, b) the Company must possess its ownstorage premises or must be entitled to the usage of storage premises the storage capacity of which is dependent upon thetype of license the Company has applied for, c) the Company’ s technical installations must be suitable for the safe transportand distribution of the products, and d) the Company must possess a tank truck fleet with a minimum number of vehicles.The Law enforces restrictions regarding the usage of tank trucks and of the vessels which carry oil products from refineries.

Companies engaged in fuel trading may obtain finished products either from domestic refineries or through imports fromany country under the sole condition that they pay taxes in harmonization to European Union directives relating to importsfrom non EU Member States. According to the Law 3054 / 2002, as it has been amended and completed by Law 3335/2005,these companies may operate gas stations and have the right to be owners of land and gas station equipment. In addition,"independent" gas station owners may get their supplies directly from the refineries and/or through imports as well asfrom companies engaging in fuel trading.

3.2.4. Mandatory Reserves

According to the Law 3054/2002, as it has been amended and completed by Law 3335/2005, the importers of crude oiland petroleum products either domestic refineries, or companies engaged in fuel trading, or gas station owners, are obliged,as provided for by the relevant European Union directives, to maintain mandatory reserves equal to 90/365 of the previouscalendar year’s net imports as a means to meet the domestic needs in periods of crises relating to the supply of fuel andthe country’ s obligations in the context of its international responsibilities. Compliance with the law calling for maintenanceof mandatory reserves results in Greek refineries adding a mark up when selling their products in the domestic market tocompensate for the additional cost of storage.

3.2.5. Pricing

Consumer prices of petroleum products are fully liberalised and determined by the fuel trading companies and gas stationowners according to the type of services they offer and based on supply and demand prevailing conditions. For reasonsrelating to the protection of the consumers, refineries notify to the Ministry of Development the method they follow indetermining the ex factory price, while companies engaged in petroleum product commerce notify the actual selling pricesat which they supply the gas stations. The government has kept the right to impose price ceilings on a local or national level.

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3.2.6. Taxes

Law 2127/93 and Law 1642/86, as amended on January 1st, 1993, as well as Law 3336/2005 (in the context of theharmonization with the European Union Directive 2003/96/EU) which amended and completed the Law 2690/2001 dealwith all issues relating to Excise Tax and VAT on fuels.

3.2.7. Allocation of the greenhouse gas emission allowances

Aiming at the reinforcement of the global endeavor to confront the danger of climate change, the Kyoto Protocol wasofficially put in force two years ago, defining legally binding objectives for the reduction of the greenhouse gas emissionsin the developed countries. In the framework of the accomplishment of the objectives of the Protocol, the EuropeanCommission adopted the Directive 2003/87/EC, according to which, an Emission Trading Scheme (E.T.S) was established.The Directive calls on the Member States to submit comprehensive national allocation plans for the greenhouse gas emissionallowances to the various activities covered by the Directive, and therefore to the relevant installations. The EmissionTrading Scheme applies mainly to large scale combustion installations (most of which belong to the sectors of PowerGeneration, Oil Refining and Cement Production) with the objective for them to adopt the best practices energy wise asa means to reduce CO2 emissions.

Hence, during the first phase of the implementation of the Emission Trading Scheme (2005-2007) MOTOR OIL (HELLAS)S.A. was allocated with gas emission rights both for its existing and already operating units as well as for its units in theconstruction phase. The second phase of the Emission Trading Scheme (2008–2012) is currently under development andmost of the National Allocation Plans have already been prepared and submitted for approval by the European Commission.

3.2.8. Product Specifications

The specifications regarding oil products heading for the domestic market are defined in the Law 549/70 and its consequentministerial decrees. Product testing regarding specif ications fulf ilment is carried out by the State General ChemicalLaboratory. In the context of the European Union’s environmental protection policy, new specifications on sulfur contentas well as other properties for gasoline and automotive diesel were established (Directive 98/70/EC as amended with2003/17/EC), which are described in the table below. The implementation of the new specifications will take place intwo stages, in years 2005 and 2009, while it should be noted that both types of fuel (50 and 10 ppm) must be availableduring the intervening time. The policy of the European Commission for fuels with "zero" (10 ppm) content of sulfurset the foundation for investing in desulfurization units, such as the Hydrocracking complex of MOTOR OIL which is inoperation since 2005 producing fuels of the most advanced 2009 specifications, already facing strong demand comingfrom the European market.

NEW SPECIFICATIONS (FOR GASOLINE & AUTOMOTIVE DIESEL)Effective from

1/1/2005 1/1/2009 Unleaded Gasoline Sulfur content (ppm) 50 max 1 10 max Aromatics (% vol.) 35 max 35 maxOlefins (% vol. ) 18 max 18 maxBenzene (% vol.) 1 max 1 maxOxygenates (% vol.) 2.7 max 2.7 maxAutomotive Diesel Density at 15oC (kg/l) 0.845 max 0.845 maxSulfur content (ppm) 50 max 1 10 max Cetane number 51 min 51 minPolyaromatics (% wt) 11 max 11 maxDistillation at 95% vol. (oC) 360 max 360 max

1 As of January 1st, 2005, each European Union Member State must gradually make available gasoline and automotive diesel witha maximum 10mg/kg sulfur content.


One of the most significant issues expected to influence future specifications of the products with particular reference tothe transportation fuels is the introduction of BioFuels, namely, BioDiesel and BioEthanol, in the final product mix.

The European Commission directive 2003/30/EC has set an ambitious target for a market share of BioFuels equal to 5.75%of the transportation fuel market by the year 2010. This target is not easy to be met and huge efforts have been madeintermingling all parameters capable to encourage bigger contribution of BioFuels. The Commission has already suggestedthe amendment of the directives regarding the quality of the transportation fuels and the promotion of the BioFuels inthe framework of the wider energy plan of the European Union.

3.3. Recent Developments in the International Oil Market

The world economy exhibited a mixed pattern in 2006. The Asian markets kept growing maintaining the momentum ofthe recent years while the U.S. economy appeared more sluggish even though in the last quarter of 2006 it demonstratedsigns of revival as a result of increased consumer spending and finally, the economies of the European countries remainedreasonably stable.

World demand for petroleum products increased modestly in 2006 (demand grew by 0.7 million barrels per day -bpd-which is quite lower compared to the growth of demand in recent years). The markets mostly accountable for this increaseof demand were those of China and the region of Middle East.

Nearly all demand increase mentioned above was met by non-OPEC production with Former Soviet Union, Africa andCanada being the primary producers. Following a decision of the Organization taken in November 2006, OPEC productiondropped by 1.2 million bpd causing tight conditions in the crude oil market. The Organization has agreed on a furtherproduction cut during 2007 by 500,000 bpd.

Oil prices remained highly volatile throughout 2006. During the first 8 months of the year prices of crude rose steadily tohigh levels (in the beginning of August Brent reached its all-time high of 78.69 US / bbl) on the back of geopolitical tensionsworldwide (Nigeria, Iraq, Lebanon) and concerns about the nuclear programs of Iraq and North Korea. Nevertheless, asthe previously mentioned worries eased and mild weather conditions prevailed in northern Europe and northeastern U.S.following the end of the driving season - a fact which led to weak demand for heating diesel and utility heavy fuel oil - agradual normalization of the prices of crude occurred till the end of 2006. At the same time, comfortable crude stocklevels also contributed to the price slide.

The prices of petroleum products followed the pattern of the prices of crude during the year. Price fluctuations were evidentin gasolines (effect of the substitution of methanol by ethanol in the U.S.), automotive gasoil (enforcement of newspecifications calling for lower sulfur content - 15 ppm - effective since June 2006 in the U.S.) and, during the first quarterof the year, fuel oil (directive applicable up to March 2006 in Italy ordering power generators to switch to fuel oil in orderto conserve natural gas).

The international refining margins moved in tandem with the general trend of the market demonstrating an upward patternin the period from the beginning of 2006 until August while exhibiting correction signs in the subsequent period till theend of the year.



4. Company profile

4.1. General Information

MOTOR OIL is one of the most important industrial companies in Greece in the oil sector.

In 2002 the Company acquired 100% of "AVIN OIL S.A." (henceforth called "AVIN OIL"), which ranks 4th amongst thefuel trading companies in the domestic market, thus obtaining a strong arm in retail sales.

MOTOR OIL is the only refining company that possesses a lubricants complex and together with Hellenic Petroleum’sAspropyrgos refinery, are the only complex oil refineries in Greece. Besides the basic complexes (atmospheric distillation,catalytic reforming and hydrotreating) it includes other conversion units such as catalytic cracking (FCC), thermal crackingand hydrocracking.

The Company was founded in 1970 under the legal name "MOTOR OIL (HELLAS) LUBRICANT REFINERIES S.A." thatwas subsequently changed in 1972, following a decision of the General Assembly of Company Shareholders, into "MOTOROIL (HELLAS) CORINTH REFINERIES S.A." - as accurately translated from Greek – which is the official trade name usedin its transactions with foreign business entities.

The Company’ s headquarters are located in the municipality of Maroussi of Attica (registered address: 12A Irodou Attikoustr.) and is registered as an incorporated firm ("Societé Anonyme") with the Prefecture of Athens, East Attica Sector, withIncorporated Company Registration number 1482/06/B/86/26.

The Company’s term was set to 50 years, up to 7/5/2020. License number D3/A/4124/20.3.2001, issued by the Ministryof Development provides the Company the right to infinitely operate its premises in the area of Aghii Theodori of Corinth.

According to article 3 of the Codified Memorandum and Articles of Association of the Company, its corporate objectives are:

■ To establish and operate industrial units for the production and processing of gasoline, light diesel, illuminatingkerosene, fuel oil, heating gasoil, LPG (liquid petroleum gas), basic and final lubricants, mineral oils and other petroleumproducts and by-products of any kind as well as to establish units for the packaging and preservation thereof anddevelop the various types of products and by-products being produced or manufactured.

■ In accordance with Decision nr 805/729/1970 of the Ministers of Coordination, Finance and Industry to carry on anycommercial or industrial activities for the development or marketing, in Greece and abroad, with respect to the abovementioned products and any products, in general, being produced by the Company, i.e petroleum products and by-products and services to automobiles, vessels, aircraft and establish machine repair shops, motor inns, restaurantsand coffee-shops and any other relevant activities.

■ To acquire, purchase, store, import, export, be a broker with respect to, transport, sell and /or distribute crude oil,petroleum products and by-products and of other hydrocarbons, minerals and ores, chemicals (both organic andinorganic), and by-products and products used as substitutes therefore and generally to be involved in the marketingand distribution business and have any other activities which are necessary or useful for doing and developing suchbusiness.

■ To establish and operate facilities for the production of steam and electric power as well as port facilities, hydraulicfacilities, sewage facilities and other similar facilities serving the Company’ s objectives and the objectives of othercompanies to be established or of entities that are related or cooperate with the Company as well as to render variousgeneral services to these companies or entities.


■ To establish and operate factories for the industrial processing and storage of LPG, packaging materials, and toperform any marketing related thereto as well as to perform any industrial or commercial activity or business relatingto this purpose.

■ To hold, license and otherwise possess and manage in any way whatsoever trademarks, copyrights and letters patent,methods of elaboration/preparation of plans/designs, production methods, etc.

■ To establish, operate and exploit liquid fuel outlets.

■ To engage in the business of handling, transporting and disposing of hydrocarbon wastes

■ To establish other companies of any legal form with identical, similar or complementary objectives or companiessimply useful in any way, even on an indirect manner, for the accomplishment of the objectives of the Company.

■ To participate in and cooperate with other business entities/ groups of whatever form with similar, relevant, complementaryor even simply useful in any way for the accomplishment, even on an indirect basis, of the objectives of the Companyas well as to represent, directly or indirectly, Greek or foreign companies having similar objectives.

■ To purchase, rent, and lease tangible and intangible assets as a means to fulfill the above mentioned objectives.

■ To grant third party guarantees or ordinary guarantees or any security of any form whatsoever (real or personal) infavor of natural persons or legal entities and in general to perform any act that aims directly or indirectly at achievingany of the above mentioned objectives.

It is noted that the corporate objectives of the Company, as set forth in its Codified Memorandum and Articles of Association,have not been amended during the last five years.

According to the FTSE Dow Jones Industry Classification Benchmark (ICB), which has been adopted by Athens ExchangesS.A., the Company belongs to the "Oil and Gas" industry and specifically the "Exploration and Production" sub-sector.



4.2. Background

The major milestones in the Company’s history are:

1970-1972Foundation and beginning of operation of the refinery comprised of a crude oil refining unit, a basic lubricant productionunit, a jetty with loading terminal, and truck loading terminals.

1975Entrance in the fuel production with the addition of the Atmospheric Distillation Unit.

1978Construction of the Catalytic Reforming Unit (further downstream processing of naphtha).

1980Installation of the Catalytic Cracking Unit (further downstream processing of fuel oil to turn it into high value-addedproducts).

1984Construction of an Electric Power Production Unit that uses gaseous fuel as raw material. Right to sell energy to thedomestic market.

1993ISO 9002 accreditation for the entire spectrum of activities of the Company.

1996Purchase of 50% of the Company’s shares by Aramco Overseas Company BV, 100% subsidiary of Saudi Arabian Oil Company(Saudi Aramco). Relocation of Company Headquarters to a modern building in Maroussi, Attica.

2000Completion of investment projects aiming at the production of products in harmonization to European Union specificationsfor 2000. During the same year the Environmental Protection System of the Company is ISO 14001 accredited.

2001Installation of a new gas turbine in the electric power station. Upgrading of the lubricants’ vacuum unit. Company sharecapital increase through public offer of shares and listing on the Athens Stock Exchange.

