|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington, D.C. 20549            
|                                  
|FORM 20-F                         
|                                  

|           |                                                                                                                                   
|---------- | ----------------------------------------------------------------------------------------------------------------------------------
|(Mark One)
|o          | Registration
 statement pursuant to Section 12(b) or (g) of the Securities Exchange Act of
 1934                                  
|           |                                                                                                                                   
|x          | Annual
 Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the fiscal year ended December 31, 2010
|           |                                                                                                                                   
|o          | Transition
 Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                         
|           |                                                                                                                                   
|o          | Shell
 Company Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
 of 1934                                     

|                                                       |                                  | 
|------------------------------------------------------ | -------------------------------- | 
|                                                       | Commission File Number 001-34077 | 
|                                                       |                                  | 
|SAFE BULKERS, INC.                                    
|(Exact name of Registrant as specified in its charter)

Not Applicable(Translation of Registrants name into English)

Republic of The Marshall Islands(Jurisdiction of incorporation or organization)

30-32 Avenue Karamanli
P.O. Box 70837
16605 Voula
Athens, Greece
(Address of principal executive offices)

Dr. Loukas Barmparis
President
30-32 Avenue Karamanli
P.O. Box 70837
16605 Voula
Athens, Greece
Telephone : +30 210 899 4980
Facsimile : +30 210 895 4159
(Name, Address, Telephone Number and
Facsimile Number of Company contact person)


|                                                                                
|--------------------------------------------------------------------------------
|                                                                                
|Securities registered or to be registered pursuant to
 Section 12(b) of the Act:

|                                                                           |                     |                                                   |  |                                          
|-------------------------------------------------------------------------- | ------------------- | ------------------------------------------------- |  | -----------------------------------------
|                                                                           | Title of Each Class |                                                   |  | Name of Each Exchange on Which Registered
|                                                                           |                     |                                                   |  |                                          
|Common
 Stock, $0.001 par value per share
 Preferred stock purchase rights |                     | New
 York Stock Exchange
 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the
Act: None

Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report. As of December 31, 2010, there were 65,876,507 shares of the
registrants common stock outstanding.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. YesoNox

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. YesoNox

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YesxNoo

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):

| |                          |                    |                        | 
| | ------------------------ | ------------------ | ---------------------- | 
| | Large accelerated filero | Accelerated filerx | Non-accelerated filero | 

Indicate by check mark which basis of accounting the
registrant has used to prepare the financial statements included in this
filing.

U.S. GAAP x International Financial Reporting Standards as issued by the
International Accounting Standards BoardoOthero

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the registrant
has elected to follow. Item 17oItem 18o

If this is an annual report, indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). YesoNox

---



TABLE OF CONTENTS

|                               |                                                                               |     |     
|------------------------------ | ----------------------------------------------------------------------------- | --- | ----
|                               |                                                                               |     | Page
|                               |                                                                               |    
|ABOUT
 THIS REPORT             |                                                                               | ii 
|FORWARD-LOOKING
 STATEMENTS    |                                                                               | ii 
|                               |                                                                               |     |     
|PART
 I                        |                                                                               | 1  
|                               |                                                                               |     |     
|ITEM
 1.                       | IDENTITY
 OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        |     | 1   
|ITEM
 2.                       | OFFER
 STATISTICS AND EXPECTED TIMETABLE                                      |     | 1   
|ITEM
 3.                       | KEY
 INFORMATION                                                              |     | 1   
|ITEM
 4.                       | INFORMATION
 ON THE COMPANY                                                   |     | 18  
|ITEM
 4A.                      | UNRESOLVED
 STAFF COMMENTS                                                    |     | 29  
|ITEM
 5.                       | OPERATING
 AND FINANCIAL REVIEW AND PROSPECTS                                 |     | 29  
|ITEM
 6.                       | DIRECTORS,
 SENIOR MANAGEMENT AND EMPLOYEES                                   |     | 45  
|ITEM
 7.                       | MAJOR
 SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |     | 49  
|ITEM
 8.                       | FINANCIAL
 INFORMATION                                                        |     | 54  
|ITEM
 9.                       | THE
 OFFER AND LISTING                                                        |     | 55  
|ITEM
 10.                      | ADDITIONAL
 INFORMATION                                                       |     | 55  
|ITEM
 11.                      | QUANTITATIVE
 AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |     | 68  
|ITEM
 12.                      | DESCRIPTION
 OF SECURITIES OTHER THAN EQUITY SECURITIES                       |     | 68  
|                               |                                                                               |     |     
|PART
 II                       |                                                                               | 69 
|                               |                                                                               |     |     
|ITEM
 13.                      | DEFAULTS,
 DIVIDEND ARREARAGES AND DELINQUENCIES                              |     | 69  
|ITEM
 14.                      | MATERIAL
 MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |     | 69  
|ITEM
 15.                      | CONTROLS
 AND PROCEDURES                                                      |     | 69  
|ITEM
 16A.                     | AUDIT
 COMMITTEE FINANCIAL EXPERT                                             |     | 71  
|ITEM
 16B.                     | CODE
 OF ETHICS                                                               |     | 71  
|ITEM
 16C.                     | PRINCIPAL
 ACCOUNTANT FEES AND SERVICES                                       |     | 71  
|ITEM
 16D.                     | EXEMPTIONS
 FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |     | 71  
|ITEM
 16E.                     | PURCHASES
 OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |     | 72  
|ITEM
 16F.                     | CHANGE
 IN REGISTRANTS CERTIFYING ACCOUNTANT                                 |     | 73  
|ITEM
 16G.                     | CORPORATE
 GOVERNANCE                                                         |     | 73  
|                               |                                                                               |     |     
|PART
 III                      |                                                                               | 74 
|                               |                                                                               |     |     
|ITEM
 17.                      | FINANCIAL
 STATEMENTS                                                         |     | 74  
|ITEM
 18.                      | FINANCIAL
 STATEMENTS                                                         |     | 74  
|ITEM
 19.                      | EXHIBITS                                                                      |     | 74  
|                               |                                                                               |     |     
|INDEX
 TO FINANCIAL STATEMENTS |                                                                               | F-1

---



ABOUT THIS REPORT

In
this annual report, Safe Bulkers, the Company, we, us and our are
sometimes used for convenience where references are made to Safe Bulkers, Inc.
and its subsidiaries (as well as the predecessors of the foregoing). These
expressions are also used where no useful purpose is served by identifying the
particular company or companies. Our affiliated management company, Safety
Management Overseas S.A., a company incorporated under the laws of the Republic
of Panama, is sometimes referred to in this annual report as Safety
Management or our Manager.

FORWARD-LOOKING STATEMENTS

All
statements in this annual report that are not statements of historical fact are
forward-looking statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995. The disclosure and analysis set forth
in this annual report includes assumptions, expectations, projections,
intentions and beliefs about future events in a number of places, particularly
in relation to our operations, cash flows, financial position, plans,
strategies, business prospects, changes and trends in our business and the
markets in which we operate. These statements are intended as forward-looking
statements. In some cases, predictive, future-tense or forward-looking words
such as believe, intend, anticipate, estimate, project, forecast,
plan, potential, may, should, and expect and similar expressions are
intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. In addition, we and our representatives
may from time to time make other oral or written statements which are
forward-looking statements, including in our periodic reports that we file with
the Securities and Exchange Commission (SEC), other information sent to our
security holders, and other written materials.

| |                                                                               |                                                                                                                                                                                                                                                                                
| | ----------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Forward-looking statements
 include, but are not limited to, such matters as:
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | future operating or
 financial results and future revenues and expenses;                                                                                                                                                                                                       
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | future, pending or recent
 acquisitions, business strategy, areas of possible expansion and expected
 capital spending or operating expenses;                                                                                                                                  
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | availability of key
 employees, crew, length and number of off-hire days, drydocking requirements
 and fuel and insurance costs;                                                                                                                                               
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | general market conditions
 and shipping industry trends, including charter rates, vessel values and
 factors affecting supply and demand;                                                                                                                                      
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | our financial condition and
 liquidity, including our ability to make required payments under our credit
 facilities, comply with our loan covenants and obtain additional financing in
 the future to fund capital expenditures, acquisitions and other corporate
 activities;
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | the overall health and
 condition of the U.S. and global financial markets, including the value of
 the U.S. dollar relative to other currencies;                                                                                                                              
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | our expectations about
 availability of vessels to purchase, the time that it may take to construct
 and deliver new vessels or the useful lives of our vessels;                                                                                                               
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | our continued ability to
 enter into period time charters with our customers and secure profitable
 employment for our vessels in the spot market;                                                                                                                             
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | our expectations relating
 to dividend payments and ability to make such payments;                                                                                                                                                                                             
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | our ability to leverage our
 Managers relationships and reputation within the drybulk shipping industry
 to our advantage;                                                                                                                                                    
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | our anticipated general and
 administrative expenses;                                                                                                                                                                                                                          
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | environmental and
 regulatory conditions, including changes in laws and regulations or actions
 taken by regulatory authorities;                                                                                                                                               
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | risks inherent in vessel operation,
 including terrorism, piracy and discharge of pollutants;                                                                                                                                                                                  
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | potential liability from
 future litigation; and                                                                                                                                                                                                                               
| |                                                                               |                                                                                                                                                                                                                                                                                
| | ●                                                                             | other factors discussed in
 Item 3. Key Information  D. Risk Factors of this annual report.                                                                                                                                                                                 

We
caution that the forward-looking statements included in this annual report
represent our estimates and assumptions only as of the date of this annual
report and are not intended to give any assurance as to future results.
Assumptions, expectations, projections, intentions and beliefs about future
events may, and often do, vary from actual results and these differences can be
material. The reasons for this include the risks, uncertainties and factors
described under Item 3. Key Information  D. Risk Factors. As a result, the
forward-looking events discussed in this annual report might not occur and our
actual results may differ materially from those anticipated in the
forward-looking statements. Accordingly, you should not unduly rely on any
forward-looking statements.

We
undertake no obligation to update or revise any forward-looking statements
contained in this annual report, whether as a result of new information, future
events, a change in our views or expectations or otherwise. New factors emerge
from time to time, and it is not possible for us to predict all of these
factors. Further, we cannot assess the impact of each such factor on our
business or the extent to which any factor, or combination of factors, may
cause actual results to be materially different from those contained in any
forward-looking statement.

ii

---



PART I

ITEM 1. IDENTITY OF DIRECTORS,
SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND
EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATIONA.
Selected Financial Data

The
following table presents selected combined and consolidated financial and other
data of Safe Bulkers, Inc. for each of the five years in the five year period
ended December 31, 2010. The table should be read together with Item 5.
Operating and Financial Review and Prospects. The selected combined and
consolidated financial data of Safe Bulkers, Inc. is a summary of, is derived
from, and is qualified by reference to, our audited combined and consolidated
financial statements and notes thereto, which have been prepared in accordance
with U.S. generally accepted accounting principles, or U.S. GAAP.

Our audited consolidated statements of income, stockholders equity and cash
flows for the years ended December 31, 2008, 2009 and 2010 and the consolidated
balance sheets at December 31, 2009 and 2010, together with the notes thereto,
are included in Item 18. Financial Statements and should be read in their
entirety.

|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|------------------------------------------------------------------- |  | ------------------------------------------------ | ---------- | ---- | - | ---------- | - | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                    |  | Year Ended December 31,                          |           
|                                                                    |  |                                                  |           
|                                                                    |  | 2006                                             |            | 2007 |   | 2008       |   | 2009 |            | 2010 |  
|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |  
|                                                                    |  | (In thousands of U.S. dollars except share data) |           
|STATEMENT OF INCOME                                                 |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Revenues                                                            |  | $                                                | 99,040     |      | $ | 172,057    |   | $    | 208,411    |      | $ | 168,400    |   | $ | 159,698    |  
|Commissions                                                         |  |                                                  | (3,731     | )    |   | (6,209     | ) |      | (7,639     | )    |   | (3,794     | ) |   | (2,678     | )
|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Net revenues                                                        |  |                                                  | 95,309     |      |   | 165,848    |   |      | 200,772    |      |   | 164,606    |   |   | 157,020    |  
|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Voyage expenses                                                     |  |                                                  | (420       | )    |   | (179       | ) |      | (273       | )    |   | (577       | ) |   | (610       | )
|Vessel operating expenses                                           |  |                                                  | (13,068    | )    |   | (12,429    | ) |      | (17,615    | )    |   | (19,628    | ) |   | (23,128    | )
|Depreciation                                                        |  |                                                  | (9,553     | )    |   | (9,583     | ) |      | (10,614    | )    |   | (13,893    | ) |   | (19,673    | )
|General and administrative expensesManagement fee to related party |  |                                                  | (1,006     | )    |   | (1,177     | ) |      | (4,420     | )    |   | (4,436     | ) |   | (4,880     | )
|Third party expenses                                                |  |                                                  |           |      |   | (2,477     | ) |      | (3,625     | )    |   | (2,610     | ) |   | (2,138     | )
|Early redelivery cost                                               |  |                                                  | (150       | )    |   | (21,438    | ) |      | (565       | )    |   | 74,951     |   |   | 132        |  
|Loss on asset purchase cancellations                                |  |                                                  |           |      |   |           |   |      |           |      |   | (20,699    | ) |   |           |  
|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Gain on sale of assets                                              |  |                                                  | 37,015     |      |   | 112,360    |   |      |           |      |   |           |   |   | 15,199     |  
|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Operating income                                                    |  |                                                  | 108,127    |      |   | 230,925    |   |      | 163,660    |      |   | 177,714    |   |   | 121,922    |  
|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Interest expense                                                    |  |                                                  | (6,140     | )    |   | (8,225     | ) |      | (16,392    | )    |   | (10,342    | ) |   | (6,423     | )
|Other finance costs                                                 |  |                                                  | (116       | )    |   | (161       | ) |      | (408       | )    |   | (442       | ) |   | (330       | )
|Interest income                                                     |  |                                                  | 775        |      |   | 1,290      |   |      | 1,492      |      |   | 2,164      |   |   | 2,627      |  
|Loss on derivatives                                                 |  |                                                  | (1,963     | )    |   | (704       | ) |      | (19,509    | )    |   | (4,416     | ) |   | (8,164     | )
|Foreign currency
     (loss)/gain                                   |  |                                                  | (3,279     | )    |   | (13,759    | ) |      | (9,501     | )    |   | 838        |   |   | 281        |  
|Amortization and write-off of deferred finance charges              |  |                                                  | (180       | )    |   | (166       | ) |      | (131       | )    |   | (106       | ) |   | (266       | )
|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Net income                                                          |  | $                                                | 97,224     |      | $ | 209,200    |   | $    | 119,211    |      | $ | 165,410    |   | $ | 109,647    |  
|                                                                    |  |                                                  |            |      |   |            |   |      |            |      |   |            |   |   |            |  
|Earnings per share, basic and diluted                               |  | $                                                | 1.78       |      | $ | 3.84       |   | $    | 2.19       |      | $ | 3.03       |   | $ | 1.73       |  
|Cash dividends declared per share                                   |  |                                                  |           |      |   | 7.04       |   | $    | 3.83       |      | $ | 0.60       |   | $ | 0.60       |  
|Weighted average number of shares outstanding, basic and diluted    |  |                                                  | 54,500,000 |      |   | 54,500,000 |   |      | 54,500,889 |      |   | 54,510,587 |   |   | 63,300,466 |  

---



|                                                      |  |                                                  |         |      |   |          |   |      |          |      |   |          |   |   |          |  
|----------------------------------------------------- |  | ------------------------------------------------ | ------- | ---- | - | -------- | - | ---- | -------- | ---- | - | -------- | - | - | -------- | -
|                                                      |  | Year Ended December 31,                          |        
|                                                      |  |                                                  |        
|                                                      |  | 2006                                             |         | 2007 |   | 2008     |   | 2009 |          | 2010 |  
|                                                      |  |                                                  |         |      |   |          |   |      |          |      |  
|                                                      |  | (In thousands of U.S. dollars except share data) |        
|OTHER
 FINANCIAL DATA                                 |  |                                                  |         |      |   |          |   |      |          |      |   |          |   |   |          |  
|Net cash (used in)/provided
 by operating activities  |  | $                                                | (12,806 | )    | $ | 278,506  |   | $    | 259,597  |      | $ | 211,338  |   | $ | 118,147  |  
|Net cash (used in)/provided
 by investing activities  |  |                                                  | (33,835 | )    |   | 88,416   |   |      | (148,223 | )    |   | (191,863 | ) |   | (131,709 | )
|Net cash provided by/(used
 in) financing activities  |  |                                                  | 46,641  |      |   | (366,922 | ) |      | (83,672  | )    |   | (28,742  | ) |   | 60,136   |  
|Net increase/(decrease) in
 cash and cash equivalents |  |                                                  |        |      |   |         |   |      | 27,702   |      |   | (9,267   | ) |   | 46,574   |  

|                                                   |  |                    |         |      |   |         |  |      |         |      |   |         |  |  |         | 
|-------------------------------------------------- |  | ------------------ | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  |  | ------- | 
|                                                   |  | As of December 31, |        
|                                                   |  |                    |        
|                                                   |  | 2006               |         | 2007 |   | 2008    |  | 2009 |         | 2010 |  
|                                                   |  |                    |         |      |   |         |  |      |         |      |  
|BALANCE SHEET DATA                                 |  |                    |         |      |   |         |  |      |         |      |   |         |  |  |         | 
|Total current assets                               |  | $                  | 282,021 |      | $ | 98,883  |  | $    | 88,086  |      | $ | 105,648 |  |  | 104,276 | 
|Total fixed assets                                 |  |                    | 253,448 |      |   | 308,340 |  |      | 387,296 |      |   | 467,513 |  |  | 640,258 | 
|Other non-current assets                           |  |                    | 314     |      |   | 434     |  |      | 6,900   |      |   | 55,563  |  |  | 60,838  | 
|Total assets                                       |  |                    | 535,783 |      |   | 407,657 |  |      | 482,282 |      |   | 628,724 |  |  | 805,372 | 
|Total current liabilities                          |  |                    | 172,275 |      |   | 43,984  |  |      | 70,863  |      |   | 65,551  |  |  | 52,983  | 
|Derivative liabilities                             |  |                    |        |      |   | 242     |  |      | 21,716  |      |   | 15,510  |  |  | 9,787   | 
|Long-term debt, net of current portion             |  |                    | 134,457 |      |   | 306,267 |  |      | 413,483 |      |   | 420,994 |  |  | 467,070 | 
|Time charter discount                              |  |                    |        |      |   | 2,766   |  |      |        |      |   |        |  |  |        | 
|Unearned revenueLong-term                         |  |                    |        |      |   |        |  |      | 11,765  |      |   | 29,450  |  |  | 31,399  | 
|Total owners/shareholders equity/(deficit)       |  |                    | 229,051 |      |   | 54,398  |  |      | (35,545 | )    |   | 97,219  |  |  | 244,133 | 
|Total liabilities and owners/shareholders equity |  |                    | 535,783 |      |   | 407,657 |  |      | 482,282 |      |   | 628,724 |  |  | 805,372 | 

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks Inherent in Our Industry and Our Business

The international drybulk shipping industry is cyclical and
volatile, and charter rates have decreased substantially since their highs in
the middle of 2008; these factors may lead to further reductions and volatility
in our charter rates, vessel values and results of operations.

The drybulk shipping industry
is cyclical with attendant volatility in charter rates, vessel values and
profitability. For example, the degree of charter hire rate volatility among
different types of drybulk carriers has varied widely. After reaching
historical highs in mid-2008, charter hire rates for Panamax and Capesize
drybulk carriers reached near historically low levels at the end of 2008, and
have since recovered somewhat. Because from time to time we may charter some of
our vessels pursuant to short-term time charters, we may be exposed to changes
in spot market and short-term charter rates for drybulk carriers and such
changes may affect our earnings and the value of our drybulk carriers at any
given time. Although at February 20, 2011, 12 of our 16 drybulk vessels were
deployed or scheduled to be deployed on period time charters with more than one
year of remaining term, if low charter rates in the drybulk market prevail
during periods when we must replace our existing charters, it will have an
adverse effect on our revenues, profitability, cash flows and our ability to
comply with the financial covenants in our loan and credit facilities. In
addition, we have contracted to acquire nine newbuilds scheduled to be
delivered through 2013, seven of which do not currently have contracted
charters. We may be unable to successfully charter our vessels in the future or
renew existing charters at rates sufficient to allow us to meet our obligations
or pay any dividends.

2

---



The factors affecting the
supply and demand for drybulk vessels are outside of our control and are
difficult to predict with confidence. As a result, the nature, timing,
direction and degree of changes in industry conditions are also unpredictable.
Factors that influence demand for vessel capacity include:

|                                                               |   |                                                                                                                                                                                                               
|-------------------------------------------------------------- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                               | ● | demand for and production
 of drybulk products;                                                                                                                                                               
|                                                               |   |                                                                                                                                                                                                               
|                                                               | ● | global and regional
 economic and political conditions;                                                                                                                                                       
|                                                               |   |                                                                                                                                                                                                               
|                                                               | ● | environmental and other
 regulatory developments;                                                                                                                                                             
|                                                               |   |                                                                                                                                                                                                               
|                                                               | ● | the distance drybulk
 cargoes are to be moved by sea; and                                                                                                                                                     
|                                                               |   |                                                                                                                                                                                                               
|                                                               | ● | changes in seaborne and
 other transportation patterns.                                                                                                                                                       
|                                                               |   |                                                                                                                                                                                                               
|Factors that influence the
 supply of vessel capacity include:
|                                                              
|                                                               | ● | the number of newbuild
 deliveries, which among other factors relates to the ability of shipyards to
 deliver newbuilds by contracted delivery dates and the ability of purchasers
 to finance such newbuilds;
|                                                               |   |                                                                                                                                                                                                               
|                                                               | ● | the scrapping rate of older
 vessels;                                                                                                                                                                         
|                                                               |   |                                                                                                                                                                                                               
|                                                               | ● | port and canal congestion;                                                                                                                                                                                    
|                                                               |   |                                                                                                                                                                                                               
|                                                               | ● | the number of vessels that
 are in or out of service, including due to vessel casualties; and                                                                                                                 
|                                                               |   |                                                                                                                                                                                                               
|                                                               | ● | changes in environmental
 and other regulations that may limit the useful lives of vessels.                                                                                                                   

We anticipate that the future
demand for our drybulk vessels and, in turn, drybulk charter rates, will be
dependent, among other things, upon economic growth in the worlds developing
economies, including China, India, Brazil and Russia, seasonal and regional
changes in demand, changes in the capacity of the global drybulk vessel fleet
and the sources and supply of drybulk cargo to be transported by sea. A decline
in demand for commodities transported in drybulk vessels or an increase in
supply of drybulk vessels could cause a significant decline in charter rates,
which could materially adversely affect our business, financial condition and
results of operations.

The drybulk carrier charter market remains significantly
below its historical high in 2008, and has continued to be volatile during 2009
and 2010, which has and may continue to adversely affect our revenues, earnings
and profitability and our ability to comply with our loan covenants.

The revenues, earnings and
profitability of companies in our industry are affected by the charter rates
that can be obtained in the market, which is volatile and has experienced
significant declines since its highs in the middle of 2008. For example, the
Baltic Drybulk Index, or BDI, declined from a high of 11,793 in May 2008 to a
low of 663 in December 2008, which represents a decline of 94% within a single
calendar year. The BDI fell over 70% during October 2008 alone. During 2009,
the BDI remained volatile, reaching a low of 772 on January 5, 2009 and a high
of 4,661 on November 19, 2009. During 2010, the BDI remained volatile, reaching
a low of 1,700 on July 15, 2010 and a high of 4,209 on May 26, 2010. The
decline and volatility in charter rates in the drybulk market also affects the
value of our drybulk vessels, which follows the trends of drybulk charter
rates, and earnings on our charters, and similarly affects our cash flows,
liquidity and compliance with the covenants contained in our loan agreements.

A negative change in the economic conditions in the United
States, the European Union or the Asian Region, especially in China, Japan or
India, could reduce drybulk trade and demand, which could reduce charter rates
and have a material adverse effect on our business, financial condition and
results of operations.

We expect that a significant
number of the port calls made by our vessels will involve the loading or
discharging of raw materials in ports in the Asian region, particularly China,
Japan and India. As a result, a negative change in economic conditions in any
Asian country, particularly China, Japan or, to some extent, India, can have a
material adverse effect on our business, financial position and results of
operations, as well as our future prospects, by reducing demand and, as a
result, charter rates and affecting our ability to charter our vessels. In past
years, China and India have had two of the worlds fastest growing economies in
terms of gross domestic product and have been the main driving force behind
increases in marine drybulk trade and the demand for drybulk vessels. If economic
growth declines in China, Japan, India and other countries in the Asian region,
we may face decreases in such drybulk trade and demand. Moreover, a slowdown in
the United States and Japanese economies or the economies of the European Union
or certain Asian countries will likely adversely affect economic growth in
China, India and elsewhere. Such an economic downturn in any of these countries
could have a material adverse effect on our business, financial condition and
results of operations.

3

---



An oversupply of drybulk vessel capacity may lead to
reductions in charter rates and profitability.

The market supply of drybulk
vessels has been increasing, and the number of drybulk vessels on order as of
December 31, 2010, was approximately 49% of the then-existing global drybulk
fleet in terms of dwt, with deliveries expected mainly during the succeeding 24
months, although available data with regard to cancellations of existing
newbuild orders or delays of newbuild deliveries are not always accurate. We
have also seen significantly fewer vessels being scrapped at levels observed
during the economic crisis. As a result, the drybulk fleet remains an aged
fleet that has not decreased in number. An oversupply of drybulk vessel
capacity, will likely result in a reduction of charter hire rates. We will also
be exposed to changes in charter rates with respect to our existing fleet and
our remaining newbuilds depending on the ultimate growth of the global drybulk
fleet. If we cannot enter into period time charters on acceptable terms, we may
have to secure charters in the spot market, where charter rates are more
volatile and revenues are, therefore, less predictable, or we may not be able
to charter our vessels at all. Four vessels in our current fleet will be
available for employment in the first half of 2011, and we have not yet
arranged charters for three of our newbuild vessels scheduled to be delivered
to us within 2011. In addition, a material increase in the net supply of
drybulk vessel capacity without corresponding growth in drybulk vessel demand
could have a material adverse effect on our fleet utilization and our charter
rates generally, and could, accordingly, materially adversely affect our
business, financial condition and results of operations.

The market values of our vessels may decrease, which could
cause us to breach covenants in our credit and loan facilities, and could have
a material adverse effect on our business, financial condition and results of
operations.

Our credit and loan
facilities, which are secured by mortgages on our vessels, require us to comply
with specified collateral coverage ratios and satisfy certain financial and
other covenants, including those that are affected by the market value of our
vessels. The market value of drybulk vessels has generally experienced high
volatility. The market prices for secondhand and newbuild drybulk vessels in
the recent past have declined from historically high levels to low levels
within a short period of time. The market value of our vessels fluctuates
depending on a number of factors, including:

| |   |                                                                         
| | - | ------------------------------------------------------------------------
| | ● | general economic and market
 conditions affecting the shipping industry;
| |   |                                                                         
| | ● | prevailing level of charter
 rates;                                     
| |   |                                                                         
| | ● | competition from other
 shipping companies;                             
| |   |                                                                         
| | ● | configurations, sizes and
 ages of vessels;                             
| |   |                                                                         
| | ● | cost of newbuilds;                                                      
| |   |                                                                         
| | ● | governmental or other
 regulations; and                                 
| |   |                                                                         
| | ● | technological advances.                                                 

We were in compliance with
our covenants as of December 31, 2009 and December 31, 2010. However, as of
December 31, 2008, we were in breach of certain covenants relating to the
maintenance of minimum security vessel values under certain credit facilities
and subsequently entered into agreements with the relevant lenders eliminating
the effects of these defaults and confirming that certain actions did not give
rise to a default. If the market value of our vessels or newbuilds declines, we
may breach some of the covenants contained in our credit and loan facilities.
If we do breach such covenants and we are unable to remedy or our lenders
refuse to waive the relevant breach, our lenders could accelerate our
indebtedness and foreclose on the vessels in our fleet securing those credit
facilities. As a result of cross-default provisions contained in our loan
agreements, this could in turn lead to additional defaults under our loan
agreements and the consequent acceleration of the indebtedness thereunder and
the commencement of similar foreclosure proceedings by other lenders. If our
indebtedness were accelerated in full or in part, it would be difficult for us
to refinance our debt or obtain additional financing and we could lose our
vessels if our lenders foreclose their liens, which would adversely affect our
ability to continue our business.

The international drybulk shipping industry
is highly competitive, and we may not be able to compete successfully for
charters with new entrants or established companies with greater resources.

We employ our vessels in a
highly competitive market that is capital intensive and highly fragmented.
Competition arises primarily from other vessel owners, some of which have
substantially greater resources than we do. Competition for the transportation
of drybulk cargo by sea is intense and depends on price, customer
relationships, operating expertise, professional reputation and size, age,
location and condition of the vessel. Due in part to the highly fragmented
market, additional competitors with greater resources could enter the drybulk
shipping industry and operate larger fleets through consolidations or
acquisitions and may be able to offer lower charter rates than we are able to
offer, which could have a material adverse effect on our fleet utilization and,
accordingly, our profitability.

4

---



Rising crew costs may adversely affect our
profits.

Crew costs are a significant
expense for us under our charters. Recently, the limited supply of and
increased demand for well-qualified crew, due to the increase in the size of
the global shipping fleet, has created upward pressure on crewing costs, which we
generally bear under our period time and spot charters. Increases in crew costs
may adversely affect our profitability.

We are subject to regulation and liability
under environmental laws that could require significant expenditures and affect
our cash flow and net income.

Our business and the
operation of our vessels are regulated under international conventions,
national, state and local laws and regulations in force in the jurisdictions in
which our vessels operate, as well as in the country or countries of their
registration, in order to protect against potential environmental impacts.
Government regulation of vessels, particularly in the area of environmental
requirements, can be expected to become more stringent in the future and could
require us to incur significant capital expenditures on our vessels to keep
them in compliance, or even to scrap or sell certain vessels altogether. For
example, various jurisdictions that do not already regulate management of
ballast waters are considering regulating the management of ballast waters to
prevent the introduction of non-indigenous species that are considered
invasive. Such regulations could, if implemented, require us to make changes to
the ballast water management plans we currently have in place and to install
new equipment on board. Various jurisdictions are also regulating or
considering the regulation of emissions of sulfur oxides, nitrogen oxides and
greenhouse gases from vessels. Additional conventions, laws and regulations may
be adopted which could limit our ability to do business or increase the cost of
our doing business and which may materially adversely affect our business,
financial condition and results of operations. Because such conventions, laws
and regulations are often revised, or the required additional measures for
compliance are still under development, we cannot predict the ultimate cost of
complying with such conventions, laws and regulations or the impact thereof on
the resale prices or useful lives of our vessels. We are also required by
various governmental and quasi-governmental agencies to obtain certain permits,
licenses, certificates and financial assurances with respect to our operations.
These requirements can also affect the resale prices or useful lives of our
vessels or require reductions in cargo capacity, ship modifications or
operational changes or restrictions. Failure to comply with these requirements
could lead to decreased availability of or more costly insurance coverage for
environmental matters or result in the denial of access to certain
jurisdictional waters or ports, or detention in certain ports. Under local,
national and foreign laws, as well as international treaties and conventions,
we could incur material liabilities, including cleanup obligations and claims
for natural resource, personal injury and property damages in the event that
there is a release of petroleum or other hazardous materials from our vessels
or otherwise in connection with our operations. Violations of, or liabilities
under, environmental regulations can result in substantial penalties, fines and
other sanctions, including, in certain instances, seizure or detention of our
vessels. Events of this nature would have a material adverse effect on our
business, financial condition and results of operations.The operation of our
vessels is affected by the requirements set forth in the United Nations
International Maritime Organizations International Management Code for the
Safe Operation of Ships and for Pollution Prevention, or ISM Code. Under the
ISM Code we are required to develop and maintain an extensive Safety Management
System (SMS) that includes the adoption of a safety and environmental
protection policy. Failure to comply with the ISM Code may subject us to
increased liability, invalidate existing insurance or decrease available
insurance coverage for the affected vessels and result in a denial of access
to, or detention in, certain ports. Currently, each of the vessels in our
current fleet is ISM Code-certified. If we fail to maintain ISM Code
certification for our vessels, we may also breach covenants in certain of our
credit and loan facilities that require that our vessels be ISM Code-certified.
If we breach such covenants due to failure to maintain ISM Code certification
and are unable to remedy the relevant breach, our lenders could accelerate our
indebtedness and foreclose on the vessels in our fleet securing those credit
facilities.

Increased inspection procedures, tighter
import and export controls and survey requirements could increase costs and
disrupt our business.

International shipping is
subject to various security and customs inspections and related procedures in
countries of origin and destination. Inspection procedures can result in the
seizure of the contents of our vessels, delays in the loading, offloading or
delivery and the levying of customs duties, fines and other penalties against
us. It is possible that changes to inspection procedures could impose
additional financial and legal obligations on us. Furthermore, changes to
inspection procedures could also impose additional costs and obligations on our
customers and may, in certain cases, render the shipment of certain types of
cargo impractical. Any such changes or developments may have a material adverse
effect on our business, financial condition and results of operations. The hull
and machinery of every commercial vessel must be certified as safe and
seaworthy in accordance with applicable rules and regulations, and accordingly
vessels must undergo regular surveys. If any vessel does not maintain its class
and/or fails any annual survey, intermediate survey or special survey, the
vessel will be unable to trade between ports and will be unemployable and we
would be in violation of certain covenants in our credit and loan facilities.
This would also negatively impact our revenues.

5

---



Our vessels are exposed to operational
risks, including terrorism and piracy, that may not be adequately covered by
our insurance.

The operation of any vessel
includes risks such as weather conditions, mechanical failure, collision, fire,
contact with floating objects, cargo or property loss or damage and business
interruption due to political circumstances in foreign countries, piracy,
terrorist attacks, armed hostilities and labor strikes. Such occurrences could
result in death or injury to persons, loss, damage or destruction of property
or environmental damage, delays in the delivery of cargo, loss of revenues from
or termination of charter contracts, governmental fines, penalties or
restrictions on conducting business, higher insurance rates and damage to our
reputation and customer relationships generally. In the past, political
conflicts have also resulted in attacks on vessels, mining of waterways and
other efforts to disrupt international shipping, particularly in the Arabian
Gulf region. Acts of terrorism and piracy have also affected vessels trading in
regions such as the South China Sea and the Gulf of Aden and the northwestern
part of the Indian Ocean. If these attacks and other disruptions result in
areas where our vessels are deployed being characterized by insurers as war
risk zones or Joint War Committee war, strikes, terrorism and related perils
listed areas, as the northwestern part of Indian Ocean currently is, premiums
payable for such coverage could increase significantly and such insurance
coverage may be more difficult or impossible to obtain. In addition, there is
always the possibility of a marine disaster, including oil spills and other
environmental damage. Although our vessels carry a relatively small amount of
the oil used for fuel (bunkers), a spill of oil from one of our vessels or
losses as a result of fire or explosion could be catastrophic under certain
circumstances.

We may not be adequately insured against all risks, and our
insurers may not pay particular claims. With respect to war risks insurance,
which we usually obtain for certain of our vessels making port calls in
designated war zone areas, such insurance may not be obtained prior to one of
our vessels entering into an actual war zone, which could result in that vessel
not being insured. Even if our insurance coverage is adequate to cover our
losses, we may not be able to timely obtain a replacement vessel in the event
of a loss. Under the terms of our credit facilities, we will be subject to
restrictions on the use of any proceeds we may receive from claims under our
insurance policies. Furthermore, in the future, we may not be able to maintain
or obtain adequate insurance coverage at reasonable rates for our fleet. We may
also be subject to calls, or premiums, in amounts based not only on our own
claim records but also the claim records of all other members of the protection
and indemnity associations through which we receive indemnity insurance
coverage for tort liability. Our insurance policies also contain deductibles,
limitations and exclusions which, although we believe are standard in the
shipping industry, may nevertheless increase our costs in the event of a claim
or decrease any recovery in the event of a loss. If the damages from a
catastrophic oil spill or other marine disaster exceeded our insurance
coverage, the payment of those damages could have a material adverse effect on
our business and could possibly result in our insolvency.

In addition, we do not carry loss of hire insurance except in
certain occasions in which our vessels are trading in areas where a history of
piracy has been reported. Loss of hire insurance covers the loss of revenue
during extended vessel off-hire periods, such as those that occur during an
unscheduled drydocking or unscheduled repairs due to damage to the vessel.
Accordingly, any loss of a vessel or any extended period of vessel off-hire,
due to an accident or otherwise, could have a material adverse effect on our
business, financial condition and results of operations.

The operation of drybulk vessels has
certain unique operational risks; failure to adequately maintain our vessels
could have a material adverse effect on our business, financial condition and
results of operations.

With a drybulk vessel, the
cargo itself and its interaction with the vessel may create operational risks.
By their nature, drybulk cargoes are often heavy, dense and easily shifted, and
they may react badly to water exposure. In addition, drybulk vessels are often
subjected to battering treatment during unloading operations with grabs,
jackhammers (to pry encrusted cargoes out of the hold) and small bulldozers.
This treatment may cause damage to the vessel. Vessels damaged due to treatment
during unloading procedures may be more susceptible to breach while at sea.
Breaches of a drybulk vessels hull may lead to the flooding of the vessels
holds. If a drybulk vessel suffers flooding in its forward holds, the bulk
cargo may become so dense and waterlogged that its pressure may buckle the
vessels bulkheads, leading to the loss of a vessel. If we do not adequately
maintain our vessels, we may be unable to prevent these events. The occurrence
of any of these events could have a material adverse effect on our business,
financial condition and results of operations.

Maritime claimants could arrest one or more
of our vessels, which could interrupt our cash flow.

Crew members, suppliers of
goods and services to a vessel, shippers of cargo and other parties may be
entitled to a maritime lien against a vessel, or other assets of the relevant
vessel-owning company, for unsatisfied debts, claims or damages. In many
jurisdictions, a claimant may seek to obtain security for its claim by arresting
a vessel through foreclosure proceedings. The arrest or attachment of one or
more of our vessels, or other assets of the relevant vessel-owning company or
companies, could cause us to default on a charter, breach covenants in certain
of our credit facilities, interrupt our cash flow and require us to pay large
sums of money to have the arrest or attachment lifted. In addition, in some
jurisdictions, such as South Africa, under the sister ship theory of
liability, a claimant may arrest both the vessel which is subject to the
claimants maritime lien and any associated vessel, which is any vessel owned
or controlled by the same owner. Claimants could attempt to assert sister
ship liability against one vessel in our fleet for claims relating to another
of our vessels.

6

---



Changes in the economic and political
environment in China and policies adopted by the government to regulate its
economy could have a material adverse effect on our business, financial
condition and results of operations.

The Chinese
economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development in respects such as
structure, government involvement, level of development, growth rate, capital
reinvestment, allocation of resources, rate of inflation and balance of
payments position. Prior to 1978, the Chinese economy was a planned economy.
Since 1978, increasing emphasis has been placed on the use of market forces in
the development of the Chinese economy. Annual and five-year state plans are
adopted by the Chinese government in connection with the development of the
economy. Although state-owned enterprises still account for a substantial
portion of the Chinese industrial output, in general, the Chinese government is
reducing the level of direct control that it exercises over the economy through
state plans and other measures. There is an increasing level of freedom and
autonomy in areas such as allocation of resources, production, pricing and
management and a gradual shift in emphasis to a market economy and enterprise
reform. Limited price reforms have been undertaken, with the result that prices
for certain commodities are principally determined by market forces. Many of
the reforms are unprecedented or experimental and may be subject to revision,
change or abolition based on the outcome of such experiments. The Chinese
government may cease pursuing a policy of economic reform. The level of imports
to and exports from China could be adversely affected by changes to these
economic reforms by the Chinese government, as well as by changes in political,
economic and social conditions or other relevant policies of the Chinese
government, such as changes in laws, regulations or export and import
restrictions, all of which could have a material adverse effect on our
business, financial condition and results of operations.

Governments could requisition our vessels
during a period of war or emergency, resulting in a loss of earnings.

A government
could requisition one or more of our vessels for title or for hire. Requisition
for title occurs when a government takes control of a vessel and becomes its
owner, while requisition for hire occurs when a government takes control of a
vessel and effectively becomes its charterer at dictated charter rates. Generally,
requisitions occur during periods of war or emergency, although governments may
elect to requisition vessels in other circumstances. Even if we would be
entitled to compensation in the event of a requisition of one or more of our
vessels, the amount and timing of payment would be uncertain. Government
requisition of one or more of our vessels may cause us to breach covenants in
certain of our credit facilities, and could have a material adverse effect on
our business, financial condition and results of operations.

Changes in fuel prices may adversely affect
our profits.

Upon
redelivery of vessels at the end of a period time or trip time charter, we may
be obligated to repurchase bunkers on board at prevailing market prices, which
could be materially higher than fuel prices at the inception of the charter
period. In addition, although we rarely deploy our vessels on voyage charters,
fuel is a significant, if not the largest, expense that we would incur with
respect to vessels operating on voyage charter. As a result, an increase in the
price of fuel may adversely affect our profitability. The price and supply of
fuel is volatile and fluctuates based on events outside our control, including
geopolitical developments, supply and demand for oil and gas, actions by OPEC
and other oil and gas producers, war and unrest in oil producing countries and
regions, regional production patterns and environmental concerns and
regulations.

Seasonal fluctuations in industry demand
could have a material adverse effect on our business, financial condition and
results of operations and the amount of available cash with which we can pay
dividends.

We operate our
vessels in markets that have historically exhibited seasonal variations in
demand and, as a result, in charter rates. This seasonality may result in
quarter-to-quarter volatility in our results of operations, which could affect
the amount of dividends, if any, that we pay to our stockholders from quarter
to quarter. The market for marine drybulk transportation services is typically
stronger in the fall and winter months in anticipation of increased consumption
of coal and other raw materials in the northern hemisphere during the winter
months. In addition, unpredictable weather patterns in these months tend to
disrupt vessel scheduling and supplies of certain commodities. This seasonality
could have a material adverse effect on our business, financial condition and
results of operations.

Charterers may renegotiate or default on
period time charters, which could reduce our revenues and have a material
adverse effect on our business, financial condition and results of operations.

The ability
and willingness of each of our counterparties to perform its obligations under
a period time charter agreement with us will depend on a number of factors that
are beyond our control and may include, among other things, general economic
conditions, the condition of the drybulk shipping industry and the overall
financial condition of the counterparties. If we enter into period time charters
with charterers when charter rates are high and charter rates subsequently fall
significantly, charterers may seek to renegotiate financial terms. Also, our
charterers may experience financial difficulties due to prevailing economic
conditions or for other reasons, and as a result may default under our period
time charters. During depressed drybulk market conditions, there have been
numerous reports of charterers renegotiating their charters or defaulting on
their obligations thereunder. While we have not experienced a default by a
charterer during the past three years, we have agreed to certain early
redeliveries at the request of charterers. See Operating and Financial Review
and Prospects. If a charterer defaults on a charter, we will seek the remedies
available to us, which may include arbitration or litigation to enforce the
contract, although such efforts may not be successful. Should a charterer
default on a period time charter, we may have to enter into a charter at a
lower charter rate, which would reduce our revenues. If we cannot enter into a
new period time charter, we may have to secure a charter in the spot market,
where charter rates are volatile and revenues are less predictable. It is also
possible that we would be unable to secure a charter at all, which would also
reduce our revenues, and could have a material adverse effect on our business,
financial condition, results of operations and cash flows.

7

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We depend upon a limited number of customers
for a large part of our revenues and the loss of one or more of these customers
could have a material adverse effect on our business, financial condition and
results of operations.

We expect to
derive a significant part of our revenues from a limited number of customers.
During the year ended December 31, 2010, approximately 76.3 % of our revenues
were derived from three charterers, namely Daiichi Chuo Kisen Kaisha, Kawasaki
Kisen Kaisha and Cargill International S.A. Geneva, with each one accounting
for more than 10% of total revenues. We could lose a customer for many
different reasons, including:

| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | failures of
 the customer to make charter payments because of its financial inability,
 disagreements with us or otherwise;                                                                                                        
| |   |                                                                                                                                                                                                                                    
| | ● | the
 customers termination of its charters because of our non-performance,
 including serious deficiencies with the vessels we provide to that customer
 or prolonged periods of off-hire; or                                     
| |   |                                                                                                                                                                                                                                    
| | ● | in certain
 cases, a prolonged force majeure event affecting the customer, including
 damage to or destruction of relevant production facilities, war or political
 unrest, prevents us from performing services for that customer.

If we lose a
key customer, we may be unable to obtain period time charters on comparable
terms with charterers of comparable standing or may have increased exposure to
the volatile spot market, which is highly competitive and subject to
significant price fluctuations. We would not receive any revenues from such a
vessel while it remained unchartered, but we may be required to pay expenses
necessary to maintain the vessel in proper operating condition, insure it and
service any indebtedness secured by such vessel. The loss of any of our key
customers, a decline in payments under our charters or the failure of a key
customer to perform under its charters with us could have a material adverse
effect on our business, financial condition and results of operations.

We may have difficulty properly managing our
planned growth through acquisitions of our newbuilds and additional vessels.

We intend to
grow our business through the acquisition of our contracted newbuilds and we
may make selective acquisitions of additional vessels. Our future growth will
primarily depend on our ability to locate and acquire suitable additional
vessels, enlarge our customer base, operate and supervise any newbuilds we may
order and obtain required debt or equity financing on acceptable terms. We have
contracted to acquire nine newbuilds scheduled to be delivered through 2013.

A delay in the
delivery to us of any such vessel, or the failure of the shipyard to deliver a
vessel at all, could cause us to breach our obligations under a related charter
and could adversely affect our earnings. In addition, the delivery of any of
these vessels with substantial defects could have similar consequences.

A shipyard
could fail to deliver a newbuild on time or at all because of:

| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | work
 stoppages or other hostilities, political or economic disturbances that
 disrupt the operations of the shipyard;                                                
| |   |                                                                                                                                                                       
| | ● | quality or
 engineering problems;                                                                                                                                     
| |   |                                                                                                                                                                       
| | ● | bankruptcy
 or other financial crisis of the shipyard;                                                                                                                
| |   |                                                                                                                                                                       
| | ● | a backlog of
 orders at the shipyard;                                                                                                                                 
| |   |                                                                                                                                                                       
| | ● | weather
 interference or catastrophic events, such as major earthquakes or fires;                                                                                     
| |   |                                                                                                                                                                       
| | ● | our requests
 for changes to the original vessel specifications or disputes with the
 shipyard; or                                                                    
| |   |                                                                                                                                                                       
| | ● | shortages of
 or delays in the receipt of necessary construction materials, such as steel,
 or equipment, such as main engines, electricity generators and propellers.

8

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In addition,
we may seek to terminate a newbuild contract due to market conditions,
financing limitations or other reasons. The outcome of contract termination
negotiations may require us to forego deposits on construction and pay
additional cancellation fees. In addition, where we have already arranged a
future charter with respect to the terminated newbuild contract, we would need
to provide an acceptable substitute vessel to the charterer to avoid breaching
our charter agreement.

During periods
in which charter rates are high, vessel values generally are high as well, and
it may be difficult to consummate vessel acquisitions or enter into newbuild
contracts at favorable prices. During periods when charter rates are low, we
may be unable to fund the acquisition of newbuild vessels, whether through
lending or cash on hand. For these reasons, we may be unable to execute our
growth plans or avoid significant expenses and losses in connection with our
future growth efforts.

As we expand our business, we will need to
improve or expand our operations and financial systems, staff and crew; if we
cannot improve these systems or recruit suitable employees, our performance may
be adversely affected.

Our current
operating and financial systems may not be adequate as we implement our plan to
expand the size of our fleet, and our Managers attempts to improve those
systems may be ineffective. In addition, as we expand our fleet, we will have
to rely on our Manager to recruit additional seafarers and shoreside
administrative and management personnel. Our Manager may not be able to
continue to hire suitable employees or a sufficient number of employees as we
expand our fleet. If our Managers unaffiliated crewing agents encounter
business or financial difficulties, we may not be able to adequately staff our
vessels. We may also have to increase our customer base to provide continued
employment for most of our new vessels. If we are unable to operate our
financial system, our Manager is unable to operate our operations systems
effectively or to recruit suitable employees in sufficient numbers or we are
unable to increase our customer base as we expand our fleet, our performance
may be adversely affected.

Unless we set aside reserves for vessel
replacement, at the end of a vessels useful life, our revenue will decline,
which would adversely affect our cash flows and income.

As of February
20, 2011, the vessels in our current fleet had an average age of 3.9 years.
Unless we maintain cash reserves for vessel replacement, we may be unable to
replace the vessels in our fleet upon the expiration of their useful lives. We
estimate the useful life of our vessels to be 25 years from the date of initial
delivery from the shipyard. Our cash flows and income are dependent on the
revenues we earn by chartering our vessels to customers. If we are unable to
replace the vessels in our fleet upon the expiration of their useful lives, our
business, financial condition and results of operations will be materially
adversely affected. Any reserves set aside for vessel replacement would not be
available for other cash needs or dividends.

