Container shipping is responsible for the movement of a wide range of goods from one part of the world to another in a unitized form. Participants in the container shipping industry include “liner” companies, who operate container shipping services, containership owners, often known as charter owners, who own containerships and charter them out to the operators, and shippers who require the seaborne movement of containerized goods. Container shipping represents an important and increasingly significant part of the global seaborne movement of goods. In 2004, global container trade stood at an estimated 96 million TEU. As of June 1, 2005, the global containership fleet contained 3,463 fully cellular containerships, with a total standing slot capacity of over 7.4 million TEU, while the total container capable fleet capacity stood at over 9.4 million TEU. Growth in the liner shipping market has been relatively rapid in comparison with other major shipping sectors such as tankers and bulkcarriers. In terms of loaded containers moved from origin to destination, estimated global container trade moved from 50.8 million TEU in 1997 to 95.8 million TEU in 2004, a compound average annual growth rate of 9.5%. In the last three years demand for container shipping has accelerated strongly, with estimated growth in world container trade reaching 10.5% in 2002, 11.3% in 2003 and 13.9% in 2004.

The Transpacific and the Far East-Europe are the world’s two largest container trades. In recent years, it has been Chinese trade which has driven most of the increase in volumes out of Asia. Chinese trade remains the key factor behind expanding container trade, and in 2004, estimated trade volumes on the eastbound Transpacific trade grew by approximately 17% and on the westbound Far East-Europe trade by approximately 16%. In addition to the impact of China on global container trade, other recent growth areas include trade out of Brazil, trade in and out of Russia and the Baltic, and intra-Asian trade, which has also been largely influenced by growth in Chinese trade.

Each of the vessels in the Company’s contracted fleet is subject to a long-term time charter. 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; the charterer is responsible for substantially all of the vessel voyage costs. The Company has two general forms of time charters. The initial term for a time charter commences on the vessel’s delivery. Under all of the Company’s time charters, the charterer may also extend the term for periods in which the vessel is off-hire. One of the Company’s charterers has a very specific right to terminate its charters prior to expiration of the original term. Five of the charters for the 4250 TEU vessels have initial terms of ten years each with options, exercisable by the charterer, to extend the term of each charter for an additional two years. The two charters for the 8500 TEU vessels have initial terms of 12 years with options, in favor of the charterer, to extend the term of each charter for an additional three years. The charters for the remaining three 4250 vessels currently in operation and the two 4250 TEU vessels under construction have terms of 12 years. The two 9600 TEU vessels under construction are subject to charters with terms of 12 years.

“Hire rate” refers to the basic payment from the charterer for the use of the vessel. Under all of the Company’s time charters, hire is payable, in advance, in U.S. dollars, as specified in the charter. If a vessel’s speed is reduced as a result of a defect or breakdown of the hull, machinery or equipment, hire payments under all of the Company’s time charters may be reduced by the cost of the time lost and extra fuel consumed. Under both forms of time charter, when the vessel is “off-hire,” or not available for service, the charterer generally is not required to pay the hire rate, and the Company is responsible for all costs, including the cost of fuel bunkers unless the charterer is responsible for the circumstances giving rise to the lack of availability.

Under each of its time charters, the Company is responsible for the operation and management of each vessel that includes maintaining the vessel, periodic drydocking, cleaning and painting and performing work required by regulations.

Ship operating expenses increased 70.1%, or $1.0 million, to $2.5 million for the three months ended March 31, 2005, from $1.5 million for the three months ended March 31, 2004.

Depreciation on the vessels increased 64.4%, or $1.4 million, to $3.5 million for the three months ended March 31, 2005, from $2.1 million for the three months ended March 31, 2004.

General and administrative expenses were $0.1 million for the three months ended March 31, 2004 and 2005.

Interest expense increased 64.4%, or $1.9 million, to $4.8 million for the three months ended March 31, 2005, from $2.9 million for the three months ended March 31, 2004.