2002Acquisition of 100% of AVIN OIL which engages in fuel trading in the domestic market.

2003Certification of the Quality Management System of the Company for the whole spectrum of its activities according to theISO 9001:2000.

2004Recertification of the Environmental Protection System of the Company according to the ISO 14001 with validity for threemore years (until 2007).

2005Completion of the installation of the Hydrocracking Unit (Hydrocracker) for the production of the new clean fuels accordingto the specifications of the European Union not only of 2005 but also of 2009 (Auto Oil II). Acquisition of the aggregatestake of Aramco Overseas Company B.V. in the Company by Motor Oil Holdings S.A.

2006Recertification of the Quality Management System of the Company according to the ISO 9001:2000 for the whole spectrumof its activities with validity for three more years (until 2009). Signing of an agreement with the Spanish firm "IBERDROLAS.A." for cooperation in the field of electric power through the company "KORINTHOS POWER S.A.".


4.3. Company Activity – Fixed Assets

Together with its ancillary units and its fuel blending and oil movement facilities the refinery constitutes the largest privateindustrial complex in Greece and is considered one of the most flexible refineries in Europe.

Up until 1989 MOTOR OIL exported its entire production. From 1989 until today, following the liberalization of the market,the Company has acquired approximately 25% of the domestic market remaining at the same time a strong export refinery.Consequently, business risk is reduced through the geographical distribution of sales between domestic and foreign marketsas well bunkering (shipping and aviation).

The refinery is one of the most modern industrial complexes, capable of processing low-quality raw material and turn itinto high-value-added finished products. The refinery is vertically integrated to the highest degree possible and apart fromthat its facilities include extensive storage capacity of approximately 2.2 million cubic meters, loading premises and, portinstallations consisting of three jetties with maximum berthing capacity of 450,000 tons.

The Company uses crude oil as its primary raw material to produce a full range of products, i.e, gasoline, diesel, fuel oil,asphalt, jet fuel and lubricants with the emphasis being placed on high-value-added products and on new-specificationproducts thus catering to the needs of large companies engaged in petroleum product commercial activities in Greece andabroad. It is also the only producer of lubricants in Greece. The basic and final lubricants produced are approved byinternational organizations (ACEA, API) and by the United States Armed Forces.

Total covered area at refinery premises concerns mainly storage tanks and building complexes. These building complexesaccommodate the monitoring equipment of the production facilities, the ancillary power stations, the maintenance-repairunits, the storage premises for auxiliary production material – equipment, and management offices.

Most of those premises were built in the period 1972-3. Major additions were effected gradually throughout the 1980sand the 1990s. Furthermore, large scale investments were carried out during the four year period 2003–2006 exceedingthe amount of ª 500 million mainly concerning the construction and installation of the Hydrocracker Complex (detaileddescription in the section 4.9 of this Chapter).

As of 31.12.2006 the net book value of the Company’ s buildings and technical construction premises amounted to ª 72,061thousand and the net book value of land sites to ª 31,593 thousand.

Apart from its refining activities, the Company is active in commerce through buying and selling finished products, takingadvantage of any market opportunities whenever they arise.

The Company rents office space at the building at Maroussi (12A Irodou Attikou str., 151 24 Athens) where it houses itsheadquarters.

It is emphasized that the Company has all required licenses relating to its operation while no administrative penalty hasever been imposed or is pending for any violation on these licenses.

It must also be stressed that there has never been an interruption in Company activities throughout the period since itsfoundation.



4.4. Sales & Distribution Network – Customer Service

The bulk of the Company’s product output is delivered to its customers FOB at the refinery premises at Aghii Theodori.Part of the output targeted for consumption in the large cities is carried with vessels to third party premises, while theremainder is either carried through pipelines at the nearby storage tanks of AVIN OIL or delivered onto tank-trucks directlyfrom the new Truck Loading Terminal (TLT) of the refinery the operation of which commenced in 2004.

The clientele of MOTOR OIL includes all large Greek companies engaged in petroleum product activities as well as companiesengaged in ship refueling (bunkering), while significant part of the revenue is generated from exports to the countries ofthe East Mediterranean, the Balkans, the European Union etc.

Further to its commercial activities, the Company offers its customers various types of services taking full advantage of itsinfrastructure. These services include product storage facilities as well as crude oil refining for third parties.

It is also noted that MOTOR OIL participates in the share capital of "ATHENS AIRPORT FUEL PIPELINE COMPANY S.A."which constructed and operates the pipeline carrying fuel directly from the Aspropyrgos Hellenic Petroleum refinery tothe new Athens Airport, and in the share capital of "OLYMPIC FUEL COMPANY S.A" which is assigned with the task tohandle the fuel tanks and the supply of fuel within the new Athens Airport area (for the share participation percentagesplease see Chapter 6).

4.5. Share Capital – Shareholder Structure

The share capital of the Company amounts to ª 33,234,894 divided into 110,782,980 common registered shares of anominal value of ª 0.30 each. It must be noted that there is not any authorized but not yet issued share capital and noissue of shares which do not represent share capital has taken place. Moreover, there are not any outstanding convertibleto shares bonds (or any other form of debt), and there are not any terms in the Codified Memorandum and Articles ofAssociation relating to changes of share capital which are more restrictive than those specified by the law.

The Company’s shareholder structure is presented below:

Shareholder Number of Shares %PETROVENTURE HOLDINGS LTD 56,499,320 51.00%PETROSHARES LIMITED 11,673,690 10.54%Free Float 42,609,970 38.46%TOTAL 110,782,980 100.00%

The two legal entities-shareholders of MOTOR OIL, PETROVENTURE HOLDINGS LTD and PETROSHARES LIMITED havetheir headquarters at Jersey, Channel Islands and they operate according to the 1991 Jersey law. MOTOR OIL HOLDINGSS.A., a Luxembourg based holding company owned by the Vardinoyannis family, is the controlling shareholder ofPETROVENTURE HOLDINGS LTD and PETROSHARES LIMITED.


4.6. Company Administration & Management

The composition of the Board of Directors of the Company is presented hereunder:

First Name and Surname BoD Position Member Identity *1. Vardis J. Vardinoyannis Chairman & Managing Director Executive2. John V. Vardinoyannis Vice-Chairman Non-Executive3. Panayotis N. Kontaxis Vice-Chairman Non-Executive 4. John N. Kosmadakis Deputy Managing Director Executive 5. Petros T. Tzannetakis Deputy Managing Director Executive6. Demosthenes N. Vardinoyannis Member Non-Executive 7. Nikos Th. Vardinoyannis Member Non-Executive 8. George P. Alexandridis Member Non-Executive9. George Th. Theodoroulakis Member Non-Executive 10. Despina N. Manolis Member Non-Executive 11. Antonis H. Theoharis Member Independent

Non-Executive 12. Konstantinos V. Maraveas Member Independent

Non-Executive

* According to Corporate Governance Law 3016/2002

The term of the above Board of Directors expires on the next Annual Ordinary General Assembly which will approve theCompany Financial Statements of the fiscal year 2006.

The top executives of the Company are presented below:

■ Vardis J. Vardinoyannis, Chairman & Managing Director. He is one of the founders of the Company and has been amember of the top management team since 1972. Apart from MOTOR OIL, he has exploited a wide array of entrepreneurialendeavours in Greece and abroad.

■ John N. Kosmadakis, Deputy Managing Director, General Manager of Marketing. He has been working with theCompany since 1978.

■ Petros T. Tzannetakis, Deputy Managing Director, Chief Financial Officer. He has been working with the Companysince 1986.

■ Michael Stiakakis. Refinery Manufacturing General Manager. He has been working with the Company since 1982.

■ Constantinos Vasilakis, General Manager of Corporate Planning. He gave up his post due to retirement on December29th, 2006.

Mr. Constantinos Thanopoulos is the Internal Audit Manager.

Top Management and Administration remuneration for the fiscal year 2006 amounted to ª 2,409.0 thousand while BoDmembers fees (included in Administrative Expenses) amounted to ª 219.0 thousand.

TOP MANAGEMENT REMUNERATION(amounts in thousand euros) 2004 2005 2006Top Management and Administration Remuneration 1,941.5 1,852.0 2,409.0BoD Members’ Fees 213.0 216.0 219.0TOTAL 2,154.5 2,068.0 2,628.0



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4.8. Personnel

The Company is one of the biggest employers in Greece. The total employee headcount as of December 31, 2006 reached1,197 persons of whom 1,011 worked at the refinery and 186 at the Company headquarters.

PERSONNEL HEADCOUNT (at year end) 2004 2005 2006

Refinery 988 971 1,011 Headquarters 190 186 186 TOTAL 1,178 1,157 1,197

The Company places particular emphasis οn employee educational background as this provides a comparative advantageagainst competition given the international and technologically advanced character of the refining sector. Today 20% ofCompany personnel have graduated from Institutions of Higher or Highest Education while intra-company educationalprograms are offered and seminars are held on a regular basis each year.

Company employees may take advantage of a comprehensive program of educational courses and seminars conductedin Greece or abroad. In this way continuous development of Company personnel is achieved to the benefit of MOTOROIL and of society at large.

In addition, the Company places emphasis on the optimization of working conditions and above all on workforce safety,employing 2 doctors, medical personnel, and owning 3 fully equipped ambulances. As part of its interest in employeewelfare, the Company offers its personnel and their families a private life insurance and medical care program coveringall hospital treatment expenses that may arise as well as an additional pension scheme. These programs are consideredto be innovative as a result of the benefits and compensations they provide. The Company has also a multi-member securitysection and a specialized safety technician who is assigned with the responsibility to supervise and secure hygiene andsafety conditions at workplace as well as to prevent work accidents. As an aid to workplace accident prevention theCompany owns 5 f ire extinction vehicles and a multitude of stable and portable f ire & smoke detection systems andextinguishers.

The accident prevention policy is implemented through the following methods:

■ Strict adherence to legislation and internationally accepted codes, protocols and safety operation rules.

■ Continuous improvement of all safety and hygiene control systems.

■ Record keeping of all accidents, accident evaluation and adopting appropriate corrective action and preventivemeasures.

■ Continuous upgrade of all resources relating to individual safety and fire prevention, combined with personnel trainingon the use of these resources.



4.9. 2004–2006 Capital Expenditure

During the last three years the Company’ s capital expenditure amounted to ª 434 million including a significant part ofthe Hydrocracking complex investment completed in the period 2003 – 2005 aiming at the upgrading and expansion ofthe production units of the refinery. The Company’ s aggregate capital expenditure for the last four years amounted to ª520 million as shown in the following table:

(Amounts in million Euros) 2003 2004 2005 2006 TotalCapital Expenditure 86 243 154 37 520

Α) The major part of the investment projects undertaken in the period after 2003 aimed at the maximization of the refiningmargin. The most significant of these investments are presented below:

■ Installation of a Hydrocracking Complex (total expenditure ª 350 million) for the production of the new "clean"fuels according to the specifications of the European Union not only for 2005 but also for 2009 (Auto Oil II). Thisunit enhanced the production capacity of the refinery with reference to diesel, of which there is a shortage in Greeceand generally in Europe. The additional diesel production replaced refinery imports while the particular unit providedgreater flexibility in maximizing the production of either diesel or gasolines according to seasonal demand.

In the context of this project the following units were constructed:• A Mild Hydrocracker unit with a 37,000 bpd capacity.• A Gasoil desulfurisation unit with a 32,000 bpd capacity.• A hydrogen production unit with a 65,000 Nm3/hr capacity.• A 150 kV substation for the connection of the refinery with the interconnected transmission system of electricity, as

well as a new gas turbine with which the installed electricity capacity increased to 62 MW.• A new complex for sulfur recovery.

Furthermore, extended revamp works in the existing distillation units (atmospheric and vacuum) as well as restructuringin the refinery utilities (new flare, new desalination units, water treatment, instrument air etc.) took place.

The Hydrockracker Complex commenced its operation in November 2005. All project objectives regarding deliverydeadlines, quality of produced products and budgeted capital expenditure were met.

More than 4.5 million man hours were required for the completion of this project. It is important to mention thatthroughout the duration of the project no working accident occurred. This is indicative of the emphasis placed by theCompany on the aspect of safety at workplace.

In the context of the Hydrockracker project and through a series of upgrades, modif ications and additions, theenvironmental terms of the refinery improved as regards both the gas emissions and the management of liquid wastes.

As a result of the installation of the Hydrockracker, the Nelson Complexity Index of the refinery increased significantlyplacing it among the most sophisticated and modern ones all over Europe, thus strengthening one of its key competitiveadvantages even more.

■ The installation of an Advanced Process Control (APC) System, which is an extension of the Distributed Control System,contributes to the maximization of the refining profit margin since it constitutes a key factor for the increase in productionof high value-added products, the rationalization of the utilization of the refinery production units and the operatingcost containment. During the period 2004-2006, and in the context of a wider investment project of a total expenditureof ª 8.8 million, the APC system was applied on the existing refinery units particularly on the Fluid Catalytic Cracking(FCC) unit given the changes in the operating conditions (desulfurized feedstock) following the installation of the newMild Hydrocracker. The work is continued with the application of the system on the Crude Distillation Unit.

■ In 2005 the installation of the Power Management System (PMS) aiming at increasing the reliability of the electricitynetwork of the ref inery as well as reducing the energy cost was completed. The capital expenditure for the PMSamounted to ª 3 million.