If we are unable to obtain additional secured
indebtedness, we may default on our commitments relating to our contracted
newbuilds, and we may not be able to finance our future fleet expansion
program, which would have a material adverse effect on our business, financial
condition and results of operations.

The net
remaining unpaid balance of the contract prices for our eight newbuilds was
$264.0 million as of December 31, 2010. In addition, in January 11, 2011, we
contracted to acquire one additional newbuild at a price of approximately $42.2
million, including a cost adjustment for extra items, (see Note 25 to our
financial statements included in this annual report). We anticipate that our primary
sources of funds to satisfy these commitments will be from existing cash and
time deposits, operating cash surplus and existing undrawn loan commitments. As
of February 20, 2011, the company has one existing and eight newbuild vessels
unencumbered and a $50 million long-term floating rate note facility against
which additional loan and credit facilities can be drawn. Our ability to obtain
bank financing or to access the capital markets for future offerings may be
limited by our financial condition at the time of any such financing or
offering, including the actual or perceived credit quality of our charterers
and the market value of our fleet, as well as by adverse market conditions
resulting from, among other things, general economic conditions, weakness in
the financial markets and contingencies and uncertainties that are beyond our
control. Significant contraction, de-leveraging and reduced liquidity in credit
markets worldwide is reducing the availability and increasing the cost of
credit. To the extent that we are unable to enter into new credit facilities
and obtain such additional secured indebtedness on terms acceptable to us, we
will need to find alternative financing. If we are unable to find alternative
financing, we will not be capable of funding all of our commitments for capital
expenditures relating to our contracted newbuilds. A failure to fulfill our
commitments generally results in a forfeiture of the advance we paid to the
shipyard with respect to the contracted newbuild and a write off of expenses
capitalized which together amounted to $99.0 million as of December 31, 2010.
In addition, we may also be liable for other damages for breach of contract.
Examples of such liabilities could include payments to the shipyard for the
difference between the forfeited advance and the amount that remains to be paid
by us if the shipyard cannot locate a third-party buyer that is willing to pay
an amount equal to the difference or compensatory payments by us to charter
parties with whom we have entered into charters with respect to the contracted
newbuilds. We note, however, that we have never been liable for breach of
contract to any shipyards or charterers. Such events, if they occurred, would
adversely affect our business, financial condition and results of operation.

The aging of our fleet may result in
increased operating costs in the future, which could adversely affect our
ability to operate our vessels profitably.

In general,
the costs to maintain a vessel in good operating condition increase with the
age of the vessel. As of February 20, 2011, the average age of the vessels in
our current fleet was 3.9 years. As our vessels age, they may become less fuel
efficient and more costly to maintain and will not be as advanced as more
recently constructed vessels due to improvements in design and engine
technology. Rates for cargo insurance, paid by charterers, also increase with
the age of a vessel, making older vessels less desirable to charterers.
Governmental regulations, safety or other equipment standards related to the
age of vessels may require expenditures for alterations, or the addition of new
equipment, to our vessels and may restrict the type of activities in which our
vessels may engage. As our vessels age, market conditions may not justify those
expenditures or enable us to operate our vessels profitably during the
remainder of their useful lives.

9

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Because we generate substantially all of our
revenues in U.S. dollars but incur a material portion of our expenses in other
currencies, and may, in the future, also incur a material portion of our
indebtedness and our capital expenditure requirements in other currencies,
exchange rate fluctuations could have a material adverse effect on our
business, financial condition and results of operations.

We generate
substantially all of our revenues in U.S. dollars, but in 2010 we incurred
approximately 24.93% of our vessel operating expenses in currencies other than
the U.S. dollar. Although as of December 31, 2010, all of our indebtedness and
the amounts due under our newbuild contracts were denominated in U.S Dollars,
in January 2011, we entered into a shipbuilding contract whereby part of the
contract price is payable in Japanese yen. In addition, certain of our existing
credit facilities allow us to convert the outstanding loan amount or any part
thereof into currencies other than the U.S. dollar. Also, in the future, we may
enter into new credit facilities or newbuild contracts that are denominated in
or permit conversion into currencies other than the U.S. dollar. The use of
different currencies could lead to fluctuations in our net income due to
changes in the value of the U.S. dollar relative to other currencies, in
particular the euro and the Japanese yen. We have not hedged our currency exposure,
and, as a result, our results of operations and financial condition,
denominated in U.S. dollars, and our ability to pay dividends could suffer.

Restrictive covenants in our existing credit
facilities impose, and any future credit facilities will impose, financial and
other restrictions on us, and any breach of these covenants could result in the
acceleration of our indebtedness and foreclosure on our vessels.

Our existing
credit facilities impose, and any future credit facility will impose, operating
and financial restrictions on us. These restrictions in our existing credit
facilities generally limit our ability to, among other things:

| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | pay
 dividends if an event of default has occurred and is continuing or would
 occur as a result of the payment of such dividend;                                     
| |   |                                                                                                                                                                       
| | ● | enter into
 long-term charters for more than 13 months;                                                                                                               
| |   |                                                                                                                                                                       
| | ● | incur
 additional indebtedness, including through the issuance of guarantees;                                                                                         
| |   |                                                                                                                                                                       
| | ● | change the
 flag, class or management of the vessel mortgaged under such facility or
 terminate or materially amend the management agreement relating to such
 vessel;
| |   |                                                                                                                                                                       
| | ● | create liens
 on their assets;                                                                                                                                        
| |   |                                                                                                                                                                       
| | ● | make loans;                                                                                                                                                           
| |   |                                                                                                                                                                       
| | ● | make
 investments;                                                                                                                                                    
| |   |                                                                                                                                                                       
| | ● | make capital
 expenditures;                                                                                                                                           
| |   |                                                                                                                                                                       
| | ● | undergo a
 change in ownership or control or permit a change in ownership and control of
 our Manager;                                                                
| |   |                                                                                                                                                                       
| | ● | sell the
 vessel mortgaged under such facility; and                                                                                                                   
| |   |                                                                                                                                                                       
| | ● | permit our
 chief executive officer to change.                                                                                                                        

Therefore, we
may need to seek permission from our lenders in order to engage in some
corporate actions. Our lenders interests may be different from ours, and we
cannot guarantee that we will be able to obtain our lenders permission when
needed. This may limit our ability to pay dividends to our stockholders,
finance our future operations or pursue business opportunities.

Certain of our
existing credit facilities require our subsidiaries to maintain specified
financial ratios and satisfy financial covenants. Depending on the credit
facility, certain of our subsidiaries are subject to financial ratios and
covenants requiring that these subsidiaries:

| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | ensure that
 the market value of the vessel mortgaged under the applicable credit
 facility, determined in accordance with the terms of that facility, does not
 fall below 100% to 120%, as applicable, of the outstanding amount of the
 loan;
| |   |                                                                                                                                                                                                                                                 
| | ● | ensure that
 outstanding amounts in currencies other than the U.S. dollar do not exceed
 100% or 110%, as applicable, of the U.S. dollar equivalent amount specified
 in the relevant credit agreement for the applicable period by, if         

10

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| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |   | necessary,
 providing cash collateral security in an amount necessary for the outstanding
 amounts to meet this threshold;
| |   |                                                                                                                           
| | ● | maintain a
 cash collateral deposit or minimum cash balance per vessel with the
 respective lender; and                   
| |   |                                                                                                                           
| | ● | ensure that
 we comply with certain financial covenants under the guarantees described
 below.                            

In addition,
under guarantees we have entered into with respect to certain of our
subsidiaries existing credit facilities, we are subject to specified financial
covenants. Depending on the guarantee, these financial covenants include the
following:

| |   |                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | our total
 liabilities (on a consolidated basis, including those of our subsidiaries)
 divided by our total consolidated assets (based on the market value of all
 vessels owned by our subsidiaries, and the book value of all other assets, on
 an adjusted basis as set out in the relevant guarantee) must not exceed 70%
 or 80% (depending on the relevant guarantee);
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| | ● | the ratio of
 our aggregate debt to EBITDA must not at any time exceed 5.5:1 on a trailing
 12 months basis;                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| | ● | our
 consolidated net worth (consolidated total assets less consolidated total
 liabilities) must not at any time be less than $150.0 million, $175.0 million
 or $200.0 million (depending on the relevant guarantee), as adjusted to
 reflect, among other things, the market value of our vessels as set out in
 the relevant guarantee;                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| | ● | maintenance
 of minimum free liquidity of $500,000 on deposit with the relevant lender on
 a per vessel basis; and                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| | ● | payment of
 dividends, subject to no event of default having occurred.                                                                                                                                                                                                                                                                                                      

In connection
with these guarantees, we have also undertaken to ensure that a minimum of 51%
of our shares shall remain directly or indirectly beneficially owned by the
Hajioannou family for the duration of the relevant credit facilities.

A failure to
meet our payment and other obligations or to maintain compliance with the
applicable financial covenants could lead to defaults under our secured credit
facilities. Our lenders could then accelerate our indebtedness and foreclose on
the vessels in our fleet securing those credit facilities. The loss of these
vessels would have a material adverse effect on our business, financial
condition, and results of operations.

The declaration and payment of dividends will
always be subject to the discretion of our board of directors and will depend
on a number of factors. Our board of directors may not always declare dividends
in the future.

The
declaration and payment of dividends, if any, will always be subject to the
discretion of our board of directors. The timing and amount of any dividends
declared will depend on, among other things: (i) our earnings, financial
condition and cash requirements and available sources of liquidity, (ii)
decisions in relation to our growth strategies, (iii) provisions of Marshall
Islands and Liberian law governing the payment of dividends, (iv) restrictive
covenants in our existing and future debt instruments, and (v) global financial
conditions. We can give no assurance that dividends will be paid in the future.

There may be a
high degree of variability from period to period in the amount of cash, if any,
that is available for the payment of dividends based upon, among other things:

| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| | ● | the rates we
 obtain from our charters as well as the rates obtained upon the expiration of
 our existing charters;             
| |   |                                                                                                                                 
| | ● | the level of
 our operating costs;                                                                                              
| |   |                                                                                                                                 
| | ● | the number
 of unscheduled off-hire days and the timing of, and number of days required
 for, scheduled drydocking of our ships;
| |   |                                                                                                                                 
| | ● | vessel
 acquisitions and related financings;                                                                                    
| |   |                                                                                                                                 
| | ● | restrictions
 in our loan and credit facilities and in any future debt facilities;                                              
| |   |                                                                                                                                 
| | ● | prevailing
 global and regional economic and political conditions;                                                              
| |   |                                                                                                                                 
| | ● | the effect
 of governmental regulations and maritime self-regulatory organization
 standards on the conduct of our business;    
| |   |                                                                                                                                 
| | ● | the amount
 of cash reserves established by our board of directors; and                                                         

11

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| |   |                                                       
| | - | ------------------------------------------------------
| | ● | restrictions
 under Marshall Islands and Liberian law.

We may incur
expenses or liabilities or be subject to other circumstances in the future that
reduce or eliminate the amount of cash that we have available for distribution
as dividends, if any. Our growth strategy contemplates that we will finance the
acquisition of our newbuilds or selective acquisitions of additional vessels in
addition to our contracted newbuilds through a combination of our operating
cash flow and debt financing or equity financing. If financing is not available
to us on acceptable terms, our board of directors may decide to finance or
refinance such acquisitions with a greater percentage of cash from operations
to the extent available, which would reduce or even eliminate the amount of
cash available for the payment of dividends. We may also enter into other
agreements that will restrict our ability to pay dividends.

Under the
terms of certain of our existing credit facilities, we are not permitted to pay
dividends if an event of default has occurred and is continuing or would occur
as a result of the payment of such dividend. We expect that any future credit
facilities will also have restrictions on the payment of dividends.

The laws of
the Republic of Liberia, where each of our vessel-owning subsidiaries is
incorporated, generally prohibit the payment of dividends other than from
surplus or net profits, or while a company is insolvent or would be rendered
insolvent by the payment of such a dividend. Our subsidiaries may not have
sufficient funds, surplus or net profits to make distributions to us. In
addition, under guarantees we have entered into with respect to certain of our
subsidiaries existing credit facilities, we are subject to specified financial
and other covenants, which may limit our ability to pay dividends. We also may
not have sufficient surplus or net profits in the future to pay dividends.

The amount of
cash we generate from our operations may differ materially from our net income
or loss for the period, which will be affected by non-cash items. We may incur
other expenses or liabilities that could reduce or eliminate the cash available
for distribution as dividends. As a result of these and the other factors
mentioned above, we may pay dividends during periods when we record losses and
may not pay dividends during periods when we record net income.

We are a holding company, and we depend on
the ability of our subsidiaries to distribute funds to us in order to make
dividend payments.

We are a
holding company and our subsidiaries, which are all wholly-owned by us, conduct
all of our operations and own all of our operating assets. We have no
significant assets other than the equity interests in our wholly-owned
subsidiaries. As a result, our ability to make dividend payments depends on our
subsidiaries and their ability to distribute funds to us. The ability of a
subsidiary to make these distributions could be affected by a claim or other
action by a third party, including a creditor, and the laws of the Republic of
Liberia, where each of our vessel-owning subsidiaries is incorporated, which regulate the payment of dividends by companies. If we are unable to
obtain funds from our subsidiaries, our board of directors may exercise its
discretion not to declare or pay dividends.

We depend on our Manager to operate our
business and our business could be harmed if our Manager failed to perform its
services satisfactorily.

Pursuant to
our management agreement, our Manager provides us with our executive officers
and with technical, administrative and commercial services (including vessel
maintenance, crewing, purchasing, shipyard supervision, insurance, assistance
with regulatory compliance, financial services and office space). Our
operational success depends significantly upon our Managers satisfactory
performance of these services. Our business would be harmed if our Manager
failed to perform these services satisfactorily. In addition, if the management
agreement were to be terminated or if its terms were to be altered, our
business could be adversely affected, as we may not be able to immediately
replace such services, and even if replacement services were immediately
available, the terms offered could be less favorable than those under our
existing management agreement.

Our ability to
compete for and enter into new period time and spot charters and to expand our
relationships with our existing charterers will depend largely on our
relationship with our Manager and its reputation and relationships in the shipping
industry. If our Manager suffers material damage to its reputation or
relationships, it may harm our ability to:

| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| | ● | renew
 existing charters upon their expiration;                                           
| |   |                                                                                           
| | ● | obtain new
 charters;                                                                     
| |   |                                                                                           
| | ● | successfully
 interact with shipyards during periods of shipyard construction constraints;
| |   |                                                                                           
| | ● | obtain
 financing on commercially acceptable terms;                                       
| |   |                                                                                           
| | ● | maintain
 satisfactory relationships with our charterers and suppliers; and               

12

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| |   |                                               
| | - | ----------------------------------------------
| | ● | successfully
 execute our business strategies.

If our ability
to do any of the things described above is impaired, it could have a material
adverse effect on our business, financial condition and results of operations.

Although we
may have rights against our Manager if it defaults on its obligations to us,
investors in us will have no recourse against our Manager.

Our Manager
has provided in the past certain management services to an affiliated and to an
unaffiliated company under the specific restrictions of our management
agreement. Although our Manager is required to provide preferential treatment
to our vessels with respect to chartering arrangements under the management
agreement, our Managers time and attention may be diverted from the management
of our vessels in such circumstances.

Currently, our
Manager does not provide any services to any company other than us.

Further, we
will need to seek approval from our lenders to change our Manager.

Management fees are payable to our Manager
regardless of our profitability, which could have a material adverse effect on
our business, financial condition and results of operations.

Pursuant to
our management agreement, we pay our Manager a fee of $575 per day per vessel
for providing commercial, technical and administrative services and a fee of
1.25% on gross freight, charter hire, ballast bonus and demurrage. In addition,
we pay our manager certain commissions and fees with respect to vessel
purchases, sales and newbuilds. The management fees do not cover expenses such
as voyage expenses, vessel operating expenses, maintenance expenses, crewing
costs, insurance premiums, commissions and certain public company expenses such
as directors and officers liability insurance, legal and accounting fees and
other similar third party expenses, which are reimbursed by us. The management
fees can be adjusted annually on May 29 of each year, the anniversary of our
management agreement, by agreement between us and our Manager. The management
fees are payable whether or not our vessels are employed, and regardless of our
profitability, and we have no ability to require our Manager to reduce the
management fees if our profitability decreases, which could have a material
adverse effect on our business, financial condition and results of operations.

Our Manager is a privately held company, and
there is little or no publicly available information about it; an investor
could have little advance warning of problems affecting our Manager that could
have a material adverse effect on us.

The ability of
our Manager to continue providing services for our benefit will depend in part
on its own financial strength. Circumstances beyond our control could impair
our Managers financial strength. Because our Manager is privately held, it is
unlikely that information about its financial strength would become public or
available to us prior to any default by our Manager under the management
agreement. As a result, our investors might have little advance warning of
problems that affect our Manager, even though those problems could have a material
adverse effect on us.

Our chief executive officer also controls our
Manager, which could create conflicts of interest between us and our Manager.

Our chief
executive officer, Polys Hajioannou, owns all of the issued and outstanding
capital stock of our Manager through his wholly-owned company, Machairiotissa
Holdings Inc. Polys Hajioannou, together with his brother Nicolaos Hadjioannou,
controls Vorini Holdings Inc., which owns approximately 69.54% of our
outstanding common stock. These relationships could create conflicts of
interest between us, on the one hand, and our Manager, on the other hand. These
conflicts may arise in connection with the chartering, purchase, sale and
operation of the vessels in our fleet versus vessels owned or chartered-in by
other companies affiliated with our Manager or our chief executive officer. To
the extent we elect not to exercise our right of first refusal with respect to
any drybulk vessel that may be acquired by companies affiliated with our chief
executive officer, such companies could acquire and operate such drybulk
vessels under the management of our Manager in competition with us. Although
under our management agreement our Manager will be required to first provide us
any chartering opportunities in the drybulk sector, our Manager is not
prohibited from giving preferential treatment in other areas of its management
to vessels that are beneficially owned by related parties. These conflicts of
interest may have an adverse effect on our business, financial condition and
results of operations.

Our business depends upon certain employees
who may not necessarily continue to work for us; if such employees were no
longer to be affiliated with us, our business, financial condition and results
of operation could suffer.

Our future
success depends, to a significant extent, upon our chief executive officer,
Polys Hajioannou, and certain other members of our senior management and of our
Manager. Polys Hajioannou has substantial experience in the drybulk shipping
industry and for 24 years has worked with us and our Manager and its
predecessor. He and others employed by our Manager to manage our business and
our Manager are crucial to the execution of our business strategies and to the
growth and development of our business. If these

13

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individuals
were no longer to be affiliated with us or our Manager, or if we were to
otherwise cease to receive advisory services from them, we may be unable to
recruit other employees with equivalent talent and experience, and our business
and financial condition could suffer. We do not intend to maintain key man
life insurance on any of our executive officers.

The provisions in our restrictive covenant
arrangement with our chief executive officer restricting his ability to compete
with us, like restrictive covenants generally, may not be enforceable.

Our chief
executive officer, Polys Hajioannou, has entered into a restrictive covenant
agreement with us under which he is precluded during the term of his service
with us as executive and director and for one year thereafter (and for the term
of our management agreement with our Manager and one year thereafter, if
longer) from owning and operating drybulk vessels and from acquiring, investing
in or controlling any business that owns or operates such vessels. Courts
generally do not favor the enforcement of such restrictions, particularly when
they involve individuals and could be construed as infringing on such
individuals ability to be employed or to earn a livelihood. Our ability to enforce
these restrictions, should it ever become necessary, will depend upon the
circumstances that exist at the time enforcement is sought. A court may not
enforce the restrictions as written by way of an injunction and we may not
necessarily be able to establish a case for damages as a result of a violation
of the restrictive covenants.

Our vessels call on ports located in Iran,
which is subject to restrictions imposed by the United States government, which
could be viewed negatively by investors and adversely affect the trading price
of our common stock.

From time to
time, vessels in our fleet have called and/or may call on ports located in
countries subject to sanctions and embargoes imposed by the United States
government and countries identified by the United States government as state
sponsors of terrorism. From January 1, 2005 through December 31, 2010, vessels
in our fleet have made 19 calls to ports in Iran out of a total of 1,520 calls
on worldwide ports. Iran continues to be subject to sanctions and embargoes
imposed by the United States government and is identified by the United States
government as a state sponsor of terrorism. Although these sanctions and
embargoes do not prevent our vessels from making calls to ports in these
countries, potential investors could view such port calls negatively, which
could adversely affect our reputation and the market for our common stock.
Investor perception of the value of our common stock may be adversely affected
by the consequences of war, the effects of terrorism, civil unrest and
governmental actions in these and surrounding countries.

We are incorporated in the Marshall Islands,
which does not have a well-developed body of corporate law; therefore, you may
have more difficulty protecting your interests than stockholders of a U.S.
corporation.

Our corporate
affairs are governed by our articles of incorporation, our bylaws and by the
Marshall Islands Business Corporations Act, or the BCA. The provisions of the
BCA resemble provisions of the corporation laws of a number of states in the
United States. However, there have been few judicial cases in the Marshall
Islands interpreting the BCA. The rights and fiduciary responsibilities of
directors under the laws of the Marshall Islands are not as clearly established
as the rights and fiduciary responsibilities of directors under statutes or
judicial precedent in existence in certain United States jurisdictions. The
rights of stockholders of companies incorporated in the Marshall Islands may
differ from the rights of stockholders of companies incorporated in the United
States. While the BCA provides that it is to be interpreted according to the
laws of the State of Delaware and other states with substantially similar
legislative provisions, there have been few, if any, court cases interpreting
the BCA in the Marshall Islands and we cannot predict whether Marshall Islands
courts would reach the same conclusions as United States courts. Thus, you may
have more difficulty in protecting your interests in the face of actions by our
management, directors or controlling stockholders than would stockholders of a
corporation incorporated in a United States jurisdiction which has developed a
more substantial body of case law in the corporate law area.

It may be difficult to serve us with legal
process or enforce judgments against us, our directors or our management.

We are
incorporated under the laws of the Marshall Islands, and our business is
operated primarily from our offices in Athens, Greece. In addition, a majority
of our directors and officers are or will be non-residents of the United
States, and all of our assets and a substantial portion of the assets of these
non-residents are located outside the United States. As a result, it may be
difficult or impossible for you to bring an action against us or against these
individuals in the United States if you believe that your rights have been
infringed under the securities laws or otherwise. You may also have difficulty
enforcing, both within and outside of the United States, judgments you may
obtain in the United States courts against us or these persons in any action,
including actions based upon the civil liability provisions of United States
federal or state securities laws. There is also substantial doubt that the courts
of the Marshall Islands or Greece would enter judgments in original actions
brought in those courts predicated on United States federal or state securities
laws.

14

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Risks Relating to Our Common Stock

Vorini Holdings Inc., our principal
stockholder, controls the outcome of matters on which our stockholders are
entitled to vote and its interests may be different from yours.

Vorini
Holdings Inc., which is controlled by our chief executive officer, Polys
Hajioannou and Nicolaos Hadjioannou, owns approximately 69.54% of our
outstanding common stock. This stockholder is able to control the outcome of
matters on which our stockholders are entitled to vote, including the election
of our entire board of directors and other significant corporate actions. The
interests of this stockholder may be different from yours.

We are a controlled company under the New
York Stock Exchange rules, and as such we are entitled to exemption from
certain New York Stock Exchange corporate governance standards, and you may not
have the same protections afforded to stockholders of companies that are
subject to all of the New York Stock Exchange corporate governance
requirements.

We are a
controlled company within the meaning of the New York Stock Exchange
corporate governance standards. Under the New York Stock Exchange rules, a
company of which more than 50% of the voting power is held by another company
or group is a controlled company and may elect not to comply with certain New
York Stock Exchange corporate governance requirements, including: (a) the
requirement that a majority of the board of directors consist of independent
directors, (b) the requirement that the nominating committee be composed
entirely of independent directors and have a written charter addressing the
committees purpose and responsibilities, (c) the requirement that the
compensation committee be composed entirely of independent directors and have a
written charter addressing the committees purpose and responsibilities and (d)
the requirement of an annual performance evaluation of the corporate
governance, nominating and compensation committees. We may utilize these
exemptions. As a result, non-independent directors, including members of our
management who also serve on our board of directors, will comprise the majority
of our board of directors and may serve on the corporate governance, nominating
and compensation committee of our board of directors which, among other things,
reviews the compensation of certain members of our management and resolves
governance issues regarding our company. Accordingly, you may not have the same
protections afforded to stockholders of companies that are subject to all of
the New York Stock Exchange corporate governance requirements.

Future sales of our common stock could cause
the market price of our common stock to decline and our existing stockholders
may experience significant dilution.

We may issue
additional shares of our common stock in the future and our stockholders may
elect to sell large numbers of shares held by them from time to time.We filed
a shelf registration statement on Form F-3 with the SEC on October 8, 2009,
which became effective on November 12, 2009. We may use this registration
statement to issue up to an aggregate public offering price of $300.0 million
of additional common or preferred stock, warrants or subscription rights. In
March 2010, under this registration statement, we issued and sold 10,350,000
shares of common stock in a public offering. Concurrently with this public
offering, we issued and sold 1,000,000 shares of common stock to Vorini
Holdings Inc. in a private placement. The gross proceeds of the public offering
and the private placement were $79.45 million. In the future, we may use the
registration statement to issue up to an aggregate public offering price of
$220.55 million of additional shares of common or preferred stock, warrants or
subscription rights. Sales of a substantial number of shares of our common
stock in the public market, or the perception that these sales could occur, may
depress the market price for our common stock. These sales could also impair
our ability to raise additional capital through the sale of our equity
securities in the future.Our existing stockholders may also experience
significant dilution in the future as a result of any future offering. We also
entered into a registration rights agreement in connection with our initial
public offering with Vorini Holdings Inc., our principal stockholder, pursuant
to which we have granted it and certain of its transferees the right, under
certain circumstances and subject to certain restrictions, to require us to
register under the Securities Act of 1933, as amended (the Securities Act),
shares of our common stock held by them. Under the registration rights
agreement, Vorini Holdings and certain of its transferees have the right to
request us to register the sale of shares held by them on their behalf and may
require us to make available shelf registration statements permitting sales of
shares into the market from time to time over an extended period. In addition,
those persons have the ability to exercise certain piggyback registration
rights in connection with registered offerings initiated by us. Registration of
such shares under the Securities Act would, except for shares purchased by
affiliates, result in such shares becoming freely tradable without restriction
under the Securities Act immediately upon the effectiveness of such
registration.

15

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Anti-takeover provisions in our
organizational documents could make it difficult for our stockholders to
replace or remove our current board of directors and together with our adoption
of a stockholder rights plan could have the effect of discouraging, delaying or
preventing a merger or acquisition, which could adversely affect the market
price of the shares of our common stock.

Several
provisions of our articles of incorporation and bylaws could make it difficult
for our stockholders to change the composition of our board of directors in any
one year, preventing them from changing the composition of our management. In
addition, the same provisions may discourage, delay or prevent a merger or
acquisition that stockholders may consider favorable. These provisions:

| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | authorize
 our board of directors to issue blank check preferred stock without
 stockholder approval;                                                                                   
| |   |                                                                                                                                                                                           
| | ● | provide for
 a classified board of directors with staggered, three-year terms;                                                                                                            
| |   |                                                                                                                                                                                           
| | ● | prohibit
 cumulative voting in the election of directors;                                                                                                                                 
| |   |                                                                                                                                                                                           
| | ● | authorize
 the removal of directors only for cause;                                                                                                                                       
| |   |                                                                                                                                                                                           
| | ● | prohibit
 stockholder action by written consent unless the written consent is signed by
 all stockholders entitled to vote on the action;                                                 
| |   |                                                                                                                                                                                           
| | ● | establish advance
 notice requirements for nominations for election to our board of directors or
 for proposing matters that can be acted on by stockholders at stockholder
 meetings; and
| |   |                                                                                                                                                                                           
| | ● | provide that
 special meetings of our stockholders may only be called by the chairman of
 our board of directors, chief executive officer or a majority of our board of
 directors.       

We have
adopted a stockholder rights plan pursuant to which our board of directors may
cause the substantial dilution of the holdings of any person that attempts to
acquire us without the approval of our board of directors.These anti-takeover
provisions, including the provisions of our prospective stockholder rights
plan, could substantially impede the ability of public stockholders to benefit
from a change in control and, as a result, may adversely affect the market
price of our common stock and your ability to realize any potential change of
control premium.

Tax Risks

In addition to
the following risk factors, you should read Item 10. Additional InformationE.
Tax ConsiderationsMarshall Islands Tax Considerations, Item 10. Additional
InformationE. Tax ConsiderationsLiberian Tax Considerations, and Item 10.
Additional InformationE. Tax ConsiderationsUnited States Federal Income Tax
Considerations for a more complete discussion of expected material Marshall
Islands, Liberian and U.S. federal income tax consequences of owning and
disposing of our common stock.

We may earn shipping income that will be
subject to United States income tax, thereby reducing our cash available for
distributions to you.

Under U.S. tax
rules, 50% of our gross income attributable to shipping that begins or ends in
the United States will be subject to a 4% U.S. income tax (without allowance
for deductions). The amount of this income may fluctuate, and we will not
qualify for any exemption from this U.S. tax. Many of our charters contain
provisions that obligate the charterers to reimburse us for this 4% U.S. tax.
To the extent we are not actually reimbursed by our charterers, the 4% U.S. tax
will decrease our cash that is available for dividends.For a more complete
discussion, see the section entitled Item 10. Additional InformationTax
ConsiderationsE. United States Federal Income Tax ConsiderationsTaxation of
Our Shipping Income.

United States tax authorities could treat us
as a passive foreign investment company, which could have adverse United
States federal income tax consequences to United States holders.

A foreign
corporation will be treated as a passive foreign investment company, or PFIC,
for U.S. federal income tax purposes if either (a) at least 75% of its gross
income for any taxable year consists of certain types of passive income or
(b) at least 50% of the average value of the corporations assets produce or
are held for the production of those types of passive income. For purposes of
these tests, passive income includes dividends, interest and gains from the
sale or exchange of investment property and rents and royalties other than
rents and royalties that are received from unrelated parties in connection with
the active conduct of a trade or business. For purposes of these tests, income
derived from the performance of services does not constitute passive income.
U.S. stockholders of a PFIC are subject to a disadvantageous U.S. federal
income tax regime with respect to the income derived by the PFIC, the
distributions they receive from the PFIC, and the gain, if any, they derive
from the sale or other disposition of their shares in the PFIC. In particular,
U.S. holders who are individuals would not be eligible for the 15% tax rate on
qualified dividends.

16

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Based on our
current operations and anticipated future operations, we believe that it is
more likely than not that we currently will not be treated as a PFIC. In this
regard, we intend to treat gross income we derive or are deemed to derive from
our time chartering activities as services income, rather than rental income.
Accordingly, we believe that our income from our time chartering activities
should not constitute passive income, and that the assets we own and operate
in connection with the production of that income do not constitute passive
assets.

There are
legal uncertainties involved in this determination. A recent case by the U.S.
Court of Appeals for the Fifth Circuit held that, contrary to the position of
the U.S. Internal Revenue Service or the IRS in that case, and for purposes
of a different set of rules under the Internal Revenue Code of 1986, or the
Code, income received under a time charter of vessels should be treated as
rental income rather than services income. If the reasoning of this case were
extended to the PFIC context, the gross income we derive or are deemed to
derive from our time chartering activities would be treated as rental income,
and we would probably be a PFIC. In recent guidance, however, the IRS stated
that it disagreed with the holding in the Fifth Circuit case, and specified
that income from time charters should be treated as services income. In light
of these authorities, no assurance can be given that the IRS or a United States
court will accept the position that we are not a PFIC, and there is a risk that
the IRS or a United States court could determine that we are a PFIC. Moreover,
no assurance can be given that we would not constitute a PFIC for any future
taxable year if there were to be changes in our assets, income or operations.

If the IRS
were to find that we are or have been a PFIC for any taxable year, our U.S.
stockholders will face adverse U.S. tax consequences. See Item 10. Additional
InformationE. Tax ConsiderationsUnited States Federal Income Tax
ConsiderationsUnited States Federal Income Taxation of U.S. Holders for a
more comprehensive discussion of the U.S. federal income tax consequences to
U.S. stockholders if we are treated as a PFIC.

The enactment of proposed legislation could
affect whether dividends paid by us constitute qualified dividend income
eligible for a preferential rate of United States federal income taxation.

Legislation
has been introduced in the U.S. Senate that would deny the preferential rate of
U.S. federal income tax currently imposed on qualified dividend income with
respect to dividends received from a non-U.S. corporation, unless the non-U.S.
corporation either is eligible for benefits of a comprehensive income tax
treaty with the United States or is created or organized under the laws of a
foreign country that has a comprehensive income tax system. Because the
Marshall Islands has not entered into a comprehensive income tax treaty with
the United States and imposes only limited taxes on corporations organized
under its laws, it is unlikely that we could satisfy either of these
requirements. Consequently, if this legislation were enacted, the preferential
rate of U.S. federal income tax discussed under Item 10. Additional
InformationE. Tax ConsiderationsUnited States Federal Income Tax
ConsiderationsUnited States Federal Income Taxation of U.S.
HoldersDistributions on Our Common Stock may no longer be applicable to
dividends received from us. As of the date hereof, it is not possible to
predict with any certainty whether the proposed legislation will be enacted.

If the regulations regarding the exemption
from Liberian taxation for non-resident corporations issued by the Liberian
Ministry of Finance were found to be invalid, the net income and cash flows of
our Liberian subsidiaries and therefore our net income and cash flows would be
materially reduced.

Each of our
vessel-owning subsidiaries is incorporated under the laws of the Republic of
Liberia. The Republic of Liberia enacted a new income tax act effective as of
January 1, 2001 (the New Act) which does not distinguish between the taxation
of non-resident Liberian corporations, such as our subsidiaries, which
conduct no business in Liberia and were wholly exempt from taxation under the
income tax law previously in effect since 1977, and resident Liberian
corporations which conduct business in Liberia and are, and were under the
prior law, subject to taxation.

In 2004, the
Liberian Ministry of Finance issued regulations exempting non-resident
corporations engaged in international shipping (and not exclusively within
Liberia), such as our vessel-owning subsidiaries, from Liberian taxation under
the New Act retroactive to January 1, 2001. It is unclear whether these
regulations, which ostensibly conflict with the express terms of the New Act
adopted by the Liberian legislature, are valid. However, the Liberian Ministry
of Justice issued an opinion that the new regulations are a valid exercise of
the regulatory authority of the Ministry of Finance. The Liberian Ministry of
Finance has not at any time since January 1, 2001 sought to collect taxes from
any of our subsidiaries.

If our
subsidiaries were subject to Liberian income tax under the New Act, they would
be subject to tax at a rate of 35% on their worldwide income. As a result,
their, and subsequently our, net income and cash flows would be materially
reduced. In addition, as the ultimate stockholder of our Liberian subsidiaries,
we would be subject to Liberian withholding tax on dividends paid by our
subsidiaries at rates ranging from 15% to 20%, which would limit our access to
funds generated by the operations of our subsidiaries and further reduce our
income and cash flows.

17

---



ITEM 4.
INFORMATION ON THE COMPANY

A. History and Development of the Company

Safe Bulkers,
Inc. was incorporated in the Republic of The Marshall Islands on December 11,
2007, under the Marshall Islands Business Corporations Act, for the purpose of
acquiring ownership of various subsidiaries that either owned or were scheduled
to own vessels. We are controlled by the Hajioannou family, which has a long
history of operating and investing in the international shipping industry,
including a long history of vessel ownership. Vassos Hajioannou, the late
father of Polys Hajioannou, our chief executive officer, first invested in
shipping in 1958. Polys Hajioannou has been actively involved in the industry
since 1987, when he joined the predecessor of Safety Management.Over the past
16 years under the leadership of Polys Hajioannou, we have renewed our fleet by
selling eleven drybulk vessels during periods of what we viewed as favorable
secondhand market conditions and contracting to acquire 36 drybulk newbuilds.
Also under his leadership, we have expanded the classes of drybulk vessels in
our fleet and the aggregate carrying capacity of our fleet has grown from
146,000 deadweight tons, or dwt, in 1995 to 1,443,800 dwt currently. The
quality and size of our current fleet, together with our long-term
relationships with several of our charter customers, are, we believe, the
results of our long-term strategy of maintaining a young, high quality fleet,
our broad knowledge of the drybulk industry and our strong management team. In
addition to benefiting from the experience and leadership of Polys Hajioannou,
we also benefit from the expertise of our Manager which, along with its
predecessor, has specialized in drybulk shipping since 1965, providing services
to over 33 drybulk vessels. A number of our Managers key management and
operational personnel have been continuously employed with Safety Management
and its predecessor company for over 25 years. In June 2008, we completed an initial
public offering of our common stock in the United States and our common stock
began trading on the New York Stock Exchange. In March 2010, we completed a
public offering of common stock and a private placement of common stock to
Vorini Holdings Inc. We maintain our offices at 30-32 Avenue Karamanli, P.O.
Box 70837, 16605 Voula, Athens, Greece. Our telephone number at that address is
011-30-210-899-4980. Our registered address in the Marshall Islands is Trust
Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands
MH96960. The name of our registered agent at such address is The Trust Company
of the Marshall Islands, Inc.

B. Business Overview

We are an
international provider of marine drybulk transportation services, transporting
bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping
routes for some of the worlds largest consumers of marine drybulk
transportation services. As of February 20, 2011, we had a fleet of 16 drybulk
vessels, with an aggregate carrying capacity of 1,443,800 dwt and an average
age of 3.9 years, making us one of the worlds youngest fleets of Panamax,
Kamsarmax, Post-Panamax and Capesize class vessels. Our fleet is expected to
grow through 2013 as the result of the delivery of nine further contracted
newbuilds, comprised of two Panamax, three Kamsarmax, two Post-Panamax and two
Capesize class vessels. Upon delivery of the last of our contracted newbuilds,
our fleet will be comprised of 25 vessels, having an aggregate carrying
capacity of 2,387,800 dwt.We employ our vessels on both period time charters
and spot charters, according to our assessment of market conditions, with some
of the worlds largest consumers of marine drybulk transportation services. The
vessels we deploy on period time charters provide us with relatively stable
cash flow and high utilization rates, while the vessels we deploy in the spot
market allow us to take advantage of attractive spot charter rates during
periods of strong charter market conditions.

General

As of February
20, 2011 our fleet comprised 16 vessels, of which four are Panamax, three are
Kamsarmax, eight are Post-Panamax class and one is Capesize class vessel, with
an aggregate carrying capacity of 1,443,800 dwt and an average age of 3.9
years. Assuming delivery of the last of our contracted newbuilds in 2013, our
fleet will be comprised of six Panamax, six Kamsarmax, ten Post-Panamax and
three Capesize class vessels, and the aggregate carrying capacity of our 25
vessels will be 2,387,800 dwt. As of February 20, 2011, the average remaining
duration of the charters for our existing fleet was 3.5 years.The majority of
vessels in our fleet have sister ships with similar specifications in our
existing or newbuild fleet. We believe using sister ships provides cost savings
because it facilitates efficient inventory management and allows for the
substitution of sister ships to fulfill our period time charter obligations.

18

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Our Fleet and
Newbuilds

The table below presents
additional information with respect to our drybulk vessel fleet, including our
newbuilds, and its deployment as of February 20, 2011.

|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|------------------ |  | --------- |  | ---------------- |  | ------------------------ |  | ------------- |  | ----------------- | ------ | ---------------- | ----- | ------------------ |  | ---------------------- |  | -
|Vessel Name        |  | Dwt       |  | Year
 Built
 (1) |  | Country of
 Construction |  | Charter
 Type |  | Charter
 Rate (2) |        | Commissions
 (3) |       | Charter Period (4) |  | Sister Ship 
 (5)     
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                       
|Current Fleet      |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Panamax            |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Maria              |  | 76,000    |  | 2003             |  | Japan                    |  | Time
 (6)     |  | $                 | 17,750 |                  | 0.00  | %                  |  | Sep.
 2010  Apr. 2011 |  | A
|                   |  |           |  |                  |  |                          |  | Time          |  | $                 | 20,250 |                  | 3.50  | %                  |  | Apr.
 2011  Apr. 2014 |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Vassos             |  | 76,000    |  | 2004             |  | Japan                    |  | Time          |  | $                 | 29,000 |                  | 1.25  | %                  |  | Nov.
 2008  Oct. 2013 |  | A
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Katerina           |  | 76,000    |  | 2004             |  | Japan                    |  | Time
 (7)     |  | $                 | 20,000 |                  | 3.375 | %                  |  | Feb.
 2011  Feb. 2014 |  | A
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Maritsa            |  | 76,000    |  | 2005             |  | Japan                    |  | Time
 (8)     |  | $                 | 32,000 |                  | 1.25  | %                  |  | Mar.
 2010  Mar. 2012 |  | A
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 28,000 |                  |       |                    |  | Mar.
 2012  Mar. 2013 |  |  
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 24,000 |                  |       |                    |  | Mar.
 2013  Mar. 2015 |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Kamsarmax          |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Pedhoulas Merchant |  | 82,300    |  | 2006             |  | Japan                    |  | Time
 (9)     |  | $                 | 27,250 |                  | 4.75  | %                  |  | Apr.2010
  Apr. 2011  |  | B
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Pedhoulas Trader   |  | 82,300    |  | 2006             |  | Japan                    |  | Time
 (8)     |  | $                 | 69,000 |                  | 1.00  | %                  |  | Aug.
 2008  Jul. 2009 |  | B
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 56,500 |                  |       |                    |  | Aug.
 2009  Jul. 2010 |  |  
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 42,000 |                  |       |                    |  | Aug.
 2010  Jul. 2011 |  |  
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 20,000 |                  |       |                    |  | Aug.
 2011  Jul. 2013 |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Pedhoulas Leader   |  | 82,300    |  | 2007             |  | Japan                    |  | Spot
 (10)    |  | $                 | 18,750 |                  | 4.75  | %                  |  | Dec.
 2010 - Mar. 2011 |  | B
|                   |  |           |  |                  |  |                          |  | Time (11)     |  | $                 | 18,350 |                  | 3.50  | %                  |  | Aug.
 2011  Aug. 2013 |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Post-Panamax       |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Stalo              |  | 87,000    |  | 2006             |  | Japan                    |  | Time          |  | $                 | 34,160 |                  | 1.25  | %                  |  | Mar.
 2010  Feb. 2015 |  | C
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Marina             |  | 87,000    |  | 2006             |  | Japan                    |  | Time
 (8)     |  | $                 | 61,500 |                  | 2.50  | %                  |  | Dec.
 2008  Mar. 2009 |  | C
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 57,500 |                  |       |                    |  | Apr.
 2009  Dec. 2009 |  |  
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 52,500 |                  |       |                    |  | Dec.
 2009  Dec. 2010 |  |  
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 42,500 |                  |       |                    |  | Dec.
 2010  Dec. 2011 |  |  
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 32,500 |                  |       |                    |  | Dec.
 2011  Oct. 2012 |  |  
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 31,500 |                  |       |                    |  | Oct.
 2012  Dec. 2012 |  |  
|                   |  |           |  |                  |  |                          |  |               |  | $                 | 21,500 |                  |       |                    |  | Dec.
 2012  Dec. 2013 |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Sophia             |  | 87,000    |  | 2007             |  | Japan                    |  | Time          |  | $                 | 34,720 |                  | 1.25  | %                  |  | Oct.
 2008  Sep. 2013 |  | C
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Eleni              |  | 87,000    |  | 2008             |  | Japan                    |  | Time          |  | $                 | 34,160 |                  | 1.25  | %                  |  | Apr.
 2010  Mar. 2015 |  | C
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Martine            |  | 87,000    |  | 2009             |  | Japan                    |  | Time          |  | $                 | 40,500 |                  | 1.25  | %                  |  | Feb.
 2009  Feb. 2014 |  | C
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Andreas K          |  | 92,000    |  | 2009             |  | South
 Korea             |  | Time          |  | $                 | 22,000 |                  | 3.75  | %                  |  | Feb.
 2011  Nov. 2011 |  | D
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Panayiota K        |  | 92,000    |  | 2010             |  | South
 Korea             |  | Time          |  | $                 | 22,750 |                  | 3.75  | %                  |  | Apr.
 2010  Apr. 2011 |  | D
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Venus Heritage     |  | 95,800    |  | 2010             |  | Japan                    |  | Time          |  | $                 | 22,000 |                  | 5.00  | %                  |  | Dec.
 2010  Apr. 2011 |  | F
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Capesize           |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Kanaris            |  | 178,100   |  | 2010             |  | China                    |  | Time          |  | $                 | 31,000 |                  | 5.00  | %                  |  | Sep.
 2010  Sep. 2011 |  |  
|                   |  |           |  |                  |  |                          |  | Time          |  | $                 | 25,928 |                  | 2.50  | %                  |  | Sep.
 2011  May 2031  |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Subtotal           |  | 1,443,800 |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|New builds         |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Kamsarmax          |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull
No.616        |  | 82,000    |  | 2H
2011          |  | China                    |  |               |  |                   |        |                  |       |                    |  |                        |  | E
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull
No.617        |  | 82,000    |  | 1H
2012          |  | China                    |  |               |  |                   |        |                  |       |                    |  |                        |  | E
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull
No.631        |  | 82,000    |  | 2H
2011          |  | China                    |  |               |  |                   |        |                  |       |                    |  |                        |  | E
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Panamax            |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull
No.1154       |  | 76,000    |  | 2H
2013          |  | China                    |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull
No.804        |  | 76,000    |  | 1H
2012          |  | Japan                    |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Post-Panamax       |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull No. 1579      |  | 95,000    |  | 2H
2011          |  | Japan                    |  |               |  |                   |        |                  |       |                    |  |                        |  | F
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull No. 1594      |  | 95,000    |  | 1H
2012          |  | Japan                    |  |               |  |                   |        |                  |       |                    |  |                        |  | F
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Capesize           |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull No. 131       |  | 180,000   |  | 2H
2012          |  | China                    |  | Time
(12)     |  | $                 | 24,810 |                  | 1.25  | %                  |  | Sep.
2012  Sep. 2022  |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Hull No. 1074      |  | 176,000   |  | 2H
2011          |  | China                    |  | Time          |  | $                 | 38,000 |                  | 1.00  | %                  |  | Jun.
2012  May 2022   |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|Subtotal           |  | 944,000   |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|TOTAL              |  | 2,387,800 |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  
|                   |  |           |  |                  |  |                          |  |               |  |                   |        |                  |       |                    |  |                        |  |  

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  | For newbuilds, the dates
 shown reflect the expected delivery dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(2)  | Quoted charter rates are
 gross charter rates. Gross charter rates are inclusive of commissions. Net
 charter rates are charter rates after the payment of commissions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(3)  | Commissions reflect
 payments made to third-party brokers or our charterers, and do not include
 the 1.25% fee payable on gross freight, charter hire, ballast bonus and
 demurrage to our Manager pursuant to our vessel management agreements with
 our Manager.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(4)  | The start dates listed
 reflect either actual start dates or, in the case of contracted charters that
 had not commenced as of February 20, 2011, scheduled start dates. Actual
 start dates and redelivery dates may differ from the scheduled start and
 redelivery dates depending on the terms of the charter and market conditions.                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(5)  | Each vessel with the same
 letter is a sister ship of each other vessel that has the same letter, and
 under certain of our charter contracts, may be substituted with its sister
 ships.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(6)  | In July 2010, we agreed
with the charterers of the Maria to terminate the $18,000 daily fixed rate
time charter which had commenced on June 28, 2009, and was due to expire by
November 30, 2010. As compensation for early redelivery of the vessel, we
paid to the charterers an amount of $0.2 million, on August 4, 2010. The vessel
was redelivered on August 24, 2010, and was subsequently fixed at a daily
charter rate of $17,750 until April 2011 and since then at a daily charter
rate of $20,250 for three years.                                                                                                                                                                                                                                    
|(7)  | In March 2010, we agreed
with the charterers of the Katerina to terminate the $15,500 daily fixed rate
time charter which had commenced on June 26, 2009, and was due to expire by
September 15, 2011. As compensation for early redelivery of the vessel, we
paid to the charterers an amount of $1.5 million on April 7, 2010. The vessel
was redelivered on February 1, 2011, was subsequently fixed at a daily
charter rate of $20,000 for three years.                                                                                                                                                                                                                                                                                                       
|(8)  | Charter agreement which
 provides for variable charter rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(9)  | In December 2009, we agreed
with the charterer of the Pedhoulas Merchant to terminate the existing
charter in February or March of 2010. Pedhoulas Merchant was redelivered on
April 2010, instead of the contracted earliest redelivery date of November 5,
2010. In connection with this early redelivery, we recognized early
redelivery income of $3.6 million, comprising cash compensation paid by the
relevant charterer of $4.8 million on May 6, 2010, less accrued revenue of
$1.2 million. The vessel was subsequently fixed at a daily charter rate of
$27,250 until April 2011.                                                                                                                                                                      
|(10) | In April 2010, we agreed
with the charterers of the Pedhoulas Leader to terminate the $18,500 daily
fixed rate time charter which had commenced on July 19, 2009, and was due to
expire by September 30, 2011. As compensation for early redelivery of the vessel,
we paid to the charterers an amount of $1.8 million, on May 6, 2010. The
vessel was redelivered on November 12, 2010, and was subsequently fixed at a
daily charter rate of $21,750 until December 12, 2010 and since then at a
daily charter rate of $18,750 for three months.                                                                                                                                                                                                                
|(11) | Charter agreement which
provides us with choice of deploying either Pedhoulas Merchant or Pedhoulas Leader.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(12) | The Charter
 agreement grants the charterer the option to extend the time charter for an
 additional twelve months at a time, at a gross daily charter rate of $26,330,
 less 1.25% total commissions, which option may be exercised by the charterer
 a maximum of two times. The Charter agreement also grants the charterer an
 option to purchase the vessel at any time beginning at the end of the seventh
 year of the time charter period, at a price of $39 million less 1.00%
 commission, decreasing thereafter on a pro-rated basis by $1.5 million per
 year. Should the charterer decide to subsequently sell the vessel to a third
 party after exercising this purchase option, we have retained a right of
 first refusal to buy back the vessel.

