The international drybulk shipping industry is a vital link in international trade, with oceangoing vessels representing the most efficient, and often the only method of transporting large volumes of basic commodities and finished products. In 2004, approximately 2.5 billion tons of dry bulk cargo was transported by sea, comprising more than one-third of all international seaborne trade.

The balance of seaborne trade involves the transport of liquids or gases in tanker vessels and includes products such as oil, refined oil products and chemicals. In terms of seaborne trade volumes (and the shipping ton-miles generated), the dominant influence is that of the major bulk trades, which include coal, iron ore and grains. During 2004 global seaborne trade in major bulks was an estimated 1.5 billion tons, representing 61% of the estimated total seaborne drybulk trade.

The balance of dry bulk trade, minor bulks, subdivides into two types of cargo. Firstly secondary bulks or free-flowing cargo, such as agricultural cargoes, bauxite and alumina, fertilizers and cement. Second are the so-called neo-bulks, non free-flowing or part manufactured cargo. These are principally forest products and steel products including scrap. The latter are mainly transported in small vessels of less than 40,000 dwt. In 2004, total trade in minor bulks amounted to an estimated 958 million tons.

The demand for drybulk carrier capacity is determined by the underlying demand for commodities transported in drybulk carriers, which in turn is influenced by trends in the global economy. Seaborne dry bulk trade increased by slightly more than 2%, on an average annual basis during the 1980s and 1990s. However, this rate of growth has increased dramatically in recent years. Between 1999 and 2004, trade in all drybulk commodities increased from 1.97 billion tons to 2.46 billion tons, an increase of 25% overall.

Initially, most of the vessels in the Company’s fleet will be subject to time charters. A time charter is a contract for the use of a vessel for a fixed period of time at a specified daily rate. Under a time charter, the vessel owner provides crewing and other services related to the vessel’s operation, the cost of which is included in the daily rate and the customer is responsible for substantially all of the vessel voyage costs. The initial term for a time charter commences upon the vessel’s delivery. All of the Company’s customers have rights to terminate their charters prior to expiration of the original term in specified circumstances. “Hire” rate refers to the basic payment from the customer for the use of the vessel. Hire is payable every fifteen days, in advance, in Dollars as specified in the charter, less a specified commission for the chartering broker and approximately 3.75% of the hire rate as an address commission for the charterer.

Hire payments may be reduced, or under some charters, the Company must pay liquidated damages, if the vessel does not perform to certain of its specifications, such as if the average vessel speed falls below a guaranteed speed or the amount of fuel consumed to power the vessel under normal circumstances exceeds a guaranteed amount. The Company is responsible for vessel operating expenses, which include crewing, repairs and maintenance, insurance, stores, lube oils and communication expenses. The Company is also directly responsible for providing all of these items and services. The customer generally pays the voyage expenses, which include all expenses relating to particular voyages, including the cost of any bunkers, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. When the vessel is “off-hire” — or not available for service — the customer generally is not required to pay the hire rate, and the Company is responsible for all costs. Under all of its time charters, the Company is responsible for the technical management of the vessel and for maintaining the vessel, periodic drydocking, cleaning and painting and performing work required by regulations. Each time charter terminates automatically upon loss of the vessel. In addition, the Company is generally entitled to suspend performance (but with the continuing accrual to its benefit of hire payments and default interest) and, under most time charters, terminate the charter if the customer defaults in its payment obligations. Under most of the Company’s time charters, either party may also terminate the charter in the event of war in specified countries or in locations that would significantly disrupt the free trade of the vessel or if the vessel is requisitioned by its flag state for more than three months. The Company intends to employ some of its vessels in the spot charter market. A spot market voyage charter is generally a contract to carry a specific cargo from a load port to a discharge port for an agreed upon total fee. Under spot market voyage charters, the vessel owner pays voyage expenses such as port, canal and fuel costs.

When the Company employs its vessels on spot market voyage charters it will incur expenses that include port and canal charges and bunker expenses. The Company expects that port and canal charges and bunker expenses will represent a relatively small portion of its vessels’ overall expenses.

Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. The Company’s vessel operating expenses will increase with the enlargement of its fleet.