B) In addition, aiming at the promotion and sale of all refinery products at the best possible price, MOTOR OIL proceededwith the construction of a new Truck Loading Terminal (TLT) at the refinery as a means to improve and optimize thedistribution system of the Company. This new loading terminal, the operation of which commenced in 2004, improvescustomer service while contributing to the Company’ s increasing its market share in the areas of Peloponissos and WesternGreece (total project budget ª 20.5 million). Furthermore in order to facilitate the loading and unloading procedure ofthe middle distillates (kerosene, diesel) the construction work of three (3) fixed roof tanks of an aggregate capacity of105,000 m3 has commenced. The commencement of the operation of these tanks is expected to take place within 2007.

C) During the period 2004–2006 the Company completed, as part of its firm policy, a number of significant projects forthe improvement of environmental conditions and safety standards of the refinery.

■ In 2006 the works for the upgrading of the Waste Water Treatment (WWT) Unit were completed with the installationof a new biological treatment unit and the thorough upgrading of the system of primary and secondary treatment.This investment facilitates the increase of the capacity of the WWT Unit in order to serve the new Hydrocracker complexas well as to address extreme rainfall situations. Furthermore, provision has been made for the modernization of theinstallations with the employment of new technologies as a means to further improve waste water quality and enhancethe mechanical availability of the unit. The capital expenditure for the project amounted to ª 16 million.

■ In 2005 along with the project of the Hydrocracker complex an important investment for the reduction of catalystemissions from the Fluid Catalytic Cracking Unit (FCC) was completed (total budget ª 10.9 million). The projectincluded, among other things, the installation of an electrostatic precipitator on the f lue gas of the FCC for theminimization of the catalyst emissions in the atmosphere by following the Best Available Techniques (BAT) adoptedby the European Union with reference to the refineries.

For the year 2007 the capital expenditure of the Company is estimated at approximately ªª 40 million, concerning theconnection of the refinery with the natural gas pipeline and the subsequent internal network construction, the replacementof one of the four gas turbines used for the cogeneration of steam and power for the needs of the refinery, and variousother small scale maintenance and/or upgrading projects for the installations of the refinery.



4.10. MOTOR OIL and Society

4.10.1 Environment – Quality

From the beginning of its operation MOTOR OIL focused its efforts on the production of quality products having as majorobjective to satisfy the needs of its customers. Another Company objective is to offer its customers dependable qualityproducts through total mobilization of its management and to resolve any potential problems before they arise.

As a result of the previously mentioned objectives, in 1992 the Company initiated the planning and development of aQuality Assurance System which covered all Company activities and fulfilled the requirements of the ISO 9002 standards.This system was firstly certified in December 1993.

Since then, the Quality System has become an integral part of MOTOR OIL operations.

The restructuring of the existing system started in 2002 in order to develop a new Quality Management System fulfillingthe ISO 9001:2000 standards. This new system was certif ied in January 2003 by Bureau Veritas Quality International(BVQI). This system was recertified in March 2006 with validity until February 2009.

The commitment of the Company’ s administration and personnel for continuous quality improvement is universal. Withinthe framework of this commitment, in September 2006 the Laboratory of the refinery was accredited by the NationalAccreditation System with validity until September 2010.

The adoption of methods and procedures that protect the environment comprise top priority for MOTOR OIL. The refineryoperation conforms to the environmental regulation of the Ministry of Urban Planning and the Ministry of Developmentand is fully harmonized with the most stringent international environmental standards. The employment of advancedprocessing methods that do not cause any environmental harm contributed to the refinery’ s certification with ISO 14001initially in December 2000 followed by a recertification in January 2004 (with validity until January 2007) and another onein March 2007 (with validity until January 2010).

It is important to note that MOTOR OIL is the unique refinery in Greece and one among only a handful in Europe withsuch a high complexity index which has been certified with both systems which are part of the Integrated ManagementSystem.

In order to accomplish and adhere to the above mentioned environmental objectives, the Company seeks to:

■ Reduce its consumption needs for natural resources and energy while at the same time increase its self-producedenergy capacity.

■ Produce products and use technologies that are environment friendly.

■ Control the management of gaseous emissions and continue the monitoring of the quality of the atmosphere.

■ Promote recycling and effective management of solid and liquid waste.

■ Tackle environmental emergencies through the development and implementation of emergency response plans suchas the Oil Spill Contingency Plan.

Ultimately, the new Hydrocracker complex, the operation of which started in 2005 producing gasoline and diesel with lowsulfur content, has a decisive contribution to the Company’ s environmental protection goals. Moreover, several otherunits such as sour water stripping, sulfur recovery, waste water treatment upgrading as well as energy saving projects,secure that the Company’ s production facilities are environment friendly.


4.10.2. Social responsibility

The commitment of MOTOR OIL to Corporate Social Responsibility – in the sense of achieving balanced growth, basedon the three pillars, "community-environment-economy" – is an integral part of its business strategy and operations.

Corporate Social Responsibility (CSR) emerged as a prominent issue for the business world in the early 1990s, althoughsocial responsibility – in the sense of initiatives by businesses to integrate community and environmental activities intotheir programs – was adopted by businesses in both the United States and the European Union many years before thedevelopment and establishment of the concept of CSR as a part of modern business practice.

In the past few years, the world’s major and most accountable organizations have begun to move away from the traditionalapproach – which confined their social role merely to donations for charitable causes, sponsorships of events and basicwelfare measures for their employees – and are gradually adopting a systematic and strategic approach to Corporate SocialResponsibility, both in their internal and external business environment. This strategy aims at a long-term increase in theirperformance, through practices that satisfy all stakeholders.

Since its establishment, MOTOR OIL’s business activity has been characterized by accountability and social awareness.Today, as a modern public company, listed on the Athens Stock Exchange, its activity complies with the current code ofbusiness ethics and meets contemporary demands for more openness, and the reliable and timely dissemination ofinformation to all stakeholders. As a founding member of the Greek Network for Corporate Social Responsibility, itsystematically supports the application of best practices and promotes the concepts of social sensitivity, corporateresponsibility, social cohesion and sustainable development – namely, development that meets today’s needs, withoutdepleting resources for future generations.

MOTOR OIL:

■ As a responsible employer, cares about developing and utilizing its human resources, investing in their training, ensuringa creative and supportive workplace, where health and safety constitute major priorities, secured through state-of-the-art technical support and management practices.

■ Having a responsible attitude towards the environment, tries to ensure the minimum possible impact of its activitieson the environment, utilizing the most advanced systems for environmental protection and for the management andsaving of energy.

■ As a responsible member of society, seeks fruitful social dialogue, in a climate of mutual trust and respect, with thelocal communities in which it chiefly operates; it supports these communities, by participating in programs thatenhance their economic, social and cultural life, and takes part in activities that benefit society as a whole.

■ Having a responsible position in the market, respects market rules and produces top quality products; it focuses onrelations of trust with its clients and associates, and strives – through systematic and consistent achievement of itsbusiness targets – to ensure satisfactory returns to shareholders.

The above commitments are realized through specific policies, programs and activities in the framework of the overallstrategy of the Company, and are fully detailed in its separate edition titled "Environmental and Social Report".



4.10.3. Subsidies – Sponsorships – Educational Programs

MOTOR OIL is involved in a wide array of social activities supporting, among other things, international sports events,athletic clubs, cultural events, hospitals, educational institutes, social welfare organizations and Non-GovernmentalOrganizations through sponsorships, donations and grants.

Detailed reference regarding MOTOR OIL’ s social contribution is offered in its separate edition titled "Environmental andSocial Report". For the year 2006 particular reference must be made, due to their significant contribution to society, to(a) the considerable grant made to the "ELPIDA" Association of Friends of Children with Cancer for supporting the effortto build the f irst Children’ s Oncology Hospital in Greece, and (b) to the equally sizeable sponsorship made to "TheSuzanne Mubarak Women’ s International Peace Movement" for organizing in Athens the round table "The businesscommunity against human traff icking" from which the relevant code "The Athens Principles" evolved already beingforwarded to enterprises worldwide in order to be endorsed by as many corporations as possible.

The education and training of personnel, both in respect to personal development and professional skills, is a matter ofstrategic importance for MOTOR OIL. The growth strategy of the Company requires matching training with businessobjectives and this is achieved by investing in the improvement and development of employee skills. Therefore, within thisframework:

■ Intra-company seminars are organized on a regular basis.

■ Employees participate in seminars organized by internationally accredited educational and training bodies as well asin conferences held in Greece or abroad.

■ Employees are given the opportunity to continue their academic studies or to embark on postgraduate courses.

■ Personnel is encouraged and supported financially to attend foreign language lessons wherever this is required.

The employee training and development policy of the Company aims to secure that the qualities, qualifications and skillsof each member of the staff suit the job requirements of his / her post. This objective is met by continuously providingflexible and systematic professional training and education to the personnel of MOTOR OIL.

In addition to providing on-the-job intra-company training seminars to its personnel, MOTOR OIL holds every year a seriesof educational sessions at the refinery to visiting university students who receive up to date information on various technicaland commercial matters as well as advice on professional orientation.

Moreover, every year MOTOR OIL accommodates a large number of university students doing their practice, as partrequirement of their studies, either at the refinery or the headquarters.


5. Performance review

5.1 Company Activities

Company turnover for 2006 amounted to ª 3,629.7 million compared to ª 2,923.8 million for 2005 and ª 1,937.2 millionfor 2004 demonstrating an increase of 24.14% in 2006 in relation to 2005. The analysis of Company turnover by product,type of activity (refining – trading) and geographical market during the last three year period is presented hereunder:

TURNOVER BREAKDOWN (amounts in million euros)2004 2005 2006

Refining ProductionDomestic 681.8 827.4 1,681.7Exports 801.4 1,181.3 1,177.9Total Refining Production 1,483.3 2,008.7 2,859.6

Trading ActivityDomestic 207.4 479.5 362.0Export 246.5 435.6 408.1Total Trading Activity 453.9 915.1 770.1TOTAL TURNOVER 1,937.2 2,923.8 3,629.7

TURNOVER BREAKDOWN (% of total)2004 2005 2006

Refining ProductionDomestic 35.2% 28.3% 46.3%Exports 41.4% 40.4% 32.5%Total Refining Production 76.6% 68.7% 78.8%

Trading ActivityDomestic 10.7% 16.4% 10.0%Exports 12.7% 14.9% 11.2%Total Trading Activity 23.4% 31.3% 21.2%TOTAL TURNOVER 100.0% 100.0% 100.0%

The refining production concerns the sales of products produced in the refinery of MOTOR OIL.

The trading activity concerns the sales generated as a result of imports of finished products from the international marketand their resale in the domestic market and/or abroad. The Company has the flexibility to take full advantage of thefavorable market conditions, whenever these arise, and is in a position to respond in any exceptional and unpredictableevent meeting the increased demand in the domestic and international market with imports.



5.1.1. Turnover

The major objective of MOTOR OIL is to achieve the optimum selling price for its products and to increase its market sharein Greece. At the same time the Company aims to accomplish emerging market penetration. To this end, MOTOR OIL hascreated a coherent sales and distribution network for the promotion of its products as a means to strengthen its presencein the oil market. It is important to note that the Company responds to customer demand without neglecting workplacehygiene, workforce safety and environmental protection issues. Through these moves MOTOR OIL aims to increase itsprofitability and maximize shareholder value.

The following tables include summary data of MOTOR OIL’ s turnover breakdown by type of activity, market and productfor the last three years. It is clarified that the breakdown of the turnover in the three distinct markets presented below isbased on the methodology adopted by the Company regarding the way it monitors the development of its sales, that is,using as criterion the location of final destination and consumption of the products.

By Type of Activity(thousand MT) (million EURO)

2004 2005 2006 2004 2005 2006Refining Production 5,808 5,492 6,797 1,483.3 2,008.7 2,859.6Trading Activity 1,495 2,158 1,579 453.9 915.1 770.1TOTAL 7,303 7,650 8,376 1,937.2 2,923.8 3,629.7

By Type of Market(thousand MT) (million EURO)

2004 2005 2006 2004 2005 2006Domestic 3,066 3,238 3,272 890.6 1,306.9 1,552.5Exports 2,867 3,160 3,589 782.3 1,259.2 1,586.0Shipping – Aviation 1,370 1,252 1,516 264.3 357.7 491.2TOTAL 7,303 7,650 8,376 1,937.2 2,923.8 3,629.7

Domestic Market

The domestic sales of the Company increased in 2006 both by volume (1.05%) and value (18.79%) compared to theprevious year.

Exports

In 2006 MOTOR OIL exports increased compared to the previous year both by volume (13.58%) and value (25.95%). Thisdevelopment confirms the exporting profile of the Company and further enhances its competitive advantage.

Shipping - Aviation

The sales of the Company in this market showed an even greater rate of growth both by volume (21.9%) and value (37.32%)compared to the previous year.