19

---



From the beginning of 1995
through February 20, 2011, we have taken delivery of 27 newbuilds. We are
currently contracted to take delivery of a further nine newbuilds, comprised of
one Japanese-built Panamax class vessel with a contract price including cost
adjustment for extra items of approximately $42.2 million, consisting of
payments of $18.9 million and JPY 1.9 billion, scheduled for delivery in 2012,
one Chinese-built Panamax vessel with contract price of $28.2 million,
scheduled for delivery in 2013, three Chinese built Kamsarmax vessels, two with
a contract price of $32.2 million each and one with a contract price of $34.0
million, scheduled for delivery in 2011, 2012 and 2011 respectively, two
Japanese-built Post-Panamax class vessels, the first with an amended contract
price of $56.0 million, less 1% commission, and the second with a contract
price of $48.0 million less 1% commission, scheduled for delivery in 2011 and
2012, respectively, and two Chinese-built Capesize class vessels, with a an amended
contract price of $80.0 million and a contract price of $53.0 million,
respectively, scheduled for delivery in 2011 and 2012, respectively. In
addition to payment of the contract prices for the newbuilds, we are required
to make payments to our counterparties under such contracts for certain
adjustments or modifications, to third party brokers as commissions and to our
Manager under our Management Agreement.

Chartering of Our
Fleet

We currently
deploy the vessels in our fleet under long-term, or period time, charters and
trip time charters, which are short-term time charters of up to three months
where the vessel performs one or more voyages between load port(s) and
discharge port(s). Trip time charters and voyage charters (described below) of
three months or less are referred to in our industry as spot charters or spot
market charters due to their short-term duration. Our vessels are used to
transport bulk cargoes, particularly coal, grain and iron ore, along worldwide
shipping routes. We intend to employ our drybulk vessels on a mix of period and
spot charters and, according to our assessment of market conditions, adjust the
mix of these charters to take advantage of the relatively stable cash flow and
high utilization rates associated with long-term period time charters or to
profit from attractive spot rates during periods of strong charter market
conditions.

A time charter
is a contract to charter a vessel for a fixed period of time at a set daily
rate and can last from a few days up to several years. Under our time charters
the charterer pays for most voyage expenses, such as port, canal and fuel
costs, agents fees, extra war risks insurance and any other expenses related
to the cargoes, and we pay for vessel operating expenses, which include, among other
costs, costs for crewing, provisions, stores, lubricants, insurance,
maintenance and repairs, drydocking and intermediate and special surveys.

Voyage
charters are generally contracts to carry a specific cargo from a load port to
a discharge port, including positioning the vessel at the load port. Under a
voyage charter, the charterer pays an agreed upon total amount or on a per
cargo ton basis, and we pay for both vessel operating expenses and voyage
expenses. We infrequently enter into voyage charters.

Our Customers

Since 2005 our
customers have included over 30 national, regional and international companies,
including Bunge, Cargill, Daiichi Chuo Kishen Kaisha, Intermare Transport
G.m.b.H., Eastern Energy Pte. Ltd., NYK, Shinwa Kaiun Kaisha, Kawasaki Kisen
Kaisha, Ltd, or their affiliates. During 2010, three of our charterers
accounted for 76.3% of our revenues, namely Daiichi Chuo Kishen Kaisha,
Kawasaki Kisen Kaisha and Cargill, with each one accounting for more than 10%
of total revenues. During 2009, two of our charterers accounted for 74.9% of
our revenues, namely Daiichi Chuo Kishen Kaisha and Kawasaki Kisen Kaisha, with
each one accounting for more than 10% of total revenue. During 2008, three of
our charterers accounted for 72.4% of our revenues, namely Daiichi Chuo Kishen
Kaisha, Bunge and NYK, with each one accounting for more than 10% of total
revenues. We seek to charter our vessels primarily to charterers who intend to
use our vessels without sub-chartering them to third parties. A prospective
charterers financial condition and reliability are also important factors in
negotiating employment for our vessels.

20

---



Management of Our
Fleet

We have a
management agreement pursuant to which our Manager provides us with technical,
administrative, commercial and certain other services for an initial term of
two years during which the management fees remained constant with automatic
one-year renewals for an additional eight years, during which the management
fees can be adjusted every year upon agreement between us and our Manager. The
initial two year term expired on May 28, 2010. The management agreement can be
terminated earlier if we provide notice of non-renewal 12 months prior to the
end of the then-current term. We have not provided such notice to our Manager
and our management agreement was automatically renewed after the initial
expiration on May 28, 2010. Our arrangements with our Manager and its
performance are reviewed by our board of directors. Our chief executive
officer, president, chief financial officer and chief operating officer,
collectively referred to in this annual report as our executive officers,
provide strategic management for our company and also supervise the management
of our day-to-day operations by our Manager. Our Manager reports to us and our
board of directors through our executive officers.

In return for
providing such services our Manager currently receives a management fee of $575
per day per vessel. In return for chartering services rendered to us, our
Manager also receives a fee of 1.25% on all freight, charter hire, ballast
bonus and demurrage for each vessel. Our Manager also receives a commission of
1.0% based on the contract price of any vessel bought or sold by it on our
behalf, including the acquisition of each of our contracted newbuilds. We also
pay our Manager a flat supervision fee of $375,000 per newbuild, which we
capitalize, for the on-premises supervision by selected engineers and others on
the Managers staff of newbuilds we have agreed to acquire pursuant to
shipbuilding contracts, memoranda of agreement, or otherwise.

Our Manager
has agreed that, during the term of our management agreement and for a period
of one year following its termination, our Manager will not provide management
services to, or with respect to, any drybulk vessels other than (a) on our
behalf or (b) with respect to drybulk vessels that are owned or operated by
companies affiliated with our chief executive officer or his brother Nicolaos
Hadjioannou, and drybulk vessels that are acquired, invested in or controlled
by companies affiliated with our chief executive officer or Nicolaos
Hadjioannou subject in each case to compliance with, or waivers of, the
restrictive covenant agreements entered into between us and such companies. Our
Manager has also agreed that if one of our drybulk vessels and a drybulk vessel
owned or operated by any such company are both available and meet the criteria
for a charter being arranged by our Manager, our drybulk vessel will receive
such charter.

Historically
our Manager has rarely provided services to third parties. Currently our
Manager does not provide management services to any third party vessels.

Competition

We operate in
highly competitive markets that are based primarily on supply and demand. Our
business fluctuates in line with the main patterns of trade of the major
drybulk cargoes and varies according to changes in the supply and demand for
these items. We believe we differentiate ourselves from our competition by
providing young, modern vessels with advanced designs and technological
specifications. As of February 20, 2011 our fleet had an average age of 3.9
years compared to an industry average of approximately 14 years. Upon delivery
of our contracted newbuilds, the majority of our fleet will have been built in
Japanese shipyards, which we believe provides us with an advantage in
attracting large, well-established customers, including Japanese customers.

The drybulk
sector is characterized by relatively low barriers to entry, and ownership of
drybulk vessels is highly fragmented. In general, we compete with other owners
of Panamax class or larger drybulk vessels for charters based upon price,
customer relationships, operating expertise, professional reputation and size,
age, location and condition of the vessel.

Crewing and Shore
Employees

Our management
team consists of our chief executive officer, president, chief financial
officer and chief operating officer, all of whom are provided by our Manager.
In addition, we employ a legal representative for our office in Greece. Our
Manager is responsible for the technical management of our fleet and therefore
also handles the recruiting, either directly or through a crewing agent, of the
senior officers and all other crew members for our vessels. As of December 31,
2010, 339 people served on board the vessels in our fleet, and our Manager
employed 46 people, all of whom were shore-based.

Permits and
Authorizations

We are
required by various governmental and other agencies to obtain certain permits,
licenses, certificates and financial assurances with respect to each of our
vessels. The kinds of permits, licenses, certificates and financial assurances
required by governmental and other agencies depend upon several factors,
including the commodity being transported, the waters in which the vessel
operates, the nationality of the vessels crew and the type and age of the
vessel. All permits, licenses, certificates and financial assurances currently
required to operate our vessels have been obtained. Additional laws and
regulations, environmental or otherwise, may be adopted which could limit our
ability to do business or increase the cost of doing business.

21

---



Risk of Loss and
Liability Insurance

General

The operation
of our fleet includes risks such as mechanical failure, collision, property
loss, cargo loss or damage as well as personal injury, illness and loss of
life. In addition, the operation of any oceangoing vessel is subject to the
inherent possibility of marine disaster, including oil spills and other
environmental mishaps, and the liabilities arising from owning and operating
vessels in international trade. The U.S. Oil Pollution Act of 1990 (OPA 90),
which imposes virtually unlimited liability upon owners, operators and demise
charterers of vessels trading in the United States exclusive economic zone for
certain oil pollution accidents in the United States, has made liability
insurance more expensive for vessel owners and operators trading in the United
States market.

Our Manager is
responsible for arranging insurance for all our vessels on terms specified in
our management agreement, which we believe are in line with standard industry
practice. In accordance with our management agreement, our Manager procures and
maintains hull and machinery insurance, war risks insurance, freight, demurrage
and defense coverage and protection and indemnity coverage with mutual
assurance associations. Due to our low incident rate and the young age of our
fleet, we are generally able to procure relatively low rates for all types of
insurance.

While our
insurance coverage for our drybulk vessel fleet is in amounts that we believe
to be prudent to protect us against normal risks involved in the conduct of our
business and consistent with standard industry practice, our Manager may not be
able to maintain this level of coverage throughout a vessels useful life.
Furthermore, there can be no assurance that all risks are adequately insured
against, that any particular claim will be paid or that adequate insurance
coverage will always be obtainable at reasonable rates.

Hull and machinery insurance

Our marine
hull and machinery insurance covers risks of partial loss or actual or
constructive total loss from collision, fire, grounding, engine breakdown and
other insured risks up to an agreed amount per vessel. Our vessels will each be
covered up to at least their fair market value after meeting certain
deductibles per incident per vessel. We also maintain increased value coverage
for each of our vessels. Under this increased value coverage, in the event of
the total loss of a vessel, we are entitled to recover amounts not recoverable
under our hull and machinery policy.

Protection and indemnity insurance

Protection and
indemnity insurance is a form of mutual indemnity insurance provided by mutual
marine protection and indemnity associations, or P&I Associations, formed
by vessel owners to provide protection from large financial loss to one club
member by contribution towards that loss by all members.

Protection and
indemnity insurance covers our third-party liabilities in connection with our
shipping activities. This includes third-party liability and other related
expenses of injury or death of crew members, passengers and other third
parties, loss or damage to cargo, claims arising from collisions with other
vessels, damage to other third party property, pollution arising from oil or
other substances, and salvage, towing and other related costs, including wreck
removal. Our coverage, except for pollution, will be unlimited, and insurance
covering passengers and crew is estimated to be around $6.9 billion in 2010.
Furthermore, within this aggregate limit, club coverage is also limited to the
amount of the members legal liability.

Our protection
and indemnity insurance coverage for pollution is limited to $1.0 billion per
vessel per incident. Our protection and indemnity insurance coverage in respect
of passengers is limited to $2.0 billion and in respect of passengers and
seamen is limited to $3.0 billion per vessel per incident. The 13 P&I
Associations that comprise the International Group of P&I Clubs (the
International Group) insure approximately 90% of the worlds commercial
blue-water tonnage and have entered into a pooling agreement to reinsure each
P&I Associations liabilities. As a member of a P&I Association that is
a member of the International Group, we are subject to calls payable to the
P&I Association based on the International Groups claim records, as well
as the claim records of all other members of the individual associations.

Although the
P&I Associations compete with each other for business, they have found it
beneficial to mutualise their larger risks among themselves through the
International Group. This is known as The Pool. This pooling is regulated by
a contractual agreement which defines the risks that are to be covered and how
claims falling on The Pool are to be shared among the participants in the
International Group. The Pool provides a mechanism for sharing all claims in
excess of $8.0 million up to $50.0 million. For claims in excess of $50.0
million, the International Group purchases reinsurance from the commercial
market of up to $2.00 billion per vessel per incident in excess of $50.0
million and additional overspill insurance of $1.0 billion in excess of $2.05
billion in respect of passengers and seamen, per vessel per incident.

War risks insurance

Our war risk
insurance covers risks of partial loss or actual or constructive total loss
from confiscations, seizure, capture, vandalism, sabotage and other war related
risks and is $500.0 million per vessel per incident.

22

---



Inspection by
Classification Societies

Every
oceangoing vessel must be classed by a classification society. The
classification society certifies that the vessel is in class, signifying that
the vessel has been built and maintained in accordance with the rules and
regulations of the classification society. In addition, each vessel must comply
with all applicable laws, rules and regulations of the vessels country of
registry, or flag state, as well as the international conventions of which
that flag state is a member. A vessels compliance with international
conventions and corresponding laws and ordinances of its flag state can be
confirmed by the applicable flag state, port state control or, upon application
or by official order, the classification society, acting on behalf of the
authorities concerned.

The
classification society also undertakes, upon request, other surveys and checks
that are required by regulations and requirements of the flag state. These
surveys are subject to agreements made in each individual case or to the
regulations of the country concerned.

All areas
subject to survey as defined by the classification society are required to be
surveyed at least once per class period, unless shorter intervals between
surveys are prescribed elsewhere. The period between two subsequent surveys of
each area must not exceed five years. The maintenance of class, regular and
extraordinary surveys of a vessels hull and machinery, including the
electrical plant, and any special equipment classed are required to be
performed as follows:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Annual Surveys.
 For oceangoing vessels, annual surveys are conducted for their hulls and
 machinery, including the electrical plants, and for any special equipment
 classed, at intervals of 12 months from the date of commencement of the class
 period indicated in the certificate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Intermediate Surveys.
 Extended annual surveys are referred to as intermediate surveys and
 typically are conducted on the occasion of the second or third annual survey
 after commissioning and after each class renewal.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Class Renewal / Special Surveys.
 Class renewal surveys, also known as special surveys, are more extensive
 than intermediate surveys and are carried out at the end of each five-year
 period. During the special survey the vessel is thoroughly examined,
 including thickness-gauging to determine any diminution in the steel
 structures. Should the thickness be found to be less than class requirements,
 the classification society would prescribe steel renewals. It may be
 expensive to have steel renewals pass a special survey if the vessel is aged
 or experiences excessive wear and tear. A vessel owner has the option of
 arranging with the classification society for the vessels machinery to be on
 a continuous survey cycle, according to which all machinery would be surveyed
 within a five-year cycle. At an owners application, the surveys required for
 class renewal may be split according to an agreed schedule to extend over the
 entire period of class.

Vessels are
drydocked during intermediate and special surveys for repairs of their
underwater parts. If In Water Survey notation is assigned by class, as is the
case for our vessels, the vessel owner has the option of carrying out an
underwater inspection of the vessel in lieu of drydocking related to
intermediate surveys up to the tenth anniversary of vessel delivery, subject to
certain conditions, thereby generally achieving a higher utilization for the
relevant vessel.

Following an
incident or a scheduled survey, if any defects are found, the classification
surveyor will issue a recommendation or condition of class which must be
rectified by the vessel owner within the prescribed time limits.

In general,
insurance underwriters make it a condition for insurance coverage that a vessel
be certified as in class by a classification society which is a member of the
International Association of Classification Societies (IACS). All of our
vessels are certified as being in class by Lloyds Register of Shipping,
which is a member of IACS.

The following
table lists the dates by which we expect to carry out the next drydockings and
special surveys for the vessels in our current drybulk vessel fleet:

|                   |  |                |  |                   
|------------------ |  | -------------- |  | ------------------
|Vessel Name        |  | Drydocking (1) |  | Special Survey (1)
|                   |  |                |  |                   
|Maria              |  | April 2012     |  | April 2013        
|Vassos             |  | February 2013  |  | February 2014     
|Katerina           |  | May 2013       |  | May 2014          
|Maritsa            |  | January 2014   |  | January 2015      
|Pedhoulas Merchant |  | March 2015     |  | March 2016        
|Pedhoulas Trader   |  | May 2015       |  | May 2011          
|Pedhoulas Leader   |  | June 2011      |  | February 2012     
|Stalo              |  | January 2015   |  | January 2016      
|Marina             |  | January 2015   |  | January 2016      
|Sophia             |  | June 2011      |  | June 2012         
|Eleni              |  | November 2012  |  | November 2013     
|Martine            |  | February 2013  |  | February 2014     
|Andreas K          |  | August 2013    |  | August 2014       
|Kanaris            |  | March 2014     |  | March 2015        
|Panayiota K        |  | April 2014     |  | April 2015        
|Venus Heritage     |  | December 2014  |  | December 2015     

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have the ability to
 carry out in-water surveys of these vessels in lieu of drydocking, subject to
 certain conditions, which allows us to achieve a higher utilization of the
 relevant vessel. In the event of an in-water survey as part of a particular
 intermediate survey, drydocking would be required for the following special
 survey. Drydocking can be undertaken as part of a special survey if the
 drydocking occurs within 15 months prior to the special survey deadline.

23

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Environmental and
Other Regulations

General

Government
regulation significantly affects the ownership and operation of our vessels.
Our vessels are subject to international conventions and national, state and
local laws and regulations in force in international waters and the countries
in which they operate or are registered, including those governing the
management and disposal of hazardous substances and wastes, the cleanup of oil
spills and the management of other contamination, air emissions, water discharges
and ballast water. These laws and regulations include OPA 90, the U.S.
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), the U.S. Clean Water Act (CWA) and Clean Air Act (CAA), the
International Convention for Prevention of Pollution from Ships, the
International Convention for Safety of Life at Sea (SOLAS) and implementing
regulations adopted by the International Maritime Organization (IMO), the
European Union (EU) and other international, national and local regulatory
bodies. Compliance with these laws, regulations and other requirements entails
significant expense, including vessel modifications and implementation of
certain operating procedures. Our fleet, however, is young and modern and
complies with all current requirements. Under our management agreement, our
Manager has assumed technical management responsibility for our fleet,
including compliance with all applicable government and other regulations. If
the management agreement with our Manager terminates, we would attempt to hire
another party to assume this responsibility. In the event of termination, we
may be unable to hire another party to perform these and other services for a
fixed fee, as is the case with our Manager. However, due to the nature of our
relationship with our Manager, we do not expect our management agreement to be
terminated early.

A variety of
governmental and private entities subject our vessels to both scheduled and
unscheduled inspections. These entities include the local port authorities
(such as the U.S. Coast Guard, harbor master or equivalent), classification
societies, flag state administration (country of registry), charterers and
terminal operators. Certain of these entities require us to obtain permits,
licenses, financial assurances and certificates for the operation of our
vessels. Failure to maintain necessary permits or approvals could require us to
incur substantial costs or result in the temporary suspension of the operation
of one or more of our vessels.

We believe
that the heightened level of environmental and quality concerns among insurance
underwriters, regulators and charterers is leading to greater inspection and
safety requirements on all vessels and may accelerate the scrapping of older
vessels throughout the drybulk shipping industry. Increasing environmental
concerns have created a demand for vessels that conform to the stricter
environmental standards. We are required to maintain operating standards for
all of our vessels that emphasize operational safety, quality maintenance,
continuous training of our officers and crews and compliance with U.S. and
international regulations. We believe that the operation of our vessels is in
substantial compliance with all environmental laws and regulations applicable to
us as of the date of this annual report. However, because such laws and
regulations are subject to frequent change and may impose increasingly stricter
requirements, such future requirements may limit our ability to do business,
increase our operating costs, force the early retirement of our vessels and/or
affect their resale value, all of which could have a material adverse effect on
our financial condition and results of operations. However, we believe that
because our fleet is young and modern, we will not be exposed to the same level
of risk faced by owners of older, less modern vessels.

The International Maritime Organization

Our vessels
are subject to standards imposed by the IMO, the United Nations agency for
maritime safety and the prevention of pollution by ships. The IMO has adopted
regulations that are designed to reduce pollution in international waters, both
from accidents and from routine operations, and has negotiated international
conventions that impose liability for oil pollution in international waters and
a signatorys territorial waters. For example, Annex III of the International
Convention for the Prevention of Pollution from Ships (MARPOL) regulates the
transportation of marine pollutants and imposes standards on packing, marking,
labeling, documentation, stowage, quantity limitations and pollution
prevention. These requirements have been expanded by the International Maritime
Dangerous Goods Code, which imposes additional standards for all aspects of the
transportation of dangerous goods and marine pollutants by sea.

In September
1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels.
Annex VI became effective on May 19, 2005, and sets limits on sulfur oxide and
nitrogen oxide emissions from vessel exhausts and prohibits deliberate
emissions of ozone depleting substances, such as chlorofluorocarbons. Annex VI
also includes a global cap on the sulfur content of marine fuels and allows for
the establishment of so-called Emission Control Areas with more stringent
controls on sulfur emissions. We have obtained International Air Pollution
Prevention Certificates for all our vessels, and believe that maintaining
compliance with Annex VI will not have an adverse financial impact on the
operation of our vessels. Additional or new conventions, laws and regulations
may be adopted that could adversely affect our ability to manage our vessels.
In October 2008, the IMO Marine Environment Protection Committee adopted
amendments to Annex VI regarding particulate matter, nitrogen oxides and sulfur
oxide emissions. These amendments, which entered into force on July 1, 2010,
are intended to reduce air pollution from vessels by, among other things, (i)
implementing a progressive reduction of sulfur oxide emissions from ships, with
the global sulfur cap reduced initially to 3.50% (from the current cap of
4.50%), effective from January 1, 2012, then progressively to 0.50%, effective
from January 1, 2020, subject to a feasibility review to be completed no later
than 2018; and (ii) establishing new tiers of stringent nitrogen oxide
emissions standards for new marine engines, depending on their date of
installation.

24

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In addition,
the European Union has established separate limitations on the sulfur content
of marine fuels, and some European Union countries may be declared Emission
Control Areas in the future, pursuant to Annex VI and its amendments. On March
26, 2010, the International Maritime Organization to designated the area
extending 200 miles from the U.S territorial sea baseline adjacent to the
Atlantic/Gulf and Pacific coasts and the eight main Hawaiian Islands as
Emission Control Areas under Annex VI and its amendments. Compliance with these
requirements, or the adoption in the future of other Emission Control Areas, or
other new or more stringent emissions requirements are adopted by the European
Union, the U.S. or individual states, or other jurisdictions in which we
operate, could entail significant capital expenditures or otherwise increase
the costs of our operations.

In March 2001,
the IMO adopted the International Convention on Civil Liability for Bunker Oil
Pollution Damage, or the Bunker Convention, which imposes strict liability on
ship owners for pollution damage in jurisdictional waters of ratifying states
caused by discharges of bunker fuel. The Bunker Convention also requires
registered owners of ships over 1,000 gross tons to maintain insurance in
specified amounts to cover their liability for relevant pollution damage. The
Bunker Convention was ratified by a sufficient number of nations for entry into
force, and the Bunker Convention became effective on November 21, 2008.

The operation
of our vessels is also affected by the requirements set forth in the ISM Code.
The ISM Code requires vessel owners or any other person, such as a manager or
bareboat charterer, who has assumed responsibility for the operation of a
vessel from the vessel owner and on assuming such responsibility has agreed to
take over all the duties and responsibilities imposed by the ISM Code, to
develop and maintain an extensive SMS that includes the adoption of a safety
and environmental protection policy setting forth instructions and procedures
for safe operation and describing procedures for dealing with emergencies. The
ISM Code requires that vessel operators obtain a Safety Management
Certificate for each vessel they operate from the government of the vessels
flag state. The certificate verifies that the vessel operates in compliance
with its approved SMS. Currently, our Manager has the requisite documents of
compliance and safety management certificates for each of the vessels in our
fleet for which the certificates are required by the IMO. Our Manager is
required to renew these documents of compliance and safety management
certificates every five years. Compliance is externally verified on an annual
basis for the Manager and between the second and third years for each vessel by
the applicable flag state. Although all our vessels are currently ISM
Code-certified, there can be no assurance that such certification will be
maintained indefinitely.

Noncompliance
by a vessel owner, manager or bareboat charterer with the ISM Code may subject
such party to increased liability, invalidate existing insurance or decrease
available insurance coverage for the affected vessels and result in a denial of
access to, or detention in, certain ports. For example, the U.S. Coast Guard
and EU authorities have indicated that vessels not in compliance with the ISM
Code will be prohibited from trading in U.S. and EU ports.

The U.S. Oil Pollution Act of 1990

OPA 90
established an extensive regulatory and liability regime for the protection of
the environment from oil spills and cleanup of oil spills. OPA 90 applies to
discharges of any oil from a vessel, including discharges of fuel and
lubricants. OPA 90 affects all owners and operators whose vessels trade in the
United States, its territories and possessions or whose vessels operate in U.S.
waters, which includes the United States territorial sea and its two hundred
nautical mile exclusive economic zone. While our vessels do not carry oil as
cargo, they do carry lubricants and fuel oil, or bunkers, which subjects our
vessels to the requirements of OPA 90.

Under OPA 90,
vessel owners, operators and bareboat charterers are responsible parties and
are jointly, severally and strictly liable (unless the discharge of pollutants
results solely from the act or omission of a third party, an act of God or an
act of war) for all containment and clean-up costs and other damages arising
from discharges, or threatened discharges, of pollutants from their vessels,
including bunkers. OPA 90 defines these other damages broadly to include:

| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | natural
 resource damages and the costs of assessment thereof;                                                                                                           
| |   |                                                                                                                                                                          
| | ● | real and personal
 property damage;                                                                                                                                      
| |   |                                                                                                                                                                          
| | ● | net loss of
 taxes, royalties, rents, fees and other lost revenues;                                                                                                      
| |   |                                                                                                                                                                          
| | ● | lost profits
 or impairment of earning capacity due to property or natural resource
 damages; and                                                                        
| |   |                                                                                                                                                                          
| | ● | net cost of
 public services necessitated by a spill response, such as protection from
 fire, safety or health hazards and loss of subsistence use of natural
 resources.

25

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OPA 90
preserves the right to recover damages under other existing laws, including
maritime tort law.

Effective July
31, 2009, the U.S. Coast Guard adopted regulations that adjust the limits of
liability of responsible parties under OPA 90 to the greater of $1,000 per
gross ton or $854,400 per non-tank vessel and established a procedure for
adjusting the limits for inflation every three years. These limits of liability
do not apply if an incident was directly caused by violation of applicable U.S.
safety, construction or operating regulations or by a responsible partys gross
negligence or willful misconduct, or if the responsible party fails or refuses
to report the incident or to cooperate and assist in connection with oil
removal activities. As a result of the oil spill in the Gulf of Mexico
resulting from the explosion of the Deepwater Horizon drilling rig, bills have
been introduced in both houses of the U.S. Congress to increase the limits of
OPA liability for all vessels, including tanker vessels.

All owners and
operators of vessels over 300 gross tons are required to establish and maintain
with the U.S. Coast Guard evidence of financial responsibility sufficient to
meet their potential aggregate liabilities under OPA 90 and CERCLA, which is
discussed below. Under the regulations, owners and operators may evidence their
financial responsibility by showing proof of insurance, surety bond, guarantee,
letter of credit or self-insurance. An owner or operator of a fleet of vessels
is required only to demonstrate evidence of financial responsibility in an
amount sufficient to cover the vessel in the fleet having the greatest maximum
liability under OPA 90 and CERCLA. Under the self-insurance provisions, the
vessel owner or operator must have a net worth and working capital, measured in
assets located in the United States against liabilities located anywhere in the
world, that exceeds the applicable amount of financial responsibility. We have
complied with the U.S. Coast Guard regulations by providing a financial
guarantee evidencing sufficient self-insurance. We have satisfied these
requirements and obtained a U.S. Coast Guard certificate of financial
responsibility for all of our vessels.

The U.S. Coast
Guards regulations concerning certificates of financial responsibility
provide, in accordance with OPA 90, that claimants may bring suit directly
against an insurer or guarantor that furnishes certificates of financial
responsibility. In the event that such insurer or guarantor is sued directly,
it is prohibited from asserting any contractual defense that it may have had
against the responsible party and is limited to asserting those defenses
available to the responsible party and the defense that the incident was caused
by the willful misconduct of the responsible party. Certain organizations,
which had typically provided certificates of financial responsibility under
pre-OPA 90 laws, including the major protection and indemnity organizations,
have declined to furnish evidence of insurance for vessel owners and operators
if they are subject to direct actions or required to waive insurance policy
defenses. This requirement may have the effect of limiting the availability of
the type of coverage required by the U.S. Coast Guard and could increase our
costs of obtaining this insurance for our fleet, as well as the costs of our
competitors that also require such coverage.

We currently
maintain, for each of our vessels, oil pollution liability coverage insurance
in the amount of $1.0 billion per incident. Although our vessels carry a
relatively small amount of bunkers, a spill of oil from one of our vessels
could be catastrophic under certain circumstances. We also carry hull and
machinery and protection and indemnity insurance to cover the risks of fire and
explosion. Losses as a result of fire or explosion could be catastrophic under
some conditions. While we believe that our present insurance coverage is
adequate, not all risks can be insured and there can be no guarantee that any
specific claim will be paid, or that we will always be able to obtain adequate
insurance coverage at reasonable rates. If the damages from a catastrophic
spill exceeded our insurance coverage, the payment of those damages could have
a severe, adverse effect on us and could possibly result in our insolvency.

Title VII of
the Coast Guard and Maritime Transportation Act of 2004 amended OPA 90 to
require the owner or operator of any non-tank vessel of 400 gross tons or more
that carries oil of any kind as a fuel for main propulsion, including bunkers,
to prepare and submit a response plan for each vessel. These vessel response
plans include detailed information on actions to be taken by vessel personnel
to prevent or mitigate any discharge or substantial threat of such a discharge
of ore from the vessel due to operational activities or casualties. All of our
vessels have U.S. Coast Guard-approved response plans.

OPA 90 specifically
permits individual states to impose their own liability regimes with regard to
oil pollution incidents occurring within their boundaries, and some states have
enacted legislation providing for unlimited liability for oil spills. In some
cases, states which have enacted such legislation have not yet issued
implementing regulations defining vessels owners responsibilities under these
laws. We intend to comply with all applicable state regulations in the ports
where our vessels call.

The U.S. Comprehensive Environmental
Response, Compensation, and Liability Act

CERCLA applies
to spills or releases of hazardous substances other than petroleum or petroleum
products, whether on land or at sea. CERCLA imposes joint and several
liability, without regard to fault, on the owner or operator of a ship, vehicle
or facility from which there has been a release, along with other specified
parties. Costs recoverable under CERCLA include cleanup and removal costs,
natural resource damages and governmental oversight costs. Liability under
CERCLA is generally limited to the greater of $300 per gross ton or $0.5
million per vessel carrying non-hazardous substances ($5.0 million for vessels
carrying hazardous substances), unless the incident is caused by gross negligence,
willful misconduct or a violation of certain regulations, in which case
liability is unlimited. As described above, owners and operators of vessels
must establish and maintain with the U.S. Coast Guard evidence of financial
responsibility sufficient to meet their potential liabilities under CERCLA.

26

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The U.S. Clean Water Act

The CWA
prohibits the discharge of oil or hazardous substances in navigable waters and
imposes strict liability in the form of penalties for any unauthorized
discharges. It also imposes substantial liability for the costs of removal,
remediation and damages and complements the remedies available under the more
recently enacted OPA 90 and CERCLA, discussed above. The U.S. Environmental
Protection Agency (EPA) regulates the discharge in U.S. ports of ballast
water and other substances incidental to the normal operation of vessels. Under
EPA regulations, commercial vessels greater than 79 feet in length are required
to obtain coverage under the Vessel General Permit, or VGP, to discharge
ballast water and other wastewater into U.S. waters by submitting a Notice of
Intent, or NOI. The VGP requires vessel owners and operators to comply with a
range of best management practices and reporting and other requirements for a
number of incidental discharge types and incorporates current U.S. Coast Guard
requirements for ballast water management, as well as supplemental ballast
water requirements. We have submitted NOIs for our vessels operating in U.S.
waters and will likely incur costs to meet the requirements of the VGP. In
addition, various states have also enacted legislation restricting ballast
water discharges and the introduction of non-indigenous species considered to
be invasive. These and any similar restrictions enacted in the future could
increase the costs of operating in the relevant waters.

The U.S. Clean Air Act

On October 9,
2008, the U.S. ratified the amended Annex VI to the MARPOL Convention,
addressing air pollution from ships, which went into effect on January 8, 2009.
In December 2009, the EPA announced its intention to publish final amendments
to the emission standards for new marine diesel engines installed on ships
flagged or registered in the United States that are consistent with standards
required under recent amendments to Annex VI of MARPOL. The new regulations
include near-term standards beginning in 2011 for newly built engines requiring
more efficient use of engine technologies in use today and long-term standards
beginning in 2016 requiring an 80 percent reduction in nitrogen oxide emissions
below current standards. The CAA also requires states to adopt State
Implementation Plans, or SIPs, designed to attain national health-based air
quality standards in primarily major metropolitan and/or industrial areas.
Several SIPs regulate emissions resulting from vessel loading and unloading
operations by requiring the installation of vapor control equipment. In
addition, individual states, including California, have attempted to regulate
vessel emissions within state waters. The California Air Resources Board also
has recently adopted fuel content regulations that would apply to all vessels
sailing within 24 nautical miles of the California coast and whose itineraries
call for them to enter California ports, terminal facilities or estuarine
waters.

New or more
stringent federal or state air emission regulations which may be adopted could
require significant capital expenditures to retrofit vessels and could
otherwise increase our operating costs.

Other environmental initiatives

The EU has
adopted legislation that (1) requires member states to refuse access to their
ports by certain substandard vessels, according to vessel type, flag and number
of previous detentions; (2) obliges member states to inspect at least 25% of
vessels using their ports annually and increase surveillance of vessels posing
a high risk to maritime safety or the marine environment; (3) provides the EU
with greater authority and control over classification societies, including the
ability to seek to suspend or revoke the authority of negligent societies; and
(4) requires member states to impose criminal sanctions for certain pollution
events, such as the unauthorized discharge of tank washings. It is also
considering legislation that will affect the operation of vessels and the
liability of owners for oil pollution. While we do not believe that the costs
associated with our compliance with these adopted and proposed EU initiatives
will be material, it is difficult to predict what additional legislation, if
any, may be promulgated by the EU or any other country or authority. For
example, in October 2007, the Commission of the European Communities proposed
an Integrated Maritime Policy for the European Union. Under the proposal, the
Commission indicated that it will, among other things, support international
efforts to diminish air pollution, including greenhouse gas emissions, from
ships, and will consider additional proposals in these areas at the European
level.

The U.S.
National Invasive Species Act (NISA) was enacted in 1996 in response to
growing reports of harmful organisms being released into U.S. ports through
ballast water taken on by vessels in foreign ports. Under NISA, the U.S. Coast
Guard adopted regulations in July 2004 imposing mandatory ballast water
management practices for all vessels equipped with ballast water tanks entering
U.S. waters. These requirements can be met by performing mid-ocean ballast
exchange, by retaining ballast water on board the vessel or by using
environmentally sound alternative ballast water management methods approved by
the U.S. Coast Guard. However, mid-ocean ballast exchange is mandatory for
vessels heading to the Great Lakes or Hudson Bay. Mid-ocean ballast exchange is
the primary method for compliance with the U.S. Coast Guard regulations, since
holding ballast water can prevent vessels from performing cargo operations upon
arrival in the United States and alternative methods are still under
development. Vessels that are unable to conduct mid-ocean ballast exchange due
to voyage or safety concerns may discharge minimum amounts of ballast water (in
areas other than the Great Lakes and Hudson Bay), provided that they comply
with record keeping requirements and document the reasons they could not follow
the required ballast water management requirements. The U.S. Coast Guard has
proposed amendments to its ballast water management regulations that, if
finalized, could set stricter discharge limits for various invasive species or
lead to requirements for active treatment of ballast water. A number of bills
relating to ballast water management have been introduced in the U.S. Congress,
but it is difficult to predict which, if any, will be enacted. Several states,
including Michigan and California, have adopted legislation or regulations
relating to the permitting and management of ballast water discharges. Other
states could adopt similar requirements that could increase the costs of
operation in state waters.

27

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At the
international level, the IMO adopted an International Convention for the
Control and Management of Ships Ballast Water and Sediments in February 2004
(the BWM Convention). The BWM Conventions implementing regulations call for
a phased introduction of mandatory ballast water exchange requirements, to be
replaced in time with mandatory concentration limits. The BWM Convention will
not enter into force until 12 months after it has been adopted by 30 states,
the combined merchant fleets of which represent not less than 35% of the gross
tonnage of the worlds merchant shipping. As of January 31, 2011, the BWM
Convention had been adopted by 27 states, representing 25.32% of the worlds
tonnage. Each vessel in our current fleet has been issued a BWM plan Statement
of Compliance by the classification society with respect to the applicable IMO
regulations and guidelines.

If mid-ocean
ballast exchange is made mandatory at the international level or if ballast
water treatment requirements or options are instituted, significant capital
expenditures to retrofit vessels will be needed and could increase our
operating costs.

Greenhouse Gas Regulation

In February
2005, the Kyoto Protocol to the United Nations Framework Convention on Climate
Change entered into force. Pursuant to the Protocol, adopting countries are
required to implement national programs to reduce emissions of certain gases,
generally referred to as greenhouse gases, which are suspected of contributing
to global warming. Currently, the emissions of greenhouse gases from
international shipping are not subject to the Kyoto Protocol. However, a new
treaty may be adopted in the future that includes restrictions on shipping
emissions. International and multinational bodies or individual countries also
may adopt their own climate change regulatory initiatives. The IMO recently
announced its intention to develop reduction measures for greenhouse gases from
international shipping. The European Union has indicated that it intends to
propose an expansion of the existing European Union emissions trading scheme to
include emissions of greenhouse gases from vessels. In the United States, the
EPA is considering a petition from the California Attorney General and a
coalition of environmental groups to regulate greenhouse gas emissions from
ocean-going vessels under the Clean Air Act. Climate change initiatives also
are being considered in the U.S. Congress. These or other developments may
result in U.S. federal regulations relating to the control of greenhouse gas
emissions. Any passage of climate control legislation or other regulatory
initiatives by the IMO, European Union, the U.S. or other individual countries
where we operate that restrict emissions of greenhouse gases could entail
financial impacts on our operations that we cannot predict with certainty at
this time.

Vessel security regulations

A number of
initiatives have been introduced in recent years intended to enhance vessel
security. On November 25, 2002, the Maritime Transportation Security Act of
2002 (the MTSA) came into effect. To implement certain portions of the MTSA,
the U.S. Coast Guard issued regulations in July 2003 requiring the
implementation of certain security requirements aboard vessels operating in
waters subject to the jurisdiction of the United States. Similarly, in December
2002, amendments to SOLAS created a new chapter of the convention dealing
specifically with maritime security. This new chapter came into effect in July
2004 and imposes various detailed security obligations on vessels and port
authorities, most of which are contained in the newly created International
Ship and Port Facilities Security Code, or ISPS Code. Among the various
requirements are:

| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| | ● | on-board
 installation of automatic information systems to enhance vessel-to-vessel and
 vessel-to-shore communications;
| |   |                                                                                                                         
| | ● | on-board
 installation of ship security alert systems;                                                                  
| |   |                                                                                                                         
| | ● | the
 development of vessel security plans; and                                                                          
| |   |                                                                                                                         
| | ● | compliance
 with flag state security certification requirements.                                                        

The U.S. Coast Guard regulations, intended to
align with international maritime security standards, exempt non-U.S. vessels
from MTSA vessel security measures, provided such vessels have on board a valid
International Ship Security Certificate that attests to the vessels
compliance with SOLAS security requirements and the ISPS Code. We have
implemented the various security measures addressed by the IMO, SOLAS and the
ISPS Code, and we have approved ISPS certificates and plans on board all our
vessels, which have been certified by the applicable flag state.

Seasonality

We operate our
vessels in markets that have historically exhibited seasonal variations in
demand and, as a result, in charter rates. This seasonality may result in
quarter-to-quarter volatility in our results of operations. The market for
marine drybulk transportation services is typically stronger in the fall and
winter months in anticipation of increased consumption of coal and other raw
materials in the northern hemisphere during the winter months. In addition,
unpredictable weather patterns in these months tend to disrupt vessel
scheduling and supplies of certain commodities. This seasonality could
materially affect our business, financial condition, results of operations and
ability to pay dividends.

C. Organizational Structure

Safe Bulkers,
Inc. is a holding company with 28 subsidiaries, 27 of which are incorporated in
Liberia and one of which is incorporated in the Republic of The Marshall
Islands. Of our Liberian subsidiaries, 25 either own vessels in our fleet or
are parties to contracts to obtain newbuild vessels. Our subsidiaries are
wholly-owned by us. A list of our subsidiaries as of February 20, 2011 is set
forth in Exhibit 8.1 to this annual report.

D. Property, Plant and Equipment

We have no freehold or material
leasehold interest in any real property. We occupy office space at 30-32 Avenue
Karamanli, 16605 Voula, Athens, Greece, that is provided to us as part of the
services we receive under our management agreement. We have established a
representation office in Greece and pursuant to legal obligations for such
establishment, we directly lease an office space in the same building for that
purpose. Other than our vessels, we do not have any material property. Our
vessels are subject to priority mortgages, which secure our obligations under
our various credit facilities. For further details regarding our credit
facilities, refer to Item 5. Operating and Financial Review and Prospects  B.
Liquidity and Capital Resources  Credit Facilities.

28

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ITEM 4A.
UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING
AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial
condition and results of operations should be read in conjunction with the
financial statements and the notes to those statements included elsewhere in
this annual report. This discussion includes forward-looking statements that
involve risks and uncertainties. As a result of many factors, such as those set
forth under Item 3. Key InformationD. Risk Factors and elsewhere in this
annual report, our actual results may differ materially from those anticipated
in these forward-looking statements. Please see the section Forward-Looking
Statements at the beginning of this annual report.

Overview

Our business
is to provide international marine drybulk transportation services by operating
vessels in the drybulk sector of the shipping industry. As of February 20, 2011
our fleet consisted of 16 drybulk vessels, and we had newbuild contracts for an
additional nine vessels with an aggregate capacity of 2,387,800 dwt. We deploy
our vessels on a mix of period time and spot charters according to our
assessment of market conditions, adjusting the mix of these charters to take
advantage of the relatively stable cash flow and high utilization rates
associated with period time charters or to profit from attractive spot charter
rates during periods of strong charter market conditions. As of February 20,
2011, 15 out of 16 vessels in our fleet were employed on period time charters.
We believe our customers, some of which have been chartering our vessels or
vessels of our predecessor for over 21 years, enter into period time and spot
charters with us because of the quality of our young and modern vessels and our
record of safe and efficient operations.

The average
number of vessels in our fleet for the years ended December 31, 2008, 2009 and
2010 was 11.1, 13.2 and 14.6 respectively.

After delivery
of our contracted newbuilds, our drybulk fleet will consist of 25 vessels and
will have an aggregate carrying capacity of 2,387,800 dwt, assuming we do not
acquire any additional vessels or dispose of any of our vessels.

Our Manager

Our operations
are managed by our Manager, Safety Management Overseas S.A., under the
supervision of our executive officers and our board of directors. Under our
management agreement, our Manager provides us with technical, administrative
and commercial services for an initial term that expired on May 28, 2010, with
automatic one-year renewals for an additional eight years, at our option. Our
Manager is ultimately owned by Machairiotissa Holdings Inc., which is a
corporation wholly-owned by Polys Hajioannou.

A. Operating Results

Our operating
results are largely driven by the following factors:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Ownership days. We define ownership days as
 the aggregate number of days in a period during which each vessel in our
 fleet has been owned by us. Ownership days are an indicator of the size of
 our fleet over a period and affect both the amount of revenues and the amount
 of expenses that we record during a period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Available days. We define available days
 (also referred to as voyage days) as the total number of days in a period
 during which each vessel in our fleet was in our possession net of off-hire
 days associated with scheduled maintenance, which includes major repairs,
 drydockings, vessel upgrades or special or intermediate surveys. Available
 days are used to measure the number of days in a period during which vessels
 should be capable of generating revenues.                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Operating days. We define operating days as
 the number of our available days in a period less the aggregate number of
 days that our vessels are off-hire due to any reason, excluding scheduled
 maintenance. Operating days are used to measure the aggregate number of days
 in a period during which vessels actually generate revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Fleet utilization. We calculate fleet
 utilization by dividing the number of our operating days during a period by
 the number of our ownership days during that period. Fleet utilization is
 used to measure a companys ability to efficiently find suitable employment
 for its vessels and minimize the number of days that its vessels are off-hire
 for reasons such as scheduled repairs, vessel upgrades, drydockings or
 special surveys. During the three years ended December 31, 2010, our average
 annual fleet utilization rate was approximately 98.97%. However, an increase
 in annual off-hire days could reduce our operating days, and therefore, our
 fleet utilization.                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ● | Time charter equivalent rates. We define
 time charter equivalent rates, or TCE rates, as our charter revenues less
 commissions and voyage expenses during a period divided by the number of our
 available days during the period. TCE rate is a standard shipping industry
 performance measure used primarily to compare daily earnings generated by
 vessels on period time charters and trip time charters with daily earnings
 generated by vessels on voyage charters, because charter rates for vessels on
 voyage charters are generally not expressed in per day amounts, while charter
 rates for vessels on period time charters and trip time charters generally
 are expressed in such amounts. We have only rarely employed our vessels on
 voyage charters and, as a result, generally our TCE rates approximate our
 time charter rates.

29

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|                                |  |                                                                                       |         |      |   |         |  |   |         | 
|------------------------------- |  | ------------------------------------------------------------------------------------- | ------- | ---- | - | ------- |  | - | ------- | 
|                                |  | Year
Ended December 31,                                                               |        
|                                |  |                                                                                       |        
|                                |  | 2008                                                                                  |         | 2009 |   | 2010    | 
|                                |  |                                                                                       |         |      |   |         | 
|                                |  | (In
thousands of U.S. dollars
except available days and time charter equivalent rate) |        
|Time charter revenues           |  | $                                                                                     | 208,411 |      | $ | 168,400 |  | $ | 159,698 | 
|Less commissions                |  |                                                                                       | 7,639   |      |   | 3,794   |  |   | 2,678   | 
|Less voyage expenses            |  |                                                                                       | 273     |      |   | 577     |  |   | 610     | 
|                                |  |                                                                                       |         |      |   |         |  |   |         | 
|Time charter equivalent revenue |  | $                                                                                     | 200,499 |      | $ | 164,029 |  | $ | 156,410 | 
|                                |  |                                                                                       |         |      |   |         |  |   |         | 
|Available days                  |  |                                                                                       | 4,040   |      |   | 4,795   |  |   | 5,296   | 
|                                |  |                                                                                       |         |      |   |         |  |   |         | 
|Time charter equivalent rate    |  | $                                                                                     | 49,626  |      | $ | 34,208  |  | $ | 29,534  | 
|                                |  |                                                                                       |         |      |   |         |  |   |         | 

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Daily vessel operating expenses. We define
 daily vessel operating expenses to include the costs for crewing, insurance,
 lubricants, spare parts, provisions, stores, repairs, maintenance, statutory
 and classification expense, drydocking, intermediate and special surveys and
 other miscellaneous items. Daily vessel operating expenses are calculated by
 dividing vessel operating expenses by ownership days for the relevant period.
 Our ability to control our fixed and variable expenses, including our daily
 vessel operating expenses, also affects our financial results. In addition,
 factors beyond our control, such as developments relating to market premiums
 for insurance and the value of the U.S. dollar compared to currencies in
 which certain of our expenses, including certain crew wages, are denominated
 can cause our vessel operating expenses to increase.