By Product Category

(Amounts in thousand Metric Tons) 2004 2005 2006Asphalt 179 132 169Fuel Oil 1,702 1,549 1,975Diesel (Automotive – Heating) 2,284 2,641 3,435Jet Fuel 852 1,007 472Gasoline 1,873 1,928 1,897LPG 156 138 135Lubricants 187 181 188Other 70 74 105TOTAL 7,303 7,650 8,376

The breakdown of the Company’ s production output by product category for the last three years is presented in thefollowing table:

Production Output By Product Category

Products (in thousand MT) 2004 2005 2006Lubricants 177 175 174LPG 157 142 135Gasoline 1,492 1,359 1,593Jet Fuel 599 649 341Diesel (Automotive – Heating) 1,392 1,390 2,481Special Products 298 237 316Fuel Oil 1,645 1,544 1,935TOTAL 5,760 5,496 6,975

The Company’ s market share by product category in the domestic market is presented in the following table:

MOTOR OIL MARKET SHARE BY PRODUCT CATEGORY IN THE GREEK MARKET2004 2005 2006

Domestic MarketLPG 24.5% 21.7% 20.6%Gasoline 26.2% 26.5% 27.1%Jet Fuel 0.7% 0.6% 0.2%Diesel (Automotive – Heating) 20.1% 21.9% 22.4%Fuel Oil 10.8% 10.9% 9.4%Asphalt 39.0% 41.6% 38.2%Domestic Market Total (Fuels) 20.7% 21.4% 21.6%Shipping - AviationJet Fuel 33.7% 29.2% 24.0%Fuel Oil 27.5% 25.3% 32.2%Bunker Gasoil 19.7% 18.5% 21.3%Shipping – Aviation Total (Fuels) 26.9% 24.8% 29.0%Lubricants 57.2% 56.5% 53.0%INLAND MARKET TOTAL 22.2% 22.2% 23.4%



5.2. Company Turnover and Earnings Review 2004-2006

The development of Company earnings for the period 2004-2006 is presented hereunder:

(amounts in thousand euros) 2004 2005 2006Turnover (Sales) 1,937,191 2,923,769 3,629,694Less: Cost of Sales (before Depreciation) -1,745,885 -2,660,561 -3,384,207Gross Profit (before depreciation) 1 191,306 263,208 245,487% on turnover 9.88% 9.00% 6.76%Less: Administrative Expenses (before depreciation)1,2 -14,558 -14,376 -19,280% on turnover -0.75% -0.49% -0.53%Less: Selling Expenses (before depreciation) 1 -12,576 -12,776 -12,729% on turnover -0.65% -0.44% -0.35%Plus (Less): Other Operating Income (Expenses) 20,394 -17,322 45,126Earnings before Interest, Depreciation & Tax (EBITDA) 184,566 218,734 258,604% on turnover 9.52% 7.48% 7.12%Plus: Income from Participations & Interest 6,351 4,773 6,574Less: Interest & Related Expenses -6,727 -12,461 -32,307Earnings before Depreciation & Tax 184,190 211,046 232,871% on turnover 9.50% 7.22% 6.42%Less: Depreciation -17,504 -22,516 -43,272Earnings Before Tax (EBT) 166,686 188,530 189,599% on turnover 8.60% 6.45% 5.22%Less: Income Tax 3 -48,026 -57,843 -62,125Earnings after Tax (EAT) 118,660 130,687 127,474% on turnover 6.12% 4.47% 3.51%Weighted number of shares 4 110,715,732 110,776,573 110,782,980Number of shares at year end 110,782,980 110,782,980 110,782,980

PER SHARE DATA (in euros) 2004 2005 2006Earnings before Depreciation and Tax 5 1.66 1.91 2.10Earnings Before Tax 5 1.50 1.70 1.71Earnings after Tax 5 1.07 1.18 1.15Dividend per share 6 0.85 1.10 1.15

Notes:

1 The breakdown of depreciation charges relating to Cost of Sales and Administrative & Selling Expenses is available in the section"Depreciation" of the present chapter.

2 Administrative Expenses include BoD fees for 2004: ª 213,000 - 2005: ª 216,000 - 2006: ª 219,000. 3 The Company has been audited for tax purposes until the fiscal year 2004 (included). The income tax for the period 1.1.2006 –

31.12.2006 includes an amount of ª 10.2 million which refers to the outcome of the statutory tax audit for the fiscal years 2000– 2004 (5 years) of which an amount of ª 5.7 million concerns additional tax relating to accounting differences and an amountof ª 4.5 million concerns surcharges.

4 For the weighted number of shares the buy back shares in possession of the Company were taken into consideration. 5 Based on the weighted number of shares. It is noted that due to the small number of buy back shares in possession of the Company

during the years 2004 and 2005 the data per share would not differ in case the calculations were made using the number of sharesat the year end.

6 The 2006 dividend amount per share relates to the proposal of the Company BoD to the General Assembly of Company Shareholders.


❑ Turnover

In principle, the turnover increase or decrease of oil refining and trading companies is mainly a function of the followingfactors:

a) Volume of Sales.b) Crude Oil and Petroleum Product prices.c) Euro / U.S Dollar parity.

The turnover of the Company in 2006 amounted to ª 3,629.7 million from ª 2,923.8 million in 2005 demonstrating a24.14% increase. Positive catalysts for this development were the increase of the sales volume by 9.49% (from MT 7,650thousand in 2005 to MT 8,376 thousand in 2006) and the increase of the average prices of petroleum products byapproximately 15% while the devaluation of the USD in relation to the Euro (average parity) by 1% had a negative impact.

The increase in the volume of sales is mainly attributed to increased sales of transportation diesel and fuel oil.

It must be noted that the bulk of Company sales regards refining production comprising 78.8% of turnover in 2006, 68.7%of turnover in 2005 and 76.6% of turnover in 2004. The reduction of the percentage of refining production during 2005is attributed to the three week period shutdown of the ref inery in April for the necessary works in the context of theinstallation of the new Hydrocracker unit. This unit operated throughout the year 2006 and this is demonstrated by therebound of the refining production to a high level as a percentage of the turnover of the Company.

❑ Cost of Sales (before Depreciation) - Gross Profit

The Cost of Sales, before depreciation, increased at a higher rate in relation to Turnover (27.2% compared to 24.14%)amounting to ª 3,384.2 million in 2006 from ª 2,660.6 million in 2005 and as a result the Gross Profit (before depreciation)decreased as an absolute figure by 6.73% from ª 263,208 thousand in 2005 to ª 245,487 thousand in 2006.

It must be noted that the Cost of Sales (before depreciation) includes the Refinery Operating Cost (ROC) which mainlyconcerns the cost of production. More specifically, the Refinery Operating Cost amounted to ª 95,900 thousand in 2006compared to ª 89,100 thousand in 2005 due to the new conditions regarding Company size following the addition of theHydrocracker complex (increased energy cost bill, higher insurance premium due to increased aggregate value of assets),the regular annual payroll cost increase of the production staff and the compensation payments due to retirement of partof the refinery personnel.

Excluding the Refinery Operating Cost, the Gross Profit amounted to ª 341.4 million in 2006 from ª 352.3 million in2005. This decrease is mainly explained by the low profitability of the last quarter of 2006 due to the negative impact ofinventory valuation, the low refining margins and the continuing devaluation of the USD against the Euro (it must bestressed, however, that a significant part of the losses due to the weakening of the USD is recovered through OperatingIncome - see section "Other Operating Income" below -). Despite the above mentioned adverse conditions in the lastquarter of the year, the Company managed to maintain its high level of profitability as an absolute figure in terms of profitmargin.

The development of the Company Gross Profit Margin in USD/MT for the last three years is shown below:

GROSS PROFIT MARGIN (IN $/MT) 2004 2005 2006Refining Profit Margin 53.9 72.8 60.9Trading Profit Margin 11.2 18.0 8.2Blended Profit Margin 45.9 57.4 51.0



❑ Operating Expenses (Administrative and Selling)

In 2006 the Company achieved further containment of the Selling Expenses which amounted to ª 12,729 thousandcompared to ª 12,776 thousand in 2005 (a decrease of 0.37%). The Administrative Expenses amounted to ª 19,280thousand in 2006 compared to ª 14,376 thousand in 2005 (an increase of 34.11%). This development is accounted forby the advertising and promotional expenses, the donations and grants (see Chapter 4) and the regular payroll cost increaseand additional benefits to the personnel.

❑ Other Operating Income (Expenses)

Other Operating Income (Expenses) relates mainly to the net difference of foreign exchange gains and losses which evolveduring the fiscal year from the receivables and payables of the Company denominated in foreign currency. Due to theweakening of the USD against the Euro, Other Operating Income amounted to ª 45,126 thousand (Income) in 2006compared to ª -17,322 thousand (Expenses) in 2005. This development offsets the reduction of Company Profit Marginfor 2006 as already mentioned.

It must also be stressed that at operating level the Company has chosen to tackle the issue of USD volatility against theEuro by funding the assets of the Company with similar foreign exposure liabilities.

❑ Earnings before Interest, Depreciation and Tax (EBITDA)

Subsequent to the developments of Gross Margin, Operating Expenses, and other Operating Income (Expences) detailedabove, the Company Earnings Before Interest, Depreciation and Tax (EBITDA) increased in 2006 by 18.23% and amountedto ª 258,604 thousand from ª 218,734 thousand in 2005.

❑ Income from Participations and Investments

Income from participations and investments amounted to ª 6.6 million out of which an amount of ª 4.2 million concernsthe dividend paid to the Company by the wholly owned subsidiary AVIN OIL from its 2005 earnings, an amount of ª 0.9million concerns interest income from bank deposits, and an amount of ª 1.5 million concerns the net gain from the saleof part of the Company’ s stake in "KORINTHOS POWER S.A." (Chapter 6 of this annual report).

❑ Financial Expenses

In 2006 the financial expenses of the Company amounted to ª 32.3 million from ª 12.5 million in 2005. This developmentis attributed to the additional working capital requirements caused by the higher average prices of crude and petroleumproducts, the increased volume of sales, the upward trend of interest rates during 2006 as well as the increase of averagebank debt of the Company as a result of the completion of the Hydrocracker investment.

❑ Depreciation

Following the commencement of the operation of the Hydrocracker complex, the depreciation charge increased from ª22.5 million in 2005 to ª 43.3 million in 2006 strengthening further the Company’ s cash flow.

The breakdown of the depreciation charge relating to the Cost of Sales, Administrative Expenses and Selling Expenses ofthe last three years is presented in the next table:

DEPRECIATION BREAKDOWN(amounts in thousand euros) 2004 2005 2006Cost of Sales 16,857 22,062 42,806Administrative Expenses 605 429 447Selling Expenses 42 25 19TOTAL DEPRECIATION 17,504 22,516 43,272


❑ Earnings Before Tax

Earnings Before Tax (EBT) amounted to ª 189.6 million in 2006 compared to ª 188.5 million in 2005 showing a marginalincrease of 0.57% keeping the Company at a steady course of high profitability during an exceptionally difficult year forthe Oil and Gas sector.

❑ Tax

The total amount of income tax in 2006 amounted to ª 62,125 thousand compared to ª 57,843 thousand in 2005. It isclarified that the amount of ª 62,125 thousand includes an amount of ª 10,186 thousand relating to the outcome of thestatutory tax audit of the five fiscal years from 2000 to 2004 (included). Without taking previous years’ taxes into account,the Company income tax as a percentage of Earnings Before Tax (EBT) is equivalent to 27.39% since the amount of ª 4.2million relating to the AVIN OIL dividend is tax exempted.



5.3. Company Balance Sheet Statements Review 2004 - 2006

ASSETS

The development of the balances of the Assets’ side of the Company Balance Sheet as of 31.12.2004, 31.12.2005 and31.12.2006 is presented in the following table:

ASSETS (amounts in thousand euros) 2004 2005 2006Fixed AssetsIntangible assets 1,177 871 559Tangible Assets 565,775 698,065 691,481Investments in subsidiaries and associates 38,468 38,608 38,528Investments available for sale 927 927 927Other long term receivables 776 969 1,280Total Fixed Assets 607,123 739,440 732,775Current AssetsInventories 156,878 308,225 182,122ReceivablesTrade receivables 120,865 216,863 212,415Other short term receivables 32,283 31,893 40,312Total Receivables 153,148 248,756 252,727Cash and cash equivalents 41,426 6,740 6,533Total Current Assets 351,452 563,721 441,382TOTAL ASSETS 958,575 1,303,161 1,174,157

❑ Intangible Assets

The balance of "Intangible Assets" concerns expenses for the purchase of software.

❑ Tangible Assets

An analysis of the balance of "Tangible Assets" as of 31.12.2006 is included in note 14 of the disclosures on the financialstatements for the year 2006 (please see Appendix). It is clarified that the noted cumulative ª 37 million increase in thebalance (at cost) of the Tangible Assets (ª 906 million as of 31.12.2006 compared to ª 869 million as of 31.12.2005)relates to the Company investments effected during 2006 (please see section 4.9 of this annual report).

❑ Investments in Subsidiaries and Associates & available for sale

The balance of "Investments in Subsidiaries and Associates" as of 31.12.2006 corresponds to the value of the participation ofMOTOR OIL in the companies "AVIN OIL" (ª 37.56 million), "OLYMPIC FUEL COMPANY S.A." (ª 0.9 million) and"KORINTHOS POWER S.A." (ª 0.06 million).

The balance of "Investments available for sale" as of 31.12.2006 amounts to ª 927 thousand and corresponds to thevalue of the participation of MOTOR OIL in the company "ATHENS AIRPORT FUEL PIPELINE COMPANY S.A.".

Detailed reference to all above mentioned companies is provided in chapter 6 of this annual report while the percentagesof the participation of MOTOR OIL in their share capital are presented in the following table:

Company Name % participation AVIN OIL S.A. 100 %OLYMPIC FUEL COMPANY S.A. 14 %KORINTHOS POWER S.A . 30 %ATHENS AIRPORT FUEL PIPELINE COMPANY S.A. 16 %


❑ Other Long-Term Receivables

The balance of "Other Long-Term Receivables" as of 31.12.2006 amounted to ª 1,280 thousand compared to ª 969thousand as of 31.12.2005 and concerns guarantees.

❑ Inventories

The total value of inventories as of 31.12.2006 amounted to ª 182,122 thousand compared to ª 308,225 thousand asof 31.12.2005. Year-end inventories (finished goods, raw materials, consumables etc.) are valued at the lower value betweenthe cost of purchase and the net realizable value at the end of each accounting period. It is noted that the cost of purchaseis calculated based on the moving weighted average purchase price.

Furthermore, the Company keeps a stock of spare parts which were purchased for the purpose to be used in maintenanceand repair works of its machinery. This stock concerns a large number of items, some of which are of high value and slowmoving in general. The management of the refinery has declared that this situation is acceptable because these spare partsare accompanying items of the new machinery and of the equipment purchased by the Company in order to be in operationalreadiness.

It must be stressed that because of the nature of Company products economic obsolescence of inventories is ruled outwhile the volume of transactions (purchases – sales) effected during each accounting period eliminates the possibility ofslowly moving stock, particularly, in relation to petroleum products.

It is emphasized that a firm Company policy is to always keep low level of inventories.

❑ Trade Receivables

The balance of "Trade Receivables" amounted to ª 212,415 thousand as of 31.12.2006 compared to ª 216,863 thousandas of 31.12.2005.

❑ Other short term receivables

The balance of "Other short term receivables" amounted to ª 40,312 thousand as of 31.12.2006 compared to ª 31,893thousand as of 31.12.2005 and this mainly relates to receivables from VAT return and prepaid expenses.

❑ Cash and cash equivalents

As of 31.12.2006 the cash balances of the Company relating to its current and time deposits amounted to ª 6,533 thousandcompared to ª 6,740 thousand as of 31.12.2005.



LIABILITIES & SHAREHOLDERS’ EQUITY

The development of the balances of the Liabilities & Shareholders Equity side of the Company Balance Sheet as of 31.12.2004,31.12.2005 and 31.12.2006 is presented below:

LIABILITIES & SHAREHOLDERS’ EQUITY (amounts in thousand euros) 2004 2005 2006SHAREHOLDERS’ EQUITY Paid up share capital 33,235 33,235 33,235Share premium Account 49,528 49,528 49,528Treasury shares - 113 0 0Reserves 75,487 75,374 77,136Retained earnings 143,855 180,500 184,351TOTAL SHAREHOLDERS’ EQUITY 301,992 338,637 344,250LIABILITIESLong term liabilitiesBond loans 144,695 329,880 287,048Provision for retirement benefit obligation 41,808 45,275 46,488Deferred tax liabilities 19,920 11,141 19,751Other non current liabilities and deferred income 5,206 4,821 5,059Total Long term Liabilities 211,629 391,117 358,346Short term liabilitiesSuppliers and other trade payables 185,239 253,876 102,591Bank loans 224,306 276,143 360,303Provision for retirement benefit obligation 2,324 2,403 2,117Tax payable 32,663 40,570 6,139Deferred income 422 415 411Total Short Term Liabilities 444,954 573,407 471,561TOTAL LIABILITIES 656,583 964,524 829,907TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY 958,575 913,861 1,174,157

❑ Shareholders’ Equity

As of 31.12.2006 Shareholders’ Equity amounted to ª 344,250 thousand compared to 338,637 thousand as of 31.12.2005.An analysis of the development of the shareholders’ equity of the Company from January 1st, 2004 (date of adoption ofthe International Financial Reporting Standards – IFRS) up until December 31st, 2006 is shown below:

SHAREHOLDERS’ EQUITY (amounts in thousand euros) 2004 2005 2006Shareholders’ Equity as of 1.1.2004, 1.1.2005 & 1.1.2006 respectively 237,452 301,992 338,637Plus :Earnings after tax 118,660 130,687 127,474Less: Dividends paid during the accounting year - 55,391 - 94,155 - 121,861Plus: Sale of own shares 1,271 113 0Shareholders’ Equity as of 31.12.2004, 31.12.2005 & 31.12.2006 respectively 301,992 338,637 344,250


❑ Long-Term Liabilities

As of 31.12.2006 the balance of this account amounted to ª 358,346 thousand compared to ª 391,117 thousand as of31.12.2005. The major part of this account mainly relates to two long-term loans of the Company the first of which foran amount of ª 250 million with seven year duration and an option to extend it for two more years (it was received graduallyaccording to the progress of the Hydrocracker project) and the second for an amount of USD 150 million with five yearduration also with an option to extend it for two more years. The agreement for the first loan concerns the funding of theHydrocracker project (signed in July 2004) while it matures on June 30th, 2011 with an option to extend its maturity fortwo more years (until 2013). The balance of this long-term loan as of 31.12.2006 amounts to ª 175 million compared toª 205 million as of 31.12.2005. The repayments already effected concerning this loan total ª 45 million (that is, one ª15 million installment in 2005 and two ª 15 million installments in 2006). Furthermore, an amount of ª 30 million relatingto the two ª 15 million installments payable within 2007 is included in the account "Short Term Bank Loans" (please seerelevant section below). The second loan concerns the refinancing of a long term loan for an amount of USD 150 millionfor the financing of the Company’ s working capital needs of a rather permanent nature. The refinancing was effected inDecember 2005. The new loan matures in December 2010 with an option to extend its repayment for two more years (until2012).

❑ Suppliers and other trade payables

As of 31.12.2006 the balance of "Suppliers and other trade payables" amounted to ª 102,591 thousand compared to ª253,876 thousand as of 31.12.2005.

❑ Short-Term Bank Loans

As of 31.12.2006 the balance of "Short term bank loans" amounted to ª 360,303 thousand compared to ª 276,143thousand as of 31.12.2005. It is clarified that the balances of 31.12.2006 and of 31.12.2005 include respectively an amountof ª 30 million concerning the installments payable within the following accounting period with regard to the bond loanof the Company for an initial amount of ª 250 million. The increase in the short term bank loans within the fiscal year2006 is attributed to the additional working capital requirements mainly due to the boosted production capacity of therefinery, as well as the higher average prices of crude and petroleum products.

❑ Tax payable

The Company tax liabilities were reduced significantly to ª 6,139 thousand as of 31.12.2006 from ª 40,570 thousand asof 31.12.2005. This favorable development is attributed to the netting off between the increased amount paid as taxadvance for 2006 and the actual amount of income tax for this fiscal year given the cut of the corporate tax rate to 29%from 32% previously.



5.4. Company Key Financial Ratios

The key financial ratios of the Company for the period 2004 - 2006 are presented hereunder:

KEY FINANCIAL RATIOS 2004 2005 2006Growth Ratios (%)Turnover (Sales) 24.2% 50.9% 24.2%Earnings Before Tax N/A 13.1% 0.6%Earnings after Tax N/A 10.1% - 2.5%Earnings Margin Ratios (%)Gross Profit Margin (before depreciation) 9.9% 9.0% 6.8%Net Profit Margin Before Tax 8.6% 6.5% 5.2%Net Profit Margin after Tax 6.1% 4.5% 3.5%Return on Capital Ratios (Before Tax) (%)Average Shareholders’ Equity 61.8% 58.9% 55.5%Average Total Assets N/A 17.8% 17.9%Liquidity Ratios (:1)Current Ratio 0.79 0.98 0.94Quick Ratio 0.44 0.45 0.55Efficiency Ratios (number of days)Average Collection Period 22.8 27.4 21.4Average Payment Period 38.4 34.5 10.0Inventory Turnover 34.4 43.8 20.2Times Interest EarnedEBIT / Interest Expense 23.25 10.67 7.07Capital Structure Ratios (:1)Liabilities / Equity 2.17 2.85 2.41Bank Debt / Equity 1.22 1.79 1.88

The turnover growth ratio shows a 24.2 % increase in sales in 2006 compared to 2005. This increase in turnover is explainedby an increase in the Company’ s sales volumes and in the average prices of petroleum products. The EBT and EAT growthratios exhibited an increase of 0.6% and a decrease of 2.5% respectively. The fall of the reported EAT is attributed to theadditional amount concerning previous years’ (2000 – 2004) taxes according to the outcome of the statutory tax audit.

The gross profit margin (before depreciation) was 6.8% in 2006 from 9.0 % in 2005. The net profit margin (before tax)was 5.2% in 2006 compared to 6.5% in 2005 as a result of the development of the gross profit margin.

The return on average shareholders’ equity was maintained at a high level (2006: 55.5% compared to 2005: 58.9%) whilethe same was the case for the return on average total assets (2006: 17.9% compared to 2005: 17.8%).

The current and quick ratios of the Company exhibited a marginal change from 0.98 and 0.45 respectively in 2005 to 0.94and 0.55 in 2006.

The average collection period stood at 21.4 days in 2006 compared to 27.4 days in 2005. The average payment periodwas 10.0 days in 2006 compared to 34.5 days in 2005. Furthermore, inventory turnover was 20.2 days in 2006 comparedto 43.8 days in 2005.

The times interest earned ratio was 7.07 in 2006 compared to 10.67 in 2005.

The liabilities /equity ratio was 2.41 in 2006 compared to 2.85 in 2005 a development attributed mainly to the decreasein suppliers and tax payable as of 31.12.2006. The bank debt/ equity ratio increased in 2006 to 1.88 from 1.79 in 2005due to the increased short term bank debt caused by additional working capital requirements.


DESCRIPTION OF KEY FINANCIAL RATIOSGROWTH RATIOS (%)Turnover (Sales) = [(Current Year’ s Turnover – Previous Year’ s Turnover ) /

Previous Year’ s Turnover ] *100Earnings Before Tax (EBT) = [(Current Year’ s EBT – Previous Year’ s EBT) /

Previous Year’ s EBT] *100Earnings after Tax (EAT) = [(Current Year’ s EAT – Previous Year’ s EAT) /

Previous Year’ s EAT] *100PROFIT MARGIN RATIOS (%)Gross Profit Margin (before depreciation) = [Gross Profit (before depreciation) / Turnover] * 100Net Profit Margin before Tax = [ EBT / Turnover] * 100Net Profit Margin after Tax = [ EAT / Turnover ] * 100RETURN ON CAPITAL RATIOS (%) (before tax) Average Shareholders’ Equity = [Current Year’ s EBT /((Current Year’ s Shareholders’ Equity +

Previous Year’ s Shareholders Equity)/2)]*100Average Total Assets = {(Current Year’s EBT + Interest & related Expenses) / [(Current Year’s

Total Assets + Previous Year’ s Total Assets ) / 2]}*100LIQUIDITY RATIOS (:1)Current Ratio = (Current Assets / Current Liabilities)Quick Ratio = (Current Assets - Inventories) / (Current Liabilities)EFFICIENCY RATIOS (number of days)Receivables = [Debtors’ year end balance / Turnover]* 365Payables = [Suppliers’ year end balance/Cost of Sales (before depreciation)] * 365Inventories = [Closing Stock of inventories/ Cost of Sales (before depreciation)]* 365CAPITAL STRUCTURE RATIOSLiabilities / Equity = (Long-Term Liabilities + Current Liabilities) / Shareholders’ Equity Bank Debt / Equity = (Long-Term Bank Loans + Short-Term Bank Loans + Current portion

of Long Term Bank Loans ) / Shareholders’ Equity TIMES INTEREST EARNED RATIOEarnings before Interest and Tax/Interest Expenses = (EBT + Interest Expenses ) / (Interest Expenses)

5.5. Cash Flow Statements

The Company Cash Flow Statements for the fiscal year 2006 are included in the Appendix of this Annual Report (pleasesee Appendix).



5.6. Share Market Price Development

The closing of the market price of the share of the Company on the last business day of the Athens Exchange of each monthof the year 2006, the total monthly share trading volume (both in quantity and value), and the closing prices of the ASEGeneral and the Oil & Gas Indices on the respective dates, are presented in the following table:

MOTOR OIL HELLAS INDICES CLOSING PRICESDate Share Closing TRANSACTION VOLUME ATHEX OIL &

Price in shares In Euros GENERAL GAS30/12/2005 19.86 3,867,182 76,006,963 3,663.90 5,000.00

31/1/2006 22.66 5,223,673 115,198,054 3,977.84 5,490.0528/2/2006 22.04 6,069,680 135,726,467 4,202.58 5,129.9431/3/2006 22.30 12,901,782 287,819,007 4,122.34 5,209.6528/4/2006 23.10 5,841,684 137,704,912 4,139.96 5,336.7231/5/2006 22.80 8,555,486 191,921,028 3,753.21 4,878.4430/6/2006 20.84 5,131,887 99,463,275 3,693.75 4,711.2031/7/2006 21.80 2,281,515 47,558,205 3,747.98 4,950.4431/8/2006 20.68 3,577,554 76,001,895 3,868.62 4,646.2829/9/2006 20.00 9,863,037 206,962,060 3,931.05 4,393.14

31/10/2006 20.10 8,666,755 173,020,101 4,128.60 4,557.0630/11/2006 19.60 5,974,509 120,232,885 4,220.50 4,491.7429/12/2006 19.52 2,863,645 56,992,494 4,394.13 4,602.04

The following diagrams show the development of the market price of MOTOR OIL share compared to the development ofthe Athens Exchange General Index (diagram no. 1) and the development of the Oil & Gas Index (diagram no. 2).


02/01/2

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FTSE /Athens Oil & gas

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3.800

272625242322212019181716151413121110

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2.800

28

27

26

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5.7. Consolidated Financial Statements

MOTOR OIL prepared and published Consolidated Financial Statements for the first time in 1999 including AVIN OILS.A. with the full consolidation method.

It is clarified that up until March 7th 2002, AVIN OIL was not a MOTOR OIL subsidiary. Nevertheless, nine (9) membersof the MOTOR OIL Board of Directors participated in the Board of AVIN OIL and this fact constituted condition for fullconsolidation even though there was no direct participation. On March 8th, 2002 MOTOR OIL acquired 100% of theshares of AVIN OIL.