The following
table reflects our ownership days, available days, operating days, fleet
utilization, TCE rates and daily vessel operating expenses for the periods
indicated:

|                                |  |                         |        |      |   |        |   |   |        |  
|------------------------------- |  | ----------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                                |  | Year
Ended December 31, |       
|                                |  |                         |       
|                                |  | 2008                    |        | 2009 |   | 2010   |  
|                                |  |                         |        |      |   |        |  
|Ownership days                  |  |                         | 4,075  |      |   | 4,817  |   |   | 5,326  |  
|Available days                  |  |                         | 4,040  |      |   | 4,795  |   |   | 5,296  |  
|Operating days                  |  |                         | 4,025  |      |   | 4,778  |   |   | 5,269  |  
|Fleet utilization               |  |                         | 98.77  | %    |   | 99.19  | % |   | 98.93  | %
|TCE rates                       |  | $                       | 49,626 |      | $ | 34,208 |   | $ | 29,534 |  
|Daily vessel operating expenses |  | $                       | 4,323  |      | $ | 4,075  |   | $ | 4,342  |  

Revenues

Our revenues
are driven primarily by the number of vessels in our fleet, the number of days
during which our vessels operate and the amount of daily charter rates that our
vessels earn under our charters, which, in turn, are affected by a number of
factors, including:

| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | levels of
 demand and supply in the drybulk shipping industry;                                                                                                                                                       
| |   |                                                                                                                                                                                                                      
| | ● | the age,
 condition and specifications of our vessels;                                                                                                                                                               
| |   |                                                                                                                                                                                                                      
| | ● | the duration
 of our charters;                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                      
| | ● | our
 decisions relating to vessel acquisitions and disposals;                                                                                                                                                        
| |   |                                                                                                                                                                                                                      
| | ● | the amount
 of time that we spend positioning our vessels;                                                                                                                                                           
| |   |                                                                                                                                                                                                                      
| | ● | the
 availability of our vessels, which is related to the amount of time that our
 vessels spend in drydock undergoing repairs and the amount of time required
 to perform necessary maintenance or upgrade work; and
| |   |                                                                                                                                                                                                                      
| | ● | other factors
 affecting charter rates for drybulk vessels.                                                                                                                                                          

Revenue is
recognized as earned on a straight-line basis over the charter period in
respect of charter agreements that provide for varying rates. The difference
between the revenue recognized and the actual charter rate is recorded either
as unearned revenue or accrued revenue (see Unearned Revenue/Accrued Revenue
below). Commissions (address and brokerage), regardless of charter type, are
always paid by us and are deferred and amortized over the related charter
period and are presented as a separate line item in revenues to arrive at net
revenues in the accompanying consolidated statements of income.

30

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Revenues from
our period time charters comprised 83.6%, 92.8% and 99.5% respectively, of our
charter revenues for the years ended December 31, 2008, 2009 and 2010. The
revenues from our spot charters comprised 16.4%, 7.2% and 0.5%, respectively,
of our charter revenues for the years ended December 31, 2008, 2009 and 2010.

Vessels
operating on period time charters provide more predictable cash flows, but can
yield lower profit margins than vessels operating in the spot market during
periods characterized by favorable market conditions. Vessels operating in the
spot market generate revenues that are less predictable than those on period
time charters, but may enable us to capture increased profit margins during
periods of high drybulk charter rates, although we are exposed to the risk of
low drybulk charter rates, which may have a materially adverse impact on our
financial performance. If we fix vessels on period time charters, future spot
market rates may be higher or lower than those rates at which we have time
chartered our vessels. We are constantly evaluating potential opportunities to
increase the number of our drybulk vessels employed on period time charters,
but only expect to enter into additional period time charters if we can obtain
contract terms that satisfy our criteria.

Unearned
Revenue/Accrued Revenue

Unearned
revenue as of December 31, 2010 includes: (i) cash received prior to the
balance sheet date relating to services to be rendered after the balance sheet
date amounting to $4.7 million as of December 31, 2010 and (ii) deferred
revenue resulting from straight-line revenue recognition in respect of charter
agreements that provide for varying charter rates amounting to $37.4 million,
all of which will be recognized as revenue during the period from January 1,
2011 until March 1, 2015.

Unearned
revenue as of December 31, 2009 includes: (i) cash received prior to the
balance sheet date relating to services to be rendered after the balance sheet
date amounting to $4.0 million as of December 31, 2009 and (ii) deferred
revenue resulting from straight-line revenue recognition in respect of charter
agreements that provide for varying charter rates amounting to $29.5 million,
all of which will be recognized as revenue during the period from January 1,
2010 until March 1, 2015.

Accrued
revenue represents revenue earned prior to cash being received from varying
charter rates, which amounted to $0 and $1.7 million as of December 31, 2010
and 2009, respectively.

Commissions

We pay
commissions currently ranging up to 5.0% on our period time and trip time
charters, which are a type of spot charter, to unaffiliated ship brokers, other
brokers associated with our charterers and to our charterers. These commissions
are directly related to our revenues, from which they are deducted. We expect
that the amount of our total commissions to unaffiliated ship brokers and
unaffiliated in-house brokers will continue to grow as the size of our fleet
grows and revenues increase following delivery of our nine remaining contracted
newbuilds and as a result of additional vessel acquisitions. These commissions
do not include fees we pay to our Manager, which are described under Item 4.
Information on the CompanyB. Business OverviewManagement of Our Fleet.

Voyage Expenses

We charter our
vessels primarily through period time charters and trip time charters under
which the charterer is responsible for most voyage expenses, such as the cost
of bunkers, port expenses, agents fees, canal dues, extra war risks insurance
and any other expenses related to the cargo. We are responsible for the
remaining voyage expenses such as draft surveys, hold cleaning, postage and
other minor miscellaneous expenses related to the voyage. We generally do not
employ our vessels on voyage charters under which we would be responsible for
all voyage expenses; therefore, we have not experienced during the relevant
periods, and do not expect to experience, material changes to our voyage
expenses. We also
record within voyage expenses the 4% United States federal income tax we
pay in respect of our U.S. source shipping income (imposed on gross income
without the allowance for any deductions). In many cases, we recover these
taxes from the charterers, and we record such recovered amounts within
revenues.

Vessel Operating
Expenses

Vessel
operating expenses include costs for crewing, insurance, lubricants, spare
parts, provisions, stores, repairs, maintenance, statutory and classification
expense, drydocking, intermediate and special surveys and other minor
miscellaneous items. We expect that crewing costs will continue to increase in
the future due to the limited supply of and increase in demand for
well-qualified crew. In addition, we expect that insurance costs, drydocking
and maintenance costs will increase as our vessels age. In addition, a portion
of our vessel operating expenses, primarily crew wages paid to our Greek crew
members, are in currencies other than the U.S. dollar. These expenses may
increase or decrease as a result of fluctuation of the U.S. dollar against
these currencies.

31

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Depreciation

We depreciate
our drybulk vessels on a straight-line basis over the expected useful life of
each vessel. Depreciation is based on the cost of the vessel less its estimated
residual value. We estimate the useful life of our vessels to be 25 years from
the date of delivery from the shipyard. Furthermore, we estimate the residual
value of our vessels to be $182 per light-weight ton.

Vessels, Net

Vessels are
recorded at their historical cost, which consists of the contracted purchase
price, any direct material expenses incurred upon acquisition (including
improvements, on-site supervision expenses incurred during the construction
period, commissions paid, delivery expenses and other expenditures to prepare
the vessel for her initial voyage) and financing costs incurred during the
construction of the vessel, less any potential discount or commission payable
to us resulting in a contract price reduction. Subsequent expenditures for
conversions and major improvements are also capitalized when it is determined
that they appreciably extend the life, increase the earning capacity or improve
the efficiency or safety of the vessels. If such factors are not met, such
expenditures are not capitalized and, instead, are charged to expenses as
incurred.

For the years
ended December 31, 2009 and 2010, we capitalized interest amounting to $58,826
and $315,084, respectively.

Under our
management agreement with our Manager, for purchases of vessels including with
respect to each of our nine remaining contracted newbuilds, we will pay our
Manager a commission of 1.0% on the contract price of the relevant vessel for
our Managers services in connection with finalizing the contract, arranging
for various regulatory approvals and bank financing and other administrative
services. In addition, we pay our Manager a flat fee of $375,000 per newbuild,
for the on-premises supervision of all newbuilds we have agreed to acquire
pursuant to shipbuilding contracts, memoranda of agreement, or otherwise. These
amounts payable to our Manager are included as part of the vessel cost.

General and
Administrative Expenses

General and
administrative expenses consist of management fees paid to our Manager, which
is a related party, in relation to management services offered, and expenses
paid to third parties associated with us being a public company, which include
the preparation of disclosure documents, legal and accounting costs, including
costs related to compliance with the Sarbanes-Oxley Act of 2002, incremental
director and officer liability insurance costs and director compensation.

On January 1,
2008, we amended the vessel management agreements in effect at the time, and
from that period onwards we have been required to pay our Manager a management
fee of $575 per day per vessel and a fee of 1.0% on gross freight, charter
hire, ballast bonus and demurrage. In connection with our initial public
offering which was completed in June 2008, we entered into a new two year
initial term management agreement to replace our then existing arrangements
with our Manager, with automatic one-year renewals for an additional eight
years. Under this management agreement, we have continued to pay a management
fee of $575 per day per vessel and a fee of 1.0% on gross freight, charter
hire, ballast bonus and demurrage for the initial term of two years that expired
on May 28, 2010. After expiration of the initial term, the management fees can
be adjusted every year by agreement between us and our Manager. As of May 29,
2010 our Manager requested and we have accepted to increase the fee on gross
freight, charter hire, ballast bonus and demurrage to 1.25%.

In addition to
the fees described above, we pay our Manager the commissions and fees with
respect to vessel purchases and newbuilds described above in Vessels, Net
and the commissions with respect to vessel sales described below under Gain
on Sale of Assets. Such commissions and fees remained unchanged.

Although we
have not, within the past six years, deployed our vessels on bareboat charters
and do not currently have any plans to deploy our vessels on bareboat charters,
under our management agreement, we will also provide our Manager with a fee of
$250 per day per vessel deployed on bareboat charters for providing commercial,
technical and administrative services. We expect that the amount of our total management
fees will increase following the delivery of our nine contracted newbuilds and
as a result of additional vessel acquisitions.

As a public
company since June 2008, we have incurred additional general and administrative
expenses. We expect that the primary components of general and administrative
expenses, other than the management fees described above, will continue to
consist of expenses associated with being a public company, which include the
preparation of disclosure documents, legal and accounting costs, including
costs related to compliance with the Sarbanes-Oxley Act of 2002, incremental
director and officer liability insurance costs and director compensation.

Interest Expense and
Other Finance Costs

We incur
interest expense on outstanding indebtedness under our existing credit
facilities, which we include in interest expenses. We also incurred financing
costs in connection with establishing those facilities, which is capitalized
and amortized over the period of the facility. The amortization of the finance
costs is included in amortization and write-off of deferred finance charges. We
will incur additional interest expense in the future on our outstanding
borrowings and under future borrowings.

32

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Inflation

Inflation has
only a moderate effect on our expenses given current economic conditions. In
the event that significant global inflationary pressures appear, these
pressures would increase our operating, voyage, administrative and financing
expenses.

Gain on Sale of
Assets

In June 2009, we
agreed to sell our oldest vessel, the Panamax class Efrossini, which was delivered to her new owners on January
7, 2010. The gain from the sale of this vessel amounted to $15.2 million, which
was recorded as gain on sale of assets during the year ended December 31, 2010.
In connection with the sale of Efrossini,
we paid our Manager a commission of 1.0% of the sale price of the vessel. Under
our management agreement, we are required to pay our Manager a commission of
1.0% of the sale price of a vessel for any future vessel sales.

No gain on
sale of assets was recorded in the other periods presented.

Early Redelivery
Cost/Income

Early
redelivery cost reflects amounts payable to charterers for early termination of
a period time charter resulting from our request for early redelivery of a
vessel. We generally request such early redelivery when we would like to take
advantage of a strong period time charter market environment and believe that
an opportunity to enter into a similarly priced period time charter is not
likely to be available when the relevant vessel is scheduled to be redelivered.

Early
redelivery income reflects amounts payable to us for early termination of a
period time charter resulting from a charterers request for early redelivery
of a vessel. We may accept such requests from charterers when we believe that
we are compensated by a substantial portion of the contracted revenue and
maintain the opportunity to re-employ the vessel either in the spot or in the
period time charter market at adequate levels.

We have
entered into such arrangements for early redelivery, and incurred such costs or
income in the past and we may continue to do so in the future, depending on
market conditions.

33

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On March 7,
2008, we agreed with the charterers of the Pedhoulas
Trader to terminate the $54,000 daily fixed rate time charter which
had commenced on February 9, 2008, and was due to expire by July 24, 2008. As
compensation for early redelivery of the vessel, we agreed to pay the
charterers an amount of $0.8 million. No replacement charter contract had been
secured at the time of conclusion of the early redelivery agreement. The vessel
was redelivered on June 8, 2008, and was subsequently fixed at a gross daily
charter rate of $76,500 until August 1, 2008.

On January 1,
2009, we took early redelivery of the Maritsa,
instead of on January 13, 2009. The respective charterer paid cash compensation
of $0.6 million, net of commissions. No replacement charter contract had been
secured at the time of conclusion of the early redelivery agreement. The vessel
was subsequently fixed at a gross daily charter rate of $15,500 until February
2010.

On March 15,
2009, we took early redelivery of the Efrossini,
instead of on January 8, 2011. The respective charterer paid cash compensation
of $25.5 million, net of commissions. An amount of $3.6 million, representing
the unearned revenue from the terminated period time charter contract, was
recorded as additional early redelivery income. No replacement charter contract had
been secured at the time of conclusion of the early redelivery agreement. The
vessel was subsequently fixed in the spot market, at a gross daily charter rate
of $13,750 until April 2009.

On June 26,
2009, we took early redelivery of the Katerina,
instead of on November 26, 2010. The respective charterer paid cash
compensation of $21.5 million, net of commissions. An amount of $0.9 million,
representing the unearned revenue from the terminated period time charter
contract, was recorded as additional early redelivery income. No replacement charter contract had
been secured at the time of conclusion of the early redelivery agreement. The
vessel was subsequently fixed at a gross daily charter rate of $15,500 until
September 2011.

On June 28,
2009, we took early redelivery of the Maria,
instead of on January 2, 2011. The respective charterer paid cash compensation
of $15.5 million, net of commissions. An amount of $4.5 million, representing
the unearned revenue from the terminated period time charter contract, was
recorded as additional early redelivery income. No replacement charter contract had
been secured at the time of conclusion of the early redelivery agreement. The
vessel was subsequently fixed at a gross daily charter rate of $18,000 until
August 2010.

On July 19,
2009, we took early redelivery of the Pedhoulas
Leader, instead of on November 22, 2009. The respective charterer
paid cash compensation of $2.7 million, net of commissions. No replacement
charter contract had been secured at the time of conclusion of the early
redelivery agreement. The vessel was subsequently fixed at a gross daily
charter rate of $18,500 until November.

On July 20,
2009, we took early redelivery of the Stalo,
instead of on July 29, 2009. The respective charterer paid cash compensation of
$0.2 million, net of commissions. No replacement charter contract had been
secured at the time of conclusion of the early redelivery agreement. The vessel
was subsequently fixed in the spot market at a gross daily charter rate of
$42,500 until October 2009.

On March 25,
2010, we agreed with the charterers of the Katerinato terminate the $15,500 daily
fixed rate time charter which had commenced on June 26, 2009, and was due to
expire by September 15, 2011. As compensation for early redelivery, we paid the
charterers $1.5 million. No replacement charter contract had been secured at
the time of conclusion of the early redelivery agreement. The vessel was
subsequently fixed at a gross daily charter rate of $20,000 for three years.

On April 13,
2010, we took early redelivery of the Pedhoulas Merchant, instead of the
contracted earliest redelivery date of November 5, 2010. In connection with
this early redelivery, we recognized early redelivery income of $3.6 million,
comprising cash compensation paid by the relevant charterer of $4.8 million net
of commissions, less accrued revenue of $1.2 million. No replacement charter
contract had been secured at the time of conclusion of the early redelivery
agreement. The vessel was subsequently fixed at a gross daily charter rate of
$27,250 until April 2011.

On April 28,
2010, we agreed with the charterers of the Pedhoulas Leader to terminate the $18,500
daily fixed rate time charter which had commenced on July 19, 2009, and was due
to expire by September 30, 2011. As compensation for early redelivery of the
vessel, we paid the charterers $1.8 million. No replacement charter contract
had been secured at the time of conclusion of the early redelivery agreement.
The vessel was redelivered on November 12, 2010, and was subsequently fixed in
the spot market at a gross daily charter rate of $21,750.

On July 30,
2010, we agreed with the charterers of the Maria to terminate the $18,000 daily fixed
rate time charter which had commenced on June 28, 2009, and was due to expire
by November 30, 2010. As compensation for early redelivery of the vessel, we
paid the charterers $0.2 million. No replacement charter contract had been
secured at the time of conclusion of the early redelivery agreement. The vessel
was redelivered on August 24, 2010, and was subsequently fixed at a gross daily
charter rate of $17,750 until April 2011.

Critical Accounting
Policies

We prepared
our consolidated financial statements in accordance with U.S. GAAP, which
requires us to make estimates in the application of our accounting policies
based on our best assumptions, judgments and opinions. We base these estimates
on the information currently available to us and on various other assumptions
we believe are reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. Following is a
discussion of the accounting policies that involve a high degree of judgment
and the methods of their application. For a further description of our material
accounting policies, please read Note 2 to our financial statements at the end
of this annual report.

34

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Vessels
Depreciation

Depreciation
is computed using the straight-line method over the estimated useful life of a
vessel, after considering the estimated residual value. We estimate the useful
life of our vessels to be 25 years from the date of initial delivery from the
shipyard. An increase in the useful life of a drybulk vessel or in its residual
value would have the effect of decreasing the annual depreciation and extending
it into later periods. A decrease in the useful life of a drybulk vessel or in
its residual value would have the effect of increasing the annual depreciation.

Impairment of
Long-lived Assets

The Company
reviews for impairment its long-lived assets held and used whenever events or
changes in circumstances indicate that the carrying amount of the assets may
not be recoverable. When the estimate of undiscounted cash flows, excluding
interest charges, expected to be generated by the use of the asset is less than
its carrying amount, we are required to evaluate the asset for an impairment
loss. Measurement of the impairment loss is based on the fair value of the
asset.

The carrying
values of our vessels may not represent their fair market value at any point in
time since the market prices of second-hand vessels tend to fluctuate with
changes in charter rates and the cost of newbuilds. Historically, both charter
rates and vessel values tend to be cyclical. Declines in the fair market value
of vessels, prevailing market charter rates, vessel sale and purchase
considerations, and regulatory changes in dry bulk shipping industry, changes
in business plans or changes in overall market conditions that may adversely
affect cash flows are considered as potential impairment indicators. In the
event the independent market value of a vessel is lower than its carrying
value, we determine undiscounted projected net operating cash flow for such
vessel and compare it to the vessel carrying value.

The
undiscounted projected net operating cash flows for each vessel are determined
by considering the charter revenues from existing time charters for the fixed
vessel days and an estimated daily time charter equivalent for the unfixed days
(based on our company budgeted charter rate for the first 12 months and
the most recent ten year historical average of similar size vessels for the
period thereafter) over the remaining estimated life of the vessel, net of
brokerage commissions, expected outflows for vessels maintenance, vessel
operating expenses, assuming an average annual inflation rate and management
fees. The undiscounted cash flows incorporate various factors such as estimated
future charter rates, future drydocking costs, estimated vessel operating costs
assuming an average annual inflation rate of 3%, estimated vessel utilization
rates, estimated remaining lives of the vessels, assumed to be 25 years from
the delivery of the vessel from the shipyard and estimated salvage value of the
vessels at $182 per light weight ton. These assumptions are based on historical
trends as well as future expectations. Although management believes that the
assumptions used to evaluate potential impairment are reasonable and
appropriate, such assumptions are highly subjective.

Our analysis
of the impairment test performed for the year ended December 31, 2009,
indicated a variance of minus 3% for the first twelve months, between actual
net receipts during 2010 and net receipts forecasted by the company for the
same period. Our analysis
for the year ended December 31, 2010, which also involved sensitivity tests on
the future time charter rates (which is the input that is most sensitive to
variations), allowing for variances of up to 41% depending on vessel type on
time charter rates from the Companys base scenario, indicated no impairment on
any of our vessels.

No impairment
loss was recorded for any of the periods presented.

Recent Accounting
Pronouncements

There are no
recent accounting pronouncements whose adoption would have a material effect on
the Companys consolidated financial statements in the current year or future
years.

Results of
Operations

Year ended December 31, 2010 compared to year
ended December 31, 2009

During the
year ended December 31, 2010, we had an average of 14.6 drybulk vessels in our
fleet. During the year ended December 31, 2009, we had an average of 13.2
drybulk vessels in our fleet.

During the
year ended December 31, 2010, we acquired the vessels Kanaris, a Capesize class vessel, Panayiota K, a Post-Panamax class
vessel, and Venus
Heritage, a Post-Panamax class vessel and sold Efrossini, a Panamax class
vessel.

During the
year ended December 31, 2009, we acquired the vessels Martine, a Post-Panamax class vessel, and Andreas K, a Post-Panamax class vessel.

35

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Revenues

Revenues
decreased by 5.2%, or $8.7 million, to $159.7 million during the year ended
December 31, 2010 from $168.4 million during the year ended December 31, 2009,
as result of the net effect of the following factors: (i) a decrease in the TCE
rate for 2010 by 13.7% to $29,534, compared to $34,208 for 2009 due to the
decrease in prevailing charter rates at which a number of our vessels were
chartered and (ii) an increase in operating days for the year ended December
31, 2010 by 10.3% to 5,269 days, compared to 4,778 days for the year ended
December 31, 2009 due to deliveries of the vessels Kanaris in March 2010, Panayiota
K in April 2010 and Venus
Heritage in December 2010 and the sale of Efrossini in January 2010.

Commissions

Commissions to
unaffiliated ship brokers, other brokers associated with our charterers and our
charterers during the year ended December 31, 2010 amounted to $2.7 million, a
decrease of $1.1 million, or 28.9%, compared to $3.8 million during the year
ended December 31, 2009, primarily due to the decrease in our revenues and to
lower average contracted commissions, which were reduced to 1.68% from 2.25%
for the years ended December 31, 2010 and 2009, respectively.

Vessel operating
expenses

Vessel
operating expenses increased by 17.9% to $23.1 million during the year ended
December 31, 2010 from $19.6 million during the year ended December 31, 2009.
This increase of $3.5 million reflects mainly: (i) the cost for repairs,
maintenance and drydocking of $1.8 million, compared to $1.0 million, including
three drydockings completed during 2010, of our vessels Marina, Pedhoulas Trader and Pedhoulas Merchant, compared to two
drydockings completed during 2009, of our vessels Stalo, and Maritsa,
(ii) crewing cost of $11.4 million, compared to $10.1 million primarily
attributable to increased salaries paid to our crews and increased number of
ownership days from 4,817 in 2009 to 5,326 in 2010, (iii) cost for lubricants
of $2.8 million, compared to $2.5 million mainly due to increased number of
operating days from 4,778 in 2009 to 5,269 in 2010 and increased lubricants
prices and (iv) cost for spares, stores and provisions of $3.9 million,
compared to $2.8 million due to increased use of spares for repairs, including
one additional dry-docking and one additional vessel delivery, increased prices
for stores and provisions and increased number of ownership days during the
year ended December 31, 2010 and December 31, 2009, respectively.

Consequently,
daily operating expenses, which represent the operating expenses per vessel per
ownership day, increased by 6.6% to $4,342 during the year ended December 31,
2010 from $4,075 during the year ended December 31, 2009, as a result of the
increase of vessel operating expenses by 17.9% partially offset by the 10.6%
increase of ownership days, as described above.

Depreciation

Depreciation
expense increased by 41.7% to $19.7 million during the year ended December 31,
2010, compared to $13.9 million during the year ended December 31, 2009, due to
the increase in the average number of vessels from 13.2 during the year ended
December 31, 2009 to 14.6 during the year ended December 31, 2010.

General and
administrative expenses

General and
administrative expenses remained stable at $7.0 million for the years ended
December 31, 2010, and December 31, 2009.

Interest expense

Interest
expense decreased by 37.9% to $6.4 million during the year ended December 31,
2010 from $10.3 million during the year ended December 31, 2009. The $3.9
million decrease in interest expense was mainly attributable to the decrease
    in the weighted average interest rate of our outstanding indebtedness to
    1.39% per annum (p.a.) for the year ended December 31, 2010 from
    2.14% p.a. for the year ended December 31, 2009 due to lower prevailing LIBOR
    rates. The total loans outstanding as of December 31, 2010 amounted to $494.74
    million compared to $471.2 million as of December 31, 2009.

Loss on derivatives

Loss on
derivatives increased by $3.8 million to $8.2 million during the year ended
December 31, 2010 from $4.4 million during the year ended December 31, 2009.
The increase of $3.8 million reflects: (i) an increase in losses of $4.5
million from interest rate derivatives as a result of the realized loss and the
mark-to-market valuation of interest rate swap transactions to $8.0 million for
the year ended December 31, 2010 compared to $3.5 million for the year ended
December 31, 2009, and (ii) a decrease in losses of $0.7 million from foreign
exchange derivatives, as a result of the decrease in the nominal value of the
foreign exchange derivatives and movements of the rates of the currencies in
which the derivatives contracts were denominated, to $0.2 million for the year
ended December 31, 2010, compared to $0.9 million for the year ended December
31, 2009.

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As of December
31, 2010, the aggregate notional amount of interest rate swap transactions
outstanding was $638.0 million, compared to $452.5 million at December 31,
2009. The aggregate notional amount of interest rate swap transactions
outstanding at December 31, 2010 is higher than the aggregate loans outstanding
at December 31, 2010, of $494.7 million, as during the year ended December 31,
2010, we entered into four interest rate swap transactions relating to four
outstanding loans, whereby the new interest rate swap transactions will become
effective upon the expiration of the existing interest rate swap transactions
relating to such loans. These swaps economically hedged the interest rate
exposure of 98% of the Companys aggregate loans outstanding as of December 31,
2010. The mark-to-market valuation of these interest rate swap transactions at
the end of each period is affected by the prevailing comparable interest rates
at that time.

Foreign currency
(loss)/gain

Foreign
currency gain was $0.3 million during the year ended December 31, 2010,
compared to gain of $0.8 million during the year ended December 31, 2009.
Foreign currency exchange losses resulted primarily from currency translation
or currency conversion of loans denominated in foreign currencies. Following
conversions during 2008 and the first quarter of 2009, none of our loans were
denominated in foreign currency as of December 31, 2010.

Early redelivery
(cost)/income

During the
year ended December 31, 2010, we recorded early redelivery income, relating to
the early termination of period time charters of our vessels, of $0.1 million
compared to $75.0 million early redelivery income during the year ended
December 31, 2009. Early redelivery income during the year ended December 31,
2010 is analyzed as follows: (i) Maria
was redelivered on August 24, 2010 instead of November 30, 2010, for which we
paid compensation of $0.2 million, net of commissions, (ii) Katerina was
agreed to be redelivered on January 15, 2011 instead of September 15, 2011, for
which we recognized a cost of $1.5 million, consisting of cash compensation paid
to charterer on April 7, 2010, net of commissions, (iii) Pedhoulas
Merchant was redelivered on April 13, 2010 instead of November 5,
2010, for which we recognized income of $3.6 million, consisting of cash
compensation paid by the relevant charterer on May 6, 2010 of $4.8 million, net
of commissions, less $1.2 million representing the accrued revenue from the
terminated period time charter contract, (iv) Pedhoulas
Leader was redelivered on November 12, 2010 instead of September 30,
2011, for which we recognized a cost of $1.8 million, consisting all of cash
compensation paid to the relevant charterer on May 6, 2010, net of commissions.
Early redelivery income during the year ended December 31, 2009 is analyzed as
follows: (i) Maritsa was
redelivered on January 1, 2009 instead of January 13, 2009, for which we
received compensation of $0.6 million, net of commissions, (ii) Efrossini was
redelivered on March 15, 2009 instead of January 8, 2011, for which we recognized
income of $29.1 million consisting of cash compensation received of $25.5 million,
net of commissions, and $3.6 million representing the unearned revenue from the
terminated period time charter contract, (iii) Katerina
was redelivered on June 26, 2009 instead of November 26, 2010, for which we
recognized income of $22.3 million consisting of cash compensation paid by the
relevant charterer on July 1, 2009 of $21.5 million, net of commissions, and
$0.9 million representing the unearned revenue from the terminated period time
charter contract, (iv) Maria was
redelivered on June 28, 2009 instead of January 2, 2011, for which we
recognized income of $20.0 million consisting of cash compensation paid by the
relevant charterer on July 1, 2009 of $15.5 million, net of commissions, and
$4.5 million representing the unearned revenue from the terminated period time
charter contract, (v) Pedhoulas Leader
was redelivered on July 19, 2009 instead of November 22, 2009, for which we
received cash compensation of $2.7 million, net of commissions and (vi) Stalo was
redelivered on July 20, 2009 instead of July 29, 2009, for which we received
cash compensation of $0.2 million, net of commissions.

Year ended December
31, 2009 compared to year ended December 31, 2008

During the
year ended December 31, 2009, we had an average of 13.2 drybulk vessels in our
fleet. During the year ended December 31, 2008, we had an average of 11.1
drybulk vessels in our fleet.

During the
year ended December 31, 2009, we acquired the vessels Martine, a Post-Panamax class vessel, and Andreas K, a Post-Panamax class vessel.

During the
year ended December 31, 2008, we acquired the vessel Eleni, a Post-Panamax class vessel.

Revenues

Revenues
decreased by 19.2%, or $40.0 million, to $168.4 million during the year ended
December 31, 2009 from $208.4 million during the year ended December 31, 2008,
as result of the net effect of the following factors: (i) a decrease in the TCE
rate for 2009 by 31.1% to $34,208, compared to $49,626 for 2008 due to a
decrease in prevailing charter rates at which a number of our vessels were
chartered and (ii) an increase in operating days for the year ended December
31, 2009 by 18.7% to 4,778 days, compared to 4,025 days for the year ended
December 31, 2008 due to deliveries of the vessels Eleni in November 2008, Martine
in February 2009 and Andreas K in
September 2009.

Commissions

Commissions to
unaffiliated ship brokers, other brokers associated with our charterers and our
charterers during the year ended December 31, 2009 amounted to $3.8 million, a
decrease of $3.8 million, or 50.0%, compared to $7.6 million during the year
ended December 31, 2008, primarily due to the decrease in our revenues and to
lower average contracted commissions, which were reduced to 2.25% from 3.65%
for the years ended December 31, 2009 and 2008, respectively.

Vessel operating
expenses

Vessel
operating expenses increased by 11.4% to $19.6 million during the year ended
December 31, 2009 from $17.6 million during the year ended December 31, 2008.
This increase of $2.0 million reflects mainly: (i) cost for repairs,
maintenance and drydocking of $1.0 million, compared to $2.2 million, primarily
due to two drydockings completed during 2009, of our vessels Stalo and Maritsa,
compared to four drydockings completed during 2008, of our vessels Efrossini, Maria, Vassos
and Katerina, (ii) crewing cost
of $10.1

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million,
compared to $8.2 million primarily attributable to increased salaries paid to
our crews and increased number of ownership days from 4,075 in 2008 to 4,817 in
2009, (iii) cost for lubricants of $2.5 million, compared to $1.9 million
mainly due to increased number of operating days from 4,025 in 2008 to 4,778 in
2009 and increased lubricants prices and (iv) cost for spares, stores and
provisions of $2.8 million, compared to $2.4 million due to deliveries of two
vessels in 2009 compared to one in 2008 and increased prices for stores and
provisions, for the year ended December 31, 2009 and December 31, 2008,
respectively.

Daily
operating expenses decreased by 5.7% to $4,075 during the year ended December
31, 2009 from $4,323 during the year ended December 31, 2008, primarily due to
the decrease in the costs for repairs, maintenance and drydocking.

Depreciation

Depreciation
expense increased by 31.1% to $13.9 million during the year ended December 31,
2009 compared to $10.6 million during the year ended December 31, 2008, due to
the increase in the average number of vessels from 11.13 during the year ended
December 31, 2008 to 13.20 during the year ended December 31, 2009, as well as
higher costs for the most recent additions to our fleet.

General and
administrative expenses

General and
administrative expenses decreased by 12.5% to $7.0 million during the year
ended December 31, 2009 from $8.0 million during the year ended December 31,
2008. This decrease of $1.0 million, or 27.8%, to $2.6 million in 2009 from
$3.6 million in 2008 mainly reflects the decrease in initial public offering
expenses.

Interest expense

Interest
expense decreased by 37.2% to $10.3 million during the year ended December 31,
2009 from $16.4 million during the year ended December 31, 2008. The $6.1
million decrease in interest expense was mainly attributable to the decrease in
the weighted average interest rate of our outstanding indebtedness to 2.14% per
annum (p.a.) for the year ended December 31, 2009 from 4.03% p.a. for the
year ended December 31, 2008 due to lower prevailing LIBOR rates. The total
loans outstanding as of December 31, 2009 amounted to $471.2 million compared
to $468.3 million as of December 31, 2008.

Loss on derivatives

Loss on
derivatives improved by $15.1 million to a loss of $4.4 million during the year
ended December 31, 2009 from a loss of $19.5 million during the year ended
December 31, 2008. The decrease of $15.1 million reflects: (i) a decrease in
losses of $18.5 million from interest rate derivatives as a result of the
realized loss and the mark-to-market valuation of interest rate swap
transactions for the year ended December 31, 2009 compared to the year ended
December 31, 2008, and (ii) a loss on foreign exchange derivatives, as a result
of movements in the rates of the currencies in which the derivatives contracts
were denominated of $0.9 million for the year ended December 31, 2009, compared
to a gain of $2.5 million for the year ended December 31, 2008.

At December
31, 2009, the aggregate notional amount of interest rate swap transactions
outstanding was $452.5 million, compared to $445.2 million at December 31,
2008. These swaps economically hedged the interest rate exposure of 96% of the
Companys aggregate loans outstanding as of December 31, 2009. The
mark-to-market valuation of these interest rate swap transactions at the end of
each period is affected by the prevailing comparable interest rates at that
time.

Foreign currency
(loss)/gain

Foreign
currency gain was $0.8 million during the year ended December 31, 2009,
compared to loss of $9.5 million during the year ended December 31, 2008.
Foreign currency exchange losses resulted primarily from currency translation
or currency conversion of loans denominated in foreign currencies. Following
conversions during 2008 and the first quarter of 2009, none of our loans were
denominated in foreign currency as of December 31, 2009.

Early redelivery
(cost)/income

During the
year ended December 31, 2009, we recorded early redelivery income, relating to
the early termination of period time charters of our vessels, of $75.0 million
compared to $0.6 million early redelivery cost during the year ended December
31, 2008. Early redelivery income during the year ended December 31, 2009 is
analyzed as follows: (i) Maritsa
was redelivered on January 1, 2009 instead of January 13, 2009, for which we
received compensation of $0.6 million, net of commissions, (ii) Efrossini was redelivered on March 15,
2009 instead of January 8, 2011, for which we recognized income of $29.1
million, consisting of cash compensation received of $25.5 million, net of
commissions, and $3.6 million representing the unearned revenue from the
terminated period time charter contract, (iii) Katerina
was redelivered on June 26, 2009 instead of November 26, 2010, for which we
recognized income of $22.3 million, consisting of cash compensation paid by the
relevant charterer on July 1, 2009 of $21.5 million, net of

38

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commissions,
and $0.9 million representing the unearned revenue from the terminated period
time charter contract, (iv) Maria
was redelivered on June 28, 2009 instead of January 2, 2011, for which we
recognized income of $20.0 million, consisting of cash compensation paid by the
relevant charterer on July 1, 2009 of $15.5 million, net of commissions, and
$4.5 million representing the unearned revenue from the terminated period time
charter contract, (v) Pedhoulas Leader
was redelivered on July 19, 2009 instead of November 22, 2009, for which we
received cash compensation of $2.7 million, net of commissions and (vi) Stalo was redelivered on July 20, 2009
instead of July 29, 2009, for which we received cash compensation of $0.2
million, net of commissions. Early redelivery costs during the year ended
December 31, 2008 were due to cash compensation of $0.8 million paid to the
charterer for the early redelivery of Pedhoulas
Trader, which was reduced by $0.2 million of early redelivery
income, representing the unearned revenue of Marina
from the terminated period time charter contract.

Loss on asset
purchase cancellations

Loss on asset
purchase cancellations was $20.7 million for the year ended December 31, 2009,
compared to none for the year ended December 31, 2008, reflecting: (i) the
aggregate loss of $13.7 million in relation to the cancellation of two
Kamsarmax-class vessels in April 2009 and (ii) the loss of $7.0 million in
relation to the cancellation of one Capesize-class vessel in June 2009. No
asset cancellations were concluded during the year ended December 31, 2008.

B. Liquidity and Capital Resources

As of December 31, 2010, we had
$105.8 million in cash and restricted cash, of which $65.3 million consisted of
cash and cash equivalents, of which $11.6 million were denominated in Japanese
Yen, $35.1 million consisted of short-term bank deposits with original
maturities longer than three months and shorter than 12 months and $5.4 million
consisted of long-term restricted cash. In addition, as of December 31, 2010,
we had $50.0 million in a long-term floating rate note investment (for more
information, please see Note 10 to our financial statements included at the end
of this annual report). Against this investment we may borrow, under certain
conditions, up to $40.0 million in cash.

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As of December
31, 2010, we had aggregate debt outstanding of $494.7 million, of which $27.7
million was payable within the next 12 months. As of December 31, 2010, we had
additional borrowing capacity of $24.0 million under a new credit facility for Panayiota K which was signed during 2010,
and we had accepted a commitment letter for a new bank credit facility for Hull No. 1074 in the amount of $58.7
million. Venus Heritage is debt
free and unencumbered as of February 20, 2011.

Our primary
liquidity needs are to fund capital expenditures in relation to newbuild
contracts, financing expenses, debt repayment, vessel operating expenses,
general and administrative expenses and dividend payments to our stockholders.
We anticipate that our primary sources of funds will be cash from operations,
additional indebtedness to be raised and, possibly, equity financing. Our
commitments for newbuilds of $264.0 million as of December 31, 2010 consisted
of $171.3 million, payable in 2011, $70.5 million, payable in 2012 and $22.2
million, payable in 2013. These commitments represent the remaining installment
payments for the delivery of eight newbuild vessels scheduled to be delivered
as follows: four vessels in 2011, three vessels in 2012 and one vessel in 2013.
As of February 20, 2010, we have contracted to acquire one additional Panamax
class newbuild to be delivered in first half of 2012 at a purchase price,
including a cost adjustment for extra items of approximately $42.2, million,
consisting of payments of $18.9 million and JPY 1.9 billion (see Note 25 to our
financial statements included at the end of this annual report).

We currently
estimate that the contracted cash flow from operations will be sufficient to
fund the operations of our fleet, including our working capital requirements,
and the capital expenditure requirements through the end of 2011. However,
during 2011 or 2012, we may seek additional indebtedness to partially fund our
capital expenditure requirements in order to maintain a stronger cash position.
We may incur additional indebtedness secured by the Venus Heritage or by our other seven newbuild vessels which
are currently unencumbered. To the extent that market conditions deteriorate,
charterers may default or seek to renegotiate charter contracts, and vessel
valuations may decrease, resulting in a breach of our debt covenants. In such
case our contracted revenues may decrease and we may be required to make
additional prepayments under existing loan facilities, resulting in additional
financing needs. If we acquire additional vessels, our capital expenditure
requirements will increase and we will need to rely on existing cash and time
deposits, operating cash surplus and existing undrawn loan commitments. If we
are unable to obtain additional indebtedness, or to find alternative financing,
we will not be capable of funding our commitments for capital expenditures
relating to our contracted newbuilds. A failure to fulfill our commitment would
generally result in a forfeiture of the advance we paid to the shipyard with
respect to the contracted newbuild. In addition, we may also be liable for
other damages for breach of contract. Examples of such liabilities could
include payments to the shipyard for the difference between the forfeited
advance and the amount that remains to be paid by us if the shipyard cannot
locate a third-party buyer that is willing to pay an amount equal to the
difference or compensatory payments by us to charter parties with whom we have
entered into charters with respect to the contracted newbuilds. We note,
however, that we have never been liable for breach of contract to any shipyards
or charterers. Such events could adversely impact the dividends we intend to
pay, and could have a material adverse effect on our business, financial condition
and results of operation.

We have paid
dividends to our stockholders, each quarter since our initial public offering
in June 2008, including an aggregate amount of $37.8 million over four
consecutive quarterly dividends, each in the amount of $0.15 per share, paid
during 2010. We also declared a dividend of $0.15 per share, paid on February
    25, 2011, to our shareholders of record on February 18, 2011. Our future
    liquidity needs will impact our dividend policy. We currently intend to use
    a portion of our free cash to pay dividends to our stockholders. The declaration
    and payment of dividends, if any, will always be subject to the discretion
    of our board of directors. The timing and amount of any dividends declared
    will depend on, among other things: (i) our earnings, financial condition
    and cash requirements and available sources of liquidity, (ii) decisions
    in relation to our growth strategies, (iii) provisions of Marshall Islands
    and Liberian law governing the payment of dividends, (iv) restrictive covenants
    in our existing and future debt instruments and (v) global financial conditions.
    We can give no assurance that dividends will be paid in the future.

Cash Flows

Cash and cash
equivalents increased to $65.3 million as of December 31, 2010, compared to
$18.4 million as of December 31, 2009. We consider highly liquid investments
such as time deposits and certificates of deposit with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents are
primarily held in U.S. dollars.

Net Cash Provided by Operating Activities

Net cash
provided by operating activities amounted to $118.1 million in 2010, consisting
of net income after non-cash items of $109.6 million plus an increase in
working capital of $8.5 million. Net cash provided by operating activities
amounted to $211.3 million in 2009, consisting of net income after non-cash
items of $195.1 million plus an increase in working capital of $16.2 million.

Net cash
provided by operating activities amounted to $259.6 million in 2008, consisting
of net income after non-cash items of $156.7 million plus an increase in
working capital of $102.9 million. The increase in working capital was mainly
attributable to the settlement of amounts due from the Manager of $96.4 million
prior to our initial public offering.

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Net Cash Used in Investing Activities

Net cash flows
used in investing activities were $131.7 million for the year ended December
31, 2010 compared to net cash flows used in investing activities of $191.9
million for the year ended December 31, 2009. The decrease in cash flows used
in investing activities of $60.2 million from 2009 is mainly attributable from
the following factors: (i) investment in a 5 year floating rate note of $50
million in 2009, compared to no new long term investments in 2010, (ii) a
decrease in our net bank time deposits by $22.8 million during the year ended
December 31, 2010, compared to an increase of $36.6 million during the same
period in 2009 and (iii) proceeds of $32.2 million during the year ended December
31, 2010 from the sale of Efrossinion
January 7, 2010, compared to no sales of assets during the year ended December
31, 2009 and (iv) a partial offset caused by an increase of $60.9 million to
$192.4 million from $131.5 million in vessel acquisitions and advances for
vessels payments during the year ended December 31, 2010 due to our acquisition
of three new vessels, Kanaris in
March, Panayiota K in April and Venus Heritage in December, while during
the year ended December 31, 2009, we acquired two new vessels, Martine in February and Andreas K.

Net cash flows
used in investing activities were $191.9 million for the year ended December
31, 2009, compared to net cash flows used in investing activities of $148.2
million for the year ended December 31, 2008, an increase of $43.7 million.
This increase is mainly attributable to the increase in vessel acquisitions and
advances for vessels payments, as during the year ended December 31, 2009, we
acquired two new vessels, Martine
in February and Andreas K in September,
while during the year ended December 31, 2008, we acquired one vessel, Eleni, in November. In 2009, the Company
invested $131.5 million for vessel acquisitions and advances for vessel
payments, purchased a five-year floating rate note of $50.0 million, increased
its net bank time deposits by $36.6 million and released from restricted cash a
net amount of $26.2 million.

Net Cash (Used in)/Provided by Financing
Activities

Net cash flows
provided by financing activities were $60.1 million for the year ended December
31, 2010, compared to net cash flows used in financing activities of $28.7
million for the year ended December 31, 2009. This increase of $88.8 million,
compared to 2009 is largely attributable to an increase of $75.0 million in proceeds
from the issuance of common stock, an increase in long-term debt principal
payments of $13.0 million, an increase in long-term debt proceeds of $32.5
million and an increase in dividends paid of $5.1 million.

Net cash flows
used in financing activities were $28.7 million for the year ended December 31,
2009 compared to net cash flows used in financing activities of $83.7 million
for the year ended December 31, 2008. This decrease of $55.0 million compared
to 2008 is largely attributable to a decrease of $47.5 million in long-term
debt principal payments, a decrease of long-term debt proceeds of $179.6
million and a decrease in dividends paid of $176.5 million.

Credit Facilities

We operate in
a capital intensive industry which requires significant amounts of investment,
and we fund a portion of this investment through long-term bank debt. Our
subsidiaries have entered into individual credit facilities in order to finance
the acquisition of the vessels owned by these subsidiaries and for general
corporate purposes. The durations until maturity of our various credit
facilities outstanding in December 31, 2010, range from 5 to 13 years, and they
are repaid by semiannual principal installments and a balloon payment due on
maturity. We pay interest on these facilities which is based on floating rate
LIBOR plus an applicable margin. The obligations under our credit facilities
are secured by first priority mortgages over the vessels owned by the
respective borrower subsidiaries, first priority assignments of all insurances
and earnings of the mortgaged vessels and guarantees by Safe Bulkers, Inc.

During 2010,
we drew down loans totaling $74.5 million and we repaid $51.0 million of our
indebtedness. As of December 31, 2010, we had 14 outstanding credit facilities with
a combined outstanding balance of $494.7 million. These credit facilities have
maturity dates between 2015 and 2023. For a description of our credit
facilities as of December 31, 2010, please see Note 9 to our financial
statements included at the end of this annual report. During 2011, we plan to
repay approximately $27.7 million of our long-term debt outstanding as of
December 31, 2010. During 2010, we entered into a new credit facility in the
amount of $24.0 million that is available until April 30, 2011 and that will be
secured by the vessel Panayiota K.Additionally,
during 2010, we accepted a commitment letter from a bank for a credit facility
for up to $58.7 million, which will be used for the financing of the
acquisition of Hull 1074. This
credit facility will be made available after delivery from the shipyard of Hull 1074 and upon commencement of her
contracted employment. For more information regarding these credit facilities,
please refer to Note 12(b) of the financial statements included at the end of
this annual report.

Covenants under Credit Facilities

The credit
facilities impose operating and financial restrictions on us. These
restrictions in our existing credit facilities generally limit our
subsidiaries ability to, among other things:

| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | pay
 dividends if an event of default has occurred and is continuing or would
 occur as a result of the payment of such dividends;                                    
| |   |                                                                                                                                                                       
| | ● | enter into
 long-term charters for more than 13 months;                                                                                                               
| |   |                                                                                                                                                                       
| | ● | incur
 additional indebtedness, including through the issuance of guarantees;                                                                                         
| |   |                                                                                                                                                                       
| | ● | change the
 flag, class or management of the vessel mortgaged under such facility or
 terminate or materially amend the management agreement relating to such
 vessel;
| |   |                                                                                                                                                                       
| | ● | create liens
 on their assets;                                                                                                                                        
| |   |                                                                                                                                                                       
| | ● | make loans;                                                                                                                                                           

41

---



|  |                                                                                                       
|- | ------------------------------------------------------------------------------------------------------
|● | make
 investments;                                                                                    
|  |                                                                                                       
|● | make capital
 expenditures;                                                                           
|  |                                                                                                       
|● | undergo a
 change in ownership or control or permit a change in ownership and control of
 our Manager;
|  |                                                                                                       
|● | sell the
 vessel mortgaged under such facility; and                                                   
|  |                                                                                                       
|● | permit our chief
 executive officer to change.                                                        

Our existing credit facilities
also require certain of our subsidiaries to maintain specified financial ratios
and satisfy financial covenants. Depending on the credit facility, certain of
our subsidiaries are subject to financial ratios and covenants requiring that
these subsidiaries:

| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | ensure that
 the market value of the vessel mortgaged under the applicable credit
 facility, determined in accordance with the terms of that facility, does not
 fall below 100% to 120%, as applicable, of the outstanding amount of the loan
 (the Minimum Value Covenant);                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | ● | ensure that
 outstanding amounts in currencies other than the U.S. dollar do not exceed
 100% or 110%, as applicable, of the U.S. dollar equivalent amount specified
 in the relevant credit agreement for the applicable period by, if necessary,
 providing cash collateral security in an amount necessary for the outstanding
 amounts to meet this threshold; and
| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | ● | ensure that
 we comply with certain financial covenants under the guarantees described
 below.                                                                                                                                                                                                                                                                        

In addition, under guarantees
we have entered into with respect to certain of our subsidiaries existing
credit facilities, we are subject to specified financial covenants. Depending
on the guarantee, these financial covenants include the following:

| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | our total
 consolidated liabilities with the relevant bank divided by our total
 consolidated assets must not exceed 70% or 80% as the case may be
 (Consolidated Leverage Covenant). The total consolidated assets are based
 on the market value of our vessels and the book values of all other assets,
 on an adjusted basis as set out in the relevant guarantee;
| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | ● | the ratio of
 our aggregate debt to EBITDA must not at any time exceed 5.5:1 on a trailing
 12 months basis (EBITDA Covenant);                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | ● | our net
 consolidated worth (total consolidated assets less total consolidated
 liabilities) (Consolidated Net Worth Covenant) must not at any time be less
 than $150.0 million, $175.0 million or $200.0 million, as the case may be,
 with the relevant bank;                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | ● | payment of
 dividends is subject to no event of default having occurred;                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | ● | maintenance
 of minimum free liquidity of $500,000 is required on deposit with a relevant
 lender on a per vessel basis for four vessels; and                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                         
| | ● | a minimum of
 51% of the Companys shares shall remain directly or indirectly beneficially
 owned by the Hajioannou family for the duration of the relevant credit
 facilities.                                                                                                                                                                                         

We entered
into supplemental agreements with our respective lenders on April 6, 2009, in
relation to the loan facilities of Marathassa Shipping Corporation
(Marathassa), Marinouki Shipping Corporation (Marinouki), Kerasies Shipping
Corporation (Kerasies) and Soffive Shipping Corporation (Soffive), and on
March 31, 2009, in relation to the credit facilities of Efragel Shipping
Corporation (Efragel), Avstes Shipping Corporation (Avstes), Pelea Shipping
Ltd. (Pelea), Marindou Shipping Corporation (Marindou), Eniaprohi Shipping
Corporation (Eniaprohi) and Eniadefhi Shipping Corporation (Eniadefhi).
Among other things these supplemental agreements (i) eliminated the effects of
certain defaults existing as of December 31, 2008 and (ii) confirmed that
certain actions did not give rise to a default.As of December 31, 2010, the
Company was in compliance with all debt covenants with respect to its credit
facilities.

42

---



Interest Rate Swaps

We have
entered into interest rate swap agreements converting floating interest rate
exposure into fixed interest rates in order to economically hedge our exposure
to fluctuations in prevailing market interest rates. For more information on
our interest rate swap agreements, refer to Note 15 to our financial statements
included at the end of this annual report.

C. Research and Development, Patents and
Licenses

We incur from
time to time expenditures relating to inspections for acquiring new vessels
that meet our standards. Such expenditures are insignificant and they are
expensed as they are incurred.

D. Trend Information

Our results of
operations depend primarily on the charter hire rates that we are able to
realize, and the demand for drybulk vessel services. After reaching historical
highs in mid-2008, charter hire rates for Panamax and Capesize drybulk vessels
reached near historically low levels. For example, the Baltic Drybulk Index, or
BDI, declined from a high of 11,793 in May 2008 to a low of 663 in December
2008, which represents a decline of 94% within a single calendar year. The BDI
fell over 70% during October 2008 alone. During 2009, the BDI remained
volatile, reaching a low of 772 on January 5, 2009 and a high of 4,661 on
November 19, 2009. During 2010, the BDI remained volatile, reaching a low of
1,700 on July 15, 2010 and a high of 4,209 on May 26, 2010. The decline and
volatility in charter rates in the drybulk market reflects in part the fact
that the supply of drybulk vessels in the market has been increasing, and the
number of newbuild drybulk vessels on order is near historic highs. Demand for
drybulk vessel services is influenced by global financial conditions. The
recovery in China and India positively influenced the charter rates; however,
global financial conditions remain volatile and demand for drybulk services may
decrease in the future. The combination of increasing drybulk capacity (both
current and expected) and decreasing demand or demand which is not offset by
the increase in drybulk capacity is likely to result in reductions in charter
hire rates and, as a consequence, adversely affect our operating results.

In response to
the volatile market conditions, we seek to strengthen our charter coverage.
Currently, 12 of our 16 vessels are employed or scheduled to be employed in
period time charters of more than one year. Additionally, we believe we have
structured our capital expenditure requirements, debt commitments and liquidity
resources is a way that will provide us with financial flexibility (see Item
5. Operating and Financial Review and Prospects  B. Liquidity and Capital
Resources for more information).

E. Off-Balance Sheet Arrangements

As of December
31, 2010, we did not have any off-balance sheet arrangements.

43

---



F. Contractual Obligations

Our
contractual obligations as of December 31, 2010 were:

|                             |  |                        |         |                        |   |                      |  |                        |         |                                              |   |         |  |   |         | 
|---------------------------- |  | ---------------------- | ------- | ---------------------- | - | -------------------- |  | ---------------------- | ------- | -------------------------------------------- | - | ------- |  | - | ------- | 
|                             |  | Payments Due by Period |        
|                             |  |                        |        
|                             |  | Total                  |         | Less than 1year (2011) |   | 1-3 years(2012-2013) |  | 3-5 years
 (2014-2015) |         | More than 5
 years (After
 January 1,
 2016) |  
|                             |  |                        |        
|                             |  | (Dollars in thousands) |        
|Long-term debt obligations   |  | $                      | 494,744 |                        | $ | 27,674               |  | $                      | 59,115  |                                              | $ | 92,815  |  | $ | 315,140 | 
|Interest payments (1)        |  | $                      | 81,173  |                        | $ | 20,404               |  | $                      | 30,978  |                                              | $ | 16,433  |  | $ | 13,358  | 
|Payments to our Manager
 (2) |  | $                      | 14,422  |                        | $ | 9,239                |  | $                      | 5,183   |                                              |   |        |  |   |        | 
|Newbuild contracts           |  | $                      | 264,006 |                        | $ | 171,291              |  | $                      | 92,715  |                                              |   |        |  |   |        | 
|                             |  |                        |         |                        |   |                      |  |                        |         |                                              |   |         |  |   |         | 
|Total                        |  | $                      | 854,345 |                        | $ | 228,608              |  | $                      | 187,991 |                                              | $ | 109,248 |  | $ | 328,498 | 
|                             |  |                        |         |                        |   |                      |  |                        |         |                                              |   |         |  |   |         | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(1) | Amounts shown reflect
 estimated interest payments we expect to make with respect to our long-term
 debt obligations and interest rate swaps. The interest payments reflect an
 assumed LIBOR-based applicable interest rate of 0.45688% (the six-month LIBOR
 rate as of December 31, 2010), plus the relevant margin of the applicable
 credit facility and the estimated net settlement of our interest rate swaps.
 See B. Liquidity and Capital ResourcesInterest Rate Swaps.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | Represents a fee of $575
 per vessel per day and 1.25% of estimated charter hire based on charter
 agreements in place as of December 31, 2010, based on the managements fees
 effective as of May 29, 2010 and calculated until May 28, 2012 on which date
 the management agreement current term expires. Our management agreement is
 thereafter renewable annually until 2018 unless twelve months termination
 notice is given before the end of the current term. In addition it includes
 amounts payable to our Manager in respect of the commission of 1.0% of the
 contract price of our newbuilds and $375,000 per newbuild for the on-premises
 supervision of newbuilds we have agreed to acquire pursuant to shipbuilding
 contracts, memoranda of agreement or otherwise as of December 31, 2010. The
 level of the above mentioned fees is subject to adjustment every year and
 will be agreed upon between us and our Manager. The fees shown in the table
 above do not take into account any potential future changes to the fees,
 which may be contracted subsequent to December 31, 2010.

44

---



ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following
table sets forth, as of February 20, 2011, information regarding our directors
and executive officers.

|                          |  |     |  |                                                                     
|------------------------- |  | --- |  | --------------------------------------------------------------------
|Name                      |  | Age |  | Position                                                            
|                          |  |     |  |                                                                     
|                          |  |     |  |                                                                     
|Polys
 Hajioannou         |  | 44  |  | Chief
 Executive Officer, Chairman of the Board and Class I Director
|                          |  |     |  |                                                                     
|Dr. Loukas
 Barmparis     |  | 48  |  | President,
 Secretary and Class II Director                         
|                          |  |     |  |                                                                     
|Konstantinos
 Adamopoulos |  | 48  |  | Chief
 Financial Officer and Class III Director                     
|                          |  |     |  |                                                                     
|Ioannis
 Foteinos         |  | 52  |  | Chief
 Operating Officer and Class I Director                       
|                          |  |     |  |                                                                     
|John Gaffney              |  | 50  |  | Class II
 Director                                                  
|                          |  |     |  |                                                                     
|Frank Sica                |  | 60  |  | Class III
 Director                                                 
|                          |  |     |  |                                                                     
|Ole Wikborg               |  | 55  |  | Class I
 Director                                                   

Certain
biographical information about each of these individuals is set forth below.
The term of our Class I directors expires in 2012, the term of our Class II
directors expires in 2013 and the term of our Class III directors expires in
2011.

Polys Hajioannou is
our Chief Executive Officer and has been Chairman of our board of directors
since 2008. Mr. Hajioannou also serves with our Manager and prior to its
inception, our Managers predecessor Alassia Steamship Co., Ltd., which he
joined in 1987. Mr. Hajioannou was elected as a member of the board of
directors of the Union of Greek Shipowners in 2006 and served on the board
until February 2009. Mr. Hajioannou is also a founding member of the Union of
Cyprus Shipowners. Mr. Hajioannou holds a Bachelor of Science degree in
nautical studies from Sunderland University.

Dr. Loukas Barmparis
is our President and Secretary and has been a member of our board of directors
since 2008. Dr. Barmparis also serves as the technical manager of our Manager,
which he joined in February 2006. Until 2009 he was the project development
manager of the affiliated Alasia Development S.A., responsible for renewable
energy projects. Prior to joining our Manager and Alasia Development S.A., from
1999 to 2005 and from 1993 to 1995, Dr. Barmparis was employed at N.
Daskalantonakis Group, Grecotel, one of the largest hotel chains in Greece, as
technical manager and project development general manager. During the interim
period between 1995 and 1999, Dr. Barmparis was employed at Exergia S.A. as an
energy consultant. Dr. Barmparis holds a master of business administration
(MBA) from the Athens Laboratory of Business Administration, a doctorate from
the Imperial College of Science Technology and Medicine, a master of applied
science from the University of Toronto and a diploma in mechanical engineering
from the Aristotle University of Thessaloniki.

45

---



Konstantinos Adamopoulos
is our Chief Financial Officer and has been a member of our board of directors
since 2008. Prior to joining us, Mr. Adamopoulos was employed at Calyon, a
financial institution, as a senior relationship manager in shipping finance for
14 years. Prior to this, from 1990 to 1993, Mr. Adamopoulos was employed by the
National Bank of Greece in London as an account officer for shipping finance
and in Athens as deputy head of the export finance department. Prior to this,
from 1987 to 1989, Mr. Adamopoulos served as a finance officer in the Greek Air
Force. Mr. Adamopoulos holds an MBA in finance from the City University Business
School and a Bachelor of Science degree in business administration from the
Athens School of Economics and Business Science.

Ioannis Foteinos is
our Chief Operating Officer and has been a member of our board of directors
since February 2009. Mr. Foteinos has 25 years of experience in the shipping
industry. After obtaining a bachelors degree in nautical studies from
Sunderland University, he joined the predecessor of our Manager, Safety
Management Overseas, in 1984, where he presently serves and will continue to
serve as Chartering Manager.

Frank Sica has been
a member of our board of directors and of our corporate governance, nominating
and compensation committee, and a member and chairman of our audit committee,
since 2008. Mr. Sica has served as a Managing Partner at Tailwind Capital, a
private equity firm since 2006. From 2004 to 2005, Mr. Sica was a Senior
Advisor to Soros Private Funds Management. From 1998 to 2003, Mr. Sica worked
at Soros Fund Management where he oversaw the direct real estate and private
equity investment activities of Soros. From 1988 to 1998, Mr. Sica was a
Managing Director at Morgan Stanley. Mr. Sica is a graduate of Wesleyan
University, where he received a B.A. degree, and of the Amos Tuck School of
Business at Dartmouth College, where he received his M.B.A. Mr. Sica is also
director of CSG Systems International, an account management and billing
software company for communication industries, JetBlue Airways Corporation, a
commercial airline, and Kohls Corporation, an owner and operator of department
stores.

Ole Wikborg has been
a member of our board of directors and of our audit committee and corporate
governance, nominating and compensation committee since 2008. Mr. Wikborg has
been involved in the marine and shipping industry in various capacities for
over 30 years. Since 2002, Mr. Wikborg has served as a director, senior
underwriter and member of the management team of the Norwegian Hull Club, based
in Oslo, Norway. From 2002 to 2006, Mr. Wikborg also served as a member and
chairman of the Ocean Hull Committee of the International Union of Marine
Insurance (IUMI). Since 2006, he has served as Vice President and a member of
the Executive Board of the IUMI and in 2010, he was elected as President of
IUMI. Since 1997, Mr. Wikborg has served as a board member of the Central Union
of Marine Insurers, based in Oslo, and is presently that organizations
Chairman. From 1997 until 2002, Mr. Wikborg served as the senior vice president
and manager of the marine and energy division of the Zurich Protector Insurance
Company ASA, based in Oslo and Zurich, and from 1993 until 1997, he served as a
senior underwriter for the marine division of Protector Insurance Company ASA,
based in Oslo. Prior to his career in the field of marine insurance, Mr.
Wikborg served in the Royal Norwegian Navy, attaining the rank of Lieutenant
Commander.

John Gaffney has
been a member of our board of directors and of our audit committee, and a
member and chairman of our corporate governance, nominating and compensation
committee, since October 2009. Mr. Gaffney joined Solyndra, Inc. in January
2010 as its Senior Vice President, Corporate Affairs and General Counsel, where
he leads Solyndras corporate affairs and legal activities. From January 2008
through December 2009, Mr. Gaffney was an Executive Vice President at First
Solar, where he led First Solars corporate development, legal, sustainable
development and environmental affairs activities. Prior to joining First Solar,
Mr. Gaffney practiced law at the firm of Cravath, Swaine & Moore LLP, where
he was a partner from 1993 to 2008. During his time at Cravath, Mr. Gaffney
advised numerous corporate and financial institution clients on merger,
acquisition and capital markets transactions. Mr. Gaffney holds a B.A. from
George Washington University and a J.D. and an MBA from New York University.

B. Compensation of Directors and Senior
Management

We did not pay
our directors prior to our initial public offering. Beginning from the date of
closing of our initial public offering on June 3, 2008 through September 30,
2008, each non-executive independent director received a fee of $10,000. Since
October 1, 2008 through the date of the 2009 annual meeting of the shareholders
of the Company, and for subsequent years measured from the date of the annual
meeting of the shareholders of the Company, non-executive independent directors
have been paid an annual fee in the amount of $40,000 plus reimbursement for
their out-of-pocket expenses.

46

---



In addition,
the chairman of the audit committee, Frank Sica, received, from the date of
closing of our initial public offering on June 3, 2008 through September 30,
2008, the equivalent of $15,000 in the form of shares of our common stock. From
October 1, 2008 through the date of the 2009 annual meeting of the shareholders
of the Company, and for subsequent years measured from the date of the annual
meeting of the shareholders of the Company, the chairman of the audit
committee, Frank Sica, has received the annual equivalent of $60,000 in the
form of shares of our common stock. Beginning on January 1, 2010, John Gaffney
and Ole Wikborg have received the annual equivalent of $30,000 in the form of
shares of our common stock, payable in arrears on a quarterly basis as measured
from that date. The members of our senior management are provided and
compensated by our Manager and have not received and will not receive any
compensation from us. We do not have any employment contracts with any of our
executive officers whose services are provided to us by our Manager. For a
discussion of the fees payable to our Manager, refer to Item 7. Major
Shareholders and Related Party TransactionsB. Related Party
TransactionsManagement Agreement. Also, we do not have any service contracts
with any of our non-executive directors that provide for benefits upon
termination of their services.

No amounts are
set aside or accrued by us to provide pension, retirement or similar benefits.

C. Board Practices

As of December
31, 2010, we had seven members on our board of directors. The board of
directors may change the number of directors to not less than three, nor more
than 15, by a vote of a majority of the entire board. Each director shall be
elected to serve until the third succeeding annual meeting of stockholders and
until his or her successor shall have been duly elected and qualified, except
in the event of death, resignation or removal. A vacancy on the board created
by death, resignation, removal (which may only be for cause), or failure of the
stockholders to elect the entire class of directors to be elected at any
election of directors or for any other reason, may be filled only by an
affirmative vote of a majority of the remaining directors then in office, even
if less than a quorum, at any special meeting called for that purpose or at any
regular meeting of the board of directors. None of our directors is a party to
service contracts with us providing for benefits upon termination of
employment.

During the
fiscal year ended December 31, 2010, the full board of directors held five
meetings. Each director attended all of the meetings of committees of which the
director was a member. Our board of directors has determined that each of Mr.
Sica, Gaffney and Wikborg are independent within the current meanings of
independence employed by the corporate governance rules of the New York Stock
Exchange and the SEC.

Stockholders
who wish to send communications on any topic to the board of directors or to
the independent directors as a group, or to the chairman of the audit
committee, Mr. Frank Sica, or to the chairman of the corporate governance,
nominating and compensation committee, Mr. John Gaffney, may do so by writing
to our Secretary, Dr. Loukas Barmparis, Safe Bulkers, Inc., 30-32 Avenue
Karamanli, 16605, Voula, Athens, Greece.

Corporate Governance

The board of
directors and our Companys management have engaged in an ongoing review of our
corporate governance practices in order to oversee our compliance with the
applicable corporate governance rules of the New York Stock Exchange and the
SEC.We have adopted a number of key documents that are the foundation of the
Companys corporate governance, including:

| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | a Code of
 Business Conduct and Ethics for all officers and employees, which
 incorporates a Code of Ethics for directors and a Code of Conduct for
 corporate officers;
| |   |                                                                                                                                                                         
| | ● | a Corporate
 Governance, Nominating and Compensation Committee Charter; and                                                                                             
| |   |                                                                                                                                                                         
| | ● | an Audit
 Committee Charter.                                                                                                                                            

These
documents and other important information on our governance are posted on our
website and may be viewed at http://www.safebulkers.com.
We will also provide a paper copy of any of these documents upon the written
request of a stockholder. Stockholders may direct their requests to the
attention of our Secretary, Dr. Loukas Barmparis, Safe Bulkers, Inc., 30-32
Avenue Karamanli, 16605, Voula, Athens, Greece.

Committees of the
Board of Directors

Audit committee

Our audit
committee consists of Ole Wikborg, John Gaffney and Frank Sica, as chairman.
Our board of directors has determined that Frank Sica qualifies as an audit
committee financial expert, as such term is defined in Regulation S-K
promulgated by the SEC. The audit committee is responsible for:

| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | the
 appointment, compensation, retention and oversight of independent auditors
 and approving any non-audit services performed by such auditor;

47

---



| |   |                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | assisting
 the board in monitoring the integrity of our financial statements, the
 independent auditors qualifications and independence, the performance of the
 independent accountants and our internal audit function and our compliance
 with legal and regulatory requirements;
| |   |                                                                                                                                                                                                                                                                                      
| | ● | annually
 reviewing an independent auditors report describing the auditing firms
 internal quality-control procedures, and any material issues raised by the
 most recent internal quality control review, or peer review, of the auditing
 firm;                                  
| |   |                                                                                                                                                                                                                                                                                      
| | ● | discussing
 the annual audited financial and quarterly statements with management and the
 independent auditors;                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                      
| | ● | discussing
 earnings press releases, as well as financial information and earnings
 guidance provided to analysts and rating agencies;                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                      
| | ● | discussing
 policies with respect to risk assessment and risk management;                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                      
| | ● | meeting
 separately, and periodically, with management, internal auditors and the
 independent auditor;                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                      
| | ● | reviewing
 with the independent auditor any audit problems or difficulties and
 managements responses;                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                      
| | ● | setting
 clear hiring policies for employees or former employees of the independent
 auditors;                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                      
| | ● | annually
 reviewing the adequacy of the audit committees written charter, the internal
 audit charter, the scope of the annual internal audit plan and the results of
 internal audits;                                                                                             
| |   |                                                                                                                                                                                                                                                                                      
| | ● | reporting
 regularly to the full board of directors; and                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                      
| | ● | handling
 such other matters that are specifically delegated to the audit committee by
 the board of directors from time to time.                                                                                                                                                    

Corporate governance, nominating and compensation committee

Our corporate governance,
nominating and compensation committee consists of Ole Wikborg, Frank Sica and
John Gaffney, as chairman. The corporate governance, nominating and
compensation committee is responsible for:

| |   |                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | nominating
 candidates, consistent with criteria approved by the full board of directors,
 for the approval of the full board of directors to fill board vacancies as
 and when they arise, as well as putting in place plans for succession, in
 particular, of the chairman of the board of directors and executive officers;
| |   |                                                                                                                                                                                                                                                                                                                                
| | ● | selecting,
 or recommending that the full board of directors select, the director
 nominees for the next annual meeting of shareholders;                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                
| | ● | developing
 and recommending to the full board of directors corporate governance
 guidelines applicable to us and keeping such guidelines under review;                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                
| | ● | overseeing
 the evaluation of the board and management; and                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                
| | ● | handling
 such other matters that are specifically delegated to the corporate
 governance, nominating and compensation committee by the board of directors
 from time to time.                                                                                                                                                 

D. Employees

Other than an
employee who serves as our legal representative in Greece, we have no salaried
employees and have not entered into any employment agreements. Our Manager
employs, and provides us with, all four of our executive officers, including
our chief executive officer, Polys Hajioannou, our president, Dr. Loukas
Barmparis, our chief financial officer, Konstantinos Adamopoulos, and our chief
operating officer, Ioannis Foteinos. Our Manager is responsible for paying any
salaries payable to our executive officers. Approximately 339 officers and crew
members served on board the vessels we own as of December 31, 2010, but are
employed by our Manager.

E. Share Ownership

The common
stock beneficially owned by our directors and executive officers and/or
companies affiliated with these individuals is disclosed in Item 7. Major
Shareholders and Related Party TransactionsA. Major Shareholders below.

Equity Compensation Plans

We have agreed to provide the
chairman of the audit committee, Mr. Frank Sica, as part of his remuneration,
the annual equivalent of $60,000 in the form of shares of our common stock, and
our non-management independent directors, Mr. John Gaffney and Mr. Ole Wikborg,
as part of their remuneration, the annual equivalent of $30,000 each, in the
form of shares of our common stock.

48

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ITEM 7. MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The following
table sets forth certain information regarding the beneficial ownership of our
outstanding common stock as of February 20, 2011 held by:

| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| | ● | each person
 or entity that we know beneficially owns 5% or more of our common stock;
| |   |                                                                                      
| | ● | each of our
 officers and directors; and                                             
| |   |                                                                                      
| | ● | all our
 directors and officers as a group.                                          

Beneficial
ownership is determined in accordance with the rules of the SEC. In general, a
person who has voting power or investment power with respect to securities is
treated as a beneficial owner of those securities.

Beneficial
ownership does not necessarily imply that the named person has the economic or
other benefits of ownership. For purposes of this table, shares subject to
options, warrants or rights or shares exercisable within 60 days of February
20, 2011 are considered as beneficially owned by the person holding those
options, warrants or rights. Each stockholder is entitled to one vote for each
share held. The applicable percentage of ownership for each stockholder is
based on 65,879,916 shares of common stock outstanding as of February 20, 2011.
Information for certain holders is based on their latest filings with the SEC
or information delivered to us. Except as noted below, the address of all
stockholders, officers and directors identified in the table and the
accompanying footnotes below is in care of our principal executive offices.

|                                                            |  |                                              |            |                                  |  |       |  
|----------------------------------------------------------- |  | -------------------------------------------- | ---------- | -------------------------------- |  | ----- | -
|Identity of Person or Group                                 |  | Number of 
 Shares 
 of Common 
 Stock Owned |            | Percentage 
 of 
 Common 
 Stock | 
|                                                            |  |                                              |            |                                  | 
|5% Beneficial Owners:                                       |  |                                              |            |                                  |  |       |  
|                                                            |  |                                              |            |                                  |  |       |  
|Vorini
 Holdings Inc. (1)                                   |  |                                              | 45,814,815 |                                  |  | 69.54 | %
|                                                            |  |                                              |            |                                  |  |       |  
|Officers and Directors:                                     |  |                                              |            |                                  |  |       |  
|                                                            |  |                                              |            |                                  |  |       |  
|Polys
 Hajioannou (2)                                       |  |                                              | 45,814,815 |                                  |  | 69.54 | %
|                                                            |  |                                              |            |                                  |  |       |  
|Dr. Loukas
 Barmparis                                       |  |                                              |           |                                  |  |      |  
|                                                            |  |                                              |            |                                  |  |       |  
|Konstantinos
 Adamopoulos                                   |  |                                              |           |                                  |  |      |  
|                                                            |  |                                              |            |                                  |  |       |  
|Ioannis
 Foteinos                                           |  |                                              |           |                                  |  |      |  
|                                                            |  |                                              |            |                                  |  |       |  
|Frank Sica                                                  |  |                                              | 40,563     |                                  |  | *     |  
|                                                            |  |                                              |            |                                  |  |       |  
|Ole Wikborg                                                 |  |                                              | 3,818      |                                  |  | *     |  
|                                                            |  |                                              |            |                                  |  |       |  
|John Gaffney                                                |  |                                              | 3,818      |                                  |  | *     |  
|                                                            |  |                                              |            |                                  |  |       |  
|All executive officers and directors as a group (7 persons) |  |                                              | 45,863,014 |                                  |  | 69.62 | %

---

|    |                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------
|*   | Less than
 1%.                                                                                          
|    |                                                                                                         
|(1) | Vorini
 Holdings Inc. is controlled by Polys Hajioannou and Nicolaos Hadjioannou.                       
|    |                                                                                                         
|(2) | By virtue of
 shares owned indirectly through Vorini Holdings Inc., which is our principal
 stockholder.

In June 2008,
we completed a registered public offering of our shares of common stock in
which the selling stockholder was Vorini Holdings Inc., and our common stock
     began trading on the New York Stock Exchange. Our major stockholders have
    the  same voting rights as our other stockholders. As of February 20, 2011,
    we had 6  stockholders of record, 4 of these stockholders of record were
    located in the  United States and held an aggregate 20,376,098 shares of
    common stock, representing  approximately 30.93% of our outstanding shares
    of common stock. However, one of  the United States stockholders of record
    is Cede & Co., a nominee of The
Depository Trust Company, which holds 20,366,179 shares of our common stock.
     Accordingly, we believe that the shares held by Cede & Co. include shares
      of common stock beneficially owned by both holders in the United States
     and  non-United States beneficial owners. We are not aware of any arrangements
     the  operation of which may at a subsequent date result in our change of
     control. We  are not aware of any significant changes in the percentage
     ownership held by  any major stockholders since our initial public offering.

49

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Vorini
Holdings Inc. owns approximately 69.54% of our outstanding common stock. This
stockholder is able to control the outcome of matters on which our stockholders
are entitled to vote, including the election of our entire board of directors
and other significant corporate actions. Shares of our common stock held by
Vorini Holdings Inc. do not have different or unique voting rights.

B. Related Party Transactions

Management Affiliations

Our Manager,
Safety Management Overseas S.A., is ultimately owned by Machairiotissa Holdings
Inc., which is wholly-owned by Polys Hajioannou, our chief executive officer.
Our Manager, along with its predecessor, has provided services to our vessels
since 1965 and continues to provide technical, administrative and certain
commercial services which support our business, as well as comprehensive ship management
services such as technical supervision and commercial management, including
chartering our vessels, pursuant to our management agreement described below.

Management Agreement

Under our
management agreement, our Manager is responsible for providing us with
technical, administrative and certain commercial services, which include the
following:

Technical Services

These services
include managing day-to-day vessel operations, performing general vessel
maintenance, ensuring regulatory compliance and compliance with the law of the
flag state of each vessel and of the places where the vessel operates, ensuring
classification society compliance, supervising the maintenance and general
efficiency of vessels, arranging the hire of qualified officers and crew,
training, transportation and lodging, insurance (including handling and
processing all claims) of, and appropriate investigation of any charterer
concerns with respect to, the crew, conducting union negotiations concerning
the crew, performing normally scheduled drydocking and general and routine
repairs, arranging insurance for vessels (including marine hull and machinery,
protection and indemnity and risks insurance), purchasing stores, supplies,
spares, lubricating oil and maintenance capital expenditures for vessels,
appointing supervisors and technical consultants, providing technical support,
shoreside support and shipyard supervision, and attending to all other
technical matters necessary to run our business.

Commercial Services

These services
include chartering the vessels which we own, assisting in our chartering,
locating, purchasing, financing and negotiating the purchase and sale of our
vessels, supervising the design and construction of newbuilds, and such other
commercial services as we may reasonably request from time to time.

Administrative Services

These services
include administering payroll services, assistance with the preparation of our
tax returns and financial statements, assistance with corporate and regulatory
compliance matters not related to our vessels, procuring legal and accounting
services, assistance in complying with U.S. and other relevant securities laws,
human resources (including provision of our executive officers and directors of
our subsidiaries), cash management and bookkeeping services, development and
monitoring of internal audit controls, disclosure controls and information
technology, assistance with all regulatory and reporting functions and
obligations, furnishing any reports or financial information that might be
requested by us and other non-vessel related administrative services,
assistance with office space, providing legal and financial compliance
services, overseeing banking services (including the opening, closing,
operation and management of all of our accounts, including making deposits and
withdrawals reasonably necessary for the management of our business and
day-to-day operations), arranging general insurance and director and officer
liability insurance (at our expense), providing all administrative services
required for any subsequent debt and equity financings and attending to all
other administrative matters necessary to ensure the professional management of
our business.

50

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Reporting Structure

Our Manager
reports to us and to our board of directors through our executive officers.

Compensation of Our Manager

Under our
management agreement, in return for providing technical, commercial and
administrative services, our Manager receives a fee of $575 per vessel per day
for vessels in our fleet, prorated for the number of calendar days that we own
or charter-in each vessel and $250 per vessel per day, for bareboat charters.
Our Manager also received a fee of 1.25% on all gross freight, charter hire,
ballast bonus and demurrage with respect to each vessel in our fleet. Further,
our Manager receives a commission of 1.0% based on the contract price of any
vessel bought or sold by it on our behalf, including each of our contracted
newbuilds, other than Eleni and Martine. For these two Post-Panamax class
vessels, our Manager received a commission of 1.0% based on the contract prices
of the vessels through separate agreements with Itochu Corporation. We also pay
our Manager a flat fee of $375,000 per newbuild, for the on-premises
supervision of all newbuilds we have agreed to acquire pursuant to shipbuilding
contracts, memoranda of agreement, or otherwise. The management fees were
constant for the 2 year initial period of the management agreement, which ended
on May 29, 2010. Thereafter, our management fees can be readjusted every year
upon agreement between us and our Manager. All management fees remained
constant since May 28, 2008, when we entered into the management agreement with
our Manager, except the fee on all gross freight, charter hire, ballast bonus
and demurrage with respect to each vessel in our fleet which was readjusted to
1.25% from 1.00% on May 28, 2010, the expiration of the initial 2 year period.
Thereafter, our management fees can be readjusted every year upon agreement
between us and our Manager.

The management
fees do not cover capital expenditure, financial costs and operating expenses
for our vessels and our general and administrative expenses such as directors,
and officers liability insurance, legal and accounting fees and other similar
third party expenses. More specifically, we reimburse expenses of the Manager
or its personnel directly related to the operation and management of our
vessels, such as:

|  |                                                                                                                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|● | interest,
 principal and other financial costs,                                                                                                                                                                
|  |                                                                                                                                                                                                                
|● | voyage
 expenses                                                                                                                                                                                               
|  |                                                                                                                                                                                                                
|● | vessel
 operating expenses including crewing costs, surveyors attendance fees,
 bunkers, lubricant oils, spares, survey fees, classification society fees,
 maintenance and repair costs and vetting expenses,
|  |                                                                                                                                                                                                                
|● | commissions,
 remuneration or disbursements due to lawyers, brokers, agents, surveyors,
 consultants, financial advisors, investment bankers, insurance advisors,                                              
|  |                                                                                                                                                                                                                
|● | deductibles,
 insurance premiums and/or P&I calls,                                                                                                                                                             
|  |                                                                                                                                                                                                                
|● | postage,
 communication, traveling, victualling and other out of pocket expenses.                                                                                                                              

Each year, our
Manager prepares and submits to us a detailed draft budget for the next
calendar year, which includes a statement of estimated revenue, estimated
general and administrative expenses and a proposed budget for capital
expenditures, repairs or alterations. Once approved by us, this draft budget
becomes the approved budget.

Term and Termination Rights

Subject to the
termination rights described below, the initial term of our management
agreement expired on May 28, 2010. Our management agreement was automatically
renewed for a one-year period until May 28, 2011. Upon expiration of the
renewal term, our management agreement automatically renews for one-year
periods until May 28, 2018, at which point the agreement will expire. In
addition to the termination provisions outlined below, we are able to terminate
our management agreement at any point after the initial term upon 12 months
notice to our Manager. Such notice of termination has not been provided to our
Manager by us.

Our Managers Termination Rights

Our Manager
may terminate our management agreement prior to the end of its term if:

| |   |                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | any money
 payable by us is not paid when due or if due on demand, within ten business
 days following demand by our Manager;                                                                                          
| |   |                                                                                                                                                                                                                        
| | ● | we default
 in the performance of any other material obligation under the management
 agreement and the matter is unresolved within 20 business days after we
 receive written notice of such default from our Manager;

51

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|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|-------------------------------------------------------------------------------------------------------------- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                               | ● | the
 management fee determined by arbitration in respect of any annual period
 following the initial term is unsatisfactory to our Manager, in which case
 the Manager may terminate upon 12 months written notice to us;                                                                                                                                                                                           
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               | ● | any
 acquisition of our shares or a merger, consolidation or similar transaction
 results in any person or group acquiring 40% or more of the total voting
 power of our or the resulting entitys outstanding voting securities, and
 such percentage represents a higher percentage of such voting power than that
 held directly or indirectly by Polys Hajionnaou and Nicolaos Hadjioannou,
 collectively; or
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               | ● | there is a
 change in directors after which a majority of the members of our board of
 directors are not continuing directors.                                                                                                                                                                                                                                                                                       
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|Continuing
 directors means, as of any date of determination, any member of our board of
 directors who was:
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               | ● | a member of
 our board of directors on June 4, 2008; or                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                               |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                               | ● | nominated
 for election or elected to our board of directors with the approval of a
 majority of the directors then in office who were either directors on June 4,
 2008 or whose nomination or election was previously so approved.                                                                                                                                                                                 

52

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Our Termination Rights

In addition to
certain standard termination rights, we may terminate our management agreement
prior to the end of its term if:

| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | our Manager
 defaults in the performance of any material obligation under our management
 agreement and the matter is not resolved within 20 business days after our
 Manager receives from us written notice of such default; or
| |   |                                                                                                                                                                                                                                  
| | ● | any money
 payable by our Manager to us or third parties under our management agreement
 is not paid or accounted for within ten business days following written
 notice by us.                                                  

Non-Competition

Our Manager
has agreed that, during the term of our management agreement and for one year
after its termination, our Manager will not provide any management services to,
or with respect to, any drybulk vessels, other than in the following
circumstances:

| |     |                                                                                                                                                                                                                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | pursuant to
 its involvement with us; or                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                         
| | (b) | with respect
 to drybulk vessels that are owned or operated by companies affiliated with
 our chief executive officer or Nicolaos Hadjioannou, subject in each case to
 compliance with, or waivers of, the restrictive covenant agreements entered
 into between us and companies affiliated with our chief executive officer or
 Nicolaos Hadjioannou.

Our Manager
has also agreed that if one of our drybulk vessels and a drybulk vessel owned
or operated by a company affiliated with our chief executive officer or
Nicolaos Hadjioannou are both available and meet the criteria for a charter
being fixed by our Manager, our drybulk vessel will receive such charter.
Currently our Manager does not provide management services to any third party.

Sale of Our Manager

Our Manager
has agreed that, during the term of the management agreement and for one year
after its termination, our Manager will not transfer, assign, sell or dispose
of all or substantially all of its business that is necessary for the
performance of its services under the management agreement without the prior
written consent of our board of directors. Furthermore, during such period, in
the event of any proposed change in control of our Manager, we have a 30-day
right of first offer to purchase our Manager. For these purposes, a proposed change
in control of our Manager means (a) the approval of the board of directors of
our Manager or the stockholders of our Manager of a proposed sale of all or
substantially all of the assets or property of our Manager necessary for the
performance of its services under the management agreement, (b) the approval of
our Managers stockholders of a proposed sale of our Managers shares that
would result in Polys Hajioannou and Nicolaos Hadjioannou, collectively, owning
less than 80% of the outstanding voting securities of our Manager or (c) the
approval of our Managers stockholders of a proposed merger, consolidation or
similar transaction, as a result of which Polys Hajioannou and Nicolaos
Hadjioannou, directly or indirectly, collectively, would beneficially own less
than 80% of the outstanding voting securities of the resulting entity following
such transaction.

Restrictive Covenant Agreements

Under the
restrictive covenant agreements entered into with us, Polys Hajioannou, Vorini
Holdings Inc., Machairiotissa Holdings Inc., or any entity controlled by, or
under common control with, any of the above (together, the Hajioannou
Entities), have agreed to restrictions on their ownership or operation of any
drybulk vessels or the acquisition, investment in or control of any business
involved in the ownership or operation of drybulk vessels, subject to the
exceptions described below. In the case of Polys Hajioannou, the restricted
period continues until the later of (a) one year following the termination of the
management agreement and (b) one year following the termination of his services
and employment with us. In the case of the Hajioannou Entities, the restricted
period continues until one year following the termination of the management
agreement. Notwithstanding these restrictions, Polys Hajioannou and the
Hajioannou Entities are permitted to engage in the restricted activities during
the restricted periods in the following circumstances:

| |     |                                                                                                                       
| | --- | ----------------------------------------------------------------------------------------------------------------------
| | (a) | pursuant to
 their involvement with us;                                                                               
| |     |                                                                                                                       
| | (b) | pursuant to
 their involvement with our Manager, subject to compliance with, or waivers
 of, the management agreement;

53

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | with respect
 to certain permitted acquisitions (as defined below), provided that (i) any
 commercial management of drybulk vessels controlled by the restricted
 individuals and entities in connection with such permitted acquisition is
 performed by our Manager and (ii) the restricted individuals and entities
 comply with the requirements for permitted acquisitions described below; and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                     
| | (d) | pursuant to
 their passive ownership of up to 9.99% of the outstanding voting securities
 of any publicly traded company that is engaged in the drybulk vessel
 business.                                                                                                                                                                                                                           

As noted
above, Polys Hajioannou and the Hajioannou Entities are permitted to engage in
restricted activities with respect to two types of permitted acquisitions. One
such permitted acquisition is an acquisition of a drybulk vessel or an
acquisition or investment in a drybulk vessel business on terms and conditions
as to price that are not more favorable, and on such other terms and conditions
that are not materially more favorable, than those first offered to us and
refused by a majority of our independent directors. The second type of
permitted acquisition is an acquisition of a group of vessels or a business
that includes non-drybulk vessels and non-drybulk vessel businesses, provided
that less than 50% of the fair market value of the acquisition is attributable
to drybulk vessels or drybulk vessel businesses. Under this second type of permitted
acquisition, we must be promptly given the opportunity to buy the drybulk
vessels or drybulk vessel businesses included in the acquisition for their fair
market value plus certain break-up costs.Polys Hajioannou and the Hajioannou
Entities have also agreed that if one of our drybulk vessels and a drybulk
vessel owned or operated by any of the Hajioannou Entities are both available
and meet the criteria for a charter being fixed by our Manager, our drybulk
vessels will receive such charter.
In February 2009, pursuant to the terms of
the restrictive covenant agreements, a committee comprised of the independent
 directors of the Company, and subsequently the full board of directors of the
 Company, decided to refuse an offer to purchase a business, which at the time
 was wholly-owned by Polys Hajioannou and Nicolaos Hadjioannou, of chartering-in
 and chartering-out unrelated third-party vessels. The business was subsequently
 sold to an unaffiliated third party. Two vessels operated by this business
received limited management services from our Manager pursuant to a waiver
of our Management Agreements relevant provisions, approved by our independent
  directors.

Registration Rights Agreement

In connection
with the closing of our initial public offering, we entered into a registration
rights agreement with Vorini Holdings Inc., our largest stockholder, pursuant
to which we have granted it and certain of its transferees the right, under
certain circumstances and subject to certain restrictions, to require us to
register under the Securities Act shares of our common stock held by those
persons. Under the registration rights agreement, Vorini Holdings Inc. and
certain of its transferees have the right to request us to register the sale of
shares held by them on their behalf and may require us to make available shelf
registration statements permitting sales of shares into the market from time to
time over an extended period. In addition, those persons have the ability to
exercise certain piggyback registration rights in connection with registered
offerings initiated by us. Vorini Holdings Inc. currently owns 44,500,000
shares entitled to these registration rights.

C. Interests of Experts and Counsel

Not
applicable.

ITEM 8. FINANCIAL
INFORMATION

A. Consolidated Statements and Other
Financial Information

See Item 18. Financial Statements below.

Legal Proceedings

We have not
been involved in any legal proceedings which may have, or have had, a
significant effect on our business, financial position, results of operations
or liquidity, nor are we aware of any proceedings that are pending or
threatened which may have a significant effect on our business, financial
position, results of operations or liquidity.The nature of our business
exposes us to the risk of lawsuits for damages or penalties relating to, among
other things, personal injury, property casualty and environmental
contamination. From time to time, we may be subject to legal proceedings and
claims in the ordinary course of business, principally personal injury and
property casualty claims. We expect that these claims would be covered by
insurance, subject to customary deductibles. However, such claims, even if
lacking merit, could result in the expenditure of significant financial and
managerial resources.

Dividend Policy

We paid our first quarterly dividend as a public company
of $0.1461 per share in August 2008 and subsequent dividends of $0.475 per
share in November 2008 and $0.15 per share in February 2009, May 2009, August
2009, November 2009, February 2010, May 2010, August 2010 and November 2010. We
also declared a dividend of $0.15 per share on February 8, 2011, for the
shareholders of record on February 18, 2011, which was paid on February 25,
2011.

54

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We currently
intend to use a portion of our free cash to pay dividends to our shareholders.
The declaration and payment of dividends, if any, will always be subject to the
discretion of our board of directors. The timing and amount of any dividends
declared will depend on, among other things: (a) our earnings, financial
condition and cash requirements and available sources of liquidity, (b)
decisions in relation to our growth strategies, (c) provisions of Marshall
Islands and Liberian law governing the payment of dividends, (d) restrictive
covenants in our existing and future debt instruments and (e) global financial
conditions. There can be no assurance that dividends will be paid. Our ability
to pay dividends may be limited by the amount of cash we can generate from
operations following the payment of fees and expenses and the establishment of
any reserves, as well as additional factors unrelated to our profitability. We
are a holding company, and we depend on the ability of our subsidiaries to
distribute funds to us in order to satisfy our financial obligations and to
make dividend payments. See Item 3. Key InformationD. Risk FactorsRisks
Inherent in Our Industry and Our Business for a discussion of the risks
related to our ability to pay dividends.

B. Significant Changes

No significant
change has occurred since the date of the annual financial statements included
in this annual report on Form 20-F.

ITEM 9. THE OFFER
AND LISTING

Trading on the New York Stock Exchange

Since our
initial public offering in the United States on May 29, 2008, our common stock
has been listed on the New York Stock Exchange under the symbol SB. The
following table shows the high and low closing sales prices for our common
stock during the indicated periods.

|                         |  |             |       |     |   |      | 
|------------------------ |  | ----------- | ----- | --- | - | ---- | 
|                         |  | Price Range |      
|                         |  |             |      
|                         |  | High        |       | Low |  
|                         |  |             |       |     |  
|                         |  |             |       |     |  
|Year Ended
 December 31, |  |             |       |     |   |      | 
|2008 (1)                 |  | $           | 19.05 |     | $ | 3.27 | 
|2009                     |  |             | 9.40  |     |   | 2.81 | 
|2010                     |  |             | 9.11  |     |   | 6.66 | 
|                         |  |             |       |     |   |      | 
|First
 Quarter 2009      |  |             | 8.75  |     |   | 2.81 | 
|Second
 Quarter 2009     |  |             | 7.95  |     |   | 3.17 | 
|Third
 Quarter 2009      |  |             | 8.62  |     |   | 6.02 | 
|Fourth
 Quarter 2009     |  |             | 9.40  |     |   | 6.92 | 
|First
 Quarter 2010      |  |             | 9.11  |     |   | 6.97 | 
|Second
 Quarter 2010     |  |             | 8.26  |     |   | 6.66 | 
|Third
 Quarter 2010      |  |             | 7.93  |     |   | 6.79 | 
|Fourth
 Quarter 2010     |  |             | 8.86  |     |   | 7.79 | 
|                         |  |             |       |     |   |      | 
|September
 2010          |  |             | 7.91  |     |   | 7.49 | 
|October 2010             |  |             | 8.49  |     |   | 7.96 | 
|November
 2010           |  |             | 8.58  |     |   | 7.79 | 
|December 2010            |  |             | 8.86  |     |   | 7.96 | 
|January 2011             |  |             | 8.96  |     |   | 8.30 | 
|February
 2011           |  |             | 9.53  |     |   | 8.58 | 

|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the period from May 29,
2008, the date on which our common stock began trading on the New York Stock
Exchange, until the end of the period.

ITEM 10.
ADDITIONAL INFORMATION

A. Share Capital

Under our
articles of incorporation, our authorized capital stock consists of 200,000,000
shares of common stock, par value $0.001 per share, of which, as of December
31, 2010 and February 20, 2011, 65,876,507 and 65,879,916 shares were issued
and outstanding, respectively, and 20,000,000 shares of blank check preferred
stock, par value $0.01 per share, of which, as of December 31, 2010 and
February 20, 2011, no shares were issued and outstanding. Of this blank check
preferred stock, 1,000,000 shares have been designated Series A Participating
Preferred Stock in connection with our adoption of a stockholder rights plan as
described below under Stockholder Rights Plan. All of our shares of stock are
in registered form.
Please see Note 11 to our financial statements included at
the end of this annual report for a discussion of the history of our share
capital.

55

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B. Memorandum and Articles of Association

Our purpose,
as stated in our articles of incorporation, is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
BCA. Our articles of incorporation and bylaws do not impose any limitations on
the ownership rights of our stockholders.

The rights of
our stockholders are set forth in our articles of incorporation and bylaws.
Amendments to our articles of incorporation require the affirmative vote of the
holders of a majority of all outstanding shares entitled to vote, except that
amendments to certain provisions of our articles of incorporation dealing with
the rights of stockholders, the board of directors, our bylaws and amendments
to the articles of incorporation require the affirmative vote of at least 75%
of all outstanding shares entitled to vote. Amendments to our bylaws require
the affirmative vote of at least 75% of all outstanding shares entitled to
vote.

Under our
bylaws, annual stockholder meetings will be held at a time and place selected
by our board of directors. The meetings may be held inside or outside of the
Marshall Islands. Special meetings may be called by the chairman of the board
of directors, the chief executive officer or a majority of the board of
directors. Our board of directors may set a record date between 15 and 60 days
before the date of any meeting to determine the stockholders that will be
eligible to receive notice and vote at the meeting. Our bylaws permit
stockholder action by unanimous written consent.

We are
registered at The Trust Company of the Marshall Islands, Inc. under
registration number 27394.

Directors

Under our
bylaws, our directors are elected by a plurality of the votes cast at each
annual meeting of the stockholders by the holders of shares entitled to vote in
the election. There is no provision for cumulative voting.

Pursuant to
the provisions of our bylaws, the board of directors may change the number of
directors to not less than three, nor more than 15, by a vote of a majority of
the entire board. Each director shall be elected to serve until the third
succeeding annual meeting of stockholders and until his or her successor shall
have been duly elected and qualified, except in the event of death, resignation
or removal. A vacancy on the board created by death, resignation, removal
(which may only be for cause), or failure of the stockholders to elect the
entire class of directors to be elected at any election of directors or for any
other reason may be filled only by an affirmative vote of a majority of the
remaining directors then in office, even if less than a quorum, at any special
meeting called for that purpose or at any regular meeting of the board of
directors. The board of directors has the authority to fix the amounts which
shall be payable to the non-employee members of our board of directors for
attendance at any meeting or for services rendered to us.