In the following tables the development of MOTOR OIL consolidated financial f igures for the accounting years 2004,2005 and 2006 prepared in accordance with the International Financial Reporting Standards is presented.

Apart from MOTOR OIL, which is the parent company, the Consolidated Financial Statements include the following firms:

■ AVIN OIL AVENEP (full consolidation method, participation percentage 100%)

■ OLYMPIC FUEL COMPANY S.A. (net equity method, participation percentage -direct & indirect - 28%)

■ HELLENIC AVIATION FUEL COMPANY –HAFCO- S.A. (net equity method, participation percentage -indirect- 50%)

The regular audit of the Company’ s Consolidated Financial Statements for the fiscal years 2004 – 2006 was conductedby the Auditing Company DELOITTE, 250-254 Kif issias Avenue, Halandri, tel. ++ 30 210 6781100 (Certif ied PublicAccountant in charge Mr. George Cambanis REG No. ICPA - GR - 10761).



5.7.1 Consolidated Turnover and Earnings Review 2004 - 2006

The development of the Consolidated Turnover and Earnings during the accounting years 2004 – 2006 is presented in thefollowing table:

CONSOLIDATED YEARLY EARNINGS(amounts in thousand euros) 2004 2005 2006Turnover (Sales) 2,219,042 3,237,376 3,977,091Less: Cost of Sales (before depreciation)1 -1,986,362 -2,930,085 -3,686,468Gross Profit (before depreciation) 232,680 307,291 290,623% on Turnover 10.49% 9.49% 7.30%Less: Administrative Expenses (before depreciation)1 -21,663 -22,038 -26,882% on Turnover - 0.98% - 0.68% - 0.68%Less: Selling Expenses (before depreciation)1 -38,288 -40,834 -43,947% on Turnover - 1.73% - 1.26% - 1.11%Plus (Less): Other Operating Income (Expenses) 23,339 -14,112 50,249Earnings before Interest, Depreciation and Tax (EBITDA) 196,068 230,307 270,043% on Turnover 8.84% 7.11% 6.79%Plus: Income from Investments / earnings from participations 2,404 1,640 4,282Less: Interest and other related expenses - 8,817 - 14,631 - 35,858Earnings before Depreciation and Tax 189,655 217,316 238,467% on Turnover 8.55% 6.71% 6.00%Less: Depreciation - 21,814 - 25,959 - 47,300Earnings Before Tax (EBT) 167,841 191,357 191,167% on Turnover 7.56% 5.91% 4.81%Less: Income tax 2 -50,289 -59,722 -63,576Earnings after Tax (EAT) 117,552 131,635 127,591% on Turnover 5.30% 4.07% 3.21%Weighted Number of Shares 3 110,715,732 110,776,573 110,782,980Number of Shares at year end 110,782,980 110,782,980 110,782,980

DATA PER SHARE (in euros) 2004 2005 2006Earnings before Depreciation and Tax 4 1.71 1.97 2.15Earnings Before Tax 4 1.51 1.73 1.73Earnings after Tax 4,5 1.06 1.19 1.15

1 The breakdown of the depreciation charges relating to Cost of Sales, Administrative and Selling Expenses is presented in the section"Depreciation" of this chapter of the annual report.

2 The parent company has been audited for tax purposes until the fiscal year 2004, the wholly owned subsidiary AVIN OIL until thefiscal year 2002 and OLYMPIC FUEL COMPANY S.A. until the fiscal year 2000. HAFCO S.A has not been audited for tax purposessince its foundation.

3 For the weighted number of shares the buy back shares in possession of the parent Company were taken into consideration.4 Based on the weighted number of shares. It is noted that due to the small number of buy back shares in possession of the parent

Company during the years 2004 and 2005 the data per share would not differ in case the calculations were made using the numberof shares at the year end.

5 There are no minority interests.

❑ Consolidated Turnover

The Consolidated Turnover for 2006 amounted to ª 3,977.1 million compared to ª 3,237.4 million for 2005 demonstratinga 22.85% increase. This development is mainly attributed to the same factors which contributed to the increase in theturnover of the parent company MOTOR OIL, namely, the increase of the volume of sales and the higher average pricesof the petroleum products.


The Consolidated Turnover breakdown by geographical market (domestic – exports) and type of activity (refining, trading& marketing) for the three year period 2004 – 2006 is presented in the following tables. It is clarified that the breakdownof the consolidated turnover in domestic and export markets, presented in the tables below, has been done on the basisof the location of final destination and consumption of the products.

CONSOLIDATED TURNOVER BY GEOGRAPHICAL MARKET(amounts in thousand euros) 2004 2005 2006Domestic Sales 1,140,902 1,582,867 1,855,371% on consolidated turnover 51.41% 48.90% 46.65%Export sales 1,078,140 1,654,509 2,121,720% on consolidated turnover 48.59% 51.10% 53.35%CONSOLIDATED TURNOVER AGGREGATE 2,219,042 3,237,376 3,977,091

CONSOLIDATED TURNOVER BY TYPE OF ACTIVITY(amounts in thousand euros) 2004 2005 2006Refining 1,483,255 2,008,662 2,859,651% on consolidated turnover 66.84% 62.05% 71.90%Trading & Marketing 735,787 1,228,714 1,117,440% on consolidated turnover 33.16% 37.95% 28.10%CONSOLIDATED TURNOVER AGGREGATE 2,219,042 3,237,376 3,977,091

❑ Cost of Sales (before depreciation) and Gross Profit

In 2006 the consolidated Gross Profit (before depreciation) decreased as an absolute figure by 5.42% compared to 2005(ª 290,623 thousand from ª 307,291 thousand).

The analysis of consolidated Cost of Sales per type of activity is presented in the next table:

(amounts in thousand euros) 2004 2005 2006Refining 1,309,008 1,779,466 2,624,764Trading & Marketing 677,354 1,150,619 1,061,704COST OF SALES (BEFORE DEPRECIATION) TOTAL 1,986,362 2,930,085 3,686,468

❑ Operating Expenses (Administrative and Selling)

Total operating expenses (before depreciation) at consolidated level amounted to ª 70,829 thousand in 2006 comparedto ª 62,872 thousand in 2005 (an increase of 12.66%).

❑ Other Operating Income (Expenses)

Other operating income (expenses) relates mainly to the net difference of foreign exchange gains and losses which evolveduring the accounting year from the receivables and payables of the Group denominated in foreign currency.

❑ Earnings before Interest, Depreciation and Tax (EBITDA)

The consolidated Earnings Before Interest, Depreciation and Tax (EBITDA) increased in 2006 by 17.25% and amountedto ª 270,043 thousand from ª 230,307 thousand in 2005.

❑ Income from Investments / Earnings from Participations

Income from investments in 2006 amounted to ª4.5 million out of which an amount of ª1.5 million concerned interest earnedfrom bank deposits, an amount of ª 0.3 million concerned dividends received from associates and, an amount of ª 2.7 millionconcerned the net gains from the sale of part of the stake of the Group in "KORINTHOS POWER S.A." (Chapter 6 of this annualreport). The losses from related companies amounted to ª 0.2 million relating to the share of the Group in the "HELLENICAVIATION FUEL COMPANY (HAFCO) S.A" and "OLYMPIC FUEL COMPANY S.A" reported results for 2006.



❑ Financial Expenses

In 2006 the financial expenses on a consolidated basis amounted to ª 35,858 thousand from ª 14,631 thousand in 2005.This development is attributed to the additional working capital requirements because of the higher average prices ofcrude and petroleum products as well as the increased volume of sales, the rising trend of interest rates during 2006 and,the increase of average bank debt of the parent Company due to the completion of the Hydrocracker investment.

❑ Depreciation

The allocation of depreciation charge on the various cost accounts is presented below:

DEPRECIATION BREAKDOWN(amounts in thousand euros) 2004 2005 2006Cost of sales 16,857 22,062 42,806Administrative expenses 946 634 694Selling expenses 4,011 3,263 3,800TOTAL DEPRECIATION CHARGE 21,814 25,959 47,300

❑ Consolidated Earnings Before Tax

Consolidated Earnings Before Tax amounted to ª 191,167 thousand in 2006 compared to ª 191,357 thousand in 2005(marginal decrease of 0.1%) confirming the Group’ s high level of profitability during an exceptionally difficult year for theOil & Gas sector.

❑ Tax

The income tax at Group level in 2006 amounted to ª 63,576 thousand from ª 59,722 thousand in 2005. The total taxamount for the year 2006 corresponds to the income tax of MOTOR OIL and AVIN OIL while including an additionalamount of ª 10,186 thousand relating to the outcome of the statutory tax audit of five fiscal years (2000 – 2004) of theparent Company.

5.7.2. Review of Consolidated Balance Sheet Statements

The development of the balance of the Assets and Liabilities accounts of the Consolidated Balance Sheet Statements asof 31.12 of the years 2004 – 2006 is presented in the next tables:

ASSETS

(amounts in thousand euros) 2004 2005 2006Fixed AssetsGoodwill 16,200 16,200 16,200Other intangible assets 2,888 3,553 4,129Tangible Assets 596,519 733,951 729,751Investments in subsidiaries and associates 3,219 3,664 3,646Investments available for sale 927 927 927Other long term receivables 11,159 11,965 11,158Total Fixed Assets 630,912 770,260 765,811Current AssetsInventories 163,176 314,344 187,522ReceivablesTrade receivables 120,357 215,449 226,623Other short term receivables 73,257 89,037 100,097Total Receivables 193,614 304,486 326,720Cash and cash equivalents 43,599 9,211 8,785Total Current Assets 400,389 628,041 523,027TOTAL ASSETS 1,031,301 1,398,301 1,288,838


❑ Goodwill and Other Intangible Assets

The amount of ª 16,200 thousand relates to the goodwill which arose from the acquisition of AVIN OIL in March 2002.

The balance of "Other Intangible Assets" relates to expenses for the purchase of software incurred by the parent Companyand the value of the rights to operate gas outlets on leasehold property of the wholly owned subsidiary AVIN OIL.

❑ Tangible Assets

An analysis of "Tangible Assets" as of 31.12.2006 is included in note 14 of the disclosures on the consolidated financialstatements for the fiscal year 2006 (please see Appendix). It is clarified that the noted cumulative ª 43 million increase inthe balance (at cost) of the Tangible Assets (ª 970.4 million as of 31.12.2006 compared to ª 927.4 million as of 31.12.2005)relates mainly to the investments completed by the parent Company during 2006 (please see section 4.9 of this annualreport).

❑ Investments in Subsidiaries and Associates & available for sale

"Investments in Subsidiaries and Associates" as of 31.12.2006 amounted to ª 3,646 thousand and concerns the value ofthe participation of the Group in the companies "OLYMPIC FUEL COMPANY S.A" (ª 2,950 thousand) and "HELLENICAVIATION FUEL COMPANY –HAFCO- S.A" (ª 67 thousand), as these values evolve based on the Net Equity method, aswell as the value of the participation of the Group in the companies "KORINTHOS POWER S.A" (ª 60 thousand), "AVINALBANIA S.A" (ª 510 thousand) and "BRODERICO LTD" (ª 60 thousand).

"Investments available for sale" as of 31.12.2006 amounted to ª 927 thousand and concerns the value of the participationof the Group in the company "ATHENS AIRPORT FUEL PIPELINE COMPANY S.A".

The percentages of the participation of the Group in the share capital of the above companies are presented below:

Company’ s Legal Name % participationOLYMPIC FUEL COMPANY S.A 28%HELLENIC AVIATION FUEL COMPANY (HAFCO) S.A 50%KORINTHOS POWER S.A 30%ATHENS AIRPORT FUEL PIPELINE COMPANY S.A 16%AVIN ALBANIA S.A 100%BRODERICO LTD 100%

❑ Other Long Term receivables

As of 31.12.2006 "Other long term receivables" was ª 11,158 thousand from ª 11,965 thousand as of 31.12.2005 concerningmainly prepaid expenses and guarantees.

❑ Inventories

As of 31.12.2006 the value of the inventories, on a consolidated basis, amounted to ª 187,522 thousand compared to ª314,344 thousand as of 31.12.2005. It is emphasized that a firm policy of the parent company is to always keep low levelof inventories.

❑ Trade Receivables

As of 31.12.2006 "Trade Receivables", on a consolidated basis, amounted to ª 226,623 thousand compared to ª 215,449thousand as of 31.12.2005.



❑ Other short term receivables

"Other short term receivables" as of 31.12.2006 amounted to ª 100,097 thousand compared to ª 89,037 thousand asof 31.12.2005 and mainly concerns receivables from VAT return and prepaid expenses.

❑ Cash and cash equivalents

As of 31.12.2006 cash balances, on a consolidated basis, amounted to ª 8,785 thousand compared to ª 9,211 thousandas of 31.12.2005 and concern current bank accounts and time deposits.