Common Stock

Each
outstanding share of common stock entitles the holder to one vote on all
matters submitted to a vote of stockholders. Subject to preferences that may be
applicable to any outstanding shares of preferred stock, holders of shares of
common stock are entitled to receive ratably all dividends, if any, declared by
our board of directors out of funds legally available for dividends. Upon our
dissolution or liquidation or the sale of all or substantially all of our
assets, after payment in full of all amounts required to be paid to creditors
and to the holders of preferred stock having liquidation preferences, if any,
the holders of our common stock will be entitled to receive pro rata our
remaining assets available for distribution. Holders of common stock do not
have conversion, redemption or preemptive rights to subscribe to any of our
securities. All outstanding shares of common stock are fully paid and
nonassessable. The rights, preferences and privileges of holders of common
stock are subject to the rights of the holders of any shares of preferred stock
which we may issue in the future. Our common stock is not subject to any
sinking fund provisions and no holder of any shares will be required to make
additional contributions of capital with respect to our shares in the future.
There are no provisions in our articles of incorporation or bylaws
discriminating against a shareholder because of his or her ownership of a
particular number of shares.

We are not
aware of any limitations on the rights to own our common stock, including
rights of non-resident or foreign stockholders to hold or exercise voting
rights on our common stock, imposed by foreign law or by our articles of
incorporation or bylaws.

Preferred Stock

Our articles
of incorporation authorize our board of directors, without any further vote or
action by our stockholders, to issue up to 20,000,000 shares of blank check
preferred stock, of which 1,000,000 shares have been designated Series A
Participating Preferred Stock, in connection with our adoption of a stockholder
rights plan as described below under Stockholder Rights Plan, and to
determine, with respect to any series of preferred stock established by our
board of directors, the terms and rights of that series, including:

| |   |                                     
| | - | ------------------------------------
| | ● | the
 designation of the series;     
| |   |                                     
| | ● | the number
 of shares of the series;

56

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| |   |                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | the preferences
 and relative, participating, option or other special rights, if any, and any
 qualifications, limitations or restrictions of such series; and
| |   |                                                                                                                                                               
| | ● | the voting
 rights, if any, of the holders of the series.                                                                                                     

Stockholder Rights
Plan

Each share of
our common stock includes a right that entitles the holder to purchase from us
a unit consisting of one-thousandth of a share of our Series A participating
preferred stock at a purchase price of $25.00 per unit, subject to specified
adjustments. The rights are issued pursuant to a stockholder rights agreement
between us and American Stock Transfer & Trust Company, as rights agent.
Until a right is exercised, the holder of a right will have no rights to vote
or receive dividends or any other stockholder rights.

The rights may
have anti-takeover effects. The rights will cause substantial dilution to any
person or group that attempts to acquire us without the approval of our board
of directors. As a result, the overall effect of the rights may be to render
more difficult or discourage any attempt to acquire us. Because our board of
directors can approve a redemption of the rights or a permitted offer, the
rights should not interfere with a merger or other business combination
approved by our board of directors. The adoption of the rights agreement was
approved by our existing stockholder prior to our initial public offering in
May 2008.

We have
summarized the material terms and conditions of the rights agreement and the
rights below. For a complete description of the rights, we encourage you to
read the stockholder rights agreement, which we have filed as an exhibit to
this annual report.

Detachment of rights

The rights are
attached to all certificates representing our outstanding common stock and will
attach to all common stock certificates we issue prior to the rights
distribution date that we describe below. The rights are not exercisable until
after the rights distribution date and will expire at the close of business on
the tenth anniversary date of the adoption of the rights plan, unless we redeem
or exchange them earlier as described below. The rights will separate from the
common stock and a rights distribution date will occur, subject to specified
exceptions, on the earlier of the following two dates:

| |   |                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | ten days
 following the first public announcement that a person or group of affiliated
 or associated persons or an acquiring person has acquired or obtained the
 right to acquire beneficial ownership of 15% or more of our outstanding
 common stock; or
| |   |                                                                                                                                                                                                                                                               
| | ● | ten business
 days following the start of a tender or exchange offer that would result, if
 closed, in a person becoming an acquiring person.                                                                                                               

Our
controlling stockholder, Vorini Holdings Inc., and its affiliates are excluded
from the definition of acquiring person for purposes of the rights, and
therefore their ownership or future share acquisitions cannot trigger the
rights. Specified inadvertent owners that would otherwise become an acquiring
person, including those who would have this designation as a result of
repurchases of common stock by us, will not become acquiring persons as a
result of those transactions.

Our board of
directors may defer the rights distribution date in some circumstances, and
some inadvertent acquisitions will not result in a person becoming an acquiring
person if the person promptly divests itself of a sufficient number of shares
of common stock.

Until the
rights distribution date:

| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | our common
 stock certificates will evidence the rights, and the rights will be
 transferable only with those certificates; and                           
| |   |                                                                                                                                                           
| | ● | any new
 shares of common stock will be issued with rights, and new certificates will
 contain a notation incorporating the rights agreement by reference.

57

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As soon as
practicable after the rights distribution date, the rights agent will mail
certificates representing the rights to holders of record of common stock at
the close of business on that date. As of the rights distribution date, only
separate rights certificates will represent the rights.

We will not
issue rights with any shares of common stock we issue after the rights
distribution date, except as our board of directors may otherwise determine.

Flip-in event

A flip-in
event will occur under the rights agreement when a person becomes an acquiring
person. If a flip-in event occurs and we do not redeem the rights as described
under the heading Redemption of rights below, each right, other than any
right that has become void, as described below, will become exercisable at the
time it is no longer redeemable for the number of shares of common stock, or,
in some cases, cash, property or other of our securities, having a current
market price equal to two times the exercise price of such right.

If a flip-in
event occurs, all rights that then are, or in some circumstances that were,
beneficially owned by or transferred to an acquiring person or specified
related parties will become void in the circumstances which the rights
agreement specifies.

Flip-over event

A flip-over
event will occur under the rights agreement when, at any time after a person
has become an acquiring person:

| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| | ● | we are
 acquired in a merger or other business combination transaction; or     
| |   |                                                                                
| | ● | 50% or more
 of our assets, cash flows or earning power is sold or transferred.

If a flip-over
event occurs, each holder of a right, other than any right that has become void
as we describe under the heading Flip-in event above, will have the right to
receive the number of shares of common stock of the acquiring company having a
current market price equal to two times the exercise price of such right.

Antidilution

The number of
outstanding rights associated with our common stock is subject to adjustment
for any stock split, stock dividend or subdivision, combination or reclassification
of our common stock occurring prior to the rights distribution date. With some
exceptions, the rights agreement does not require us to adjust the exercise
price of the rights until cumulative adjustments amount to at least 1% of the
exercise price. It also does not require us to issue fractional shares of our
preferred stock that are not integral multiples of one one-hundredth of a
share, and, instead, we may make a cash adjustment based on the market price of
the common stock on the last trading date prior to the date of exercise. The
rights agreement reserves us the right to require, prior to the occurrence of
any flip-in event or flip-over event, that, on any exercise of rights, a number
of rights must be exercised so that we will issue only whole shares of stock.

Redemption of rights

At any time
until ten days after the date on which the occurrence of a flip-in event is
first publicly announced, we may redeem the rights in whole, but not in part,
at a redemption price of $0.01 per right. The redemption price is subject to
adjustment for any stock split, stock dividend or similar transaction occurring
before the date of redemption. At our option, we may pay that redemption price
in cash, shares of common stock or any other consideration our board of
directors may select. The rights are not exercisable after a flip-in event
until they are no longer redeemable. If our board of directors timely orders
the redemption of the rights, the rights will terminate on the effectiveness of
that action.

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Exchange of rights

We may, at our
option, exchange the rights (other than rights owned by an acquiring person or
an affiliate or an associate of an acquiring person, which have become void),
in whole or in part. The exchange must be at an exchange ratio of one share of
common stock per right, subject to specified adjustments at any time after the
occurrence of a flip-in event and prior to

| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | any person
 other than our existing stockholder becoming the beneficial owner of common
 stock with voting power equal to 50% or more of the total voting power of all
 shares of common stock entitled to vote in the election of directors; or
| |   |                                                                                                                                                                                                                                                 
| | ● | the
 occurrence of a flip-over event.                                                                                                                                                                                                           

Amendment of terms
of rights

While the
rights are outstanding, we may amend the provisions of the rights agreement
only as follows:

| |   |                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | to cure any
 ambiguity, omission, defect or inconsistency;                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                       
| | ● | to make
 changes that do not adversely affect the interests of holders of rights,
 excluding the interests of any acquiring person; or                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                       
| | ● | to shorten
 or lengthen any time period under the rights agreement, except that we cannot
 change the time period when rights may be redeemed or lengthen any time
 period, unless such lengthening protects, enhances or clarifies the benefits
 of holders of rights other than an acquiring person.

At any time
when no rights are outstanding, we may amend any of the provisions of the
rights agreement, other than decreasing the redemption price.

Dissenters Rights
of Appraisal and Payment

Under the BCA,
our stockholders have the right to dissent from various corporate actions,
including any merger or sale of all, or substantially all, of our assets not
made in the usual course of our business, and receive payment of the fair value
of their shares. In the event of any amendment of our articles of
incorporation, a stockholder also has the right to dissent and receive payment
for his or her shares if the amendment alters certain rights in respect of
those shares. The dissenting stockholder must follow the procedures set forth
in the BCA to receive payment. In the event that we and any dissenting
stockholder fail to agree on a price for the shares, the BCA procedures
involve, among other things, the institution of proceedings in the high court
of the Republic of The Marshall Islands or in any appropriate court in any
jurisdiction in which our shares are primarily traded on a local or national
securities exchange. The value of the shares of the dissenting stockholder is
fixed by the court after reference, if the court so elects, to the
recommendations of a court-appointed appraiser.

Stockholders
Derivative Actions

Under the BCA,
any of our stockholders may bring an action in our name to procure a judgment
in our favor, also known as a derivative action, provided that the stockholder
bringing the action is a holder of common stock both at the time the derivative
action is commenced and at the time of the transaction to which the action
relates.

Limitations on
Liability and Indemnification of Officers and Directors

The BCA
authorizes corporations to limit or eliminate the personal liability of
directors and officers to corporations and their stockholders for monetary
damages for breaches of directors fiduciary duties. Our articles of
incorporation include a provision that eliminates the personal liability of
directors for monetary damages for actions taken as a director to the fullest
extent permitted by law.

Our bylaws
provide that we must indemnify our directors and officers to the fullest extent
authorized by law. We are also expressly authorized to advance certain expenses
(including attorneys fees and disbursements and court costs) to our directors
and officers and carry directors and officers insurance providing
indemnification for our directors, officers and certain employees for some
liabilities. We believe that these indemnification provisions and insurance are
useful to attract and retain qualified directors and executive officers.

59

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The limitation
of liability and indemnification provisions in our articles of incorporation
and bylaws may discourage stockholders from bringing a lawsuit against
directors for breach of their fiduciary duty. These provisions may also have
the effect of reducing the likelihood of derivative litigation against directors
and officers, even though such an action, if successful, might otherwise
benefit us and our stockholders. In addition, stockholders investments may be
adversely affected to the extent we pay the costs of settlement and damage
awards against directors and officers pursuant to these indemnification
provisions.

There is
currently no pending material litigation or proceeding involving any of our
directors, officers or employees for which indemnification is sought.

Anti-Takeover Effect
of Certain Provisions of our Articles of Incorporation and Bylaws

Several
provisions of our articles of incorporation and bylaws, which are summarized in
the following paragraphs, may have anti-takeover effects. These provisions are
intended to avoid costly takeover battles, lessen our vulnerability to a
hostile change of control and enhance the ability of our board of directors to
maximize stockholder value in connection with any unsolicited offer to acquire
us. However, these anti-takeover provisions could also delay, defer or prevent
(a) the merger or acquisition of our company by means of a tender offer, a
proxy contest or otherwise that a stockholder might consider in its best
interest, including attempts that may result in a premium over the market price
for the shares held by the stockholders, and (b) the removal of incumbent
officers and directors.

Blank check
preferred stock

Under the
terms of our articles of incorporation, our board of directors has authority,
without any further vote or action by our stockholders, to issue up to
20,000,000 shares of blank check preferred stock, of which 1,000,000 shares
have been designated Series A Participating Preferred Stock, in connection with
our adoption of a stockholder rights plan as described above under Stockholder
Rights Plan. Our board of directors may issue shares of preferred stock on
terms calculated to discourage, delay or prevent a change of control of our
company or the removal of our management.

Classified board of
directors

Our articles
of incorporation provide for a board of directors serving staggered, three-year
terms. Approximately one-third of our board of directors will be elected each
year. This classified board provision could discourage a third party from
making a tender offer for our shares or attempting to obtain control of our
company. It could also delay stockholders who do not agree with the policies of
the board of directors from removing a majority of the board of directors for
two years.

Election and removal
of directors

Our articles of
incorporation prohibit cumulative voting in the election of directors. Our
bylaws require parties other than the board of directors to give advance
written notice of nominations for the election of directors. Our articles of
incorporation and bylaws also provide that our directors may be removed only
for cause. These provisions may discourage, delay or prevent the removal of
incumbent officers and directors.

Calling of special
meeting of stockholders

Our articles
of incorporation and bylaws provide that special meetings of our stockholders
may only be called by our Chairman of the board of directors, chief executive
officer or by either, at the request of a majority of our board of directors.

Advance notice
requirements for stockholder proposals and director nominations

Our bylaws
provide that stockholders seeking to nominate candidates for election as
directors or to bring business before an annual meeting of stockholders must
provide timely notice of their proposal in writing to the corporate secretary.

Generally, to
be timely, a stockholders notice must be received at our offices not less than
90 days nor more than 120 days prior to the first anniversary date of the
previous years annual meeting. Our bylaws also specify requirements as to the
form and content of a stockholders notice. These provisions may impede
stockholders ability to bring matters before an annual meeting of stockholders
or to make nominations for directors at an annual meeting of stockholders.

60

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C. Material Contracts

Not applicable.

D. Exchange Controls and Other Limitations Affecting Security
Holders

Under Marshall Islands law,
there are currently no restrictions on the export or import of capital,
including foreign exchange controls or restrictions that affect the remittance
of dividends, interest or other payments to non-resident holders of our common
stock.

E. Tax Considerations

Marshall Islands Tax Considerations

We are a non-resident
domestic Marshall Islands corporation. Because we do not, and we do not expect
that we will, conduct business or operations in the Marshall Islands, under
current Marshall Islands law we are not subject to tax on income or capital
gains and our stockholders (so long as they are not citizens or residents of
the Marshall Islands) will not be subject to Marshall Islands taxation or
withholding on dividends and other distributions (including upon a return of
capital) we make to our stockholders. In addition, so long as our stockholders
are not citizens or residents of the Marshall Islands, our stockholders will
not be subject to Marshall Islands stamp, capital gains or other taxes on the
purchase, holding or disposition of our common stock, and our stockholders will
not be required by the Republic of the Marshall Islands to file a tax return
relating to our common stock.

Each stockholder is urged to
consult their tax counselor or other advisor with regard to the legal and tax
consequences, under the laws of pertinent jurisdictions, including the Marshall
Islands, of their investment in us. Further, it is the responsibility of each
stockholder to file all state, local and non-U.S., as well as U.S. federal tax
returns that may be required of them.

Liberian Tax Considerations

The Republic of Liberia
enacted a new income tax act effective as of January 1, 2001. In contrast to
the income tax law previously in effect since 1977, the New Act does not
distinguish between the taxation of non-resident Liberian corporations, such
as our Liberian subsidiaries, which conduct no business in Liberia and were
wholly exempt from taxation under the prior law, and resident Liberian
corporations, which conduct business in Liberia and are (and were under the
prior law) subject to taxation.

In 2004, the Liberian
Ministry of Finance issued regulations exempting non-resident corporations
engaged in international shipping (and not engaged in shipping exclusively
within Liberia), such as our Liberian subsidiaries, from Liberian taxation
under the New Act retroactive to January 1, 2001. It is unclear whether these regulations,
which ostensibly conflict with the provisions of the New Act, are a valid
exercise of the regulatory authority of the Liberian Ministry of Finance such
that the regulations can be considered unquestionably enforceable. However, an
opinion dated December 23, 2004 addressed by the Minister of Justice and
Attorney General of the Republic of Liberia to The LISCR Trust Company stated
that the regulations are a proper exercise of the powers of the regulatory
authority of the Ministry of Finance. The Liberian Ministry of Finance has not
at any time since January 1, 2001 sought to collect taxes from any of our
Liberian subsidiaries.

If, however, our Liberian
subsidiaries were subject to Liberian income tax under the New Act, they would
be subject to tax at a rate of 35% on their worldwide income. As a result,
their, and subsequently our, net income and cash flow would be materially
reduced. In addition, as the ultimate stockholder of the Liberian subsidiaries,
we would be subject to Liberian withholding tax on dividends paid by our
Liberian subsidiaries at rates ranging from 15% to 20%.

61

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United States
Federal Income Tax Considerations

The following
discussion of U.S. federal income tax matters is based on the Code, judicial
decisions, administrative pronouncements, and existing and proposed regulations
issued by the U.S. Department of the Treasury, all of which are subject to
change, possibly with retroactive effect. This discussion does not address any
U.S. state or local taxes.

Taxation of Our Shipping
Income

For purposes
of the following discussion shipping income means income that is derived by a
non-U.S corporation from:

| |     |                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | the use of
 vessels;                                                                                                                                                                              
| |     |                                                                                                                                                                                                   
| | (b) | the hiring
 or leasing of vessels for use on a time, operating or bareboat charter basis;                                                                                                         
| |     |                                                                                                                                                                                                   
| | (c) | the
 participation in a pool, partnership, strategic alliance, joint operating
 agreement or other joint venture it directly or indirectly owns or
 participates in that generates such income; or
| |     |                                                                                                                                                                                                   
| | (d) | the
 performance of services directly related to those uses.                                                                                                                                      

Shipping
income attributable to transportation exclusively between non-U.S. ports is
generally not subject to U.S. income tax. However, unless exempt from U.S
income tax under the rules contained in Section 883 of the Code, a non-U.S
corporation is, under the rules of Section 887 of the Code, subject to a 4%
U.S. income tax in respect of its U.S. source gross transportation income
(without the allowance for deductions). U.S. source gross transportation income
includes 50% of shipping income that is attributable to transportation that
begins or ends (but that does not both begin and end) in the United States
Under Section 883 of the Code, a non-U.S. corporation will be exempt from U.S.
income tax on its U.S. source gross transportation income if:

| |     |                                                                                                                                           |                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | it is
 organized in a foreign country (or the country of organization) that grants
 an equivalent exemption to U.S. corporations; and
| |     |                                                                                                                                           |                                                                                                                                                                                                                                             
| | (b) | either                                                                                                                                   
| |     |                                                                                                                                           |                                                                                                                                                                                                                                             
| |     | (i)                                                                                                                                       | more than
 50% of the value of its stock is owned, directly or indirectly, by
 individuals who are residents of our country of organization or of another
 foreign country that grants an equivalent exemption to U.S. corporations;
 or
| |     |                                                                                                                                           |                                                                                                                                                                                                                                             
| |     | (ii)                                                                                                                                      | its stock is
 primarily and regularly traded on an established securities market in its
 country of organization, in another country that grants an equivalent
 exemption to U.S. corporations, or in the United States.                

We believe
that we will not satisfy the requirements of Section 883 of the Code. As a
result, we will be subject to the 4% U.S. income tax on U.S. source gross
transportation income. Since 50% of our gross shipping income for
transportation that begins or ends in the U.S. would be treated as U.S. source
gross transportation income, we expect that the effective rate of U.S. income
tax on our gross shipping income for such transportation would equal 2%. Many
of our charters contain a provision that obligates the charterer to reimburse
us for the 4% U.S. income tax that we are required to pay in respect of the vessel
subject to the relevant charter.

62

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In lieu of the
foregoing rules, since the exemption of Section 883 of the Code will not apply
to us, our U.S. source gross transportation income that is considered to be
effectively connected with the conduct of a U.S. trade or business would be
subject to the U.S. corporate income tax currently imposed at rates of up to
35% (net of applicable deductions). In addition, we may be subject to the 30%
U.S. branch profits taxes on earnings effectively connected with the conduct
of such trade or business, as determined after allowance for certain
adjustments, and on certain interest paid or deemed paid attributable to the
conduct of our U.S. trade or business.

We expect that
none of our U.S. source gross transportation income will be effectively
connected with the conduct of a U.S. trade or business. Such income would be
considered effectively connected only if:

| |     |                                                                                                                                                                                                                                                                                                                          
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | we had, or
 were considered to have, a fixed place of business in the United States
 involved in the earning of our U.S. source gross transportation income; and                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                          
| | (b) | substantially
 all of our U.S. source gross transportation income was attributable to
 regularly scheduled transportation, such as the operation of a vessel that
 followed a published schedule with repeated sailings at regular intervals
 between the same points for voyages that begin or end in the United States.

We believe
that we will not meet these conditions because we will not have, or permit
circumstances that would result in our having, any vessel sailing to or from
the United States on a regularly scheduled basis. In addition, income attributable to
transportation that both begins and ends in the United States is not subject to
the tax rules described above. Such income is subject to either a 30%
gross-basis tax or to U.S. corporate income tax on net income at rates of up to
35% ( and the branch profits tax discussed above). Although there can be no
assurance, we do not expect to engage in transportation that produces shipping
income of this type.

Taxation of Gain on
Sale of Assets

Regardless of
whether we qualify for the exemption under Section 883 of the Code, we will not
be subject to U.S. income taxation with respect to gain realized on a sale of a
vessel, provided the sale is considered to occur outside of the United States
(as determined under U.S. tax principles). In general, a sale of a vessel will
be considered to occur outside of the United States for this purpose if title
to the vessel (and risk of loss with respect to the vessel) pass to the buyer
outside of the United States. We expect that any sale of a vessel will be so
structured that it will be considered to occur outside of the United States.

United States
Federal Income Taxation of U.S. Holders

You are a
U.S. holder if you are a beneficial owner of our common stock and you are a
U.S. citizen or resident, a U.S. corporation (or other U.S. entity taxable as a
corporation), an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or a trust if a court within the United
States is able to exercise primary jurisdiction over the administration of the
trust and one or more U.S. persons have the authority to control all
substantial decisions of that trust.

If a
partnership holds our common stock, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. Partners in a partnership holding our common stock are encouraged
to consult their tax advisors.

Distributions on Our
Common Stock

Subject to the
discussion of PFICs below, any distributions with respect to our common stock
that you receive from us will generally constitute dividends, which may be
taxable as ordinary income or qualified dividend income as described below,
to the extent of our current or accumulated earnings and profits (as determined
under U.S. tax principles). Distributions in excess of our earnings and profits
will be treated first as a nontaxable return of capital to the extent of your tax
basis in our common stock (on a dollar-for-dollar basis) and thereafter as
capital gain.

Because we are
not a U.S. corporation, if you are a U.S. corporation (or a U.S. entity taxable
as a corporation), you will not be entitled to claim a dividends-received
deduction with respect to any distributions you receive from us.

Dividends paid
with respect to our common stock will generally be treated as passive category
income for purposes of computing allowable foreign tax credits for U.S.
foreign tax credit purposes.

63

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If you are an
individual, trust or estate, dividends you receive from us should be treated as
qualified dividend income taxed at a preferential rate of 15% (through 2010),
provided that:

| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) the
 common stock is readily tradable on an established securities market in the
 United States (such as the New York Stock Exchange);                                
| |                                                                                                                                                                           
| | (b) we are
 not a PFIC for the taxable year during which the dividend is paid or the
 immediately preceding taxable year (see the discussion below under PFIC
 Status);
| |                                                                                                                                                                           
| | (c) you own
 our common stock for more than 60 days in the 121-day period beginning 60
 days before the date on which the common stock becomes ex-dividend;               
| |                                                                                                                                                                           
| | (d) you are
 not under an obligation to make related payments with respect to positions in
 substantially similar or related property; and                                
| |                                                                                                                                                                           
| | (e) certain
 other conditions are met.                                                                                                                                    

Special rules
may apply to any extraordinary dividend. Generally, an extraordinary dividend
is a dividend in an amount that is equal to (or in excess of) 10% of your
adjusted tax basis (or fair market value in certain circumstances) in a share
of our common stock. If we pay an extraordinary dividend on our common stock
that is treated as qualified dividend income and if you are an individual,
estate or trust, then any loss you derive from a subsequent sale or exchange of
such common stock will be treated as long-term capital loss to the extent of
such dividend.

There is no
assurance that dividends you receive from us will be eligible for the preferential
15% rate. Dividends you receive from us that are not eligible for the
preferential rate of 15% will be taxed at the ordinary income rates.

In addition,
even if we are not a PFIC, under proposed legislation, dividends of a
corporation incorporated in a country without a comprehensive income tax
system paid to U.S. holders who are individuals, estates or trusts would not
be eligible for the 15% tax rate. Although the term comprehensive income tax
system is not defined in the proposed legislation, we believe this rule would
apply to us because we are incorporated in the Marshall Islands. As of the date
hereof, it is not possible to predict with certainty whether or in what form
the proposed legislation will be enacted.

Sale, Exchange or
other Disposition of Common Stock

Provided that
we are not a PFIC for any taxable year, you generally will recognize taxable
gain or loss upon a sale, exchange or other disposition of our common stock in
an amount equal to the difference between the amount realized by you from such
sale, exchange or other disposition and your tax basis in such stock. Such gain
or loss will be treated as long-term capital gain or loss if your holding
period is greater than one year at the time of the sale, exchange or other
disposition. Such capital gain or loss will generally be treated as U.S. source
income or loss, as applicable, for U.S. foreign tax credit purposes. Your
ability to deduct capital losses against ordinary income is subject to
limitations.

PFIC Status

Special U.S.
income tax rules apply to you if you hold stock in a non-U.S. corporation that
is classified as a passive foreign investment company (or PFIC) for U.S.
income tax purposes. In general, we will be treated as a PFIC in any taxable
year in which, after applying certain look-through rules, either:

| |                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) at least
 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains
 and rents derived other than in the active conduct of a rental business); or
| |                                                                                                                                                                                                                 
| | (b) at least
 50% of the average value of our assets during such taxable year consists of
 passive assets (i.e., assets
 that produce, or are held for the production of, passive income).                    

64

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For purposes
of determining whether we are a PFIC, we will be treated as earning and owning
our proportionate share of the income and assets, respectively, of any of our
subsidiary corporations in which we own at least 25% of the value of the
subsidiarys stock. Income we earned, or are deemed to earn, in connection with
the performance of services will not constitute passive income. By contrast,
rental income will generally constitute passive income (unless we are treated
under certain special rules as deriving our rental income in the active conduct
of a trade or business).

Because we
have chartered all our vessels to unrelated charterers on the basis of period
time and spot charter contracts (and not on the basis of bareboat charters) and
because we expect to continue to do so, we believe that currently we should not
be treated as being and should not become a PFIC. We believe it is more likely
than not that our gross income derived from our time charter activities
constitutes active service income (as opposed to passive rental income) and, as
a result, our vessels constitute active assets (as opposed to passive assets)
for purposes of determining whether we are a PFIC. We believe there is legal
authority supporting this position, consisting of case law and IRS
pronouncements concerning the characterization of income derived from time
charters as service income for other tax purposes. However, there is no legal
authority specifically relating to the statutory provisions governing PFICs or
relating to circumstances substantially similar to ours. Moreover, a recent case
by the U.S. Court of Appeals for the Fifth Circuit held that, contrary to the
position of the IRS in that case, and for purposes of a different set of rules
under the Code, income received under a time charter of vessels should be
treated as rental income rather than services income. If the reasoning of the
Fifth Circuit case were extended to the PFIC context, the gross income we
derive or are deemed to derive from our time chartering activities would be
treated as rental income, and we would probably be a PFIC.

We have not
sought, and we do not expect to seek, an IRS ruling on this matter. As a
result, the IRS or a court could disagree with our position that we are not
currently a PFIC. No assurance can be given that this result will not occur. In
addition, although we intend to conduct our affairs in a manner to avoid, to
the extent possible, being classified as a PFIC with respect to any taxable
year, we cannot assure you that the nature of our operations will not change in
the future, or that we can avoid PFIC status in the future.

As discussed
below, if we were to be treated as a PFIC for any taxable year, you generally
would be subject to one of three different U.S. income tax regimes, depending
on whether or not you make certain elections.

Taxation of U.S.
Holders That Make a Timely QEF Election

If we were
treated as a PFIC, and if you make a timely election to treat us as a
Qualifying Electing Fund for U.S. tax purposes (a QEF Election), you would
be required to report each year your pro rata share of our ordinary earnings
and our net capital gain for our taxable year that ends with or within your
taxable year, regardless of whether we make any distributions to you. Such
income inclusions would not be eligible for the preferential tax rates applicable
to qualified dividend income. Your adjusted tax basis in our common stock
would be increased to reflect such taxed but undistributed earnings and
profits. Distributions of earnings and profits that had previously been taxed
would result in a corresponding reduction in your adjusted tax basis in our
common stock and would not be taxed again once distributed. You would generally
recognize capital gain or loss on the sale, exchange or other disposition of
our common stock. Even if you make a QEF Election for one of our taxable years,
if we were a PFIC for a prior taxable year during which you held our common
stock and for which you did not make a timely QEF Election, you would also be
subject to the more adverse rules described below under Taxation of U.S.
Holders That Make No Election.

You would make
a QEF Election with respect to any year that our company is treated as a PFIC
by completing and filing IRS Form 8621 with your U.S. income tax return in
accordance with the relevant instructions. If we were to become aware that we
were to be treated as a PFIC for any taxable year, we would notify all U.S.
holders of such treatment and would provide all necessary information to any
U.S. holder who requests such information in order to make the QEF election
described above.

Taxation of U.S.
Holders That Make a Timely Mark-to-Market Election

Alternatively,
if we were to be treated as a PFIC for any taxable year and, as we believe, our
common stock is treated as marketable stock, you would be allowed to make a
mark-to-market election with respect to our common stock, provided that you
complete and file IRS Form 8621 in accordance with the relevant instructions.
If that election is made, you generally would include as ordinary income in
each taxable year the excess, if any, of the fair market value of our common
stock at the end of the taxable year over your adjusted tax basis in our common
stock. You also would be permitted an ordinary loss in respect of the excess,
if any, of your adjusted tax basis in our common stock over its fair market
value at the end of the taxable year (but only to the extent of the net amount
previously included in income as a result of the mark-to-market election). Your
tax basis in our common stock would be adjusted to reflect any such income or
loss amount. Gain realized on the sale, exchange or other disposition of our
common stock would be treated as ordinary income, and any loss realized on the
sale, exchange or other disposition of the common stock would be treated as ordinary
loss to the extent that such loss does not exceed the net mark-to-market gains
previously included by you.

65

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Taxation of U.S.
Holders That Make No Election

Finally, if we
were treated as a PFIC for any taxable year and if you did not make either a
QEF Election or a mark-to-market election for that year, you would be subject
to special rules with respect to (a) any excess distribution (that is, the
portion of any distributions received by you on our common stock in a taxable
year in excess of 125% of the average annual distributions received by you in
the three preceding taxable years, or, if shorter, your holding period for our
common stock) and (b) any gain realized on the sale, exchange or other
disposition of our common stock. Under these special rules:

| |                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) the
 excess distribution or gain would be allocated ratably over your aggregate
 holding period for our common stock;                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                            
| | (ii) the
 amount allocated to the current taxable year would be taxed as ordinary
 income; and                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                            
| | (iii) the
 amount allocated to each of the other taxable years would be subject to tax
 at the highest rate of tax in effect for the applicable class of taxpayer for
 that year, and an interest charge for the deemed deferral benefit would be
 imposed with respect to the resulting tax attributable to each such other
 taxable year.

If you were to
die while owning our common stock, your successor generally would not receive a
step-up in tax basis with respect to such stock for U.S. tax purposes.

United States
Federal Income Taxation of Non-U.S. Holders

You are a
non-U.S. holder if you are a beneficial owner of our common stock (other than
a partnership for U.S. tax purposes) and you are not a U.S. holder.

Distributions on Our
Common Stock

You generally
will not be subject to U.S. income or withholding taxes on dividends you
receive from us with respect to our common stock, unless that income is
effectively connected with your conduct of a trade or business in the United
States. If you are entitled to the benefits of an applicable income tax treaty
with respect to those dividends, that income generally is taxable in the United
States only if it is attributable to a permanent establishment maintained by
you in the United States.

Sale, Exchange or
Other Disposition of Our Common Stock

You generally
will not be subject to U.S. income tax or withholding tax on any gain realized
upon the sale, exchange or other disposition of our common stock, unless:

| |                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) the gain
 is effectively connected with your conduct of a trade or business in the
 United States. If you are entitled to the benefits of an applicable income
 tax treaty with respect to that gain, that gain generally is taxable in the
 United States only if it is attributable to a permanent establishment
 maintained by you in the United States; or
| |                                                                                                                                                                                                                                                                                                                                                                   
| | (b) you are
 an individual who is present in the United States for 183 days or more during
 the taxable year of disposition and certain other conditions are met.                                                                                                                                                                                                 

If you are
engaged in a U.S. trade or business for U.S. tax purposes, you will be subject
to U.S. tax with respect to your income from our common stock (including
dividends and the gain from the sale, exchange or other disposition of the
stock that is effectively connected with the conduct of that trade or business)
in the same manner as if you were a U.S. holder. In addition, if you are a
corporate non-U.S. holder, your earnings and profits that are attributable to
the effectively connected income (subject to certain adjustments) may be
subject to an additional U.S. branch profits tax at a rate of 30%, or at a
lower rate as may be specified by an applicable income tax treaty.

United States Backup
Withholding and Information Reporting

In general, if
you are a non-corporate U.S. holder, dividend payments (or other taxable distributions)
made within the United States will be subject to information reporting
requirements and backup withholding tax if you:

| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) fail to
 provide us with an accurate taxpayer identification number;                                                                          
| |                                                                                                                                                   
| | (2) are
 notified by the IRS that you have failed to report all interest or dividends
 required to be shown on your federal income tax returns; or
| |                                                                                                                                                   
| | (3) in
 certain circumstances, fail to comply with applicable certification
 requirements.                                                        

If you are a
non-U.S. holder, you may be required to establish your exemption from
information reporting and backup withholding by certifying your status on IRS
Form W-8BEN, W-8ECI or W-8IMY, as applicable.

66

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If you sell
our common stock to or through a U.S. office or broker, the payment of the
sales proceeds is subject to both U.S. backup withholding and information
reporting unless you certify that you are a non-U.S. person, under penalties of
perjury, or you otherwise establish an exemption. If you sell our common stock
through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid
to you outside the United States, then information reporting and backup
withholding generally will not apply to that payment.

However, U.S.
information reporting requirements (but not backup withholding) will apply to a
payment of sales proceeds, even if that payment is made outside the United
States, if you sell our common stock through a non-U.S. office of a broker that
is a U.S. person or has certain other connections with the United States.

Backup
withholding tax is not an additional tax. Rather, you generally may obtain a
refund of any amounts withheld under backup withholding rules that exceed your
income tax liability by accurately completing and timely filing a refund claim
with the IRS.

F. Dividends and Paying Agents

Not
applicable.

G. Statement by Experts

Not
applicable.

H. Documents on Display

We are subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended (the Exchange Act). In accordance with these requirements, we file
reports and other information as a foreign private issuer with the SEC. You may
inspect and copy our public filings without charge at the public reference
facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference room. You may obtain copies of all or any part of such materials from
the SEC upon payment of prescribed fees. You may also inspect reports and other
information regarding registrants, such as us, that file electronically with
the SEC without charge at a web site maintained by the SEC at http://www.sec.gov.

I.
Subsidiary Information

Not applicable.

67

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ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A. Quantitative Information About Market Risk

Interest Rate Risk

We are subject
to market risks relating to changes in interest rates because we have floating
rate debt outstanding, which is based on U.S. dollar LIBOR plus, in the case
    of each credit facility, a specified margin. Our objective is to manage the
    impact of interest rate changes on our earnings and cash flow in relation
    to our borrowings and to this effect, when we deem appropriate, we use derivative
financial instruments. We had entered into 18 interest rate swap agreements as
of December 31, 2010, compared to 13 interest rate swap agreements as of
December 31, 2009, in order to manage future interest costs and the risk
associated with changing interest rates.

The total
notional principal amount of these swaps as of December 31, 2010 was $638.0
million of which $443.6 is effective as of December 31, 2010 and $194.4 becomes
effective during 2011 and 2012. The swaps have specified rates and durations.
Refer to the table in Note 15 of our financial statements included at the end
of this annual report which summarizes the interest rate swaps in place as of
December 31, 2010 and December 31, 2009.

Under our
interest rate swap transactions, the bank effects quarterly or semiannual
floating-rate payments to us for the relevant amount based either on the three-
or six-month U.S. dollar LIBOR and we make quarterly or semiannual payments to
    the bank on the relevant amount at the respective fixed rates.

We entered
into these interest rate swap agreements to mitigate our exposure to interest
rate fluctuations and at a time when we believed long-term interest rates were
reasonably low. No interest rate swap meets hedge accounting criteria under
accounting guidance relating to Fair Value
Measurement. Although we are exposed to credit-related losses in the
event of non-performance in connection with such swap agreements, because the
counterparties are major financial institutions, we consider the risk of loss
due to their nonperformance to be minimal.

Through these
swap transactions, we effectively hedged the interest rate exposure of 97.6% of
our loans outstanding as of December 31, 2010.The following table sets forth
the sensitivity of our existing loans as of December 31, 2010 as to a 100 basis
point increase in LIBOR taking into account our interest rate swap agreements
that are currently in place, during the next five years, and reflects the
additional interest expense.

|     |  |        |             | 
|---- |  | ------ | ----------- | 
|Year |  | Amount |            
|     |  |        |            
|2011 |  | $      | 0.0 million | 
|2012 |  | $      | 0.0 million | 
|2013 |  | $      | 1.0 million | 
|2014 |  | $      | 1.9 million | 
|2015 |  | $      | 2.4 million | 

Foreign Currency Exchange Risk

We generate
all of our revenues in U.S. dollars, but for the year ended December 31, 2010
we incurred approximately 24.93% of our vessel operating expenses in currencies
other than the U.S. dollar. As of December 31, 2010, approximately 17.83% of
our cash and cash equivalents and 28.96% of our outstanding accounts payable
were denominated in currencies other than the U.S. dollar and were subject to
exchange rate risk, as their value fluctuates with changes in exchange rates.

A hypothetical
10% immediate and uniform adverse move in all currency exchange rates from the
rates in effect as of December 31, 2010, would have increased our vessel
operating expenses by approximately $576,468 and the fair value of our
outstanding accounts payable by approximately $41,535.

As of December
31, 2010 we maintained the equivalent of $11.65 million of our cash and cash
equivalents in Japanese Yen in view of the contemplated agreement to purchase a
newbuild vessel, the contract price of which is party payable in Japanese Yen.
The agreement was signed in January 2011, and the funds held in Japanese Yen
were at the time fully utilized to settle in full the relevant installment
under the newbuild contract.

While, from
time to time, we have in the past used financial derivatives in the form of
foreign exchange forward agreements to mitigate the risk associated with
exchange rate fluctuations, currently, no such instruments are in place,
although we may enter into foreign exchange forward agreements in the future in
relation to the remaining payments denominated in Japanese Yen for the newbuild
vessel we contracted to purchase in January 2011.

ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not
applicable.

68

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PART II

ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

NONE

ITEM 14. MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

A. Material Modifications to the Rights of
Security Holders

We adopted a
stockholder rights plan on May 13, 2008 that authorizes the issuance to our
existing stockholders of preferred share rights and additional shares of common
stock if any third party seeks to acquire control of a substantial block of our
common stock. See Item 10. Additional Information B. Memorandum and Articles
of AssociationStockholder Rights Plan included in this annual report for a
description of the stockholder rights plan.

ITEM 15. CONTROLS
AND PROCEDURES

A. Disclosure Controls and Procedures

Our
management, with the participation of our chief executive officer and chief
financial officer, has evaluated the effectiveness of the design and operation
of our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act as of December 31, 2010. Disclosure controls
and procedures are defined under SEC rules as controls and other procedures
that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within required time periods.
Disclosure controls and procedures include controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuers management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate, to
allow timely decisions regarding required disclosure. There are inherent
limitations to the effectiveness of any system of disclosure controls and
procedures, including the possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of
achieving their control objectives.

Based on our
evaluation, the chief executive officer and the chief financial officer have
concluded that our disclosure controls and procedures were effective as of
December 31, 2010.

B. Managements Annual Report on Internal
Control Over Financial Reporting

Our management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act and for the assessment of the effectiveness of internal control
over financial reporting. Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles in the
United States (U.S. GAAP).

A companys
internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit the preparation of financial statements in
accordance with U.S. GAAP, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the companys assets that could have a material effect on the financial
statements.

Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In making its
assessment of our internal control over financial reporting as of December 31,
2010, management, including the chief executive officer and chief financial
officer, used the criteria set forth in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).

Management
concluded that, as of December 31, 2010, our internal control over financial
reporting was effective. Deloitte Hadjipavlou, Sofianos & Cambanis S.A.
(Deloitte), our independent registered public accounting firm, has audited
the financial statements included herein and our internal control over
financial reporting and has issued an attestation report on the effectiveness
of our internal control over financial reporting as of December 31, 2010 which
is reproduced in its entirety in Item 15(c) below.

69

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C. Attestation Report of the Registered
Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board
of Directors and Stockholders of Safe Bulkers, Inc., 
Majuro, Republic of the Marshall Islands,

We have
audited the internal control over financial reporting of Safe Bulkers, Inc.,
and its subsidiaries (the Company) as of December 31, 2010, based on criteria
established in Internal Control  Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Companys management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Managements Annual Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Companys
internal control over financial reporting based on our audit.

We conducted
our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys
internal control over financial reporting is a process designed by, or under
the supervision of, the companys principal executive and principal financial
officers, or persons performing similar functions, and effected by the
companys board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the companys assets that could have a material effect on the financial
statements.

Because of the
inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls,
material misstatements due to error or fraud may not be prevented or detected
on a timely basis. Also, projections of any evaluation of the effectiveness of
the internal control over financial reporting to future periods are subject to
the risk that the controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures
may deteriorate.

In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2010, based on the criteria
established in Internal Control  Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.

We have also
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements as of
and for the year ended December 31, 2010 of the Company and our report dated
March 4, 2011 expressed an unqualified opinion on those financial statements.

/s/ Deloitte
Hadjipavlou, Sofianos & Cambanis S.A. 
Athens, Greece

March 4, 2011

D. Changes in Internal Control over Financial
Reporting

During the
period covered by this annual report, we have made no changes to our internal
control over financial reporting that have materially affected or are
reasonably likely to materially affect our internal control over financial
reporting.

70

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ITEM 16A. AUDIT
COMMITTEE FINANCIAL EXPERT

Our Audit
Committee consists of three independent directors, John Gaffney, Ole Wikborg
and Frank Sica, who is the chairman of the committee. Our board of directors
has determined that Frank Sica, whose biographical details are included in
Item 6. Directors, Senior Management and EmployeesA. Directors and Senior
Management, qualifies as an audit committee financial expert as defined under
current SEC regulations.

ITEM 16B. CODE OF
ETHICS

We have
adopted a Code of Business Conduct and Ethics for all officers and employees of
our company, which incorporates a Code of Ethics for directors and a Code of
Conduct for corporate officers, a copy of which is posted on our website, and
may be viewed at http://www.safebulkers.com/corp-ethics.htm.
We will also provide a paper copy of this document free of charge upon written
request by our stockholders. Stockholders may direct their requests to the
attention of Dr. Loukas Barmparis, Secretary, Safe Bulkers, Inc., 32 Avenue
Karamanli, 16605, Voula, Athens, Greece. No waivers of the Code of Business
Conduct and Ethics have been granted to any person during the fiscal year ended
December 31, 2010.

ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

Aggregate fees
billed to the Company for the fiscal years ended December 31, 2009 and 2010 by
the Companys principal accounting firm, Deloitte, Hadjipavlou, Sofianos &
Cambanis S.A, an independent registered public accounting firm and member of
Deloitte Touche Tohmatsu, Limited, by the category of service, were as follows:

|                    |  |                |     |      |   |     | 
|------------------- |  | -------------- | --- | ---- | - | --- | 
|                    |  | 2009           |     | 2010 |  
|                    |  |                |     |      |  
|                    |  | (In Thousands) |    
|Audit fees          |  | $              | 579 |      | $ | 496 | 
|Audit-related
 fees |  |                | 116 |      |   |    | 
|Tax fees            |  |                |    |      |   |    | 
|All other
 fees     |  |                |    |      |   |    | 
|Total fees          |  | $              | 695 |      | $ | 496 | 

Audit Fees

Audit fees
represent compensation for professional services rendered for the integrated
audit of the consolidated financial statements of the Company and for the
review of the quarterly financial information as well as in connection with the
review of registration statements and related consents and comfort letters and
any other audit services required for SEC or other regulatory filings.

Audit-related fees

Audit-related
fees for 2009 represent compensation for professional services in connection
with the provision of certain internal control consulting services relating to
the Companys readiness program to address certain matters in connection with
the Sarbanes-Oxley Act of 2002.

Pre-approval Policies and Procedures

The audit
committee charter sets forth our policy regarding retention of the independent
auditors, giving the audit committee responsibility for the appointment,
compensation, retention and oversight of the work of the independent auditors.
The audit committee charter provides that the committee is responsible for
reviewing and approving in advance the retention of the independent auditors
for the performance of all audit and lawfully permitted non-audit services. The
chairman of the audit committee or in the absence of the chairman, any member
of the audit committee designated by the chairman, has authority to approve in
advance any lawfully permitted non-audit services and fees. The audit committee
is authorized to establish other policies and procedures for the pre-approval
of such services and fees. Where non-audit services and fees are approved under
delegated authority, the action must be reported to the full audit committee at
its next regularly scheduled meeting.

ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not
Applicable.

71

---



ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

On June 10,
2009, the Company announced that Vorini Holdings Inc. authorized a program
under which it may from time to time purchase shares of the Companys common
stock. The maximum number of shares of common stock that can be purchased
annually under the program or any private placement is approximately 2% of the
Companys shares outstanding. The program is still in effect and details
on the shares purchased in 2010 pursuant to the program or through private placements
are set forth in the table below. As of February 20, 2011, the Company had
65,879,916 shares of common stock outstanding. Approximately 45,863,014 of
those shares, or 69.62% of common stock outstanding, were held by the Companys
affiliates, according to information provided to the Company by such
affiliates. The remaining 20,016,902 shares, or 30.38% of common stock
outstanding, represented the public float.

|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|----------- |  | ------------------------------------------------- | --------- | ---------------------------------------- | - | --------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- | --------- |  |  | ------- | 
|Period      |  | Total Number of
 Shares (or Units)
 Purchased (a) |           | Average Price Paid per
 Share (or Units) |   | Total Number ofShares (or Units)
 Purchased as Part of
 Publicly Announced
 Plans or Programs |  | Maximum Number of
 Shares that May Yet Be
 Purchased Under the
 Plans or Programs |          
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|2010        |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|January     |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 884,700 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|February    |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 884,700 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|March (a)   |  |                                                   | 1,000,000 |                                          | $ | 7.00                                                                                          |  |                                                                                   | 1,000,000 |  |  | 104,700 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|April       |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 104,700 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|May (b)     |  |                                                   | 56,500    |                                          |   | 6.75                                                                                          |  |                                                                                   | 56,500    |  |  | 48,200  | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|June (b)    |  |                                                   | 48,200    |                                          |   | 6.74                                                                                          |  |                                                                                   | 48,200    |  |  | 152,900 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|July (b)    |  |                                                   | 14,815    |                                          |   | 6.76                                                                                          |  |                                                                                   | 14,815    |  |  | 179,585 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|August      |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 179,585 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|September   |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 179,585 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|October     |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 179,585 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|November    |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 180,485 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|December    |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 180,485 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|2011        |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|January     |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 180,485 | 
|            |  |                                                   |           |                                          |   |                                                                                               |  |                                                                                   |           |  |  |         | 
|February 20 |  |                                                   |          |                                          |   |                                                                                              |  |                                                                                   |          |  |  | 180,485 | 

| |     |                                                                                                                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | On March 24,
 2010, Vorini Holdings Inc. purchased 1,000,000 new shares of the Companys
 common stock at $7.00 per share in a private placement which took place
 concurrently with our public offering. In the public offering, we offered
 10,350,000 new shares of the Companys common stock, including a 15%
 overallotment at $7.00 per share.
| |     |                                                                                                                                                                                                                                                                                                                                                      
| | (b) | All
 purchases have been made on the open market within the safe harbor provisions
 of Regulation 10b-18 under the Exchange Act.                                                                                                                                                                                                                     

72

---



ITEM 16F. CHANGE
IN REGISTRANTS CERTIFYING ACCOUNTANT

Not
Applicable.