LIABILITIES & SHAREHOLDERS’ EQUITY

(amounts in thousand euros) 2004 2005 2006SHAREHOLDERS’ EQUITY Paid up share capital 33,235 33,235 33,235Share premium Account 49,528 49,528 49,528Treasury shares - 113 0 0Reserves 76,319 76,393 79,521Retained earnings 138,989 176,395 178,997TOTAL SHAREHOLDERS’ EQUITY 297,958 335,551 341,281

LIABILITIESLong term liabilitiesBond loans 174,697 359,880 317,048Provision for retirement benefit obligation 45,010 48,637 50,038Deferred tax liabilities 20,399 11,660 20,248Other non current liabilities and deferred income 6,250 6,007 6,317Total Long term Liabilities 246,356 426,184 393,651Short term liabilitiesSuppliers and other trade payables 202,790 274,641 123,388Bank loans 248,166 317,935 421,543Provision for retirement benefit obligation 2,324 2,526 2,160Tax payable 33,285 41,049 6,404Deferred income 422 415 411Total Short Term Liabilities 486,987 636,566 553,906TOTAL LIABILITIES 733,343 1,062,750 947,557TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY 1,031,301 1,398,301 1,288,838

❑ Consolidated Shareholders’ Equity

As of 31.12.2006 Consolidated Shareholders’ Equity amounted to ª 341,281 thousand compared to ª 335,551 thousandas of 31.12.2005. An analysis of the development of the Consolidated Shareholders’ Equity from January 1st, 2004 (dateof adoption of the International Financial Reporting Standards – IFRS) up until December 31st, 2006 is shown below:

CONSOLIDATED SHAREHOLDERS’ EQUITY (amounts in ’000 euros) 2004 2005 2006Opening Shareholders’ Equity as of 1.1.2004, 1.1.2005 & 1.1.2006 234,526 297,958 335,551Plus : Consolidated Earnings after tax 117,552 131,635 127,591Less: Dividends paid during the accounting year (parent company) - 55,391 - 94,155 - 121,861Plus: Sale of treasury shares (parent company) 1,271 113 0Closing Shareholders’ Equity as of 31.12.2004, 31.12.2005 & 31.12.2006 297,958 335,551 341,281


❑ Long-Term Liabilities

As of 31.12.2006 "Long-term Liabilities" amounted to ª 393,651 thousand compared to ª 426,184 thousand as of31.12.2005. The substance of this balance relates to the two bond loans (one for an initial amount of ª 250 million andone for an amount of USD 150 million) entered into by the parent company and detailed in section 5.3 of this annualreport. The balance of "Bank Loans" both as of 31.12.2005 and 31.12.2006 includes a bond loan for an amount of ª 30million received by AVIN OIL in 2004 schechuled to be fully repaid in 2008 with an option to extend its repayment for onemore year.

❑ Suppliers and other trade payables

As of 31.12.2006 "Suppliers and other trade payables", on a consolidated basis, amounted to ª 123,388 thousandcompared to ª 274,641 thousand as of 31.12.2005.

❑ Short-Term Bank Loans

As of 31.12.2006 "Short Term Bank Loans", on a consolidated basis, increased to ª 421,543 thousand from ª 317,935thousand as of 31.12.2005. This short term debt increase is attributed to the enhanced production capacity of the parentcompany and also to the additional working capital requirements of both MOTOR OIL and AVIN OIL due to higher averageprices of crude and petroleum products.

❑ Tax Payable

As of 31.12.2006 "Tax Payable", on a consolidated basis, amounted to ª 6,404 thousand compared to ª 41,049 thousandas of 31.12.2005 due to the netting off between the increased amount paid by the parent company and its subsidiary astax advance for 2006 and the actual amount of income tax for this fiscal year (the corporate tax rate was cut to 29% from32% previously).

5.7.3. Consolidated Cash Flow Statements

The Consolidated Cash Flow Statements for the fiscal year 2006 are included in the Appendix of this Annual Report (pleasesee Appendix).



6. Αffiliated companies

6.1. Subsidiaries

AVIN OIL Industrial, Commercial & Maritime Oil Company S.A.

AVIN OIL Industrial, Commercial & Maritime Oil Company S.A was founded in Athens in 1977 and currently its headquartersare located at Maroussi (12A Irodou Attikou str., 151 24). The main activity of the company is the sale of liquid fuels,lubricants, LPG and asphalt which have a wide array of applications (transportation, industrial and household use).

As of today the share capital of AVIN OIL amounts to ª 5,709,480 divided into 1,942,000 common registered shares ofa nominal value ª 2.94 each. The last corporate action of the company concerned a share capital increase of ª 509,208with the issuance of 173,200 new common registered shares of a nominal value ª 2.94 each. This share capital increasewas effected through capitalization of reserves following a decision of the Annual Ordinary General Meeting dated June5th, 2006 and was certified by the Board of Directors on June 9th, 2006.

The sole shareholder of the company is MOTOR OIL (HELLAS) S.A which in March 2002 purchased 100% of the sharesof AVIN OIL in the context of a relevant condition set in the process of the introduction of its shares on the Athens StockExchange.

The acquisition of AVIN OIL gave MOTOR OIL a strong arm in the retail sector of fuels and lubricants since the acquiredcompany ranks fourth among its competitors in the Greek market with a market share of approximately 9%.

The gas station network of AVIN OIL numbers approximately 550 units and several representatives all over Greece whileat the same time the company owns tank-trucks and employs specialized technical personnel.

Moreover, AVIN OIL has built and operates a twin grand station at Megara (70 km outside Athens), located on the newsection of the Athens–Corinth highway, which, besides fuelling, offers banking, catering, and car maintenance services, atboth sides of the road.

The primary objective of AVIN OIL is the qualitative enhancement of its gas station network and the strengthening of itsnew endeavors. The participation of the company as a founding shareholder in the companies "HAFCO S.A" and "OLYMPICFUEL COMPANY S.A" (section 6.2 of this chapter) fall within the context of the above mentioned objective.

AVIN OIL sells fuels in the Greek market mainly through its privately owned storage premises located at Aghii Theodoroiin Corinth. The operation of the premises started in 1987 and constitute a modern truck loading terminal fully equippedwith safety and environment protection systems.

The major supplier of AVIN OIL is MOTOR OIL (section 6.5 of this chapter).

The aggregate personnel headcount of AVIN OIL as of 31.12.2006 amounted to 214 employees (2005: 212 employees).

The company is audited by certified public accountants (Auditing firm DELOITTE, Certified Public Accountant in chargefor the year 2006 Mr. George Cambanis, ICPA - GR - 10761). The AVIN OIL yearly f inancial statements (based on theInternational Financial Reporting Standards – IFRS), the report of the auditor and the management report of the Boardof Directors for the accounting year 2006 (Sales: ª 795.5 million (+ 12.8%), Earnings after Tax: ª 4.3 million (- 2.5%),Total Assets: ª 170.8 million, Shareholders’ Equity: ª 18.1 million) are available at the AVIN OIL site at the electronicaddress www.avinoil.gr.


6.2. Companies included in the Consolidated Financial Statements

A. OLYMPIC FUEL COMPANY S.A.

The company was founded in October 1998 at Athens with duration for 24 years (until 6.10.2022). The objective of thecompany, according to article 3 of its Codified Memorandum and Articles of Association, is to design, finance, constructand operate the aircraft fuel supply system and the storage facilities at the New International Athens Airport "EleftheriosVenizelos" at Spata of Attica, as well as to engage in other similar endeavors.

Following the decision of the Extraordinary General Meeting dated 12.12.2000, the headquarters of the company wererelocated to Spata County and specifically to privately owned premises situated inside the Athens International Airportarea on the 5th km of the Spata– Loutsa Avenue. The fixed assets of "OLYMPIC FUEL COMPANY S.A" include storagetanks of total capacity 24,000 m³, pipelines of total length 14km, 125 fuel supply pits and, a fully automated system tocater for fuel flow control as well as fire and environmental protection (hydrant system). The OFC premises as well as itsmethods of operation have been certified by IATA (International Air Transport Association), by the Athens InternationalAirport, and by all international and national competent authorities.

The share capital of "OLYMPIC FUEL COMPANY S.A" amounts to ª 6,457,000 divided into 220,000 common registeredshares of nominal value ª 29.347each while its current shareholder structure is as follows:

Shareholder No of Shares % Participation OLYMPIC AIRWAYS SERVICES S.A. 145,200 66%MOTOR OIL (HELLAS) CORINTH REFINERIES S.A 30,800 14%AVIN OIL 30,800 14%BELGIAN FUELLING AND SERVICES COMPANY S.A./N.V. 11,000 5%HANSA CONSULT INGENIEURE GESSELSCHAFT MBH 2,200 1%Total 220,000 100%

The company is audited by Certified Public Accountants (Auditors in charge Mr. Vasilios Petrides, ICPA-GR-11981 andMrs Eva Aggelides ICPA-GR-16331 both of SOL S.A.). The key financial figures of the company for the year 2006, basedon the preliminary f inancial statements available to MOTOR OIL at the time of the preparation of the consolidatedfinancial statements of the latter, are as follows: Sales: ª 9.8 million, Earnings after Tax: ª 0.93 million, Total Assets:ª28.97 million, Shareholders’ Equity: ª 9.4 million.

B. HAFCO S.A.

This company was founded in August 2002 with headquarters at Maroussi of Athens (12A Irodou Attikou str., 151 24Maroussi), duration for 50 years and legal name "HAFCO S.A". The objective of the Company, according to article 3 ofits Codified Memorandum and Articles of Association, is to render ground services relating to aircraft fuel supply atvarious airports located in Greece and abroad and in general to involve into jet fuel trading.

The share capital of "HAFCO S.A" amounts to ª 1,457,000 divided into 145,700 common registered shares of nominalvalue ª 10 each. The sole company shareholders are the companies AVIN OIL and TEXACO each of which is in possessionof 72,850 common registered shares (50% of the share capital). The last corporate action of the company concerned ashare capital increase for an amount of ª 500,000 with the issuance of 50,000 new common registered shares of a nominalvalue ª 10 each. This share capital increase was effected in cash following a decision of the Annual Ordinary GeneralMeeting dated June 30h, 2006 and was certified by the Board of Directors on July 6th, 2006.

The company is audited by Certified Public Accountants (Auditor in charge Mr. Efstratios Paparides of SOL S.A, ICPA-GR-14351). The key financial figures of the company for the year 2006, based on the preliminary financial statementsavailable to MOTOR OIL at the time of the preparation of the consolidated financial statements of the latter, are as follows:Sales: ª 8,371 thousand, Earnings (losses) for the accounting period: (ª 320 thousand), Total Assets: ª 1,692 thousand,Shareholdersª Equity: ª 170 thousand. It is clarified that HAFCO S.A commenced its activities in 2004.



6.3. Related companies

ATHENS AIRPORT FUEL PIPELINE COMPANY S.A.

The company was founded in May 2000 at Maroussi (199 Kifisias Ave., zip code 151 25) with duration for 50 years. Theobjective of the ATHENS AIRPORT FUEL PIPELINE COMPANY S.A, according to article no. 3 of its Codified Memorandumand Articles of Association, is the execution of all works and activities relating to the design, f inancing, construction,completion, operation, maintenance and handling of the pipeline and its premises for the carrying of aircraft fuel fromthe "Hellenic Petroleum" (EL-PE) refinery at Aspropyrgos to the Athens International Airport "Eleftherios Venizelos" atSpata. The length of the pipeline is 53 km, the diameter is 26 cm and the advancement capacity is 300 m3 / hour.

This investment provides many environmental benefits as it contributes to the reduction of air pollution as well as thetraffic relief at the greater Athens area (the aggregate distance covered every year by trucks carrying aircraft fuel to theairport was estimated at 2,000,000 km and the number of travels at 18,000). Additionally, thanks to the undergroundrouting of the pipeline both the natural environment and the settlement will be unaffected.

The operation of the pipeline started in the beginning of 2004 and caters successfully for the fulfillment of jet fuel needswhile the economic viability of the project is guaranteed as a result of increasing demand for jet fuel at the airport area.

The share capital of the "ATHENS AIRPORT FUEL PIPELINE COMPANY S.A" amounts to ª 5,782,355 divided into1,973,500 common registered shares of nominal value ª 2.93 each.

The current shareholder structure of the company is as follows:

Shareholder Number of Shares % ParticipationHELLENIC PETROLEUM S.A 986,750 50%MOTOR OIL (HELLAS) CORINTH REFINERIES S.A 315,760 16%OLYMPIC AIRWAYS SERVICES S.A 335,495 17%ATHENS INTERNATIONAL AIRPORT S.A 335,495 17%Total 1,973,500 100%

The company is audited by certif ied public accountants (Auditing f irm DELOITTE, Auditor in charge Mr. TelemahosGeorgopoulos ICPA-GR-19271) while it prepared financial statements based on the International Financial ReportingStandards (IFRS) for the first time in 2006. For this fiscal year its Sales amounted to ª 3,835 thousand and the Earningsafter Tax (EAT) to ª 1,328 thousand.


6.4. Other Subsidiaries

A. AVIN ALBANIA S.A.

This company was founded on July 19th, 2001 by its sole shareholder AVIN OIL at Tirana of Albania. The share capital ofAVIN ALBANIA amounts to ª 481,000. The objective of the company is the sale of petroleum products and the promotionof AVIN OIL exports in Albania. AVIN ALBANIA has not commenced its operations.

B. KORINTHOS POWER S.A.

This company was founded on January 5th, 2005 at Maroussi of Athens (Irodou Attikou 12A street, 151 24) with durationfor 50 years. The objective of the company according to article 4 of its Codified Memorandum and Articles of Associationis the construction, operation and business exploitation of an electricity power production unit in the region of AghiiTheodoroi of the county of Corinth.

The initial share capital of the company amounted to ª 200,000 divided into 20,000 registered shares of nominal valueª 10 each. The founding shareholders of "CORINTH POWER S.A" were MOTOR OIL and AVIN OIL with participationpercentages 70% and 30% respectively. On November 29th, 2006 AVIN OIL sold its entire "KORINTHOS POWER S.A"stake to "IBERDROLA S.A.". The same day MOTOR OIL sold 8,000 "KORINTHOS POWER S.A" shares (a stake of 40%)to "IBERDROLA S.A.".