ITEM 16G.
CORPORATE GOVERNANCE.

Statement of
Significant Differences Between our Corporate Governance Practices and the New
York Stock Exchange Corporate Governance Standards for U.S. Non-Controlled
Issuers

Overview

Pursuant to
certain exceptions for foreign private issuers and controlled companies, we are
not required to comply with certain of the corporate governance practices
followed by U.S. and non-controlled companies under the New York Stock Exchange
listing standards. However, pursuant to Section 303.A.11 of the New York Stock
Exchange Listed Company Manual and the requirements of Form 20-F, we are
required to state any significant differences between our corporate governance
practices and the practices required by the New York Stock Exchange. We believe
that our established practices in the area of corporate governance are in line
with the spirit of the New York Stock Exchange standards and provide adequate
protection to our shareholders. For example, our audit committee consists solely
of independent directors. The significant differences between our corporate
governance practices and the New York Stock Exchange standards applicable to
listed U.S. companies are set forth below.

Independent Directors

The New York
Stock Exchange requires that listed companies have a majority of independent
directors. As permitted under Marshall Islands law and our bylaws, our board of
directors consists of a majority of non-independent directors.

Executive Sessions

The New York
Stock Exchange requires that non-management directors meet regularly in
executive sessions without management. The New York Stock Exchange also
requires that all independent directors meet in an executive session at least
once a year. As permitted under Marshall Islands law and our bylaws, our
non-management directors do not regularly hold executive sessions without
management and we do not expect them to do so.

Corporate Governance, Nominating and
Compensation Committee

The New York
Stock Exchange requires that a listed U.S. company have a nominating/corporate
governance committee and a compensation committee, each composed of independent
directors. As permitted under Marshall Islands law and our bylaws, we have a
combined corporate governance, nominating and compensation committee, which at
present is composed wholly of independent directors.

73

---



PART III

ITEM 17.
FINANCIAL STATEMENTS

Not
Applicable.

ITEM 18.
FINANCIAL STATEMENTS

Reference is
made to pages F-1 through F-23 included herein by reference.

ITEM 19. EXHIBITS

|              |  |                                                                                                                                                             
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                 
|              |  |                                                                                                                                                             
|1.1           |  | Amended and
 Restated Articles of Incorporation*                                                                                                            
|              |  |                                                                                                                                                             
|1.2           |  | Articles of
 Amendment to Amended and Restated Articles of Incorporation**                                                                                  
|              |  |                                                                                                                                                             
|1.3           |  | Amended and
 Restated Bylaws*                                                                                                                               
|              |  |                                                                                                                                                             
|2.1           |  | Form of
 Registration Rights Agreement between Safe Bulkers, Inc. and Vorini Holdings
 Inc.*                                                                
|              |  |                                                                                                                                                             
|2.2           |  | Stockholder
 Rights Agreement*                                                                                                                              
|              |  |                                                                                                                                                             
|2.3           |  | Specimen
 Share Certificate*                                                                                                                                
|              |  |                                                                                                                                                             
|4.1           |  | Form of
 Management Agreement between Safety Management Overseas S.A. and Safe
 Bulkers, Inc.*                                                              
|              |  |                                                                                                                                                             
|4.2           |  | Form of
 Restrictive Covenant Agreement among Safe Bulkers, Inc., Polys Hajioannou,
 Vorini Holdings Inc., SafeFixing Corp and Machairiotissa Holdings Inc.*
|              |  |                                                                                                                                                             
|4.3           |  | Form of
 Restrictive Covenant Agreement between Safe Bulkers, Inc. and Polys
 Hajioannou*                                                                   
|              |  |                                                                                                                                                             
|4.4           |  | Shipbuilding
 Contract, dated December 6, 2006, with Jiangsu Rongsheng Heavy Industries
 Group Co., Ltd for the HN1074*                                     
|              |  |                                                                                                                                                             
|4.5           |  | Memorandum
 of Agreement, dated October 26, 2007, for the HN 1039*                                                                                          
|              |  |                                                                                                                                                             
|4.6           |  | Memorandum
 of Agreement, dated October 26, 2007, for the HN 1050*                                                                                          
|              |  |                                                                                                                                                             
|8.1           |  | List of
 Subsidiaries                                                                                                                                       
|              |  |                                                                                                                                                             
|12.1          |  | Certification
 of principal executive officer pursuant to Rule 13a-14(a) and 15d-14(a) of
 the Securities Exchange Act of 1934, as amended                  
|              |  |                                                                                                                                                             
|12.2          |  | Certification
 of principal financial officer pursuant to Rule 13a-14(a) and 15d-14(a) of
 the Securities Exchange Act of 1934, as amended                  
|              |  |                                                                                                                                                             
|13.1          |  | Certification
 of principal executive officer pursuant to 18 U.S.C. Section 1350 as added by
 Section 906 of the Sarbanes-Oxley Act of 2002                 
|              |  |                                                                                                                                                             
|13.2          |  | Certification
 of principal financial officer pursuant to 18 U.S.C. Section 1350 as added by
 Section 906 of the Sarbanes-Oxley Act of 2002                 
|              |  |                                                                                                                                                             
|99.1          |  | Consent of
 Independent Registered Public Accounting Firm                                                                                                   

---

|   |                                                                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  | Previously
 filed as an exhibit to the Companys Registration Statement on Form F-1 (Reg.
 No. 333-150995) filed with the SEC and hereby incorporated by reference to
 such Registration Statement.
|   |                                                                                                                                                                                                    
|** | Previously
 filed as an exhibit to the Companys Form 6-K filed with the SEC on October
 8, 2009.                                                                                                  

74

---



SIGNATURES

The registrant
hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.

March 4, 2011

| |    |                               |                                      
| | -- | ----------------------------- | -------------------------------------
| | By
| |   
| |    | /s/
 KONSTANTINOS ADAMOPOULOS
| |    |                              
| |    | Name:                         | Konstantinos
 Adamopoulos            
| |    | Title:                        | Chief
 Financial Officer and Director

75

---



INDEX TO FINANCIAL STATEMENTS

|                                                                                                      |  |     
|----------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                      |  | Page
|                                                                                                      |  |     
|                                                                                                      |  |     
|Report of Independent
 Registered Public Accounting Firm                                              |  | F-2 
|                                                                                                      |  |     
|Consolidated Balance Sheets
 as of December 31, 2009 and 2010                                         |  | F-3 
|                                                                                                      |  |     
|Consolidated Statements of Income
 for the Years Ended December 31, 2008, 2009 and 2010               |  | F-4 
|                                                                                                      |  |     
|Consolidated Statements of Shareholders
 Equity for the Years Ended December 31, 2008, 2009 and 2010 |  | F-5 
|                                                                                                      |  |     
|Consolidated Statements of Cash
 Flows for the Years Ended December 31, 2008, 2009 and 2010           |  | F-6 
|                                                                                                      |  |     
|Notes to Consolidated Financial
 Statements                                                           |  | F-7 

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of 
Safe Bulkers, Inc.
Majuro, Republic of the Marshall Islands

We have audited the accompanying consolidated balance
sheets of Safe Bulkers, Inc. and subsidiaries (the Company) as of December
31, 2009 and 2010, and the related consolidated statements of income,
shareholders equity, and cash flows for each of the three years in the period
ended December 31, 2010. These financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position of Safe
Bulkers, Inc. and subsidiaries as of December 31, 2009 and 2010, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2010, in conformity with accounting
principles generally accepted in the United States of America.

We have also audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States), the Companys
internal control over financial reporting as of December 31, 2010, based on the
criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 4, 2011
expressed an unqualified opinion on the Companys internal control over
financial reporting.

/s/ Deloitte
Hadjipavlou, Sofianos & Cambanis S.A.
Athens, Greece
March 4, 2011

F-2

---



SAFE BULKERS, INC. 
CONSOLIDATED BALANCE SHEETS 
DECEMBER 31, 2009 AND 2010 
(In thousands of U.S. Dollars, except for share and per share data)

|                                                                                                                                                       |  |       |    |      |              |         |  |  |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- | -- | ---- | ------------ | ------- |  |  | ------- | 
|                                                                                                                                                       |  |       |    |      | December 31, |        
|                                                                                                                                                       |  |       |    |      |              |        
|                                                                                                                                                       |  | Notes |    | 2009 |              | 2010    | 
|                                                                                                                                                       |  |       |    |      |              |         | 
|ASSETS                                                                                                                                                 |  |       |    |      |              |         |  |  |         | 
|CURRENT ASSETS:                                                                                                                                        |  |       |    |      |              |         |  |  |         | 
|Cash and cash equivalents                                                                                                                              |  |       |    |      |              | 18,435  |  |  | 65,335  | 
|Time deposits  short term                                                                                                                             |  |       |    |      |              | 57,887  |  |  | 35,080  | 
|Accounts
 receivable trade                                                                                                                             |  |       |    |      |              | 1,905   |  |  | 1,285   | 
|Asset held for sale                                                                                                                                    |  |       | 6  |      |              | 16,969  |  |  |        | 
|Inventories                                                                                                                                            |  |       |    |      |              | 1,245   |  |  | 1,417   | 
|Accrued revenue                                                                                                                                        |  |       | 21 |      |              | 1,693   |  |  |        | 
|Restricted cash                                                                                                                                        |  |       |    |      |              | 6,392   |  |  |        | 
|Prepaid expenses and other current assets                                                                                                              |  |       |    |      |              | 1,122   |  |  | 1,159   | 
|Total current assets                                                                                                                                   |  |       |    |      |              | 105,648 |  |  | 104,276 | 
|                                                                                                                                                       |  |       |    |      |              |         |  |  |         | 
|FIXED ASSETS:                                                                                                                                          |  |       |    |      |              |         |  |  |         | 
|Vessels, net                                                                                                                                           |  |       | 4  |      |              | 373,924 |  |  | 541,244 | 
|Advances for vessel acquisition and vessels
 under construction                                                                                        |  |       | 5  |      |              | 93,520  |  |  | 99,014  | 
|Other fixed assets, net                                                                                                                                |  |       | 7  |      |              | 69      |  |  |        | 
|Total fixed assets                                                                                                                                     |  |       |    |      |              | 467,513 |  |  | 640,258 | 
|                                                                                                                                                       |  |       |    |      |              |         |  |  |         | 
|OTHER NON CURRENT ASSETS:                                                                                                                              |  |       |    |      |              |         |  |  |         | 
|Deferred finance charges, net                                                                                                                          |  |       | 8  |      |              | 677     |  |  | 930     | 
|Restricted cash                                                                                                                                        |  |       |    |      |              | 4,763   |  |  | 5,423   | 
|Derivative assets                                                                                                                                      |  |       | 15 |      |              | 123     |  |  | 4,485   | 
|Long-term investment                                                                                                                                   |  |       | 10 |      |              | 50,000  |  |  | 50,000  | 
|Total assets                                                                                                                                           |  |       |    |      |              | 628,724 |  |  | 805,372 | 
|                                                                                                                                                       |  |       |    |      |              |         |  |  |         | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                   |  |       |    |      |              |         |  |  |         | 
|CURRENT LIABILITIES:                                                                                                                                   |  |       |    |      |              |         |  |  |         | 
|Current portion of long-term debt                                                                                                                      |  |       | 9  |      |              | 15,742  |  |  | 27,674  | 
|Liability directly associated with asset
 held for sale                                                                                                |  |       | 9  |      |              | 34,500  |  |  |        | 
|Unearned revenue                                                                                                                                       |  |       | 21 |      |              | 3,973   |  |  | 10,685  | 
|Trade accounts payable                                                                                                                                 |  |       |    |      |              | 2,668   |  |  | 1,470   | 
|Accrued liabilities                                                                                                                                    |  |       | 16 |      |              | 7,426   |  |  | 5,903   | 
|Derivative liability                                                                                                                                   |  |       | 15 |      |              | 1,223   |  |  | 6,802   | 
|Due to Manager                                                                                                                                         |  |       | 3  |      |              | 19      |  |  | 449     | 
|Total current liabilities                                                                                                                              |  |       |    |      |              | 65,551  |  |  | 52,983  | 
|                                                                                                                                                       |  |       |    |      |              |         |  |  |         | 
|Derivative liabilities                                                                                                                                 |  |       | 15 |      |              | 15,510  |  |  | 9,787   | 
|Long-term debt, net of current portion                                                                                                                 |  |       | 9  |      |              | 420,994 |  |  | 467,070 | 
|Unearned revenue  Long-term                                                                                                                           |  |       | 21 |      |              | 29,450  |  |  | 31,399  | 
|Total liabilities                                                                                                                                      |  |       |    |      |              | 531,505 |  |  | 561,239 | 
|                                                                                                                                                       |  |       |    |      |              |         |  |  |         | 
|COMMITMENTS AND CONTINGENCIES                                                                                                                          |  |       | 12 |      |              |        |  |  |        | 
|SHAREHOLDERS EQUITY:                                                                                                                                  |  |       |    |      |              |         |  |  |         | 
|Shareholders equity:                                                                                                                                  |  |       |    |      |              |         |  |  |         | 
|Common stock, $0.001 par value; 200,000,000
 authorized, 54,512,931 and 65,876,507 issued and outstanding at December 31,
 2009 and 2010, respectively |  |       | 11 |      |              | 55      |  |  | 66      | 
|Preferred stock, $0.01 par value;
 20,000,000 authorized, none issued or outstanding as of December 31, 2009 and
 2010                                 |  |       |    |      |              |        |  |  |        | 
|Additional paid in capital                                                                                                                             |  |       |    |      |              | 90      |  |  | 75,166  | 
|Retained earnings                                                                                                                                      |  |       |    |      |              | 97,074  |  |  | 168,901 | 
|Total shareholders equity                                                                                                                             |  |       |    |      |              | 97,219  |  |  | 244,133 | 
|                                                                                                                                                       |  |       |    |      |              |         |  |  |         | 
|Total liabilities and shareholders equity                                                                                                             |  |       |    |      |              | 628,724 |  |  | 805,372 | 
|                                                                                                                                                       |  |       |    |      |              |         |  |  |         | 

The accompanying
notes are an integral part of these consolidated statements.

F-3

---



SAFE BULKERS, INC. 
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010 
(In thousands of U.S. Dollars, except for share and per share data)



|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|------------------------------------------------------- |  | ----------------------- | ---- | ---- |  | ---------- | - | ---- | ---------- | - |  | ---------- | -
|                                                        |  | Year Ended December 31, |     
|                                                        |  |                         |     
|                                                        |  | Notes                   |      | 2008 |  | 2009       |   | 2010 |           
|                                                        |  |                         |      |      |  |            |   |      |           
|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|REVENUES:                                               |  |                         |      |      |  |            |   |      |            |   |  |            |  
|Revenues                                                |  |                         | 13   |      |  | 208,411    |   |      | 168,400    |   |  | 159,698    |  
|Commissions                                             |  |                         |      |      |  | (7,639     | ) |      | (3,794     | ) |  | (2,678     | )
|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|Net revenues                                            |  |                         |      |      |  | 200,772    |   |      | 164,606    |   |  | 157,020    |  
|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|EXPENSES:                                               |  |                         |      |      |  |            |   |      |            |   |  |            |  
|Voyage expenses                                         |  |                         |      |      |  | (273       | ) |      | (577       | ) |  | (610       | )
|Vessel operating expenses                               |  |                         | 14   |      |  | (17,615    | ) |      | (19,628    | ) |  | (23,128    | )
|Depreciation                                            |  |                         | 4, 7 |      |  | (10,614    | ) |      | (13,893    | ) |  | (19,673    | )
|General and administrative expenses                     |  |                         |      |      |  |            |   |      |            |   |  |            |  
|-Management fee to related party                        |  |                         | 3,20 |      |  | (4,420     | ) |      | (4,436     | ) |  | (4,880     | )
|-Third party expenses                                   |  |                         | 20   |      |  | (3,625     | ) |      | (2,610     | ) |  | (2,138     | )
|Early redelivery (cost)/income, net                     |  |                         | 17   |      |  | (565       | ) |      | 74,951     |   |  | 132        |  
|Loss on asset purchase cancellations                    |  |                         | 18   |      |  |           |   |      | (20,699    | ) |  |           |  
|Gain on sale of assets                                  |  |                         | 22   |      |  |           |   |      |           |   |  | 15,199     |  
|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|Operating income                                        |  |                         |      |      |  | 163,660    |   |      | 177,714    |   |  | 121,922    |  
|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|OTHER (EXPENSE)/INCOME:                                 |  |                         |      |      |  |            |   |      |            |   |  |            |  
|Interest expense                                        |  |                         | 9    |      |  | (16,392    | ) |      | (10,342    | ) |  | (6,423     | )
|Other finance costs                                     |  |                         |      |      |  | (408       | ) |      | (442       | ) |  | (330       | )
|Interest income                                         |  |                         |      |      |  | 1,492      |   |      | 2,164      |   |  | 2,627      |  
|Loss on derivatives                                     |  |                         | 15   |      |  | (19,509    | ) |      | (4,416     | ) |  | (8,164     | )
|Foreign currency (loss)/gain                            |  |                         |      |      |  | (9,501     | ) |      | 838        |   |  | 281        |  
|Amortization and write-off of deferred finance
 charges |  |                         | 8    |      |  | (131       | ) |      | (106       | ) |  | (266       | )
|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|Net income                                              |  |                         |      |      |  | 119,211    |   |      | 165,410    |   |  | 109,647    |  
|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|                                                        |  |                         |      |      |  |            |   |      |            |   |  |            |  
|Earnings per share in U.S. Dollars, basic
 and diluted  |  |                         | 24   |      |  | 2.19       |   |      | 3.03       |   |  | 1.73       |  
|Weighted average number of shares, basic
 and diluted   |  |                         |      |      |  | 54,500,889 |   |      | 54,510,587 |   |  | 63,300,466 |  

The accompanying
notes are an integral part of these consolidated statements.

F-4

---



SAFE BULKERS,
INC. CONSOLIDATED STATEMENTS
OF SHAREHOLDERS EQUITY FOR THE YEARS 
ENDED DECEMBER 31, 2008, 2009 AND 2010 
(In thousands of U.S. Dollars, except for per share data)

|                                |  |              |  |                             |  |                    |   |          |  
|------------------------------- |  | ------------ |  | --------------------------- |  | ------------------ | - | -------- | -
|                                |  | Common Stock |  | Additional
 Paid in Capital |  | Retained
 Earnings |   | Total    |  
|                                |  |              |  |                             |  |                    |   |          |  
|Balance as of January 1, 2008   |  |             |  |                            |  | 54,398             |   | 54,398   |  
|Net income                      |  |             |  |                            |  | 119,211            |   | 119,211  |  
|Issuance of common stock        |  | 55           |  |                            |  |                   |   | 55       |  
|Share based compensation        |  |             |  | 30                          |  |                   |   | 30       |  
|Dividends ($3.83 per share)     |  |             |  |                            |  | (209,239           | ) | (209,239 | )
|                                |  |              |  |                             |  |                    |   |          |  
|Balance as of December 31, 2008 |  | 55           |  | 30                          |  | (35,630            | ) | (35,545  | )
|                                |  |              |  |                             |  |                    |   |          |  
|Net income                      |  |             |  |                            |  | 165,410            |   | 165,410  |  
|Share based compensation        |  |             |  | 60                          |  |                   |   | 60       |  
|Dividends ($0.60 per share)     |  |             |  |                            |  | (32,706            | ) | (32,706  | )
|                                |  |              |  |                             |  |                    |   |          |  
|Balance as of December 31, 2009 |  | 55           |  | 90                          |  | 97,074             |   | 97,219   |  
|                                |  |              |  |                             |  |                    |   |          |  
|Net income                      |  |             |  |                            |  | 109,647            |   | 109,647  |  
|Issuance of common stock        |  | 11           |  | 74,956                      |  |                   |   | 74,967   |  
|Share based compensation        |  |             |  | 120                         |  |                   |   | 120      |  
|Dividends ($0.60 per share)     |  |             |  |                            |  | (37,820            | ) | (37,820  | )
|                                |  |              |  |                             |  |                    |   |          |  
|Balance as of December 31, 2010 |  | 66           |  | 75,166                      |  | 168,901            |   | 244,133  |  
|                                |  |              |  |                             |  |                    |   |          |  

The accompanying notes are an integral part
of these consolidated statements.

F-5

---



SAFE BULKERS,
INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In thousands of U.S. Dollars)

|                                                                                   |  |              |   |          |   |          |  
|---------------------------------------------------------------------------------- |  | ------------ | - | -------- | - | -------- | -
|                                                                                   |  | December 31, |  
|                                                                                   |  |              |  
|                                                                                   |  | 2008         |   | 2009     |   | 2010     |  
|                                                                                   |  |              |   |          |   |          |  
|Cash Flows from Operating Activities:                                              |  |              |   |          |   |          |  
|Net income                                                                         |  | 119,211      |   | 165,410  |   | 109,647  |  
|Adjustments to reconcile net income to net
 cash provided by operating activities: |  |              |   |          |   |          |  
|Depreciation                                                                       |  | 10,614       |   | 13,893   |   | 19,673   |  
|Gain on sale of assets                                                             |  |             |   |         |   | (15,199  | )
|Loss on asset purchase cancellations                                               |  |             |   | 20,395   |   |         |  
|Amortization and write-off of deferred
 finance charges                            |  | 131          |   | 106      |   | 266      |  
|Unrealized foreign exchange loss/(gain)                                            |  | 9,335        |   | (1,028   | ) | (326     | )
|Unrealized loss/(gain) on derivatives                                              |  | 20,097       |   | (3,729   | ) | (4,508   | )
|Share based compensation                                                           |  | 30           |   | 60       |   | 120      |  
|Amortization of time charter discount                                              |  | (2,766       | ) |         |   |         |  
|Change in:                                                                         |  |              |   |          |   |          |  
|Accounts receivable trade                                                          |  | 1,189        |   | (1,377   | ) | 620      |  
|Due from Manager                                                                   |  | 95,584       |   | 112      |   |         |  
|Inventories                                                                        |  | (397         | ) | (56      | ) | (172     | )
|Accrued revenue                                                                    |  | (3,938       | ) | 2,245    |   | 1,693    |  
|Prepaid expenses and other current assets                                          |  | (710         | ) | (408     | ) | (37      | )
|Due to Manager                                                                     |  |             |   | 19       |   | 430      |  
|Trade accounts payable                                                             |  | 373          |   | 1,093    |   | (1,198   | )
|Accrued liabilities                                                                |  | (5,245       | ) | 1,396    |   | (1,523   | )
|Unearned revenue                                                                   |  | 16,089       |   | 13,207   |   | 8,661    |  
|Net Cash Provided by Operating Activities                                          |  | 259,597      |   | 211,338  |   | 118,147  |  
|                                                                                   |  |              |   |          |   |          |  
|Cash Flows from Investing Activities:                                              |  |              |   |          |   |          |  
|Vessel acquisitions including advances for
 vessels under construction             |  | (89,570      | ) | (131,474 | ) | (192,418 | )
|Proceeds from sale of assets                                                       |  |             |   |         |   | 32,168   |  
|Acquisition of long term investments                                               |  |             |   | (50,000  | ) |         |  
|Increase in restricted cash                                                        |  | (37,379      | ) | (6,405   | ) | (650     | )
|Restricted cash released                                                           |  |             |   | 32,629   |   | 6,382    |  
|Increase in bank time deposits                                                     |  | (21,274      | ) | (78,147  | ) | (86,548  | )
|Maturity of bank time deposits                                                     |  |             |   | 41,534   |   | 109,357  |  
|Net Cash Used in Investing Activities                                              |  | (148,223     | ) | (191,863 | ) | (131,709 | )
|                                                                                   |  |              |   |          |   |          |  
|Cash Flows from Financing Activities:                                              |  |              |   |          |   |          |  
|Proceeds from long-term debt                                                       |  | 221,600      |   | 42,000   |   | 74,500   |  
|Principal payments of long-term debt                                               |  | (85,532      | ) | (38,026  | ) | (50,992  | )
|Advances from shareholders                                                         |  | 11,489       |   |         |   |         |  
|Repayment of advances to shareholders                                              |  | (21,575      | ) |         |   |         |  
|Dividends paid                                                                     |  | (209,239     | ) | (32,706  | ) | (37,820  | )
|Payment of deferred financing costs                                                |  | (470         | ) | (10      | ) | (519     | )
|Proceeds on
     issuance of common stock (net)                                    |  | 55           |   |         |   | 74,967   |  
|Net Cash (Used in)/Provided by Financing
 Activities                               |  | (83,672      | ) | (28,742  | ) | 60,136   |  
|                                                                                   |  |              |   |          |   |          |  
|Net increase/(decrease) in cash and cash
 equivalents                              |  | 27,702       |   | (9,267   | ) | 46,574   |  
|Effect of exchange rate changes on cash                                            |  |             |   |         |   | 326      |  
|Cash and cash equivalents at beginning of
 year                                    |  |             |   | 27,702   |   | 18,435   |  
|Cash and cash equivalents at end of year                                           |  | 27,702       |   | 18,435   |   | 65,335   |  
|Supplemental cash flow information:                                                |  |              |   |          |   |          |  
|Cash paid for interest (excluding
 capitalized interest):                          |  | 14,116       |   | 13,695   |   | 6,414    |  

The accompanying notes are an integral part
of these consolidated statements.

F-6

---



SAFE BULKERS,
INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(In thousands of United States Dollarsexcept for share and per share data,
unless otherwise stated)

1. Basis of Presentation and General
Information:

Safe Bulkers,
Inc. (Safe Bulkers) was formed on December 11, 2007, under the laws of the
Marshall Islands for the purpose of acquiring an ownership interest in 19
companies, each of which owned a newbuild drybulk vessel or was scheduled to
own a newbuild drybulk vessel, all of which were under the common control of
Polys Hajioannou and his family.

Safe Bulkers
successfully completed its initial public offering (the IPO) on June 3, 2008
and its common stock trades on the New York Stock Exchange (NYSE) under the
symbol SB. Immediately prior to the completion of the IPO, the shares of the
19 subsidiaries were contributed to Safe Bulkers by Vorini Holdings, Inc.
(Vorini Holdings), a Marshall Islands corporation controlled by Polys
Hajioannou and his family, in exchange for the issuance of 54,500,000 shares,
which represented 100% of the outstanding common stock of Safe Bulkers. This
transaction is referred to as the Reorganization. Vorini Holdings sold
10,000,000 shares of common stock of Safe Bulkers in the IPO. Following the
Reorganization and the IPO, Safe Bulkers became the owner of 100% of each of
the 19 subsidiaries, and Vorini Holdings became the controlling shareholder of
Safe Bulkers.

The
subsidiaries of Safe Bulkers as of December 31, 2010 are 26 wholly-owned
companies, all incorporated under the laws of the Republic of Liberia, except
for Maxtessera Shipping Corporation, which is incorporated under the laws of
the Marshall Islands, and are referred to herein as Subsidiaries. As of
December 31, 2010, these Subsidiaries owned and operated a fleet of 16 drybulk
vessels, and were scheduled to acquire an additional eight newbuilds (the
Newbuilds).

The
accompanying consolidated financial statements include the operations, assets
and liabilities of Safe Bulkers and its Subsidiaries, using the historical
carrying costs of the assets and the liabilities of the ship-owning companies
listed below.

|                                                            |  |                    |  |              |  |                
|----------------------------------------------------------- |  | ------------------ |  | ------------ |  | ---------------
|Subsidiary                                                  |  | Vessel Name        |  | Type         |  | Built          
|                                                            |  |                    |  |              |  |                
|Marindou
 Shipping Corporation (Marindou)                 |  | Maria              |  | Panamax      |  | April 2003     
|Avstes
 Shipping Corporation (Avstes)                     |  | Vassos             |  | Panamax      |  | February
 2004 
|Kerasies
 Shipping Corporation (Kerasies)                 |  | Katerina           |  | Panamax      |  | May 2004       
|Marathassa
 Shipping Corporation (Marathassa)             |  | Maritsa            |  | Panamax      |  | January 2005   
|Pemer
 Shipping Ltd. (Pemer)                              |  | Pedhoulas Merchant |  | Kamsarmax    |  | March 2006     
|Petra
 Shipping Ltd. (Petra)                              |  | Pedhoulas Trader   |  | Kamsarmax    |  | May 2006       
|Pelea
 Shipping Ltd. (Pelea)                              |  | Pedhoulas Leader   |  | Kamsarmax    |  | March 2007     
|Staloudi
 Shipping Corporation (Staloudi)                 |  | Stalo              |  | PostPanamax |  | January 2006   
|Marinouki
 Shipping Corporation (Marinouki)               |  | Marina             |  | PostPanamax |  | January 2006   
|Soffive
 Shipping Corporation (Soffive)                   |  | Sophia             |  | PostPanamax |  | June 2007      
|Eniaprohi
 Shipping Corporation (Eniaprohi)               |  | Eleni              |  | PostPanamax |  | November
 2008 
|Eniadefhi
 Shipping Corporation (Eniadefhi)               |  | Martine            |  | PostPanamax |  | February
 2009 
|Maxdodeka
 Shipping Corporation (Maxdodeka)               |  | Andreas K          |  | PostPanamax |  | September
 2009
|Maxpente
 Shipping Corporation (Maxpente)                 |  | Kanaris            |  | Capesize     |  | March 2010     
|Maxdekatria
 Shipping Corporation (Maxdekatria)           |  | Panayiota          |  | PostPanamax |  | April 2010     
|Maxdeka
 Shipping Corporation (Maxdeka)                   |  | Venus Heritage     |  | PostPanamax |  | December
 2010 
|Eptaprohi
 Shipping Corporation (Eptaprohi)               |  | TBN - H 1074       |  | Capesize     |  | 2H 2011 (1)    
|Shikoku
 Friendship Shipping Company (Shikoku)            |  | TBN - H 1579       |  | PostPanamax |  | 2H 2011 (1)    
|Maxeikosi
 Shipping Corporation (Maxeikosi)               |  | TBN - H 616        |  | Kamsarmax    |  | 2H 2011 (1)    
|Maxeikositria
 Shipping Corporation (Maxeikositria)       |  | TBN - H 631        |  | Kamsarmax    |  | 2H 2011 (1)    
|Maxenteka
 Shipping Corporation (Maxenteka)               |  | TBN - H 1594       |  | PostPanamax |  | 1H 2012 (1)    
|Maxeikosiena
 Shipping Corporation (Maxeikosiena)         |  | TBN - H 617        |  | Kamsarmax    |  | 1H 2012 (1)    
|Maxeikosipente
 Shipping Corporation (Maxeikosipente)     |  | TBN - H 131        |  | Capesize     |  | 2H 2012 (1)    
|Efragel
 Shipping Corporation (Efragel)                   |  | TBN - H 1154       |  | Panamax      |  | 2H 2013 (1)    
|-//-                                                        |  | Efrossini (2)      |  | Panamax      |  | February
 2003 
|Maxeikositessera
 Shipping Corporation (Maxeikositessera) |  |                   |  |             |  |               
|Maxtessera
 Shipping Corporation (Maxtessera)             |  |                   |  |             |  |               

| |     |                                                 
| | --- | ------------------------------------------------
| | (1) | Estimated
 completion date for newbuild vessels.
| |     |                                                 
| | (2) | Vessel sold
 in January 2010. Refer to Note 6.  

F-7

---



Safe Bulkers and the
Subsidiaries are collectively referred to in the notes to the consolidated
financial statements as the Company.

The Companys principal
business is the acquisition and operation of drybulk vessels. The Companys
vessels operate worldwide, carrying drybulk cargo for the worlds largest
consumers of marine drybulk transportation services. Safety Management Overseas
S.A., a company incorporated under the laws of the Republic of Panama (Safety
Management or the Manager) and a related party controlled by Polys
Hajioannou, provides technical, commercial and administrative management
services to the Company.

For the years ended December
31, 2008, 2009 and 2010, the following charterers individually accounted for
more than 10% of the Companys charter revenues as follows:

|  |  |              |   |       |   |       |  
|- |  | ------------ | - | ----- | - | ----- | -
|  |  | December 31, |  
|  |  |              |  
|  |  | 2008         |   | 2009  |   | 2010  |  
|  |  |              |   |       |   |       |  
|A |  | 36.09        | % | 56.59 | % | 44.92 | %
|B |  | 10.67        | % | 18.35 | % | 18.78 | %
|C |  |             |   |      |   | 12.67 | %
|D |  | 25.62        | % |      |   |      |  

There are many charterers
that are active in the market where the Companys vessels are offered for
charter, and management has determined that the concentration of its business
with a limited number of customers does not pose a significant risk.

2. Significant Accounting Policies:

Principles of Consolidation: The accompanying consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP) and include
the accounts of Safe Bulkers and the legal entities comprising the Company as
discussed in Note 1. All significant intra-group and intercompany balances
and transactions have been eliminated upon consolidation.

Use of Estimates: The preparation of the consolidated
financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Other Comprehensive Income / (Loss): The Company follows the accounting guidance
relating to Statement of Comprehensive
Income, which requires separate presentation of certain transactions
that are recorded directly as components of shareholders equity. The Company
has no other comprehensive income/(loss) and accordingly comprehensive
income/(loss) equals net income for the periods presented.

Foreign Currency Translation: The reporting and functional currency of the
Company is the United States (U.S.) dollar. Transactions incurred in other
currencies are translated into U.S. dollars using the exchange rates in effect
at the time of the transaction. At the balance sheet date, monetary assets and
liabilities that are denominated in other currencies are translated to reflect
the period end exchange rates. Resulting gains or losses from foreign currency
transactions are recorded within Foreign currency gain/(loss) in the
accompanying consolidated statements of income in the period in which they
arise.

Cash and Cash Equivalents: Cash and cash equivalents consist of
current, call, time deposits and certificates of deposit with original maturities
of three months or less and which are not restricted for use or withdrawal.

Time Deposits: Time deposits are held with banks with
original maturities longer than three months. In the event original maturities
are shorter than twelve months, such deposits are classified as current assets;
if original maturities are longer than twelve months, such deposits are
classified as non-current assets.

Restricted Cash: Restricted cash represents minimum cash
deposits or cash collateral deposits required to be maintained with certain
banks under the Companys borrowing arrangements or in relation to bank
guarantees issued on behalf of the Company. In the event that the obligation
relating to such deposits is expected to be terminated within the next twelve
months, these deposits are classified as current assets; otherwise they are
classified as non-current assets.

Accounts Receivable Trade: Accounts receivable trade reflects the
receivables from time or voyage charters, net of an allowance for doubtful
accounts. At each balance sheet date, all potentially uncollectible accounts
are assessed individually for purposes of determining the appropriate provision
for doubtful accounts. No allowance for doubtful accounts was recorded for any
of the periods presented.

Inventories: Inventories consist of lubricants remaining
on board the vessels at the end of each reporting period, which are stated at
the lower of cost or market. Cost is determined using the firstin, first-out
method.

F-8

---



Vessels, Net: Vessels are stated at their historical cost,
which consists of the contracted purchase price and any direct material
expenses incurred upon acquisition (including improvements, on-site supervision
expenses incurred during the construction period, commissions paid, delivery
expenses and other expenditures to prepare the vessel for her initial voyage),
less accumulated depreciation. Financing costs incurred during the construction
period of the vessels are also capitalized and included in the vessels cost.
Certain subsequent expenditures for conversions and major improvements are also
capitalized if it is determined that they appreciably extend the life, increase
the earning capacity or improve the efficiency or safety of the vessels.

Vessels Depreciation: Depreciation is computed using the
straight-line method over the estimated useful life of the vessels, after
considering the estimated residual value. Management estimates the useful life
of the Companys vessels to be 25 years from the date of initial delivery from
the shipyard.

Accounting for Special Survey and
Drydocking Costs: Special
survey and drydocking costs are expensed in the period incurred and are
included in vessel operating expenses in the accompanying consolidated
statements of income.

Repairs and Maintenance: All repair and maintenance expenses,
including major overhauling and underwater inspection expenses, are expensed
when incurred and are included in vessel operating expenses in the accompanying
consolidated statements of income.

Impairment of Long-lived Assets: The Company reviews its long-lived assets
held and used for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. When
the estimate of undiscounted cash flows, excluding interest charges, expected
to be generated by the use of the asset is less than its carrying amount, the
Company evaluates the asset for an impairment loss. Measurement of the
impairment loss is based on the fair value of the asset. In this respect,
management regularly reviews the carrying amount of the vessels in connection
with the estimated recoverable amount for each of the Companys vessels. No
impairment loss was recorded during the years ended December 31, 2008, 2009 and
2010.

Assets Held for Sale: The Company may dispose of certain of its
vessels when suitable opportunities occur, including prior to the end of their
useful lives. The Company classifies assets as being held for sale when the
following criteria are met: (i) management is committed to sell the asset; (ii)
the asset is available for immediate sale in its present condition; (iii) an
active program to locate a buyer and other actions required to complete the
plan to sell the asset have been initiated; (iv) the sale of the asset is
probable, and transfer of the asset is expected to qualify for recognition as a
completed sale within one year; (v) the asset is being actively marketed for
sale at a price that is reasonable in relation to its current fair value; and
(vi) actions required to complete the plan indicate that it is unlikely that
significant changes to the plan will be made or that the plan will be
withdrawn.

Long-lived assets classified
as held for sale are measured at the lower of their carrying amount or fair
value less cost to sell. These assets are no longer depreciated once they meet
the criteria of being held for sale.

Deferred Financing Costs: Financing fees incurred for obtaining new
loans and credit facilities are deferred and amortized over the term of the
respective loan or credit facility using the effective interest rate method.
Any unamortized balance of costs relating to loans repaid or refinanced is
expensed in the period in which the repayment or refinancing is made, subject
to the guidance regarding Debt
Extinguishment. Any unamortized balance of costs related to credit
facilities repaid is expensed in the period. Any unamortized balance of costs
relating to credit facilities refinanced is deferred and amortized over the
term of the respective credit facility in the period in which the refinancing
occurs, subject to the provisions of the accounting guidance relating to Changes in Line-of-Credit or Revolving-Debt
Arrangements.

Derivative Instruments: The Company enters into foreign exchange
forward contracts to create economic hedges for its exposure to currency
exchange risk on payments relating to the acquisition of vessels and on certain
loan obligations. The Company also enters into interest rate derivatives to
create economic hedges for its exposure to interest rate risk of its loan
obligations (see also Notes 9 and 15). When such derivatives do not qualify for
hedge accounting the Company records these financial instruments in the
consolidated balance sheet at their fair value as either a derivative asset or
a liability, and recognizes the fair value changes thereto in the consolidated
statements of income. When the derivatives do qualify for hedge accounting,
depending upon the nature of the hedge, changes in fair value of the
derivatives are either offset against the fair value of assets, liabilities or
firm commitments through income, or recognized in other comprehensive
income/(loss) (effective portion) until the hedged item is recognized in the
consolidated statements of income. For the years ended December 31, 2008, 2009
and 2010, no derivatives were accounted for as accounting hedges.

Financial Instruments: Over-the-counter foreign exchange forward
contracts and interest rate derivatives are recorded at fair value. Other
financial instruments, including cash equivalents and debt are recorded at
amortized cost.

| |                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) Interest rate risk: The Companys interest rates and long-term
 loan repayment terms are described in Note 9.The Company manages its interest
 rate risk by entering into interest rate derivative instruments which are
 described in Note 15.

F-9

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) Concentration of credit risk: Financial instruments, which potentially
 subject the Company to significant concentrations of credit risk, consist
 principally of trade accounts receivable, cash and cash equivalents, time
 deposits and derivative instruments. The Company limits its credit risk with
 accounts receivable by performing ongoing credit evaluations of its
 customers financial condition and generally does not require collateral for
 its trade accounts receivable. The Company places its cash and cash
 equivalents, time deposits and other investments with high credit quality
 financial institutions. The Company performs periodic evaluations of the
 relative credit standing of those financial institutions. The Company is
 exposed to credit risk in the event of non-performance by its counterparties
 to derivative instruments; however, the Company limits its exposure by
 transacting with counterparties with high credit ratings.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (c) Fair value Measurement: In accordance with the requirements of
 accounting guidance relating to Fair Value
 Measurement,the Company classifies and discloses assets and
 liabilities carried at fair value in one of the following three categories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Level 1: Quoted market
 prices in active markets for identical assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Level 2: Observable
 market-based inputs or unobservable inputs that are corroborated by market
 data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Level 3: Unobservable
 inputs that are not corroborated by market data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Accounting for Revenues and Related
Expenses: The
Company generates its revenues from charterers for the charter hire of its
vessels. Vessels are chartered under time charter, where a contract is entered
into for the use of a vessel for a specific voyage or a specific period of time
and at a specified daily charter rate. Time charter revenues are recognized as
earned on the straight-line basis over the term of the charter as service is
provided. Revenues from time charter may also include ballast bonus, which is
an amount paid by the charterer for repositioning the vessel at the charterers
disposal (delivery point), which is recognized over the term of the charter,
and other miscellaneous revenues from vessel operations. Expenses relating to
the Companys time charters are vessel operating expenses and certain voyage
expenses, which are paid by the Company and recognized as incurred. Vessel
operating expenses that are paid by the Company include costs for crewing,
insurance, lubricants, spare parts, provisions, stores, repairs, maintenance,
statutory and classification expense, drydocking, intermediate and special
surveys and other minor miscellaneous expenses. Voyage expenses which are also
recognized as incurred and paid by the Company include costs for draft surveys,
hold cleaning, postage and other minor miscellaneous expenses related to the
voyage. The charterer is responsible for paying the cost of bunkers and other
voyage expenses (e.g., port expenses, agents fees, canal dues, extra war risks
insurance and any other expenses related to the cargo).

Revenue is recognized when a
charter agreement exists, the vessel is made available to the charterer and
collection of the related revenue is reasonably assured. Unearned revenue
includes: (i) revenue received prior to the balance sheet date relating to
services to be rendered after the balance sheet date and (ii) deferred revenue
resulting from straight-line revenue recognition in respect of charter
agreements that provide for varying charter rates. Accrued revenue results from
straight-line revenue recognition in respect of charter agreements that provide
for varying charter rates. Commissions (address and brokerage), regardless of
charter type, are always paid by the Company, are deferred and amortized over
the related charter period and are presented as a separate line item in
revenues to arrive at net revenues in the accompanying consolidated statements
of income.

Pension and Retirement Benefit
ObligationsCrew: The
Subsidiaries included in the consolidated financial statements employ the crew
on board under short-term contracts (usually up to nine months) and
accordingly, they are not liable for any pension or post-retirement benefits.

Taxes: Entities within the group that are
incorporated under the laws of either the Republic of Liberia or the Marshall
Islands are not subject to Liberian or Marshall Islands income, tonnage or
registration taxes. However, each vessel-owning Subsidiary is subject to
registration and tonnage taxes under the laws of the Republic of Cyprus or the
    Republic of the Marshall Islands depending on where each Companys vessel is registered, which is
    not an income tax. These registration and tonnage taxes are recorded within
    Vessel operating expenses in the accompanying consolidated statements of
    income.

Furthermore, the
Subsidiaries are subject to a 4% United States federal tax in respect of its
U.S. source shipping income (imposed on gross income without the allowance for
any deductions) as they do not meet the requirements for an exemption from such
tax provided by Section 883 of the U.S. Internal Revenue Code of 1986. As a
result, the Subsidiaries file U.S. federal tax returns and pay the relevant
U.S. federal tax on their U.S. source shipping income, which is not an income
tax. Such taxes have been recorded within Voyage Expenses in the accompanying
consolidated statements of income. In many cases, these taxes are recovered
from the charterers; such amounts recovered are recorded within Revenues in the
accompanying consolidated statements of income.

Dividends: Dividends are recorded in the period in which
they are approved by the Companys Board of Directors.

F-10

---



Segment Reporting: The Company reports financial information
and evaluates its operations by total charter revenue and not by the type of
vessel or vessel employment for its customers. The Companys vessels have
similar operating and economic characteristics. As a result, management,
including the chief operating decision makers, reviews operating results solely
by revenue per day and operating results of the fleet, and thus the Company has
determined that it operates under one reportable segment. Furthermore, when the
Company charters a vessel to a charterer, the charterer is free to trade the
vessel worldwide and, as a result, the disclosure of geographic information is
impracticable.

3. Transactions with Related Parties

Safety Management Overseas S.A., Panama
(the Manager): On May
29, 2008, Safe Bulkers signed a management agreement with Safety Management, a
related party that is wholly-owned and controlled by Polys Hajioannou. Under
such agreement (the Management Agreement), each vessel-owning Subsidiary has
entered into, or in the case of vessels not yet delivered, will enter into, a
management agreement with the Manager (the Shipmanagement Agreements). Under
these Shipmanagement Agreements, chartering, operations, technical and
accounting services are provided to the vessels by the Manager. In accordance
with the Management Agreement and the Shipmanagement Agreements, the Manager
receives a fixed fee of $0.575 per day plus, 1 .0% on gross freight, charter
hire, ballast bonus and demurrage from each of the vessel-owning companies in
exchange for these management services. Effective from May 29, 2010, the
Company and the Manager agreed to set the fee on gross freight, charter hire,
ballast bonus and demurrage from each of the vessel-owning companies to 1.25%.
Under the Management Agreement, each of the Subsidiaries that are scheduled to
own a newbuild has entered into or will enter into supervision agreements with
the Manager (the Supervision Agreements). Under the Supervision Agreements,
the Manager will provide on-site supervision services with respect to all
newbuilds, and will receive a fee of $375, of which 50% is payable upon the
signing of the relevant Supervision Agreement, and 50% upon successful
completion of the sea trials of each newbuild. In addition, under the
Management Agreement, an amount equal to 1.0% of the contract price for the
sale or acquisition (constructed or purchased) of each vessel is payable to the
Manager with the exception of the acquisition of Eleni and Martine.

Until May 29, 2008, each of
the Subsidiaries that had a vessel in operation had in place a management
agreement with the Manager (the Old Management Agreements). Under
such agreements, chartering, operations, technical and accounting services were
provided with respect to the vessels by the Manager. Under the Old Management
Agreements, the Manager received a fixed daily fee of $0.575 plus 1.00% on
gross freight, charter hire, ballast bonus and demurrage from each of the vessel-owning
companies. The Old Management Agreements were effectively superseded and
replaced by the new Management Agreement and the Shipmanagement Agreements,
entered into on May 29, 2008. Management fees charged by the Manager for
the years ended December 31, 2008, 2009 and 2010 amounted to $4,420, $4,436 and
$4,880 respectively, and are recorded in the accompanying consolidated
statements of income within General and Administrative Expenses (see Note 20).
Commissions on the contract price of vessels sold, charged by the Manager
during the years ended December 31, 2008, 2009 and 2010, amounted to $0, $0 and
$330 respectively, and are recorded within Gain on sale of assets in the
consolidated statements of income (see Note 22). Commissions on the contract
price of vessels purchased, charged by the Manager during the years ended
December 31, 2008, 2009 and 2010, amounted to $0, $710 and $1,840 respectively,
and are included as part of the vessel cost. Supervision fees, charged by the
Manager during the years ended December 31, 2008, 2009 and 2010, amounted to
$750, $750 and $938, respectively, and are included as part of the vessel cost.

Transactions with shareholders: Owners advances prior to June 3, 2008, as
well as advances from Vorini Holdings, represent the receipt of funds to
finance vessel acquisitions. The repayments of these advances were made with
funds received from bank debt, proceeds of vessel sales or vessel operations.

4. Vessels, Net

Vessels, net, are comprised
of the following:

|                                               |  |              |         |                           |   |                 |   |   |         |  
|---------------------------------------------- |  | ------------ | ------- | ------------------------- | - | --------------- | - | - | ------- | -
|                                               |  | Vessel
 Cost |         | Accumulated
 Depreciation |   | Net Book
 Value |  
|                                               |  |              |         |                           |   |                 |  
|Balance, January 1, 2009                       |  |              | 322,748 |                           |   | (35,793         | ) |   | 286,955 |  
|Transfer from Advances for vessel acquisitions |  |              | 117,753 |                           |   |                |   |   | 117,753 |  
|Transfer to Assets held for sale               |  |              | (22,058 | )                         |   | 5,089           |   |   | (16,969 | )
|Depreciation expense                           |  |              |        |                           |   | (13,815         | ) |   | (13,815 | )
|                                               |  |              |         |                           |   |                 |   |   |         |  
|Balance, December 31, 2009                     |  | $            | 418,443 |                           | $ | (44,519         | ) | $ | 373,924 |  
|                                               |  |              |         |                           |   |                 |   |   |         |  
|Transfer from Advances for vessel acquisitions |  |              | 186,924 |                           |   |                |   |   | 186,924 |  
|Depreciation expense                           |  |              |        |                           |   | (19,604         | ) |   | (19,604 | )
|                                               |  |              |         |                           |   |                 |   |   |         |  
|Balance, December 31, 2010                     |  | $            | 605,367 |                           | $ | (64,123         | ) | $ | 541,244 |  
|                                               |  |              |         |                           |   |                 |   |   |         |  

F-11

---



Transfer from Advances for
vessel acquisitions represents advances paid in respect of the acquisition of
vessels, which were under construction and delivered to the Company. For the
periods presented, the Company accepted delivery of the following vessels:

| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| | ● | During the year ended
 December 31, 2009: Martine and Andreas K; and               
| |   |                                                                                    
| | ● | During the year ended
 December 31, 2010: Kanaris, Panayiota
 K and Venus Heritage.

Transfer to Assets held for
sale during the year ended December 31, 2009 relates to the vessel Efrossini; refer to Note 6 below.

As of December 31, 2010, all
of the Companys vessels except for the Venus
Heritage have been provided as collateral to secure the Companys
bank loans as discussed in Note 9 and Note 12.

5. Advances for Vessel Acquisition and Vessels under
Construction

Advances for vessel
acquisition and vessels under construction are comprised of the following:


|                                                           |  |   |          |  
|---------------------------------------------------------- |  | - | -------- | -
|Balance, January 1, 2009                                   |  |   | 100,194  |  
|Advances paid, including capitalized expenses and interest |  |   | 131,474  |  
|Asset cancellations                                        |  |   | (20,395  | )
|Transferred to vessel cost                                 |  |   | (117,753 | )
|                                                           |  |   |          |  
|Balance, December 31, 2009                                 |  | $ | 93,520   |  
|                                                           |  |   |          |  
|Advances paid, including capitalized expenses and interest |  |   | 192,418  |  
|Transferred to vessel cost                                 |  |   | (186,924 | )
|                                                           |  |   |          |  
|Balance, December 31, 2010                                 |  | $ | 99,014   |  
|                                                           |  |   |          |  

In April 2009, each of
Maxdeka and Maxenteka signed an agreement with a third party seller, whereby each
agreed to cancel its contract for the acquisition of Hull 2054 and Hull 2055,
respectively, and each agreed to forfeit the advance deposit paid of $7,212 per
newbuild.

In June 2009, Maxpente
entered into an agreement pursuant to which the shipbuilding contract for the
acquisition of Hull 1075 at a
purchase price of $80,000 was canceled, at a cancellation cost of $5,950,
excluding commissions, which was forfeited from an advance payment. The
remaining balance of the advance payment of $10,050 was used to settle the
second advance payment for the acquisition of Hull
1074.

In June 2009, Eptaprohi
entered into an amendment to the shipbuilding contract for the construction and
purchase of Hull 1074, pursuant
to which expected delivery of Hull 1074
by the shipyard has been delayed from the first half of 2010 to the second half
of 2011, and the purchase price was reduced by $1,000.

In June 2009, Maxpente
entered into a Memorandum of Agreement (MoA) for the acquisition of Hull 1144 at a purchase price of $63,000,
expected to be delivered in the first half of 2010.

In August 2009, Shikoku
entered into an addendum to an existing MoA for the purchase of Hull 1579, pursuant to which expected
delivery of the newbuild has been delayed from the second half of 2010 to the
second half of 2011. In December 2009, pursuant to a further addendum to the
MoA, the purchase price of Hull 1579
was reduced by $12,360.

In December 2009, each of
Maxdeka and Maxenteka entered into two separate MoAs for the acquisition of Hull 1583andHull 1594, respectively, at a purchase price of $49,000 and
$48,000, respectively, scheduled to be delivered in the second half of 2010 and
the first half of 2012, respectively.

In April 2010,
each of Maxeikosi and Maxeikosiena entered into two separate shipbuilding
contracts for the acquisition of Hull 616and Hull 617, respectively, each
at a purchase price of $32,201, scheduled to be delivered in the second half of
2011 and the first half of 2012, respectively.

In July 2010, Efragel entered
into a shipbuilding contract for the acquisition of Hull 1154at a purchase
price of $28,153 scheduled to be delivered in the second half of 2013.

F-12

---



In November
2010, Maxeikositria entered into a shipbuilding contract for the acquisition of
Hull 631at
a purchase price of $34,000, scheduled to be delivered in the second half of
2011.

In November
2010, Maxeikosipente entered into a shipbuilding contract for the acquisition
of Hull
131at a purchase price of $53,000, scheduled to be delivered in
the second half of 2012.

Advances Paid for vessel
acquisitions and vessels under construction relate to the payment of
installments that were due to the respective shipyard or third-party sellers of
the following vessels:

| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | During the year ended
 December 31, 2009: Martine, Andreas K, Kanaris, Venus Heritage, and Hull 1074, Hull 1579and Hull 1594; and               
| |   |                                                                                                                                                 
| | ● | During the year ended
 December 31, 2010: Kanaris, Panayiota K
 and Venus Heritage, and Hull
 1074, Hull 1579, Hull 616, Hull 617
 and Hull 631.

Transfers to vessel cost
relate to the delivery to the Company from the respective shipyard or
third-party seller of the following vessels:

| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| | ● | During the year ended
 December 31, 2009: Martine and Andreas K; and             
| |   |                                                                                  
| | ● | During the year ended
 December 31, 2010: Kanaris, Panayiota K andVenus Heritage.

6. Asset Held for Sale

Asset held for sale of
$16,969 represents the carrying value of the vessel Efrossini, for which the Company entered into a MoA with an
unrelated third party, dated June 9, 2009, for its sale at a price of $33,000.
On the date of the MoA, the vessel met all the criteria for asset held for sale
classification, and was no longer depreciated. The sale of the vessel was
concluded with its delivery to her new owners on January 7, 2010.

7. Other Fixed Assets, Net

Other fixed assets represent
minor movable equipment on board the vessels, which were capitalized up to
December 31, 2007, and which are depreciated on a straight-line basis over five
years. Depreciation charges for the years ended December 31, 2009 and 2010
amounted to $78 and $69, respectively. Acquisitions of minor movable equipment
on board the vessels subsequent to December 31, 2007 are expensed in the year
incurred, due to the immaterial amounts involved.

8. Deferred Finance Charges, Net

Deferred finance charges are
comprised of the following:

|                            |  |   |      |  
|--------------------------- |  | - | ---- | -
|Balance,
 January 1, 2009   |  |   | 773  |  
|Additions                   |  |   | 10   |  
|Amortization
 expense       |  |   | (106 | )
|                            |  |   |     
|Balance,
 December 31, 2009 |  | $ | 677  |  
|                            |  |   |     
|Additions                   |  |   | 519  |  
|                            |  |   |     
|Balance,
 December 31, 2010 |  | $ | 930  |  
|                            |  |   |      |  

Amortization of deferred
finance costs, together with the write-offs, is recorded as Amortization and
write-off of deferred finance charges in the accompanying consolidated
statements of income.

F-13

---



9. Bank Debt

Bank debt is comprised of
the following secured borrowings:

|                                                       |               |               |  |              |         |      |   |         | 
|------------------------------------------------------ | ------------- | ------------- |  | ------------ | ------- | ---- | - | ------- | 
|                                                       |               |               |  | December 31, |        
|                                                       |               |               |  |              |        
|Borrower                                               | Commencement  | Maturity      |  | 2009         |         | 2010 |  
|                                                       |               |               |  |              |         |      |  
|Marathassa                                             | February 2005 | February 2017 |  | $            | 19,825  |      | $ | 18,195  | 
|Marinouki                                              | March 2006    | March 2018    |  |              | 30,763  |      |   | 29,229  | 
|Petra                                                  | January 2007  | January 2019  |  |              | 34,871  |      |   | 32,671  | 
|Pemer                                                  | March 2007    | March 2019    |  |              | 34,867  |      |   | 32,667  | 
|Pelea                                                  | June 2007     | June 2019     |  |              | 38,750  |      |   | 37,987  | 
|Soffive                                                | November 2007 | November 2019 |  |              | 41,400  |      |   | 39,600  | 
|Kerasies                                               | December 2007 | December 2019 |  |              | 36,800  |      |   | 35,200  | 
|Efragel                                                | January 2008  | January 2010  |  |              | 34,500  |      |   |        | 
|Marindou                                               | January 2008  | January 2018  |  |              | 34,500  |      |   | 34,500  | 
|Avstes                                                 | April 2008    | April 2018    |  |              | 30,000  |      |   | 30,000  | 
|Staloudi                                               | July 2008     | July 2023     |  |              | 52,960  |      |   | 49,320  | 
|Eniaprohi                                              | November 2008 | November 2018 |  |              | 40,000  |      |   | 40,000  | 
|Eniadefhi                                              | February 2009 | February 2019 |  |              | 42,000  |      |   | 41,625  | 
|Maxdodeka                                              | February 2010 | February 2016 |  |              |        |      |   | 33,750  | 
|Maxpente                                               | July 2010     | January 2015  |  |              |        |      |   | 40,000  | 
|                                                       |               |               |  |              |         |      |   |         | 
|Total                                                  |               |               |  | $            | 471,236 |      | $ | 494,744 | 
|                                                       |               |               |  |              |         |      |   |         | 
|                                                       |               |               |  |              |         |      |   |         | 
|Liability directly associated with asset held for sale |               |               |  |              | 34,500  |      |   |        | 
|Current portion                                        |               |               |  | $            | 15,742  |      | $ | 27,674  | 
|                                                       |               |               |  |              |         |      |   |         | 
|Long-term portion                                      |               |               |  | $            | 420,994 |      | $ | 467,070 | 
|                                                       |               |               |  |              |         |      |   |         | 
|                                                       |               |               |  |              |         |      |   |         | 

The above loans and credit facilities bear interest at LIBOR plus a margin, and are
repayable in semi-annual installments and a balloon payment at maturity.

As of December 31, 2010, no
amount was available for drawing under any of the above loans and reducing
revolving credit facilities. The estimated minimum annual principal
payments required to be made after December 31, 2010, based on the bank loan
and credit facility agreements as amended, are as follows:

|                     |  |   |         | 
|-------------------- |  | - | ------- | 
|To December 31,      |  |   |         | 
|                     |  |   |         | 
|2011                 |  | $ | 27,674  | 
|2012                 |  |   | 28,854  | 
|2013                 |  |   | 30,261  | 
|2014                 |  |   | 31,541  | 
|2015                 |  |   | 61,274  | 
|2016 and
 thereafter |  |   | 315,140 | 
|                     |  |   |         | 
|Total                |  | $ | 494,744 | 
|                     |  |   |         | 

Total interest
incurred on long-term debt for the years ended December 31, 2008, 2009 and 2010
amounted to $16,696, $10,400, and $6,738, respectively, which includes interest
capitalized of $304, $58 and $315 for the years ended December 31, 2008, 2009
and 2010, respectively. The average interest rate (including the margin) for
all bank loan and credit facilities during the years 2008, 2009 and 2010 was
4.030% p.a., 2.137% p.a., and 1.394% p.a., respectively.

On June 9, 2009, Efragel
entered into a MoA with a third party, pursuant to which the vesselEfrossiniwould
be sold to the third party, hence the balance of the Efragel credit facility
as of December 31, 2009 has been recorded in the consolidated balance sheet as
Liability directly associated with asset held for sale. The vessel was sold on
January 7, 2010, and the Efragel credit facility was concurrently fully prepaid.

Certain of the above loans
or credit facilities have a currency conversion option whereby the borrower may
elect to convert the outstanding loan amount or any part thereof to certain
currencies specified in each agreement, using the spot exchange rate applicable
on the date of conversion. Specified currencies include JPY, CHF, EUR, CAD or
GBP depending on the relevant agreement. In all the above loans or credit
facilities with a currency conversion option, no consideration has been or will
be paid by any of the borrowers to

F-14

---



the respective lenders in
connection with the conversion option since the parties did not ascribe value
to the conversion option as the conversion options are always based on the
market or spot rates at the time they are exercised. The exercise of the
conversion option in any of the above loans or credit facilities results in a
change in both the currency denomination of the loan and the basis of the
interest rate (that is, a USD-denominated loan bears interest based on USD
LIBOR and, upon conversion into a JPY-denominated loan, will bear interest
based on JPY LIBOR). All other terms of the loans or credit facilities,
including the margin (the interest rate spread over LIBOR) and the repayment
terms, will remain the same upon exercise of the currency conversion option.

The Company considered the
accounting guidance relating to Accounting
for Derivative Instruments and Hedging Activities, and concluded
that the conversion options are embedded derivatives that would require
bifurcation and separate accounting because of the following:

| |       |                                                                                                                                                                                                                                                               
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)   | The economic
 characteristics and risks of an instrument in which the underlying is both a
 foreign currency and interest rate are not clearly and closely related to the
 economic characteristics and risks of a debt host;                                 
| |       |                                                                                                                                                                                                                                                               
| | (ii)  | The borrowing arrangement
 that embodies both the conversion option and the debt host is not remeasured
 at fair value under otherwise applicable generally accepted accounting
 principles with changes in fair value reported in earnings as they occur; and
| |       |                                                                                                                                                                                                                                                               
| | (iii) | A separate instrument with
 the same terms as the conversion option would be a derivative instrument
 subject to the requirements of this accounting guidance.                                                                                                

However, the Company
believes that the conversion option under the borrowing arrangements has no
fair value due to the fact that the conversion into a different currency, and,
accordingly, into a corresponding LIBOR interest rate, will always be at the
prevailing foreign currency exchange rate (spot rate) and prevailing interest
rate at the time of the conversion. Furthermore, both the Company and the bank
did not ascribe value to the currency conversion options as no consideration
was sought by the bank and no value was paid by the Company, as noted above.

As of December 31, 2009 and
2010 all loans were denominated in US Dollars.

The foregoing loans and
credit facilities are secured as follows:

| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | First priority mortgages
 over the vessels owned by the respective borrowers;                                                                                        
| |   |                                                                                                                                                                      
| | ● | First priority assignment
 of all insurances and earnings of the mortgaged vessels;                                                                                  
| |   |                                                                                                                                                                      
| | ● | Second priority mortgage
 over the Maritsa as security
 for the Kerasies loan;                                                                                       
| |   |                                                                                                                                                                      
| | ● | Second priority mortgage
 over the Pedhoulas
 Merchantas security for the Petra loan;                                                                                
| |   |                                                                                                                                                                      
| | ● | Second priority mortgage
 over the Pedhoulas
 Traderas security for the Pemer loan;                                                                                  
| |   |                                                                                                                                                                      
| | ● | Cross corporate guarantees
 issued by each of Maxdodeka, Pelea, Avstes, Marindou, Eniaprohi and Eniadefhi
 as security for the credit facility of each guarantor; and
| |   |                                                                                                                                                                      
| | ● | Corporate guarantee from
 Safe Bulkers.                                                                                                                              

The loan and credit facility
agreements, as amended, contain debt covenants including restrictions as to
changes in management and ownership of the vessels, additional indebtedness and
mortgaging of vessels without the respective lenders prior consent, minimum
vessel insurance cover ratio requirements, as well as minimum fair vessel value
ratio to outstanding loan principal requirements; the fair vessel value being
determined according to the provisions of the individual loan or credit
facility agreements with the relevant bank (the Minimum Value Covenant). The
borrowers are permitted to pay dividends to their owners as long as no event of
default under the respective loan has occurred or has not been remedied.

In six of the loan and
credit facility agreements, the respective borrower must maintain at all times
a minimum balance of $150 in the vessel operating account. In one of the loan
and credit facility agreements the borrower must maintain a cash collateral
deposit of $2,000 with the lender. In addition, the corporate guarantees, as
amended, of Safe Bulkers include the following financial covenants:

| |   |                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | its total consolidated
 liabilities divided by its total consolidated assets must not at any time
 exceed 70% or 80% as the case may be (Consolidated Leverage Covenant). The
 total consolidated assets are based on the fair market value of its vessels
 and the book values of all other assets, on an adjusted basis as set out in
 the relevant guarantee;
| |   |                                                                                                                                                                                                                                                                                                                                                                   
| | ● | the ratio of its aggregate
 debt to EBITDA must not at any time exceed 5.5:1 on a trailing 12 months
 basis (EBITDA Covenant);                                                                                                                                                                                                                                 

F-15

---



| |   |                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | its net consolidated worth
 (total consolidated assets less total consolidated liabilities)
 (Consolidated Net Worth Covenant) must not at any time be less than
 $150,000, $175,000 or $200,000 (as the case may be) with the relevant bank;
| |   |                                                                                                                                                                                                                                                
| | ● | payment of dividends is
 subject to no event of default having occurred;                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                
| | ● | maintenance of minimum
 free liquidity of $500 is required on deposit with a relevant lender on a per
 vessel basis for five vessels; and                                                                                                      
| |   |                                                                                                                                                                                                                                                
| | ● | a minimum of 51% of its
 shares shall remain directly or indirectly beneficially owned by the
 Hajioannou family for the duration of the relevant credit facilities.                                                                           

As of December
31, 2010, the Company was in compliance with all debt covenants with respect to
its loans and credit facilities.

10. Long-term Investment

During the year ended
December 31, 2009, the Company invested $50,000 in a five-year Floating Rate
Note issued by HSBC Bank Middle East Limited, which is recorded in the
consolidated balance sheet at amortized cost as the Company intends to hold the
investment until its maturity on October 14, 2014. The Company receives
interest on a quarterly basis, based on the three-month U.S. dollar LIBOR plus
a margin of 1.5%. The fair market value of the Floating Rate Note as of
December 31, 2010 was approximately $49,075 based on an indicative bid price
from the relevant bank. Subject to certain conditions, the Company may borrow
up to 80% of the Floating Rate Note amount.

11. Share Capital

The Company was incorporated
on December 11, 2007 with authorized share capital of 500 shares of common
stock with a par value of $0.001 per share. On May 9, 2008, the Companys
Articles of Incorporation were amended. Under the amended Articles of
Incorporation, the Companys authorized capital stock consists of 200,000,000
shares of common stock with a par value of $0.001 per share, of which
54,500,000 shares were issued prior to the listing of the Companys common
stock on the NYSE, which was completed on June 3, 2008, and 20,000,000 shares
of preferred stock with a par value of $0.01 per share, none of which has been
issued and is outstanding. In connection with the IPO process, Vorini Holdings
sold 10,000,000 shares of common stock of the Company of a par value of $0.001
per share at a price of $19 per share. No proceeds were paid to the Company.

In March 2010,
the Company successfully completed a public offering, whereby 10,350,000 shares
of common stock of Safe Bulkers were issued and sold, and a private placement,
whereby 1,000,000 shares of common stock of Safe Bulkers were issued and sold
to Vorini Holdings. The aggregate net proceeds of the public offering and the
private placement were $74,967.

According to an arrangement
approved by the Companys corporate governance, nominating and compensation
committee effective July 1, 2008, the audit committee chairman receives the
equivalent of $15 every quarter, payable in arrears in the form of newly issued
common stock of the Company as compensation for services rendered as audit
committee chairman. The number of shares to be issued is determined based on
the closing price of the Companys common stock on the last trading day prior
to the end of each quarter in which services were provided and are issued as
soon as practicable following the end of the quarter. During the years ended
December 31, 2009 and 2010, 11,597 shares and 7,644 shares, respectively, were
issued to the audit committee chairman.

According to an arrangement
approved by the Companys corporate governance, nominating and compensation
committee, effective January 1, 2010, the independent directors of the Company
other than the audit committee chairman each receive the equivalent of $7.5
every quarter, payable in arrears in the form of newly issued common stock of
the Company as compensation for services rendered as independent directors. The
number of shares to be issued is determined as noted above. During the year
ended December 31, 2010, 5,932 shares were issued to the independent directors
of the Company other than the audit committee chairman.

F-16

---



12. Commitments and Contingencies

|    |                                                  
|--- | -------------------------------------------------
|(a) | Commitments under Shipbuilding Contracts and MoAs

As of December 31, 2010, the
Company had commitments under six shipbuilding contracts and two MoAs for the
acquisition of eight newbuilds. The Company expects to settle these commitments
as follows:

|                        |  |                             |   |                 |  |       |       |  |   |         | 
|----------------------- |  | --------------------------- | - | --------------- |  | ----- | ----- |  | - | ------- | 
|Year Ending December 31 |  | Due to Shipyards /
 Sellers |   | Due to
 Manager |  | Total |      
|                        |  |                             |   |                 |  |       |      
|2011                    |  |                             | $ | 171,291         |  | $     | 3,895 |  | $ | 175,186 | 
|2012                    |  |                             |   | 70,562          |  |       | 2,080 |  |   | 72,642  | 
|2013                    |  |                             |   | 22,153          |  |       | 469   |  |   | 22,622  | 
|                        |  |                             |   |                 |  |       |       |  |   |         | 
|Total                   |  |                             | $ | 264,006         |  | $     | 6,444 |  | $ | 270,450 | 
|                        |  |                             |   |                 |  |       |       |  |   |         | 

|    |                  
|--- | -----------------
|(b) | Credit facilities

|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|i.  |  | In
 November 2010, the Company concluded the documentation of a loan facility for
 up to $24,000, which will be used to refinance part of the purchase
 price paid for the acquisition by Maxdekatria of the vessel Panayiota
 K (the Maxdekatria loan). The Maxdekatria loan is available
 for drawing until April 30, 2011 and is repayable over eight years in 16
 semi-annual consecutive installments commencing six months after the loan
 drawdown and a balloon payment payable with the final installment and will be
 secured by a first priority mortgage over the vessel
 Panayiota
 K and other usual maritime securities and a corporate guarantee by
 Safe Bulkers, which includes the financial covenants described in Note 9.                                                                               
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|ii. |  | In December
 2010, the Company accepted a commitment letter from a bank for loan facility
 for up to $58,748, which will be used for the financing of the acquisition by
 Eptaprohi of Hull 1074 (the Eptaprohi credit facility). The
 Eptaprohi credit facility will be made available after delivery from the shipyard
 of Hull 1074 and upon commencement of her contracted employment. The
 Eptaprohi credit facility is repayable over seven years in 14 semi-annual
 consecutive installments commencing six months after the loan drawdown and a
 balloon payment payable with the final installment and will be secured by a
 first priority mortgage over the Hull 1074 and other usual maritime
 securities and a corporate guarantee by Safe Bulkers, which includes the
 financial covenants described in Note 9.

|    |                              
|--- | -----------------------------
|(c) | Other contingent
 liabilities

The Subsidiaries have not
been involved in any legal proceedings that may have, or have had, a significant
effect on their business, financial position, results of operations or
liquidity, nor is the Company aware of any proceedings that are pending or
threatened that may have a significant effect on its business, financial
position, results of operations or liquidity. From time to time various claims,
suits and complaints, including those involving government regulations and
product liability, arise in the ordinary course of the shipping business. In
addition, losses may arise from disputes with charterers, agents, insurance
providers and other claims with suppliers relating to the operation of the
Companys vessels. Management is not aware of any material claims or contingent
liabilities which should be disclosed, or for which a provision should be established
in the accompanying consolidated financial statements.

The Company accrues for the
cost of environmental liabilities when management becomes aware that a
liability is probable and is able to reasonably estimate the probable exposure.
Management is not aware of any such claims or contingent liabilities which
should be disclosed, or for which a provision should be established in the
accompanying consolidated financial statements. A maximum of $1,000,000 of the
liabilities associated with the individual vessel actions, mainly for sea
pollution, is covered by P&I Club insurance.

13. Revenues

Revenues are comprised of
the following:

|                     |  |                            |         |      |   |         |  |   |         | 
|-------------------- |  | -------------------------- | ------- | ---- | - | ------- |  | - | ------- | 
|                     |  | Year Ended
   December 31, |        
|                     |  |                            |        
|                     |  | 2008                       |         | 2009 |   | 2010    | 
|                     |  |                            |         |      |   |         | 
|Time charter revenue |  | $                          | 202,588 |      | $ | 165,604 |  | $ | 157,663 | 
|Ballast bonus        |  |                            | 2,765   |      |   | 980     |  |   |        | 
|Other income         |  |                            | 3,058   |      |   | 1,816   |  |   | 2,035   | 
|                     |  |                            |         |      |   |         |  |   |         | 
|Total                |  | $                          | 208,411 |      | $ | 168,400 |  | $ | 159,698 | 
|                     |  |                            |         |      |   |         |  |   |         | 

F-17

---



14. Vessel Operating Expenses

Vessel
operating expenses are comprised of the following:

|                                           |  |                            |        |      |   |        |  |   |        | 
|------------------------------------------ |  | -------------------------- | ------ | ---- | - | ------ |  | - | ------ | 
|                                           |  | Year Ended
   December 31, |       
|                                           |  |                            |       
|                                           |  | 2008                       |        | 2009 |   | 2010   | 
|                                           |  |                            |        |      |   |        | 
|Crew wages
 and related costs              |  | $                          | 8,215  |      | $ | 10,055 |  | $ | 11,441 | 
|Insurance                                  |  |                            | 2,138  |      |   | 2,112  |  |   | 1,880  | 
|Repairs,
 maintenance and drydocking costs |  |                            | 2,211  |      |   | 994    |  |   | 1,764  | 
|Spares,
 stores and provisions             |  |                            | 2,372  |      |   | 2,845  |  |   | 3,947  | 
|Lubricants                                 |  |                            | 1,916  |      |   | 2,451  |  |   | 2,808  | 
|Taxes                                      |  |                            | 116    |      |   | 140    |  |   | 178    | 
|Miscellaneous                              |  |                            | 647    |      |   | 1,031  |  |   | 1,110  | 
|                                           |  |                            |        |      |   |        |  |   |        | 
|Total                                      |  | $                          | 17,615 |      | $ | 19,628 |  | $ | 23,128 | 
|                                           |  |                            |        |      |   |        |  |   |        | 

15. Fair Value of Financial Instruments and
Derivatives Instruments

Over-the-counter foreign
exchange forward contracts and interest rate derivatives are recorded at fair
value. The carrying values of the current financial assets and liabilities are
reasonable estimates of their fair value due to the short-term nature of these
financial instruments. The fair values of long-term credit facilities and bank
loans approximate the recorded values, due to their variable interest rates.
The fair value of the long term investment (the floating rate note) is
disclosed in Note 10.

Derivative instruments

The Company
enters into interest rate swap transactions to manage interest costs and the
risk associated with changing interest rates with respect to its variable
interest rate loans and credit facilities. The Company from time to time may
also enter into foreign exchange forward contracts to create economic hedges
for its exposure to currency exchange risk on payments relating to acquisition
of vessels and on certain loan obligations or for trading purposes. Foreign
exchange forward contracts are agreements entered into with a bank to exchange,
at a specified future date, currencies of different countries at a specific
rate. As of December 31, 2009 and 2010, the Company had no outstanding
derivative instruments relating to currency exchange contracts.

The Companys
interest rate swaps and foreign exchange forward contracts did not qualify for
hedge accounting. The Company marks to market the fair market value of the
interest rate swaps and foreign exchange forward contracts at the end of every
period and accordingly records the resulting unrealized loss/gain during the
period in the consolidated statement of income. Information on the location and
amounts of derivative fair values in the consolidated balance sheets and
derivative gains/losses in the consolidated statements of income are shown
below:

F-18

---



Derivatives not designated as hedging
instruments

|                 |  |                                                   |  |                                |     |                                    |   |                     |  |                     |        |  |   |        | 
|---------------- |  | ------------------------------------------------- |  | ------------------------------ | --- | ---------------------------------- | - | ------------------- |  | ------------------- | ------ |  | - | ------ | 
|                 |  |                                                   |  | Asset Derivatives
 Fair Values |     | Liability Derivatives
 Fair Values |  
|                 |  |                                                   |  |                                |     |                                    |  
|Type of Contract |  | Balance sheet location                            |  | December 31,
 2009             |     | December 31, 
 2010                |   | December 31, 
 2009 |  | December 31, 
 2010 |       
|                 |  |                                                   |  |                                |     |                                    |   |                     |  |                     |       
|Interest Rate    |  | Derivative assets / Current
 assets               |  |                                | 123 |                                    | $ | 4,485               |  |                     |       |  |   |       | 
|                 |  |                                                   |  |                                |     |                                    |   |                     |  |                     |        |  |   |        | 
|Interest Rate    |  | Derivative liabilities /
 Current liabilities     |  |                                |    |                                    |   |                    |  |                     | 1,223  |  | $ | 6,802  | 
|                 |  |                                                   |  |                                |     |                                    |   |                     |  |                     |        |  |   |        | 
|Interest Rate    |  | Derivative liabilities /
 Non-current liabilities |  |                                |    |                                    |   |                    |  | $                   | 15,510 |  | $ | 9,787  | 
|                 |  |                                                   |  |                                |     |                                    |   |                     |  |                     |        |  |   |        | 
|                 |  |                                                   |  |                                |     |                                    |   |                     |  |                     |        |  |   |        | 
|                 |  | Total Derivatives                                 |  | $                              | 123 |                                    | $ | 4,485               |  | $                   | 16,733 |  | $ | 16,589 | 
|                 |  |                                                   |  |                                |     |                                    |   |                     |  |                     |        |  |   |        | 

|                                    |  |                                                   |        |      |   |        |  
|----------------------------------- |  | ------------------------------------------------- | ------ | ---- | - | ------ | -
|                                    |  | Amount of Gain / (Loss) Recognized on Derivatives |       
|                                    |  |                                                   |       
|                                    |  | Year ended December 31,                           |       
|                                    |  |                                                   |       
|                                    |  | 2009                                              |        | 2010 |  
|                                    |  |                                                   |        |      |  
|Foreign
 Exchange Forward Contracts |  | $                                                 | (931   | )    | $ | (198   | )
|Interest
 Rate Contracts            |  |                                                   | (3,485 | )    |   | (7,966 | )
|                                    |  |                                                   |        |      |   |        |  
|Net (Loss) Recognized               |  | $                                                 | (4,416 | )    | $ | (8,164 | )
|                                    |  |                                                   |        |      |   |        |  

The gain or
loss is recognized in the consolidated statement of income and is presented in
Other (Expense)/Income  Loss on Derivatives.

The Companys
interest rate derivative instruments are pay-fixed, receive-variable interest
rate swaps based on the USD LIBOR swap rate. The fair value of the interest
rate swaps is determined using a discounted cash flow approach based on
market-based LIBOR swap yield curves. LIBOR swap rates are observable at
commonly quoted intervals for the full terms of the swaps and therefore are
considered Level 2 items in accordance with the fair value hierarchy. The
following table summarizes the valuation of the Companys financial instruments
as of December 31, 2009 and 2010.

|                                             |  |                                                |        |      |   |        | 
|-------------------------------------------- |  | ---------------------------------------------- | ------ | ---- | - | ------ | 
|                                             |  | Significant Other Observable Inputs
 (Level 2) |       
|                                             |  |                                                |       
|                                             |  | December 31,                                   |       
|                                             |  | 2009                                           |        | 2010 |  
|Derivative
 instruments  asset position     |  | $                                              | 123    |      | $ | 4,485  | 
|Derivative
 instruments  liability position |  |                                                | 16,733 |      |   | 16,589 | 

As of December
31, 2009 and 2010, no fair value measurements for assets or liabilities under
Level 1 or Level 3 were recognized in the Companys consolidated balance sheet.

F-19

---



Interest Rate Derivatives

Details of
interest rate swap transactions entered into with certain banks in respect of
certain loans and credit facilities as of December 31, 2009 and 2010 are
presented in the table below:

|                         |  |                   |  |                     |  |             |   |                    |   |                    |  |   |         | 
|------------------------ |  | ----------------- |  | ------------------- |  | ----------- | - | ------------------ | - | ------------------ |  | - | ------- | 
|                         |  |                   |  |                     |  |             |   | Notional amount    |  
|                         |  |                   |  |                     |  |             |   |                    |  
|Loan or Credit
 Facility |  | Inception         |  | Expiry              |  | Fixed
 Rate |   | December 31,
 2009 |   | December 31,
 2010 | 
|                         |  |                   |  |                     |  |             |   |                    |   |                    | 
|Kerasies (1)             |  | December 14, 2007 |  | December 14, 2010   |  | 4.0925      | % |                    | $ | 36,800             |  | $ |        | 
|Marindou (2)             |  | January 14, 2008  |  | January 14, 2013    |  | 3.9500      | % |                    |   | 28,000             |  |   | 28,000  | 
|Efragel (2)              |  | January 17, 2008  |  | January 17, 2013(3) |  | 3.6500      | % |                    |   | 28,000             |  |   |        | 
|Petra (2)                |  | February 19, 2008 |  | January 18, 2013    |  | 2.8850      | % |                    |   | 34,871             |  |   | 32,671  | 
|Pemer (2)                |  | March 7, 2008     |  | March 7, 2013       |  | 2.7450      | % |                    |   | 34,868             |  |   | 32,668  | 
|Marinouki (2)            |  | March 19, 2008    |  | March 5, 2013       |  | 2.7300      | % |                    |   | 30,763             |  |   | 29,229  | 
|Avstes (2)               |  | April 25, 2008    |  | April 18, 2013      |  | 3.8900      | % |                    |   | 29,000             |  |   | 29,000  | 
|Pelea (2)                |  | December 15, 2008 |  | December 15, 2011   |  | 3.7000      | % |                    |   | 36,000             |  |   | 36,000  | 
|Soffive (2)              |  | November 20, 2008 |  | November 20, 2011   |  | 3.5500      | % |                    |   | 41,400             |  |   | 39,600  | 
|Eniaprohi (2)            |  | November 13, 2008 |  | November 14, 2011   |  | 3.1500      | % |                    |   | 40,000             |  |   | 40,000  | 
|Staloudi (2)             |  | January 7, 2009   |  | January 7, 2012     |  | 3.3850      | % |                    |   | 52,960             |  |   | 49,320  | 
|Eniadefhi (2)            |  | April 1, 2009     |  | February 12, 2014   |  | 3.3500      | % |                    |   | 40,000             |  |   | 40,000  | 
|Marathassa (1)           |  | November 23, 2009 |  | November 23, 2012   |  | 1.6500      | % |                    |   | 19,825             |  |   | 18,195  | 
|Maxdodeka (1)            |  | February 1, 2010  |  | February 1, 2013    |  | 3.9100      | % |                    |   |                   |  |   | 33,750  | 
|Kerasies (1)             |  | December 14, 2010 |  | December 14, 2015   |  | 1.6500      | % |                    |   |                   |  |   | 35,200  | 
|Maxpente (1)             |  | January 31, 2011  |  | January 31, 2015    |  | 1.2200      | % |                    |   |                   |  |   | 39,100  | 
|Eniaprohi (1)            |  | November 14, 2011 |  | November 14, 2014   |  | 1.4000      | % |                    |   |                   |  |   | 37,776  | 
|Soffive (1)              |  | November 20, 2011 |  | November 20, 2014   |  | 1.3500      | % |                    |   |                   |  |   | 37,200  | 
|Pelea (1)                |  | December 15, 2011 |  | December 15, 2016   |  | 2.0500      | % |                    |   |                   |  |   | 36,461  | 
|Staloudi (1)             |  | January 7, 2012   |  | January 7, 2015     |  | 1.4500      | % |                    |   |                   |  |   | 43,860  | 
|                         |  |                   |  |                     |  |             |   |                    |   |                    |  |   |         | 
|Total                    |  |                   |  |                     |  |             |   |                    | $ | 452,487            |  | $ | 638,030 | 
|                         |  |                   |  |                     |  |             |   |                    |   |                    |  |   |         | 

| |     |                                                                                                                                                                                                                                                                                     
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Under these
 swap transactions, the bank effects quarterly floating-rate payments to the
 Company for the relevant amount based on the three-month U.S. dollar LIBOR,
 and the Company effects quarterly payments to the bank on the relevant amount
 at the respective fixed rates.
| |     |                                                                                                                                                                                                                                                                                     
| | (2) | Under these
 swap transactions, the bank effects semiannual floating-rate payments to the
 Company for the relevant amount based on the six-month U.S. dollar LIBOR, and
 the Company effects semiannual payments to the bank on the relevant amount at
 the respective fixed rates.
| |     |                                                                                                                                                                                                                                                                                     
| | (3) | Following
 the sale of the Efrossiniand the full repayment of the relevant credit
 facility, the relevant interest rate swap agreement was novated on January 8,
 2010 to Maxdodeka Shipping Corporation.                                                                           

The notional
amounts of the above transactions are reduced during the term of the swap
transactions based on the expected principal outstanding under the respective
facility. In the Petra, Pemer and Marinouki transactions, the respective bank
has the right to cancel each swap on January 18, 2011, March 7, 2011 and March
5, 2011, respectively, and at six-month intervals thereafter. The respective
bank did not exercise its right to cancel the Petra swap on January 18, 2011.

16. Accrued Liabilities

Accrued liabilities are
comprised of the following:

|                                                    |  |              |       |      |   |       | 
|--------------------------------------------------- |  | ------------ | ----- | ---- | - | ----- | 
|                                                    |  | December 31, |      
|                                                    |  |              |      
|                                                    |  | 2009         |       | 2010 |  
|                                                    |  |              |       |      |  
|Interest on
 long-term debt                         |  | $            | 1,005 |      | $ | 1,014 | 
|Vessels
 operating and voyage expenses             |  |              | 1,303 |      |   | 1,245 | 
|Commissions                                         |  |              | 1,311 |      |   | 35    | 
|Interest on
 derivatives and other finance expenses |  |              | 3,136 |      |   | 3,345 | 
|General and
 administrative expenses                |  |              | 671   |      |   | 264   | 
|                                                    |  |              |       |      |   |       | 
|Total                                               |  | $            | 7,426 |      | $ | 5,903 | 
|                                                    |  |              |       |      |   |       | 

F-20

---



17. Early Redelivery (Cost) / Income

From time to time, the Company
enters into arrangements for early redelivery of its vessels from charterers
and may continue to do so in the future, depending on market conditions. Early
redelivery costs are incurred where the contracted daily fixed charter rates
are substantially lower than the daily charter rates the vessels could
potentially earn in the current market. Income is recognized in connection with
early termination of a period time charter, resulting from a request of the
respective vessel charterers for early redelivery and agreement to compensate
the Company. Early redelivery costs for the periods presented represent costs
incurred in connection with early termination of charters for which no replacement
charter contract for the relevant vessel has been secured at the time of
concluding the charter termination agreement, and are recognized at the time
the charter termination agreement is concluded. Early redelivery income is
recognized when a charter termination agreement exists, the vessel is
redelivered to the Company and collection of the related compensation is
reasonably assured.

|                                |  |      |     |                            |                 |      |   |      |   |   |        |  |   |        |  
|------------------------------- |  | ---- | --- | -------------------------- | --------------- | ---- | - | ---- | - | - | ------ |  | - | ------ | -
|                                |  |      |     | Year Ended
   December 31, |                
|                                |  |      |     |                            |                
|Company                         |  | Date |     | 2008                       |                 | 2009 |   | 2010 |  
|                                |  |      |     |                            |                 |      |   |      |  
|Petra                           |  |      | (a) |                            | March 7,
 2008  |      | $ | (780 | ) |   |       |  |   |       |  
|Efragel                         |  |      | (b) |                            | March 15,
 2009 |      |   |     |   | $ | 29,096 |  |   |       |  
|Kerasies                        |  |      | (c) |                            | June 26,
 2009  |      |   |     |   |   | 22,331 |  |   |       |  
|Marindou                        |  |      | (d) |                            | June 28,
 2009  |      |   |     |   |   | 20,046 |  |   |       |  
|Pelea                           |  |      | (e) |                            | July 19,
 2009  |      |   |     |   |   | 2,653  |  |   |       |  
|Kerasies                        |  |      | (f) |                            | March 25,
 2010 |      |   |     |   |   |       |  | $ | (1,520 | )
|Pemer                           |  |      | (g) |                            | April
 13,2010  |      |   |     |   |   |       |  |   | 3,581  |  
|Pelea                           |  |      | (h) |                            | April 28,
 2010 |      |   |     |   |   |       |  |   | (1,765 | )
|Other minor
 early redeliveries |  |      |     |                            | Various         |      |   | 215  |   |   | 825    |  |   | (164   | )
|                                |  |      |     |                            |                 |      |   |      |   |   |        |  |   |        |  
|Total                           |  |      |     |                            |                 |      | $ | (565 | ) | $ | 74,951 |  | $ | 132    |  
|                                |  |      |     |                            |                 |      |   |      |   |   |        |  |   |        |  

Details of the
transactions presented in the above table are as follows:

(a) On March
7, 2008, Petra agreed with the charterers of the Pedhoulas Trader to terminate
the $54 daily fixed rate time charter which had commenced on February 9, 2008,
and was due to expire by July 24, 2008. As compensation for early redelivery,
Petra agreed to pay the charterers an amount of $780, net of commissions.

(b) On March
15, 2009, Efragel took early redelivery of the Efrossini,
instead of on January 8, 2011. The respective charterer paid cash compensation
of $25,480, net of commissions. An amount of $3,616 representing the unearned
revenue from the terminated period time charter contract was recorded as
additional early redelivery income.

(c) On June
26, 2009, Kerasies took early redelivery of the Katerina, instead of on November 26, 2010. The respective
charterer paid cash compensation of $21,463, net of commissions. An amount of
$868 representing the unearned revenue from the terminated period time charter
contract was recorded as additional early redelivery income.

(d) On June
28, 2009, Marindou took early redelivery of the Maria,instead of on January 2, 2011. The respective
charterer paid cash compensation of $15,516, net of commissions. An amount of
$4,530 representing the unearned revenue from the terminated period time
charter contract was recorded as additional early redelivery income.

(e) On July
19, 2009, Pelea took early redelivery of the Pedhoulas
Leader,instead of on November 22, 2009. The respective charterer
paid cash compensation of $2,653, net of commissions.

(f) On March
25, 2010, Kerasies agreed with the charterers of the Katerina to terminate the $15.5 daily fixed rate time
charter which had commenced on June 26, 2009, and was due to expire by September
15, 2011. As compensation for early redelivery, Kerasies agreed to pay the
charterers $1,520, net of commissions.

(g) On April
13, 2010, Pemer took early redelivery of the Pedhoulas
Merchant,instead of on November 5, 2010. The respective charterer
paid cash compensation of $3,581, net of commissions.

(h) On April
28, 2010, Pelea agreed with the charterers of the Pedhoulas Leader to
terminate the $18.50 daily fixed rate time charter which had commenced on July
19, 2009, and was due to expire by September 30, 2011. As compensation for early
redelivery, Pelea agreed to pay the charterers an amount of $1,765, net of commissions.

In all the
cases presented above, no replacement charter contract had been secured at the
time of the conclusion of the respective early redelivery agreement.

F-21

---



18. Loss on Asset Purchase Cancellations

Loss on asset
purchase cancellations during the year ended December 31, 2009 represents
losses incurred on cancellation of the newbuild contracts and MoAs discussed in
Note 4, consisting of advances forfeited totaling $20,395 plus expenses net of
interest earned of $304 related to the cancellations, and comprise the
following:

| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Loss on
 cancellation of acquisition of Hull 2054
 of $6,849, net of interest earned on the advance deposits;                                                    
| |   |                                                                                                                                                                  
| | ● | Loss on
 cancellation of acquisition of Hull 2055
 of $6,850, net of interest earned on the advance deposits; and                                                
| |   |                                                                                                                                                                  
| | ● | Loss on
 cancellation of acquisition of Hull 1075of
 $7,000, inclusive of brokerage commissions, of which $5,950 represented the
 forfeiture of advance deposits.

No
cancellations were concluded during the years ended December 31, 2008 and 2010.

19. Lease ArrangementsCharters-out

The future minimum time charter
revenue, net of commissions, based on vessels committed to non-cancelable time
charter contracts (including fixture recaps) as of December 31, 2010, is as
follows:

|              |  |   |         |  | 
|------------- |  | - | ------- |  | 
|December
 31, |  |   |         |  | 
|              |  |   |         |  | 
|2011          |  | $ | 141,287 | 
|2012          |  |   | 122,344 | 
|2013          |  |   | 106,523 | 
|2014          |  |   | 45,788  | 
|2015          |  |   | 13,404  | 
|Thereafter    |  |   | 142,426 | 
|              |  |   |         | 
|Total         |  | $ | 571,772 | 
|              |  |   |         | 

Future minimum
time charter revenue excludes the future acquisitions of the vessels discussed
in Note 12, since estimated delivery dates are not confirmed. Revenues from
time charters are not generally received when a vessel is off-hire, including
time required for normal periodic maintenance of the vessel. In arriving at the
minimum future charter revenues, an estimated off-hire time of 12 days to
perform any scheduled drydocking on each vessel has been deducted, and it has
been assumed that no additional off-hire time is incurred, although there is no
assurance that such estimate will be reflective of the actual off-hire in the
future.

20. General and Administrative Expenses

General and administrative
expenses for the years ended December 31, 2008, 2009 and 2010 were as follows:

|                                          |  |              |       |      |   |       |  |   |       | 
|----------------------------------------- |  | ------------ | ----- | ---- | - | ----- |  | - | ----- | 
|                                          |  | December 31, |      
|                                          |  |              |      
|                                          |  | 2008         |       | 2009 |   | 2010  | 
|                                          |  |              |       |      |   |       | 
|Management
 fees - related party          |  | $            | 4,420 |      | $ | 4,436 |  | $ | 4,880 | 
|Professional
 fees (legal and accounting) |  |              | 2,656 |      |   | 1,585 |  |   | 811   | 
|Director
 fees                            |  |              | 90    |      |   | 180   |  |   | 240   | 
|Listing fees
 and expenses                |  |              | 419   |      |   | 70    |  |   | 63    | 
|Investor
 relation expenses               |  |              | 89    |      |   | 196   |  |   | 175   | 
|Miscellaneous                             |  |              | 371   |      |   | 579   |  |   | 849   | 
|                                          |  |              |       |      |   |       |  |   |       | 
|Total                                     |  | $            | 8,045 |      | $ | 7,046 |  | $ | 7,018 | 
|                                          |  |              |       |      |   |       |  |   |       | 

F-22

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21. Unearned Revenue / Accrued Revenue

Unearned Revenue represents
cash received in advance of it being earned, whereas Accrued Revenue
represents revenue earned prior to cash being received. Revenue is recognized
as earned on a straight-line basis at their average rates where charter
agreements provide for varying annual charter rates over their term. Total
Unearned Revenue/Accrued Revenue during the periods presented is as follows:

|                                                                    |  |              |        |      |   |        | 
|------------------------------------------------------------------- |  | ------------ | ------ | ---- | - | ------ | 
|                                                                    |  | December 31, |       
|                                                                    |  |              |       
|                                                                    |  | 2009         |        | 2010 |  
|                                                                    |  |              |        |      |  
|Unearned Revenue                                                    |  |              |        |      |   |        | 
|Revenue received in advance of service provided  Current liability |  | $            | 3,973  |      | $ | 4,675  | 
|Deferred revenue resulting from varying charter rates               |  |              |        |      |   |        | 
|Current liability                                                   |  |              |       |      |   | 6,010  | 
|Non-current liability                                               |  |              | 29,450 |      |   | 31,399 | 
|                                                                    |  |              |        |      |   |        | 
|Total Unearned Revenue                                              |  | $            | 33,423 |      | $ | 42,084 | 
|                                                                    |  |              |        |      |   |        | 
|                                                                    |  |              |        |      |   |        | 
|Accrued Revenue                                                     |  |              |        |      |   |        | 
|Resulting from varying charter rates  Current asset                |  | $            | 1,693  |      | $ |       | 
|                                                                    |  |              |        |      |   |        | 
|Total Accrued Revenue                                               |  | $            | 1,693  |      | $ |       | 
|                                                                    |  |              |        |      |   |        | 

22. Gain on Sale of Assets

During the
year ended December 31, 2010, the Company concluded the sale of the vessel Efrossini to an unrelated third party for
gross consideration of $33,000. The
sale realized a net gain of $15,199 after
taking into account commissions and other directly related expenses amounting
to $832 for the vessel.

No sales of vessels were concluded
during the other periods presented.

23. Dividends

During 2010,
the Company declared and paid four consecutive quarterly dividends of $0.15 per
share, totaling $37,820.

The
computation of dividends per share for the period prior to the IPO gives
retroactive effect to the shares issued to Vorini Holdings in connection with
the IPO.

24. Earnings Per Share

The
computation of basic earnings per share is based on the weighted average number
of common shares outstanding during the year and gives retroactive effect to
the shares issued to Vorini Holdings in connection with the IPO for 2008 and
includes the shares issuable to the audit committee chairman and the
independent directors at the end of the year for services rendered. Diluted
earnings per share are the same as basic earnings per share. There are no other
potentially dilutive shares.

25. Subsequent Events

(a) Shipbuilding
contract:In January 2011, Maxeikositessera
entered into a shipbuilding contract for the acquisition of Hull 804at
a purchase price of approximately $42,178, as of January 11, 2011, including
a cost adjustment for extra items, consisting of payments of $18,900 and JPY
1,932,500,000, scheduled to be delivered in the first half of 2012.

(b) Formation of
subsidiaries: In January 2011, the Company formed
the subsidiaries Maxeikoseksi Shipping Corporation and Maxeikosiepta Shipping
Corporation, both Liberian Corporations.

(c) Dividend
declaration: On February 8, 2011, the Board
of Directors declared a dividend of $0.15 per common share, totaling $9,882,
payable to all shareholders of record as of February 18, 2011, paid on February
25, 2011.

F-23

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