As a result of the share transactions described above, "IBERDROLA S.A." with 14,000 shares (a stake of 70%) and "MOTOROIL (HELLAS) S.A." with 6,000 shares (a stake of 30%) became the sole shareholders of "KORINTHOS POWER S.A.".

Following a decision of the Extraordinary General Shareholders Meeting dated January 5th, 2007 the share capital of thecompany increased by ª 500,000 with the issuance of 50,000 new registered shares of a nominal value ª 10 each. Theshare capital increase was effected in cash and was certified by the Board of Directors of "KORINTHOS POWER S.A."on February 12th, 2007.

Subsequent to the above mentioned share capital increase, the share capital of the company amounts to ª 700,000 dividedinto 70,000 registered shares of nominal value ª 10 each and the shareholders "IBERDROLA S.A." and "MOTOR OIL(HELLAS) S.A." own 49,000 (70%) and 21,000 (30%) shares respectively.

"KORINTHOS POWER S.A." owns a license for the generation of electricity for a combined cycle unit of 395.9 MW withfuel natural gas at Aghii Theodoroi. The company participated in the tender called by the Hellenic Transmission SystemOperator (HTSO - DESMHE) on February 22nd, 2007.



6.5. BoD report on inter-company transactions according to corporate governance law3016/2002 (par. 4, article 2)

The Board of Directors of MOTOR OIL compiled the annual report on inter-company business transactions with its relatedcompanies, according to article 42e of the Greek Codified Law 2190/1920, as provided for by article 2 par. 4 of CorporateGovernance Law 3016/2002. The content of the report appears below:

MOTOR OIL (HELLAS) S.A sales to and purchases from its related companies:

(amounts in thousand euros)Company MOH Yearly Receivables Balance MOH Yearly Liabilities Balance

Sales to 31.12.05 31.12.06 Purchasesfrom 31.12.05 31.12.06

AVIN OIL S.A 448,105 33,831 34,917 14 3 3OLYMPIC FUEL COMPANY S.A 0 0 0 0 0 0HAFCO S.A. 1,891 0 0 0 0 0MOTOR OIL HOLDINGS S.A 0 0 0 0 0 0PETROSHARES LTD. 0 0 0 0 0 0PETROVENTURE HOLDINGS LTD 0 0 0 0 0 0

The transactions with AVIN OIL and HAFCO S.A concern usual business activities. The legal entities Petroventure HoldingsLtd and Petroshares Ltd are controlled by Motor Oil Holdings S.A.


7. Future Prospects

7.1. Goals & Strategy

The Company’s primary objective for the years to come is to establish itself as a major crude oil refining and tradingenterprise in the greater Eastern Mediterranean region. Interim goals on the way to achieving this primary objective are:

Ι) Maximization of the refining margin. The following tactics are adopted for the attainment of this goal:

■ Meet all latest product specifications on time and in the most economical way utilizing the most up-to-date technology.

■ Improve energy efficiency and thus reduce refinery operating cost.

■ Fully automate refinery processing.

■ Improve production efficiency and availability of production units.

ΙI) Effective promotion and sale of all refinery products at the optimum price. This goal can be attained through thefollowing strategic moves:

■ Maximize Company market share in the domestic market through the improvement of the distribution system.

■ Expand sales of Company products to developing markets which present good potential of high profit margins.

ΙII) Operating the refinery with the highest possible degree of safety and placing heavy emphasis on the protection ofthe environment. This goal will be attained through the following tactic:

■ Continuation of investments which help to maintain the high level of programs pertaining to the environment, thehygiene and the safety at workplace.



7.2. Prospects

At the same time with its pursuance to establish itself in the oil refining and trading sector, MOTOR OIL investigatespossible ways to achieve differentiation by entering into new activities and endeavours. To this end the Company proceededwith the following actions during the three year period 2004 - 2006:

■ It entered into a contract with the Natural Gas Corporation (DEPA) which caters for the connection of MOTOR OILto the natural gas network in the future. The contract was signed in 2004. The natural gas will be used for the thermaland energy needs of the refinery as well as for feedstock for the New Hydrogen Production Unit while at the same timeit is expected to contribute to the improvement of the environmental conditions of the refinery.

■ It formed along with the wholly owned subsidiary AVIN OIL a Société Anonyme with the legal name "KORINTHOSPOWER S.A". In March 2004 the newly formed company was granted a license for the generation of electricity for acombined cycle unit of 395.9 MW with fuel natural gas at Aghii Theodoroi of the county of Corinth. In 2006 theSpanish firm "IBERDROLA S.A." bought the AVIN OIL stake and part of MOTOR OIL stake (please see section 6.4)a fact which led to the current shareholder structure of the company being: "IBERDROLA S.A." 70% - "MOTOR OIL(HELLLAS) S.A." 30%. "KORINTHOS POWER S.A." has obtained the relevant installation permit and on February22nd, 2007 participated in the tender called by the Hellenic Transmission System Operator (HTSO – DESMHE inGreek) for the conclusion of capacity availability agreements of a new electricity generation unit.

In the context of strategic moves aiming at the maximization of the ref inery gross profit margin of the Company thefollowing investment project is in the examination and analysis phase:

■ Construction of a Propane Deasphalting Unit and Upgrading of the Lubricants Complex. Upon completion of thisproject the refinery of the Company will be endowed with the capacity to produce Brightstock, a high value-addedproduct, complementing its basic lubricants portfolio of products already produced while improving their majorqualitative features at the same time. Being the unique lubricants’ producer in Greece, the Company will furtherenhance its competitive advantage upon completion of this investment.

As regards the key activity of the Company, the international prices for the various types of crude and petroleum productsfor the period 2004-2006 are presented in the next tables:

INTERNATIONAL CRUDE OIL PRICES ($/bbl)2004 2005 2006

Dated Brent 38.28 54.53 65.18Arab Light,fob 34.44 50.22 60.83Urals,cif Med 34.67 50.66 61.37Iranian Heavy,fob 33.09 48.39 59.14Es Sider,fob 36.62 52.67 63.53

INTERNATIONAL PETROLEUM PRODUCT PRICES ($/MT)2004 2005 2006

Naphtha 352 449 537Unleaded Gasoline 388 515 610Jet Kero / A1 (Aviation fuels) 379 546 633Automotive Diesel 363 538 600Heating Gasoil 346 497 577Fuel Oil 1% 169 260 301Fuel Oil 3.5% 141 221 280

The above prices set the basis for the profit margins of the oil refining and trading companies at international level.


The following table presents the refining margin of the refineries in the Mediterranean region compared to that of MOTOROIL during the last three year period:

REFINING MARGIN ($/MT)2004 2005 2006

MOTOR OIL (HELLAS) S.A 53.9 72.8 60.9Complex Cracking Mediterranean Refinery 56.8 63.4 57.3Complex Hydrocracking Mediterranean Refinery (*) 63.6

(*) The Hydrocracking complex of MOTOR OIL commenced its operation in November 2005 and for this reason comparable figuresare offered only for the year 2006.

Demand estimates per product category are presented in detail in the following table:

ESTIMATES FOR TOTAL DEMAND PER PRODUCT CATEGORY (in thousand MT) 2004 2005 2006 2007 (Εst.)

Lubricants 160 144 140 140Asphalt 418 275 391 410LPG 382 355 346 339Jet Kero / A1 (Aviation fuels) 1,198 1,228 1,290 1,303Gasoline 3,823 3,965 4,034 4,091Fuel Oil 5,420 5,376 5,599 5,627Diesel (Automotive – Heating) 7,973 7,908 8,007 7,927TTOOTTAALL 1199,,337744 1199,,225511 1199,,880088 1199,,883388% Change over previous year - 0.4% - 0.6% 2.9% 0.2%

Demand for asphalt is expected to maintain its increasing trend with total consumption nearing the levels witnessed duringhigh construction activity periods such as the year 2004 when Greece organised the Olympic Games. Demand for LPG isanticipated to be limited due to gradual replacement by natural gas. Increase is expected in Jet Fuel demand following theinternational pattern. Demand for gasoline increases every year on the back of a series of catalysts (new registrations ofhigh cubic capacity engine vehicles, greater use of the Attika Ring Road and the Rio–Antirrio Bridge by the drivers). Theintroduction of natural gas in the energy balance of the country influences domestic demand for fuel oil. Nevertheless,during 2006 any reduction in demand for fuel oil was counterbalanced by heavy consumption of bunkering fuel oil whichis expected to increase further in 2007. The penetration of natural gas also affects demand for heating diesel althoughweather conditions during winter months remain the key factor influencing consumption. Finally, demand for automotivediesel is anticipated to increase in 2007 compared to 2006.




8. Dividend policy

The dividend policy is determined taking into consideration the Company earnings and the need for capital expenditurefor new investment projects.

Over time the Company’ s dividend payout ratio is notably high and the respective percentages for the years 2004, 2005and 2006 are shown in the table below:

DIVIDEND POLICY(amounts in thousand Euros) 2004 2005 2006Earnings after Tax 118,660 130,687 127,474Total Dividend amount 94,165 121,861 127,400Dividend as % on Earnings after Tax 79.36 % 93.25 % 100.00 %

The Board of Directors will propose to the Annual General Meeting of Company Shareholders the distribution of anaggregate dividend of ª 1.15 per share from 2006 Company earnings.

It is noted that on 12.12.2006 the Company proceeded with the distribution of an interim dividend of ª 0.20 per share,based on the summary financial statement of 30.9.2006, as advance payment for the year 2006 dividend.

According to the Greek law, the minimum amount of dividend paid to Company shareholders equals at least 35% of netearnings (after the deduction of the corresponding income tax and the legal reserves), or 6% of the paid up share capital,whichever of these two amounts is greater.

The payment of the dividend is effected within two months from the date of the Annual Ordinary General Meeting ofCompany Shareholders which approved the Company’s financial statements.

The Company aims to continue the high dividend payout policy.


9. Appentix

■ INVITATION TO THE ANNUAL GENERAL MEETING OF MAY 30TH, 2007

■ MOTOR OIL 2006 PUBLISHED FIGURES AND INFORMATION(PARENT COMPANY AND CONSOLIDATED)

■ MOTOR OIL 2006 FINANCIAL STATEMENTS (PARENT COMPANY ANDCONSOLIDATED) – REPORT OF THE AUDITORS

■ BoD REPORT ON MOTOR OIL 2006 (PARENT COMPANY AND CONSOLIDATED)FINANCIAL STATEMENTS

■ INFORMATION BULLETIN COMPILED IN ACCORDANCE WITH THE LAW 3401/2005

appendix ■ 59


INVITATIONΤΟ THE ANNUAL ORDINARY GENERAL SHAREHOLDERS’ MEETING

Pursuant to a resolution of the Board of Directors and according to the provisions of the Law and of the Company’sCodified Memorandum and Articles of Association, the Company’s shareholders are invited to the Annual Ordinary GeneralMeeting on Wednesday May 30, 2007 at 12:30 hours, to be held at the NJV Athens Plaza Hotel, at A2 Vassileos GeorgiouStreet – Syntagma Square - Municipality of Athens, for discussion and decision on the following matters:

1. Presentation and approval of the Financial Statements of the Company (on parent Company and Consolidated basis)for the accounting year 2006 (1.1.2006-31.12.2006), together with the accompanying Reports of the Board of Directorsand the Auditors.

2. Discharge of the members of the Board of Directors and the Auditors from any liability for damages with regard tothe Financial Statements and activities during the above mentioned accounting year.

3. Election of the Members of the new Board of Directors as the term of service of the existing Board expires.

4. Approval of a dividend.

5. Election of two Chartered Auditors, that is, one ordinary and one substitute, for the accounting year 2007 and approvalof their fees.

6. Approval of the fees paid to the Members of the Board of Directors for the accounting year 2006 and pre-approvalof the fees for the accounting year 2007.

7. Amendment of article 18 (Convocation of BoD meetings, Quorum – Majority) and article 20 (Administration of theCompany) of the Company’ s Memorandum and Articles of Association and specifically:

a. Amendment of paragraph 2 of article 18 regarding Board quorum requirements in order to declare that a quorumexists and therefore the Board convenes its meetings legitimately when the number of directors present in personor by proxy equals half the Board’ s headcount plus one (instead of 7 as provisioned for in the Memorandumcurrently in force), with the constraint that the number of directors present cannot be less than three. For thecalculation of the required quorum number any fraction of an integer will be ignored.

b. Amendment of the clauses e) and f) up to n) of paragraph 2 of article 20 in order to abolish the provision for amonetary ceiling above which the Board has an authorization.

8. Approval of the formation of a taxed reserve for an amount of ª 1,763,181 concerning the capital expenditure of theCompany in the investment project "Installation of New Equipment for Waste Heat Recovery".

Shareholders who wish to participate in the Annual Ordinary Shareholders’ Meeting, according to the Law and theCompany’s Codified Memorandum and Articles of Association, must block their shares, through the User of their SecuritiesAccount at the Dematerialised Securities System (S.A.T) or the Hellenic Exchanges S.A (previously Central SecuritiesDepository), and deposit the relevant receipt together with the legal documentation, at least 5 days prior to the date ofthe Ordinary Shareholders’ Meeting.

Maroussi, April12th, 2007.

THE BOARD OF DIRECTORS

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The financial statements of the Group and of the Company, set out on pages 64 to 100, were approved atthe Board of Directors’ Meeting dated Thursday February 22, 2007 and are subject to the approved of theAnnual Ordinary General Meeting of the Company Shareholders.

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The notes on pages 68-100 are an integral part of these Financial Statements

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Documents

Annual Report2006 - Motor Oil Hellas€¦ · · 2011-12-19All information and data contained in the Annual Report are complete, true, ... the consolidated financial statements include